ECONOMIC OUTLOOK
AFTER the farce of the Opec oil negotiations at Doha, there was less colour (but more integrity at least) with the release of the UK’s unemployment figures on Wednesday by the Office for National Statistics (ONS).
Although the number out of work has been on a general downward trend since 2012, the number of people claiming benefit rose by almost 7,000 in March (and was up by 21,000 from the previous threemonth period), the first increase since August last year. Wage growth was also no great shakes.
Weekly earnings (including bonuses) in the three months to February rose 1.8%, down from 2.1% in January, a shadow of a robust 2.3% predicted by Bloomberg economists.
The slowdown in jobs and wages appears to reflect other recent weakness in the economy (services and manufacturing), a clearer picture of which should emerge next week with the preliminary release of the UK’s first-quarter GDP growth figures.
UK shoppers added to the general malaise by keeping their hands firmly in their pockets in March. UK retail sales fell sharply from the month before said the ONS, with a 1.3% decline. This is much shabbier than the 0.1% shortfall that had been expected.
While the year-on-year retail sales figure showed a 2.7% gain (the 35th straight month of yearly growth), again this was less than a predicted 4.4% increase. Yet the trend for home shopping continues to surge, with the value of online sales 8.9% higher than a year ago.
The ONS also reported that UK public sector borrowing exceeded estimates. The preliminary reading overshot forecasts by the Office for Budget Responsibility by £1.8bn with the government borrowing £74bn in the year to the end of March. However, this was down £17.7bn from the previous financial year – so some pennies are being watched on a national, as well as at the consumer level.
Good news, meanwhile, for mortgage holders in the EU as the European Central Bank (ECB) pledged to keep European interest rates at zero for what is believed to be at least another year. ECB president Mario Draghi said that if necessary the bank “will act by using all the instruments available within its mandate”. So the ECB is sending out a clear signal to its detractors that it maintains the power to make more policy intervention as it deems appropriate.
The weakness and uncertainty in Europe was reinforced last Friday with the preliminary release of financial information company Markit’s eurozone manufacturing and services purchasing managers indices. Although both still showed expansion, the rate of manufacturing growth fell slightly in April while services growth nudged up marginally.
The scarcity of confidence in the region was highlighted with a German Ifo survey of business sentiment on Monday, which unexpectedly dipped.