The UK economy & BREXIT

This is a very interesting period for the UK economy but with very unhelpful press speculation being circulated.
Two thirds of the GDP growth in the UK is consumer led, and the first piece of misleading press reporting was the slow-down in retail sales in January, well I have news for members of the financial press, which may come as a surprise, but January always does slow down, people have overspent in December and are then worried about the credit card bills which are due & apply the spending brake, and true to form February’s growth was much stronger this year than in January.
The press are overplaying the inflationary threat with over estimations on how high it will climb, I expect UK inflation to be around 3.3% by the 1st quarter of 2018, which is still higher than the Bank of England’s target, but not as high as the press is suggesting.
There are a number of reasons why there will be less pressure on inflation moving forward, such as wage increases are down, and whilst there has been a spike in the price of crude oil, due to the efficiency of Shale Gas extraction in the USA, OPEC will see a reduction in its power and Oil prices are expected to fall back to circa $48 per barrel.
There is some pressure of food prices but this may lead to more home grown food produce being consumed.
One other area of inflationary pressure is the fact that Sterling is down circa 15% which is great news for exporters but has led to import inflation.
One company that has acted positively to this is Ibstock Bricks, they are increasing their UK based manufacturing as opposed to importing bricks from Europe which will create circa 300 new jobs & keep supply prices under control, and I hope this is a pattern we will see repeated elsewhere.
The UK’s recovery from the last recession has been weaker than previous recoveries, but this was purely down to the fact that our overseas trading partners were also in recession.
The UK’s manufacturing base is looking strong currently, and unlike the US we are not expected to increase our bank base rate until the end of 2018 at the earliest.
Private investors need to start reducing their cash holdings, as returns on cash are very poor and people are often suffering real term losses on cash holdings, they need to diversify their portfolios to enjoy capital growth and protect against volatility.
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