Is the British economy finally back on track?
The big economic news this week is definitely that inflation is back on target and where it should be at 2%. It’s been bobbing around for several years and at one point it was quite close to 5%, if I recall correctly. In this monetarist age, inflation really matters.
Some other indicators are looking reasonably positive too. The unemployment numbers are coming down satisfactorily (although government critics will point out that they don’t tell the whole story being artificially buoyed by people having multiple jobs).
Growth remains a little sluggish but growth it certainly is and the next numbers the Treasury release will show what sort of fourth quarter the country has had. The deficit though hasn’t been significantly reduced and borrowing has grown a great deal more than George Osborne forecast a few years back.
So lots of things going in the right direction but it’s not an overwhelmingly positive picture.
What does this mean for ecommerce traders? The big change that may come this year, especially with unemployment coming down faster than expected, is surely going to be a base interest rate increase. New Bank of England governor mark carney has indicated that he’s looking for 7% unemployment before an increase. An increase will also dampen the housing market. But then, record low rates can’t continue forever. It’s already been a record low.
And I think we can all agree that household budgets are still feeling the squeeze. That’s a result of wages remainaing largely static and the cost of living still being a worry for many. Domestic fuel bills here are certainly one of the major bogeymen.
A rate rise will mean that homeowners who have been enjoying record low rates for a record low time will have to spend more on their home loans in due course and that could mean less disposable income.
There’s definitely a way to go before the good times return but it looks like we’re on track.