Please feel free to have a look at quarter 3 2017 General Economic Overview provided by the Rayner Spencer Mills Research group.

If you would like to discuss this in more detail then please get in touch.

Established in 2004 RSMR provides research and analysis to firms working across the UK’s personal financial services marketplace. Our work is completed with total impartiality and without any conflict of interest and delivered to a high professional standard by a team of experienced and highly qualified people

The research illustrates the strength of the euro versus the US dollar. The long bull market which started in 2009 following the financial crisis has continued
– one of the remarkable things about this economic recovery is the lack of inflationary pressure both in goods and in wages which has meant that markets have remained quite sanguine despite some souring of political relations between North Korea and the rest of the world. Economic growth has continued to move ahead at a moderate pace, led by the US but increasingly supported by other regions. GDP growth has been below par relative to previous recovery phases but continues to benefit from the growth in consumer demand which has been resilient, despite political uncertainty and little wage inflation. The only worrying factor is that much of this has been based on consumer credit growth which in the UK grew by 10% in the year to April 2017, the fastest annual growth rate since 2005.

Inflation has started to creep up in the UK meaning there are negative real rates of return for cash savers. Central bank action has been tempered so far by the stubborn nature of wage rises which have not yet reacted to inflationary pressures, but there is some indication that restraint in UK public sector pay is being relaxed following a long period of austerity which may lead to more pressure to raise rates.

For much of the year the headlines regarding the UK economy have been dominated by the current and likely effect of leaving the European Union. The robust levels of growth we have seen since the EU vote have been driven by the weakness in sterling which has helped exporters, and a further easing of monetary policy which has boosted consumer confidence. That said, household consumption has been financed by credit with the household savings ratio at its lowest level since 1960, and the continued global growth which has helped to support the UK economy may not relied upon in the future. The inflation figure is therefore worrying many investors as it moving towards 3%, meaning that real household income has turned sharply negative over 2017, particularly if we recognise that at the same time wage rises year-on-year are at just 1.8%. The rate of retail spending has been reducing with GDP figures this year indicating a much lower growth rate of around 1.2%, well below forecasts at the beginning of the year of 1.7%.

Not all the news is negative however as data is still supportive of continued growth of the economy with unemployment less than 5% and UK PMI data still positive after the election blip.

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