Business confidence highest since 2007 - Green shoots flowering?Watch
This comes on the back of the construction sector returning to growth according to April PMI figures, manufacturing showing growth and strong service sector growth coupled with increasing private sector job creation.
This compares to 0.3% growth in the first three months of the year.
The BCC survey showed that in the service sector, domestic sales and orders were growing at the fastest pace since the fourth quarter of 2007, while export sales had grown at the fastest rate since the survey began in 1989.
For manufacturers, domestic sales growth was the strongest in two years and export order growth the best in a year.
right wing politics is good for business.... call the trade unions to strike. Quick!!
Manufacturing PMI climbed to 57.2.
Service sector PMI climbed to 60.5.
Highest aggregate PMI since 1998 apparently, Goldman Sachs saying that if this were to keep up then these readings are consistent with growth in excess of 3.5%.
Acid test will be if those PMI figures translate through to higher figures when the official ONS ones come out. The PMIs are surveys so pick up the fact that businesses are reporting higher orders but if they actually are starting to accrue backlogs then that should encourage them to expand which will mean both investment and employment should rise.
Another big question will be on interest rates - at the moment we still have artificially low interest rates to support the economy, which are not good in the long run, so the BofE will really need to look at starting to raise rates - a big question is can this be done steadily without knocking the economy back because it will mean a tightening of household budgets when mortgage payments jump up.
In terms of consumption levels i am a little wary that pressure on living standards caused by higher general inflation than wage rises could keep consumption subdued given that social attitude surveys alluded to in City AM suggest that the electorate have become more debt averse. The question is whether increased hours and strong private sector job creation (114, 000 created in Q2) are enough to offset this or whether the rise in consumption will again be credit driven.
In terms of investment the fact that new orders are at their highest level since 2004 is probably an indicator that business is putting some of their cash reserves to work, this coupled with the fact that the coalition have done fairly well in attracting foreign investment probably indicates sustainable growth.
Government spending is obviously restricted and their were a little over 30,000 public sector redundancies in Q2 but at the current rate it's probably not enough to push us back into stagnation.
In terms of exports i think much depends on how sensitive the manufacturing sector is to the pound strengthening and also how well the Eurozone recovers so despite strong manufacturing growth currently i think this sector of the economy could easily go into reverse.
In conclusion then i think that the recovery is uncertain and on soft ground with an uncertain pattern of consumption growth, an unstable Eurozone and a construction sector which appears to be dependent on government intervention in the credit market. With that said, with a little luck it's entirely plausible that 2013 and 2014 could see good growth before the uncertainty of how the economy copes with rate rises develops into 2015.
Another piece of the puzzle released today, unemployment fell by 24,000.
I'm just waiting for the first person to come along and disagree. They naturally won't be able to back it up though.
All bad economic news can be explained away as "Not cutting fast/hard enough", and all positive news is attributed to the cuts working - the confidence fairy at work. 21st century bloodletting.
To put things in context, the last three quarterly GDP growth rates were:
2012 Q4 -0.2
2013 Q1 0.3
2013 Q2 0.7
whereas the last three quarterly growth rates before the Coalition took over were:
2009 Q4 0.4
2010 Q1 0.5
2010 Q2 1.0
so the economy is not actually growing as fast as it was in the run up to the last election under the Labour government.
This is the best run since the Coalition has been in power but they are comparing it to the past performance under the Coalition when talking about 'good news', we haven't yet really got in a better position than we were in 2010.
Unemployment is a similar story.
Unemployment in June 2010 was 7.8%, the latest figures are for June 2013 which are 7.7%. That's a four percentage point improvement on June 2012 (8.1%) which is a good performance over the past year but the only reason it looks good is because it rose under the Coalition before it fell.
GDP per person has fallen since Q2 2010 and also fallen in the past year, so the rate of GDP growth is slower than the population increase. The same story happens with real household average income which again has fallen 3% since the election and also fallen 1% in the past year. These are the types of figures which reflect what average voters actually feel in terms of their personal economic situation so the danger is if Conservative politicians and right wing journalists (generally people that have above average incomes anyway and so have decent means to support themselves) crow too much about a booming economy, they will end up being seen as out of touch if the average Jo Bloggs is finding it a struggle.
Finally don't forget the position on national debt. In June 2010 net debt as a proportion of GDP stood at 58.6%, in June 2013 it was 74.9%, which is even rising from June 2012 when it was 71.6% or June 2011 (67.7%). To put these debt figures in context, in September 2008 at the time of the collapse of Lehmann Brothers it was 40.0% so we have seen a considerable rise since then.
Whilst the debt ratio is continuing to rise its a bit odd to be shouting about having won the battle on the economy.
I think though that debt to GDP is the wrong figure to be looking at when assessing their success though. Rather it is the fiscal deficit to GDP ratio which is important here, that peaked at 11.2% in April 2010 (calculated by the tax year obviously) and has since fallen to 6.3% in April 2013 (despite higher growth in the USA and Germany that's actually a bigger fall indicating the harsher cuts imposed early).
There was a small drop off during September however for Q3 as a whole the data is the highest since records began in 1998 and would indicate growth in Q3 of 1.2%.
GDP in Q3 expanded 0.8%.
October PMI figures are..
Service sector: 62.5 (highest since 1997)
New Business: 63.4(highest on record)
Manufacturing: 56.0 (slight fall from September)
Construction: 59.4 (highest since 2007)
All sector PMI: 61.5 (highest on record - indicates Q4 growth of 1.5%)
1. The cost of living inflation against the average wage.
2. Whether or not the "Help to buy" scheme construction bubble will burst and we all know that if that does indeed burst, we will again be plunged into another financial crisis. It is something the government needs to approach with caution and care.
However, I am optimistic about the country and I read an article today stating how the United Kingdom will be the West's fastest-growing economy in this quarter. Let's hope so.
Unemployment fell by 48,000 to 7.6%.
Carney also stated that growth and employment will be higher than he originally predicted and that there is a 40% chance that unemployment will hit his 7% mark in 2014.
Looking at the maths 7% is 2.15m unemployed so unemployment needs to fall by a further 320,000 to hit that.
Service sector: 60.0 (lowest in 5 months)
Manufacturing: 58.4 (a rise)
Construction: 62.4 (highest since August 2007)
Comparing US economic activity given a different policy approach is quite stricking to our position.