News - GM Chamber Economics

GM Chamber Economics

Retail sales volumes increase by fastest rate since April

20/11/2014

Commenting on the latest retail sales figures, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said:

"Retail sales volumes increased by 4.3% year on year in October, the fastest growth rate since April this year.

"The sectors with the strongest growth this month were non-store retailing up 11.5% over the past year and household goods stores, which saw a 10.8% increase. Department stores also continued to post positive results with growth in volumes of 8.2% over the past year. The strength of the housing market and in the increase in housing market transactions is impacting positively on retail activity.

"Prices achieved (excluding petrol) declined over the past year by 1.2%, while prices at department stores and household goods stores fell by 1.8%.

"The total value of retail sales values increased by 2.8% in the month. On line sales increased by 7.5% in the month accounting for just over 11% of all retail activity.

"Our forecasts for the year are largely unchanged. For the year as a whole we now expect retail sales to have increased by 3.5% in 2014 slowing slightly to 3.3% in the following year. The strong start to the “Golden Quarter” for retail may yet lead to an upward revision for the current year."

Strong growth in employment continues as earnings begin to rise

13/11/2014

Commenting on the national labour market figures, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said:

"Unemployment (claimant count basis) fell by a further 20,000 in October to a level of 931.7 thousand and a rate of 2.7%. This is the lowest level since August 2008 and lower than the average level achieved in 2006.

"Is this significant? Of course. Spare capacity in the labour market is evaporating. Recruitment pressures are increasing. Earnings increased by 1.4% in September compared to the single figure growth in the prior month. Private sector pay is increasing at a faster rate (2.3%) boosted by pay growth in manufacturing and construction. 400,000 have left the register over the past year. On current trends, Job Centres will be closing in the Summer of 2017, there will be no one looking for work!

"The wider LFS data confirmed the positive trend in employment, as the number fell to 1,959 thousand out of work and a rate of just 6%. Despite the strong trends in the labour market, the inflation outlook remains subdued, flattered by slow world trade growth, weak world trade prices low commodity costs and a short term collapse in the oil price.

"A spectre is now haunting the MPC. It is the spectre of high economic growth with low inflation. The textbooks will have to be rewritten along with a letter from the Governor to the Chancellor of the Exchequer as inflation is expected to fall below 1%. "

Greater Manchester Labour Market Figures Lowest Since 2007

12/11/2014

Commenting on the latest labour market figures for Greater Manchester, Christian Spence (pictured), Head of Business Intelligence at Greater Manchester Chamber of Commerce, said:

"Data published today by the Office for National Statistics shows the labour market in the UK, and particularly in Greater Manchester, is continuing to recover well. With UK unemployment standing at 6% for the third quarter (down from 6.3% on the previous quarter and from 7.6% a year ago) and full-time employment increasing quickly, even the figure for average earnings has begun to move upwards to 1.3%, slightly above the rate of inflation giving the first real-terms pay increase for over five years.

"In Greater Manchester, the picture is also very positive. The overall Jobseeker's Allowance claimant count now stands at just under 42,000, a 6.3% decrease in just one month and 40% lower than a year ago. This is now the lowest figure since the end of 2007, before the recession began. The fall of 40% over the past twelve months is a bigger decrease than that seen nationally (30%) and in the North West (37%), though the overall rate remains slightly higher at 2.4% compared to 2.2% for the UK and the region. Oldham has seen the quickest fall over the past year with claimant count down 49% since October 2013.

"The youth (under-25s) claimant count has performed even more strongly. With under 9,000 young people in Greater Manchester claiming Jobseeker's Allowance, this figure is now the lowest since records began in 1985 and is 12% lower than the previous month at 50% lower than one year ago. All Greater Manchester boroughs have seen a fall of at least one-third over the past year, with Oldham again the best performer with a fall of 66% since this time last year.

"As the labour market continues to improve, with vacancy rates now close to those of the pre-recession high, greater pressure will be placed on employers as finding the right skills for their business will become harder. This may place further pressure on pay awards as companies compete more heavily to place the right people into their new positions. For much of the labour force, the continued recovery will support them into employment over the coming months and beyond, but government, both locally and nationally, must focus its efforts on those people furthest from the labour market, ensuring that no-one is needlessly left behind and that the recovery benefits every part of our society."

christian.spence@gmchamber.co.uk

Trade Deficit increases in September - no overall threat to growth

10/11/2014

According to first estimates from the ONS released recently, the UK’s deficit on trade in goods and services was £2.8 billion in September 2014, compared with £1.8 billion prior month. This reflects a deficit of £9.8 billion on goods, partly offset by an estimated surplus of £7.0 billion on services.

In the third quarter of the year, the deficit (trade in goods) increased to £29 billion compared to £28 billion in the prior quarter.

Germany remains the the UK's largest trading partner but in Q3 2014 the UK recorded its largest ever deficit with Germany, reflecting a fall in exports and rise in imports.

Although we may worry about growth in Europe, the UK's surplus with the USA reached a lowest level in almost eight years, reflecting slow growth in the North American economy.

Some good news? There were notable improvements to the UK's deficits with China and Hong Kong, reflecting a rise in exports and a fall in imports in Q3.

Do the latest figures change our outlook? Not really. For the year as a whole we expect the deficit (trade in goods) to increase to around £113 billion compared to £110 billion last year offset by an £82 billion (trade in services) surplus. The residual deficit (goods and services) will be around £31 billion, slightly down on prior year and less than 2% of GDP.

Manufacturing output increased by 2.9% in September as consumer durables output surges with 11% growth

6/11/2014

John Ashcroft (pictured), Chief Economist at Greater Manchester Chamber of Commerce, said:

“Manufacturing output increased by 2.9% in September according to the latest data from the Office for National Statistics. Growth for the quarter was just over 3%, which is slightly below the first estimate suggested in the preliminary GDP release.

“Our forecasts for the year remain unchanged; we expect GDP to increase by 3.1% for the year as a whole, supported by a 3.7% expansion in manufacturing output. Despite the fears for export growth particularly to the Euro zone, manufacturing is demonstrating a significant recovery this year, supported by strong growth in motor, marine and aerospace.

“Capital goods output increased by 3.7% in the month, and a remarkable 11% growth was recorded in consumer durables output in September, up almost 10% in the quarter. It is possible the strength of the housing market is boosting output in the household durables sector.

“Energy and utilities continue to be a drag on growth and overall manufacturing output remains some 4.5% below the peak recorded in January 2008. Despite fears for the recovery, the latest data confirms the recovery is on track as suggested in the Manchester Index™ derived from the influential Greater Manchester Chamber of Commerce Quarterly Economic Survey.”

Strong GDP growth continues into the third quarter of the year

24/10/2014

Commenting on the latest GDP figures, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said:

“The UK economy grew by 3% year-on-year in the third quarter as the strong growth experienced in the first half of the year continued. The results are in line with our latest forecasts and estimates produced by the Manchester Index™, the now-casting model from the Chamber’s Quarterly Economic Survey.

“Service sector growth underpins the recovery in the economy with overall growth up by 3.3%. Business Services increased by 4.3% and leisure activity was also strong (up by 3.8%). Distribution activity came in ahead of our latest forecasts with strong growth of 3.7%.

“So what of manufacturing and construction? Manufacturing growth was 3.4% and construction activity increased by a more modest 3%. An all round strong performance for the economy held back by the secular down trends in agriculture and oil and gas extraction, quarrying and mining.

“Our forecasts for the year are unchanged. We expect growth of 3.1% for the year slowing to 2.8% in 2015.”

Read the full UK Economic Outlook here: http://www.gmchambereconomics.com/uk-outlook.html

No Retail Boom … as the online squeeze continues

23/10/2014

Commenting on the latest retail sales figures, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said:

"Retail sales volumes increased by just 2.7% in September as values increased by just 1.3%. Online sales were up by over 10% accounting for 11% of all activity continuing the squeeze on the conventional retail model.

"You can’t run a retail business without commenting on the weather and so it is with the Office For National Statistics. The official government source of all knowledge explained that warm weather in September appeared to hit clothing and footwear sales. “Too hot, too cold, too wet, too dry”, the retail mantra, perhaps the met office should handle the retail data.

"Average store prices in the month fell by 1.4% but with a large assist from petrol prices down by over 5%.

"Online food sales increased by over 13% year on year, compounding the footprint challenge for Tesco and other large store formats. Now accounting for 4% of all food sales, the problems set by multi channel will only increase in the food sector.

"After a strong start to the year with sales up 4% in the first six months, the third quarter has been disappointing. We have downgraded our forecasts for the rest of the year and into 2015 to just over 3%."

Public Sector Net Borrowing Off Track

21/10/2014

Commenting on the latest public sector finances, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said:

“Six months into the year and borrowing remains off track compared both to last year and this year’s plan. In the first six months, total borrowing was £46.2 billion compared to £42.3 billion in 2013. In September, borrowing was £11.8 billion compared to £10.3 billion in the prior year.

“The UK economy grew by just over 3% in the first half of the year. We would expect an improvement in borrowing given the strength of the recovery. Last year’s figure has been revised down to £98 billion for the year as a whole. Good news but revenues will have to improve if this year’s OBR forecast is to be met.

“Spending is not really the problem. The squeeze on local government continues as departmental spending increased by a modest 1.6%. The paradox of thrift continues as debt payments were up by 2.6% and social security payments increased by 3%.

“The real problem for the Chancellor is revenue. Central government receipts were down compared to last year, despite a strong rise in VAT (up 3.9%) and stamp duty (up 25%). Corporation tax revenues were healthy, up by over 5% but income tax revenues increased by just 0.1%. This is a real problem in an economy growing at over 3% expanding jobs in the process. The low growth in earnings is largely to blame perhaps but the paradox is at odds with basic economics.

“Compounding the embarrassment for Treasury is the fall in interest and dividend receipts from the ‘Money for nothing, gilts for free’ programme otherwise dubbed ‘QE’. Interest and dividends fell by £7.3 billion to just £9.1 billion.

“Public sector net debt excluding financial interventions (PSND ex) was £1.45 billion in September 2014, £100.7 billion or 7.5% higher than at the end of September 2013. That’s approximately 80% of GDP.

“So what can we make of it all? The government is set to miss the OBR target for the current year, with borrowing overshooting the £100 billion mark in the year unless some dexterous accounting takes place. A serious embarrassment in the immediate run up to the election in either case.”

To read the latest full UK Economic Outlook, click here: http://www.gmchambereconomics.com/uk-outlook.html

Latest Economic Outlook Forecasts Continued Recovery

8/10/2014

Greater Manchester Chamber of Commerce has released its latest UK Economic Outlook, which forecasts continued growth in the economy up until the end of 2014, slowing down in 2015.

As well as forecasting growth of 3.1% this year, the Chamber believes inflation will remain slightly below target over the balance of the year. Unemployment will continue to fall, government borrowing will also fall and the service sector will lead the recovery as manufacturing and construction output also rise.

Commenting on the Economic Outlook, Chief Economist at Greater Manchester Chamber of Commerce, John Ashcroft (pictured), said:

“We have increased our forecasts for manufacturing output, modifying slightly the outlook for construction and investment. We now expect investment to increase by 8.3% in 2014 and by 7.5% in 2015 following revisions to the calculation of the investment data.

“Manufacturing output remains almost 5% below the peaks registered in 2008 prior to recession. Following a fall in output of -1.3% in 2012 and -0.1% in 2013, we expect a recovery in output this year of 3.7% slowing to below 3.0% in 2015. Construction output, driven by developments in housing and infrastructure, is expected to increase just around 5.5% in the year and 4.0% in 2015.”

Commenting on the latest trade figures, John continued: “The trade figures will continue to disappoint. The UK will be unable to grow faster than major trade partners in Europe without a significant deterioration in the trade balance. The challenge to the current account following the collapse in overseas investment income may present a significant problem to the outlook for sterling over the medium term.

“In Europe the challenge of low growth and a risk of deflation contrasts significantly with the outlook for the UK. Despite the strong performance of the UK economy and the strength of the housing market, the Bank of England is unlikely to raise base rates too far ahead of the Fed and the ECB, therefore we expect rates to rise in February or June 2015.”

"Stellar growth is no flash in the pan” - BCC upgrades forecasts for the UK

28/8/2014

Following the release of the British Chambers of Commerce Economic Forecast, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, shares his views:

We welcome the BCC assessment of growth in the UK economy. Our more detailed quarterly economic forecast will be released next month. Growth in the UK this year is likely to be just over 3% with strong growth continuing into 2015. We base our assessment on latest readings from the Manchester Index™ and our Quarterly Economic Survey data.

We believe John Longworth is right to emphasise a government focus on infrastructure and access to finance particularly in export finance. However we also accept David Kern’s concerns about the geo political threats from the Ukraine, the Middle East to which we would add potential choppy waters in the South China Seas.

We have always been realistic about export performance …

BCC may be disappointed about the prospects for export growth but our models have long been more realistic about the prospects for export rebalancing and the elusive £1trillion target by 2020.

More optimistic about investment and Capital Stock …

In investment, we are more optimistic about the assessment of investment and productive capital stock in the UK. The fall in investment can be largely attributed to property and commercial real estate collapse. Our four year and ten year capital stock models suggest there has been no significant loss to output capacity in the manufacturing sector specifically. Our surveys relating to capacity utilisation and investment intentions suggest a strong rally in investment over the next three years.

Interest rates - Flip Flops the footwear of choice for central bankers

Interest rates are likely to rise in the first quarter of 2015. However we caution flip flops are becoming footwear of choice for central bankers in the UK and the USA. Although some may call for an interest rate rise before the end of the year, the Bank of England will be unwilling to act ahead of the Fed. David Kern’s forecast of an interest rate rise in the first quarter appears sound.

John Longworth suggests “We must ensure the stellar growth is not a flash in the pan”. A realistic assessment of policy objectives will help. The service sector will continue to drive output in the economy, with assistance from a strong recovery in housing and construction. Investment will follow but exports will fail to provide a solution to growth. Nevertheless we predict strong growth this year of just over 3% continuing into next year.

To read the British Chambers of Commerce Economic Forecast, click here.