Uttoxeter Online Magazine

See-Saw Recovery

Here in the UK, the path to economic recovery continues to be uneven with positive numbers mixed with less encouraging ones. Data from the Society of Motor Manufacturers and Traders said vehicle production rose by 58.5% in December – the sharpest jump in almost 34 years – helped by the government’s car scrappage scheme. “The significant rise in December vehicle production is welcome news and signals some greater stability across global automotive markets” said the society’s CEO. However, separate figures from the Office of National Statistics showed December retail sales growth that was much weaker than expected at 0.3% - down on the 1.1% predicted by economists. And the chances of a consumer-led recovery seem increasingly optimistic as other ONS data showed that wage growth hit a record low in the three months to November, with average pay in the private sector failing to rise at all.

But one good piece of news came in the form of better unemployment figures – they fell for the first time in eighteen months, with the jobs market bolstered by increasing numbers of people being forced into part-time work, according to ONS data. The number of people working jumped by 99,000 and unemployment fell by 7,000 to 2.45m in the three months to November. Elsewhere, homebuyers rushed to beat the increase in stamp duty at the end of last year and helped push up mortgage lending figures by 14% in December, according to Bank of England figures. But UK public borrowing hit a new high last month, driving public debt to a new record of £870bn – almost 62% of GDP. There was some glimmer of hope as tax receipts rose for a second consecutive month, albeit by a modest 1%. On the corporate front, profit warnings fell sharply in 2009 and economists expect the recession to be declared over this week, according to Ernst & Young – the number of warnings issued fell 37% to a six-year low.

Taking a more global view, economic growth in Europe’s emerging economies will be much stronger than predicted, according to the European Bank for Reconstruction and Development. GDP is forecast to increase from 2.5% to 3.3% - lifting investor confidence in a region hard hit by the global economic crisis because of its dependency on external capital. Whilst the global economy is expected to return to growth this year, expanding by 2.7% according to the World Bank, it will effectively remain in recession as governments withdraw stimulus measures and private demand remains muted. Growth below 3% is deemed to be recessionary according to the IMF. However, the World Bank sees growth increasing to 3.2% for the global economy in 2011, with developing countries leading the way.

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Extract from this weeks Financial Marketing Bulletin, issued by RBA Wealth Management Ltd.

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