We’re well known in this part of the world for bemoaning the weather. But in recent times, it’s prices that we have been lamenting in our chit-chat with neighbours and in the pub. And that’s not surprising given the vast increases in the cost of things like gas and electricity that we have seen. To put this in context, if beer prices had increased at the same rate as gas, we’d now be paying about £40 a pint in some establishments.
Last week’s showstopper was inflation which hit double digits for the first time in 40 years. Previously latent concerns are also coming to the fore, like a cooling labour market, zero productivity gains, and waning consumer confidence. Recent policy support will only temporarily assuage spending before an energy price cap increase in October renews stress.
The latest data for Northern Ireland house prices and the latest figures for UK inflation were both released this morning. Both showed strong rates of growth but whilst the CPI rate of inflation certainly has further to go until its peak, can we say the same for house prices?
We’ve heard lots of recent comparisons between today and 1976, given the heatwaves and drought that affected both years, and that 2022 is the UK’s driest year since. But whilst we have recently been basking in sunshine and dealing with the impact of the warm weather, it is the cost of heat, light and food for households this winter that should be on all of our minds.
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The estimates of where household energy bills are heading keep going up. £5k is the latest forecast come next year. An acute energy shock, to be sure. GDP data suggests the UK economy withstood the shock’s initial impacts better than expected over the spring. But those were the early days. The real test is yet to come.
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Today sees the release of July data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by S&P Global – signalled that declines in customer demand amid strong inflationary pressures led to further sharp reductions in output and new orders in the Northern Ireland private sector. Rates of inflation remained elevated over the month, despite showing signs of easing. The main positive from the latest survey was a further rise in employment.
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Last week interest rates were hiked by the largest amount since the Bank of England gained independence in 1997. But it was the further hike in the estimated inflation peak, with it set to remain higher for longer, as well as a forecast recession that ultimately grabbed the headlines. Conditions outside the UK are little better, confidence in the Euro area is dropping and Chinese PMIs are contracting as the impetus from reopening fades.
Continue readingCentral bankers are raising rates at the fastest pace since 1980s, with the Fed last week raising rates by 0.75 ppts. Will the Bank of England follow suit on Thursday? Members will need to navigate a tight trade-off between growth and inflation. Given the latter remains at eye-watering levels, a rate hike is very much on the cards. However, the question remains whether the BoE will stick to a gradual approach or will step up the pace of its tightening cycle following the lead of other central banks.
Despite the upsurge in recessionary chatter, Northern Ireland’s labour market continues to churn out positive headlines. The ILO unemployment rate in the three months to April stood at 2.6%, just north of Q1 2020’s pre-pandemic level (2.5%) and the record low of 2.3% (Sep-Nov 2019). Both the HMRC payrolls data and the Quarterly Employer Survey (QES) posted record employee numbers for May and March 2022 respectively. Meanwhile there is still nothing of note on the redundancy front. From a recession watch perspective there is certainly ‘nothing to see here’ as far as the local labour market statistics are concerned.
At this point upside surprises in inflation rate occur with such frequency that “surprise” is probably the wrong word for them. Inflation in the UK rose for a ninth month in a row in June and was the highest among G7 countries, while with another hefty rise in the energy price cap to come, the inflation peak is still some way off. Meanwhile PMI data across the UK, Eurozone and US all point to slowing growth momentum.
