Sterling stages May rally
ELECTION campaigns can be peculiarly dispiriting because there is so much focus on the negative. Sure, there are many domestic issues our politicians need to get to grips with, including weak points in the NHS, long-term social care and the scale of national debt.
The happier aspect of all of this is that the campaign and the Brexit negotiations are taking place against favourable economic circumstances.
Chancellor Philip Hammond is determined to support growth at a sensitive time and resist steps that damage prospects.
Much recent analysis focuses on the idea that somehow the economy is about to slow because of the squeeze on household incomes caused by rising inflation.
Nevertheless, the latest survey data from the CBI shows retailers reported the biggest increases in sales volumes in April since September 2015.
The actual figures might be even better because the CBI data doesn’t include Easter – an important shopping weekend.
The survey also reports fierce price competition among retailers, which suggests that rather than ladling higher prices for imported goods on the consumer, shopping chains are taking the hit. That ought to be good for households.
My own conversations with executives from the airline industry and the High Street suggest consumers are not holding back. Bookings for summer flights are robust and one retailer with a chain of 400 shops noted that while footfall is flat, people are actually placing more goods in their baskets.
Analysts at Capital Economics note that British consumers don’t seem to be ‘tightening their belts’ because of Brexit. Indeed, if and when consumer price inflation starts to fall back to its 2pc target there will be opportunity for a rebound in spending growth.
There is stuff not to like in the Lloyds Banking Group first-quarter figures, such as the widening margin between what it charges for loans and how much it pays depositors. But there is no disputing the fact that the bank has been stabilised and earned £2.1bn in the first quarter after stripping out another £350m of payment protection insurance mis-selling costs.
The healthy results and the fall in bad debt charges at Lloyds can only happen in a prospering economy. Among the reasons why the UK has recovered so vigorously from the Great Recession is because the banks (in most cases) have been repaired and are able to satisfy the loan needs of consumers and business. Lloyds boss Antonio Horta-Osorio notes ‘the UK economy continues to benefit from low unemployment and reduced levels of indebtedness’.
And while there is much that is disagreeable going on at Britain’s housebuilders, there is no escaping the fact that the market is still buzzing, with the overpaid fat-cat executives at Persimmon delivering £2.5bn in sales since January 1 for 8,928 new homes. That doesn’t happen in a flat economy.
Since the Brexit vote there have been fears of a sterling crisis. The combination of robust output and the prospect of Theresa May winning the June 8 election, strengthening her hand in Brexit talks, has lifted the pound to a seven-month high against the dollar at above $1.29 in latest trading. Even hard-bitten currency traders are coming to recognise the favourable economic background to the upcoming election.
Schroders gluttony
IN AN age when so many shares are held by passive investors, activist funds – which collect the bigger fees – have a duty to enforce better governance.
Fund manager Schroders and its investors seem to think higher standards don’t apply to them. A prospective revolt against the £6.3m pay of chief executive Peter Harrison came to nothing, with just 6.5pc of investors voting against pay policy.
Harrison is in a class of his own, earning far more than his cohorts at Henderson, Aberdeen and Jupiter – and 33 times the average wage at his own firm. As a key investor, Schroders hardly sets a fine example for other greedy FTSE 100 bosses.
Data leaks
THE mystery of who in Government asked the Bank of England to intercede with Barclays to hold down the Libor rate during the financial crisis in 2008 remains unresolved.
But there seems to be a sinister trend of the market getting wind of confidential Government data from the Office For National Statistics leading to flash moves in the pound. Insider dealing in Whitehall? Wash your mouth out.