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Consumer confidence in UK rises with growth prospects

Andy-Jalil
Andy-Jalil
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The jittery mood among the public, prior to the General Election, has largely diminished with the ‘Boris Bounce’, following the prime minister’s overwhelming victory. Consumer optimism for the year has risen across a number of surveys. Polling released by GfK saw an increase of two points, which, their client strategy director, Joe Staton, described as a “mini Boris Bounce”.


He said: “A great many people will be gazing into their crystal balls right now: ours indicates a rebound in confidence in 2020 based on renewed optimism and energy for a post-Brexit Britain”.


He added: “This is linked to the uptick in jobs and housing markets.” Notably individuals polled were particularly optimistic about their personal financial situation over the next 12 months.


Another survey, conducted by CEBR and YouGov, saw consumer confidence jump to an indexed 107.7, a significant increase on last year, and the highest in 16 months.


The UK will be the fastest-growing European economy in the G7 this year and next, the International Monetary Fund (IMF) said recently as it once again downgraded its forecast for global growth. The IMF predicted that the UK economy grew 1.3 per cent in 2019, its slowest since the crisis, and will grow 1.4 per cent and 1.5 per cent in 2020 and 2021 respectively. This puts British growth expectations third out of the G7 countries for this year.


The updated forecasts came as the IMF cut its global growth expectations and said there are “no clear signs of a turning point” for the world economy despite the signing of a US-China trade deal. The lender of last resort said it expects global growth for 2019 to come in at just 2.9 per cent. This is lower than its previous three per cent prediction, which would have already been the worst figure since the global financial crisis.


The IMF predicted global growth will pick up to 3.3 per cent this year, down from a previous prediction of 3.4 per cent. It foresaw growth in 2021 of 3.4 per cent. The IMF chief economist Gita Gopinath said the downgrades “owed largely to downward revisions for India”. She said that “the world needs stronger multilateral cooperation” to tackle slowing growth.


Accountancy giant Deloitte’s chief economist, Ian Stewart said “the fog on uncertainty that has lingered over the UK since the 2016 referendum is lifting”. The firm’s latest survey of chief financial officers (CFOs) showed the biggest ever increase in optimism in its 11-year history. CFOs now expect the UK firms to increase capital expenditure for the first time in four years.


Stewart added: “The scale of the improvement (in sentiment) eclipses previous surges in the wake of interest rate cuts during the financial crisis in 2009 and following the European Central Bank president’s pledge to ‘do whatever it takes’ to save the euro”. Expectations of an increase in corporate revenues have surged – as has an appetite for risk.


The Recruitment and Employment Confederation (REC) has also clocked a new mood among businesses, with the group’s permanent staff placement index nudging up to 51.9 in December, from a more cautious 48.8 the month before. The REC survey was conducted over a two-week period that included the General Election, so there may be further good news to come.


Purchasing manager surveys also paint a more positive picture than before the threat of a hung parliament or Labour victory evaporated.


While the difficulties in the sector such as retail are well-known (and deep-rooted) there is a boost to the UK’s tech sector, with 74 per cent of executives at early-stage firms confident of a hike in turnover and 67 per cent planning to boost investment. However, 69 per cent remain concerned that Brexit will make it harder to hire the talent they need, giving a reminder that not all of the Brexit uncertainties have been smoothed over.


Tory strategists would be extremely pleased of the burst of certainty kicking the economy into gear after a period of paralysis thanks to the House of Commons’ prevarication on the method of Britain’s departure from the EU.


As Rupert Harrison from Blackrock, the global investment management corporation, says, the government must “nurture” this potential bounce-back – not take it for granted. He should know, having been at the right hand of the chancellor during the stuttering recovery and then burst of growth between 2010 and 2015. (The writer is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)


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