Mixed messages on the economy

Are we the only ones confused about the mixed messages regarding the UK economy?

Looking first at energy costs, most commentators suggest that the price cap will be extended at the current level from April but the doom monger headline writers are saying consumer bills will rise. This is confusing because, despite the fact that we are currently enduring a cold blast, the energy cost has fallen dramatically and as we move into spring the longer, brighter & hopefully warmer days will mean our energy consumption will be less unless one intends and hance actual bills will be lower.

This latest cold snap has highlighted an ongoing issue with UK energy supply – namely that alternative energy sources are not as reliable as coal fired power stations which have been running due to the lack of wind. Thankfully this is not a conundrum we need worry ourselves with.

We are concerned to see the latest consumer credit numbers from the Bank which showed a doubling of credit in January compared to December last year. Mortgage lending, not surprisingly, decreased in January as did house sales values but the worrying thing is the number of people that are borrowing to finance monthly expenditure. This does not bode well for the economy in general.

Those who are taking on greater levels of debt will no doubt have been pleased to hear MPC member Swati Dhingra say that rates should not be increased again, echoing the view of her committee colleague Silvana Tenreyro. They both voted to leave rates at 3.5% last month but were outvoted by the other seven members.

Andrew Bailey has done a great job recently of confusing most of us, by giving no clear view on short term rates policy. If we have been interpreting his comments correctly he has argued for both another hike in rates but contradicted himself by sharing the view of Swati and Silvana that the rate hikes are still feeding through the economy and another could do more harm than good.

The futures markets have changed their perspective as they are now predicting a peak nearer 5% in September against an implied price last month of rates being at 4% by September. We are unsure whether this is because they are as confused as we are, or because they share the view of an analyst at Bank of America who has said the Bank has ‘messed up’ and will have to raise rates further.

We will have to wait until 23 March to see who wins the rate argument this month and sincerely hope that those responsible understand the pain consumers and businesses continue to feel with rates at these levels.

If you are involved with, or know of any business or individuals that are struggling financially we suggest that you talk to us.

The directors of SKSi look at a formal insolvency process as the last resort – not the first. It is their long held belief – borne out with proven experience – that seeking advice at the first sign of financial pressures will lead to a more favourable outcome. Conversely, doing nothing and hoping the problem will go away is far more likely to lead to a c all form the bank and an insolvency process.

We are always available for an initial zero cost assessment which can be arranged by contacting us.