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It has now been over a month and a half since the conservatives romped to victory in the latest election. One might think that this timespan would be of sufficient length to collect ample data on the consequences of said result. Up to a point, this assumption is true, and yet the major news outlets seem to be determined, collectively, to paint as confusing and ill-balanced a picture of our economy as they possibly can.
To see the truth of this statement, all one need do is type ‘UK economy’ into Google’s News search. One side of the debate tells us that the UK is ‘set to trounce the eurozone;’ while the other seems to hold up every half-way negative statistic as a portent of our inevitable doom. But who is to be believed? Is the ‘Boris bounce’ a real thing? Or are these optimistic taglines the words of fanatics seeking to evade reality?
Throughout this article we will look at the latest batch of statistics released from various sources with the hope of making out the signal from the noise. We aim to provide an impartial voice amidst the storm of warring opinions that currently rages within the mainstream media.
Contrary to conventional wisdom, property prices actually held reasonably steady during 2019. Halifax, for example, had annual house price growth at 4%; Nationwide had it at 1.4%; Hometrack’s top 20 cities index came in at 3.4%; and the ONS had annual house price growth to November at 2.2%. Such statistics reveal a remarkable degree of resilience in the property market at a time when most pundits predictions were steeped in pessimism. There were, it must be said, a number of regions, such as London and the South East, which seem to have suffered the brunt of Brexit’s adverse effects; but these were more than offset by other regions, which appear to have experienced something akin to a boom since 2016.
And while these statistics encourage a tentative kind of optimism, Rightmove has recently released a number of reports that suggest that the property market may in fact be on the brink of a post-election, post-brexit boom. They reported, for example, that demand from prospective buyers rose 28% during the four days following the election result (a staggering 58% in London); and the average price of property coming onto the market rose by 2.3% during the last month, marking the highest rate on record.
One of the most promising sets of statistics to arise over the last eighteen months has been those relating to the labour market. The latest labour market report has the employment rate between September and November at a record high of 76.3%, which is 0.6% higher than a year earlier and 0.5% higher than the previous quarter. The UK economic inactivity rate, which measures the number of people who are not in employment and have not been seeking work within the last four weeks, is also currently at a record low of 20.6%. And then, with inflation currently sitting at only 1.4%, real wage growth is also up at the moment, with real annual growth of total pay at 1.8%. All of these statistics reveal a labour market that is, far from languishing as a result of Brexit, positively thriving.
One of the most worrying statistics to arise over the past few weeks has come from the ONS’s latest growth report, which shows that the UK economy shrunk by 0.3% during November. This therefore puts the rolling three-month rate of growth at 0.1%, which is, of course, less than ideal.
A number of pundits have suggested that such statistics, alongside the latest inflation figures, constitute a persuasive reason to lower the BoE base rate from 0.75% to 0.5%. To do so now, however, would be to act in haste, basing policy decisions on a number of as-yet unverified assumptions: namely, that the economy has proceeded along the same trajectory since November and that the so called Boris bounce is little more than a fabrication…but are these reasonable assumption to make?
Drawing any certain conclusions about the health of the economy is currently very difficult. Some of the statistics currently in circulation seem to urge unbridled optimism, while others do the opposite. The truth is that it’s probably going to be several more months before we are able to reliably assess the full effects of Boris’s election win. On the one hand, November’s growth statistics are slightly worrying; but on the other, there are a number of early, tentative, but quite persuasive indications that the economy might be in surprisingly good standing. Rightmove’s aforementioned reports provide such an indication; as do the IMF’s latest forecasts, which have the UK economy comfortably outgrowing the major players of the eurozone over the next few years. Moreover, with the labour market as hale as it appears to be and house prices holding steady in the face of all expectations, there’s every reason to believe that the UK economy is in a good position to weather the winds of Brexit that are sure to come over the coming months and years.
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