Consumers coppering up ...

Consumers Coppering Up ... Of Retail Sales, Jobs and Inflation ...
Retail spending increased by over 4% in July according to the latest data from the ONS this week. Sales volumes increased by just 1.3%. Consumers are spending but getting less for the money as inflation hits the high street. Great news for retail, higher prices and higher margins, with less work at the till, a blissful trilogy for retail success.

In the second quarter as a whole, retail sales volumes increased by 2.6%, spending increased by almost 6%. In the same period last year, volumes increased by over 4% but spending increased by less than 2%. Households are spending despite the apparent squeeze in real incomes. If the trend is maintained, fears of a consumer slowdown this year will evaporate.

Inflation is hitting the high street. The headline index CPI was up by 2.6% in July unchanged from the prior month. Goods inflation at 2.7% moved ahead of service sector inflation (2.6%) for the first time in almost five years. Producer prices increased by 3.2%. Input costs slowed to 6.5% from a peak of 20% in January. The impact of oil prices and sterling depreciation is working out of cost pressures. We expect inflation to moderate towards the end of the year. Inflation CPI should close around 2.5% assuming no real acceleration in earnings.

Job numbers this week, suggested strong growth continues in the UK. Unemployment fell to 1,484 million. The unemployment rate fell to 4.4%. The U:V rate fell to 1.9. Vacancies in the economy numbered 768,000.
Earnings increased by 2.8% in the month of June. Private sector earnings increased by 3.1%. Finance and business sector earnings increased by 4.1%.

The long awaited acceleration in earnings, may be appearing. We expect earnings to increase by over 3% by the end of the year, maintaining price pressures, offsetting the slowdown in imported inflation. Strong growth, a tightening jobs market, inflation above target, interest rates at 25 basis points. Sometimes, like Alice, I think of six impossible things before breakfast ... monetary policy and the government approach to Brexit always feature ... 

Sterling weakness boosts tourism  ... true
Weaker sterling attracts record number of foreign tourists to the UK, is the headline in the Guardian today. ONS figures reveal there were 3.5 million visits in the month of June an increase of 7% on a year ago.

Tourism is one area of trade which demonstrates price elasticity and a response to the vagaries of sterling. UK visits overseas are expected to increase by 4% this year, compared to 7% growth last year. We model tourism as a function of relative wealth and price. Much traveling to be done if the trade deficit is to be eliminated.

We expect the volume of foreign visits to the UK to increase to over 40 million this year. Visits abroad for UK residents will increase to over 70 million. The deficit on tourism will be over £20 billion once again this year as in 2016. It hasn't been so high, since 2008 ... More information and charts on this and more, are available in The Saturday Economist Library.

That's all from the West Wing Whisky Tango Foxtrot this week. It has been a chaotic week, make that four weeks. The President has attacked the Attorney General, the leader of the Republican Party and the GOP as a whole. Who would have thought governing a country could be so difficult ...


Don't Miss the Economics Conference on the 13th October. Our theme is the Economics of Greater Manchester. We will be talking about the Inclusive Growth Challenge, Balancing the Books and the Sectors Driving Growth in the City Region! Another Great Conference in the pro-manchester series . We have a great line up of speakers to be announced soon. Book Now Don't Miss Out ...

John
Markets are mixed on news from the White House. The president's plans for tax cuts and infrastructure spending are under threat. That's all for this week. Have a great week-end ... We are getting some great feedback on the Net Promoter Scores survey. Thanks.

© 2017 John Ashcroft, Economics, Strategy and Social Media, experience worth sharing.
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