6
THE ECONOMY IS BRIGHTER BUT WATCH OUT FOR THE CLOUDS
WHILST THE UK ECONOMY IS SHOWING ENCOURAGING SIGNS, THE FACT THAT THE FTSE IS
10% LOWER THAN IT WAS JUST SIX WEEKS AGO SHOWS THAT IT IS NOT BEYOND THE ODD
COLLYWOBBLE. RENOWNED POLITICAL ECONOMIST
DR STEPHEN BARBER
CONSIDERS SOME OF
THE FACTORS THAT THE DIY INVESTOR SHOULD BE AWARE OF.
Not for the first time in recent
months it can be said that economic
data is mixed. Domestic growth
remains solid but markets have taken
fright at prospects for slowdown in
global expansion or even contraction.
As always, it’s time for investors
to ensure their strategy protects
their assets and takes advantage of
opportunities.
THE GOOD NEWS?
Unemployment in the UK has fallen
below the two million mark for the
first time since 2008 and at 6.2% puts
Britain in a much healthier position
than many of our near neighbours and
key competitors.
While Germany still enjoys rates
under 5% and the USA just under 6%,
unemployment in troubled France, for
instance, remains above one in ten and
the situation is much worse in even
more troubled Italy and Spain.
Unlike the USA where ‘non-farm’
payroll numbers are pored over,
we have tended to overlook
unemployment as a key economic
indicator. And not without
justification.
After all, the ‘harder’ number
measuring economic growth is a
truer reflection of just where we
are. And GDP is more sensitive to
change compared to unemployment,
improvement in which lags economic
recovery. But when other indicators
fail to point in the same direction, it is
worth delving deeper.
The Bank of England forecasts healthy
growth of 3.5% this year falling a little
to 3% in 2015. It all suggests we have
been in recovery for some time but
it is taking even longer to feed into
consumers’ pockets.
Perhaps this is because those in
work have not enjoyed an advance in
earnings while a majority of new jobs
created are paying below average
rates. The great challenge for the
British economy is increasing both
productivity and real wages.
THE STORM CLOUDS?
What has spooked markets at home
and around the world recently has
been a fear that the global economy is
slowing down.
From cautious optimism a few months
ago to investor anxiety, a number of
factors contributed to the sell-off in
equities which dragged markets down
to an eight month low.
FROM CAUTIOUS OPTIMISM A FEW
MONTHS AGO TO INVESTOR ANXIETY,
A NUMBER OF FACTORS CONTRIBUTED
TO THE SELL-OFF IN EQUITIES WHICH
DRAGGED MARKETS DOWN
