Economic Review – October 2019
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SIGNS OF SLOWING LABOUR MARKET |
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CONSUMER CAUTION ABOUNDS |
The latest set of retail sales statistics suggest consumers have become more cautious about their spending in recent months despite the relatively strong growth in real wages witnessed over the past year.
Official data published by ONS revealed that retail sales volumes were flat in September when compared to the previous month, following a 0.3% decline during August. And, while moderate growth in sales was recorded across the third quarter as a whole, the annual pace of expansion did fall to 3.1%, the weakest rate of growth since late 2018. ONS statisticians said that some retailers had suggested unusually rainy weather had a negative impact on high street shopping during September and this contributed to sales at department stores continuing their downward trend. In contrast, sales at food shops bounced back following a couple of weak months. Signs that consumers may be turning more cautious will clearly be a key area of concern for the UK economy, as consumer spending has been the principal driver of growth over the past couple of years. Retail surveys conducted by the Confederation of British Industry and British Retail Consortium continue to paint a relatively bleak picture of conditions in the retail sector, although each survey’s findings have so far proved to be much worse than subsequent official data has shown. However, the lacklustre nature of the latest ONS retail sales figures may suggest that political uncertainty is starting to weigh more heavily on consumers and testing the resilience of UK shoppers. While the recent strong growth in real wages can be expected to continue underpinning consumer spending to some extent, the latest data will certainly add to concerns that confidence amongst the household sector may now be waning. |
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ECONOMIC COST OF BREXIT |
A study conducted by the National Institute of Economic and Social Research (NIESR) suggests the Brexit deal negotiated by Boris Johnson will ultimately leave the UK £70bn worse off than if the country had retained its EU membership.
The analysis by the UK’s oldest economic research institute estimates that the economy will be 3.5% smaller in 10 years’ time if the UK leaves the EU with the Prime Minister’s deal. While this is a better potential outcome than leaving with no deal at all – which NIESR estimates would see the economy shrink by 5.6% – it would be slightly worse than leaving under the terms previously negotiated by Theresa May. Mr Johnson’s Brexit plan centres on much looser economic ties with the EU, and the independent forecaster’s modelling suggests the subsequent imposition of customs and regulatory barriers would hinder trade with the continent. Its analysis suggests this would leave all regions of the UK worse off than if the country had remained within the EU. The Treasury has so far resisted calls to produce its own assessment of the economic impact of the new Brexit deal. However, a Treasury spokesperson did question the NIESR figures, suggesting the government plans a ‘more ambitious’ free trade agreement with the EU than assumed in the institute’s economic model. Whether the UK does ultimately leave under the terms agreed by the Prime Minister remains to be seen, as the Brexit process is once more in limbo while the political parties fight out a General Election scheduled for 12 December. With the EU agreeing to a further extension until 31 January, the final outcome of the Brexit saga would now appear to depend upon the make-up of the House of Commons when the newly elected MPs take up their seats in around six weeks’ time. |
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It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. |