An Inconvenient Truth

29 July, 2019

Sam Roberts

This week sees a busy week of market reports and data releases.

With all the political posturing that has taken place recently and everyone holding their breaths to see if Prime Minister Johnston (still sounds weird when I say that) can really pull off the great escape from Europe, while keeping everyone satisfied across Great Britain, the data releases will show how the markets have taken the last month and quarter and also how much confidence there is going forward into ‘the unknown’.

With a report from the CBI (Confederation of British Industry) this morning, stating that neither Britain nor Europe are ready for a no-deal Brexit. We need to look at the economic data being released that reports on different aspects of our economy, to get a more factual picture.

This morning we have the Nationwide Housing Prices Month on Month and Year on Year figures.

These are always key to show the appetite of the British consumer to buy new houses. Basic supply and demand but in lots of areas, demand outstrips supply.
Whilst the figures will show a slow but steady rise in house prices throughout the country as a whole, the truth is London house prices have fallen by 3% over the past year, whilst house prices outside of Greater London have risen by an average of 5%.
House prices in London were inflated for years but the appetite of first-time buyers, who wanted to live in the capital and foreign buyers, looking for a capital ‘bolt hole’ to enjoy for a couple of months throughout the year, kept the bubble inflated.

Later this morning, we have the Bank of England Consumer Credit Figures.
These are key all around, as they are the figures from financial institutions, which show how much we have borrowed.
These can be viewed in two different ways. Either we are in debt and keep borrowing, or things are so good, we just get more credit as we can afford it.
These figures are for the month of June and are expected to go down to £3.7bn from £ in May. Make of this what you will, but when a bank lends less to its clients, it normally reflects in the banks’ overall profit, as loans and interest on those loans are a major pillar of a banks profits.

We also have The Mortgage Lending and Approval Figures for June.
These again are good markers as to where the public is heading. Not everyone that applies for a Mortgage actually gets one (there are many different reasons for this, credit scoring being just one) but these figures are expected to be down once more on the previous month, which would show that as a nation, we are finding it more difficult to save. Take into accout that house repossessions are at an all time high and you can see a worrying trend here.

Mortgage Lending figures are also expected to be down from £3.1bn in May, which was the smallest increase since April 2017

Wednesday sees the GFK Consumer Confidence figures.
Gesellschaft Fur Konsumforshung: German for Society for Consumer Research (or there abouts)

The June figures went back to -13 in June, erasing a 3 point rebound in May to -10
The main indices dropped from the previous month, with personal finance and our ‘big purchase’ ability being major fallers. The average UK consumer continues to remain concerned about the wider economic situation, ie: Brexit (I tried not to mention it), with the main issue being, that we have no real control over it.
Unfortunately, these figures seem to be pointing to a turbulent time over the coming summer months.

Later on this week we also have The Bank of Englands’ QE (quantitative easing) statement.

So taking all of this into account, you can see why the markets and sterling in particular are not following 92,000 people throughout the country and jumping for joy, over the appointment of a man with a bad haircut and an ill-fitting suit.

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