ECONOMIC OUTLOOK
CONCERNS about the economy rose above those about terrorism or immigration as the date for the start of Brexit negotiations approached. A poll of 504 people carried out by Nielsen found that 28% of respondents saw the economy as one of their two top areas of concern at the tail-end of 2016 – a 12% increase on a year before.
British manufacturers’ order books are growing at their fastest pace in two years, despite the weak pound pushing up input costs, according to a survey by the Confederation for British Industry (CBI). The mechanical engineering and metal products sectors are at the forefront of this stronger demand, said the CBI.
“Stronger demand and production is good news for UK manufacturers, though the weaker pound continues to push up input costs and this is now feeding through to output price inflation expectations,” said chief economist Rain Newton-Smith.
Nearly 40% of the surveyed manufacturers expect to raise prices over the next quarter.
The research follows Office for National Statistics (ONS) data showing input prices for materials and fuels up more than 20% compared with a year ago, with factory gate – output – prices up 3.5%
The European Commission (EC) upgraded its forecast for UK growth in 2017 to 1.5%, from 1% previously. Forecasts for the eurozone area were also revised up to 1.6% for 2017 and 1.8% for 2018.
Consumer inflation in the UK rose at its highest level since 2014 in January, according to Office for National Statistics. The CPI index rose 1.8% in the year to January, from 1.6% in December.
The ONS said that CPI inflation is likely to rise above the Bank of England’s 2% target in coming months. The bank’s own forecasts show it expects inflation to hit 2.7% this year, before falling back to 2.6% in 2018.
Meanwhile in the US, Janet Yellen, chairwoman of the Federal Reserve, hinted that a US interest rate rise could come as soon as March due to improving economic data.
Waiting too long before raising rates could be “unwise” and force the Fed to raise rates more rapidly later on, she said. Yellen’s comments came ahead of data showing that US inflation had hit 2.5%, its highest in five years.
UK wage growth slowed to 2.6% in the three months to December, despite unemployment remaining at a low and amid continuing jobs growth.
The headline unemployment rate held steady at 4.8% and employment was up 37,000 to a new high of 31.84 milllion, or 74.6% of people of working age. The ONS said the jobs market “appears to be edging towards full capacity”, with the employment rate for women reaching 70% for the first time.
Rising food and fuel prices led to a sharp fall in retail sales in January, indicating that higher prices are starting to bite.
Seasonally adjusted volumes, excluding fuel, were 0.2% lower in January than in December, the ONS reported.
This was significantly weaker than analysts had predicted, and followed a drop in sales in December.
“In the three months to January 2017, retail sales saw the first signs of a fall in the underlying trend since December 2013,” said Kate Davies, ONS senior statistician.