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OPINION

Seven Days

Seven Days
April 16, 2015
Seven Days

 

Shopping surge

US sales rebound

Is the US consumer back on form? A first glance at retail sales figures for March, which were 0.9 per cent higher than the previous month, suggests that confidence is returning. But deeper consideration, especially given the context of the two weather-blighted months with which the year started, suggests that the rebound was actually quite weak given that it failed to reverse even half of the weakness of the previous three months, leaving the cumulative first-quarter figure looking relatively anaemic.

 

No-flation

IMF praise

In a boost to the ruling coalition politicians, the UK managed to avoid dipping into deflation in March, by the skin of its teeth. In fact, the rate of inflation as measured by the consumer prices index, remained anchored at zero per cent, unchanged from February's reading, as falling energy bills and lower food and clothing prices offset a minor uptick in petrol prices to keep a lid on any inflationary effects from rising wages. Meanwhile, the International Monetary Fund further boosted the ruling parties by declaring the UK's economic situation "solid" this week, while urging that interest rates are held until the middle of next year at the earliest.

 

Greek threat

Default looms

As the political impasse between Greece and its paymasters in Europe and at the IMF goes on, the stakes are rising. Indeed, this week word came from Greece that failure to agree some sort of deal to free up funding before a crunch deadline later this month would result in Greece defaulting on its €2.5bn of payments due to the IMF in May and June. This drastic measure is likely to lead to withdrawal of other external financial support and thus the Greek banking sector potentially going into meltdown, prompting capital controls and further economic chaos. Whether this is merely brinkmanship remains to be seen.

 

Global shock

IMF warning

The International Monetary Fund's six-monthly economic outlook has turned slightly more rosy, but was tinged with starker warnings of potential economic pitfalls to come. Leaving global growth forecasts unchanged at 3.5 per cent for this year, the IMF upgraded next year's outlook by 0.1 per cent to 3.8 per cent, but went on to warn that a recovery based on lower oil prices and easing of austerity policies may not be built on secure enough foundations to withstand some of the potential risks to the global economy. One of the biggest risks identified is that posed to emerging market economies by the US raising interest rates more quickly than expected.

 

Housing hiatus

Post-election rebound?

With just weeks now until we know the identity of the next resident of 10 Downing Street, estate agents across the UK must be sharpening up their sales patter once more. The predicted pre-election hiatus in the housing market has come to pass, with house price inflation slowing to 7.2 per cent in February according to Office for National Statistics figures, down from 8.4 per cent in January. Some in the industry point to typical seasonal slowing being exacerbated by the election uncertainty, while others are expecting this slow but steady decline in growth rates to continue for the rest of the year. See page 12.

 

Time-bomb ticking

Bearish warning

One of the City's most bearish commentators has warned that the past five years of Coalition management of the economy has simply created a "time-bomb" in the UK economy, which could go off after the election. Société Générale's Albert Edwards has highlighted the "grotesquely wide" deficit in the UK's current account, which will come back to haunt sterling. He said: "The UK economy stands alone, up to its eyeballs in macro manure. Eventually the stench will fill the nostrils of currency markets, with the inevitable result - another sterling crisis."