Investment Newsletter April 2017
Running on empty Last month, 562,337 new cars were registered in the UK. That’s roughly one shiny new car rolling off the forecourt every 4.7 seconds, 24 hours a day, 7 days a week. This was an all-time record for new car sales in the UK and follows on the tail of strong sales growth in the last year.
Neal Foundly Investment Analyst
Indeed, the car market is not the only consumer sector in rude health. In February, month-on-month retail spending grew by 1.4% and on an annual basis, it rose by 3.7%, significantly ahead of forecasts of 2.6%. Online sales rose by a fifth on the previous year.
What’s going on? Well, it is true to say the UK economy is in generally better shape than many predicted this time last year. The labour market is relatively tight and many are likely to feel secure in employment and inclined to
spend more as a result. It is precisely this wave of strong data and positive sentiment that no doubt led to Theresa May’s call for a snap general election in June. Improving economic conditions never hurt in persuading voters to stick with you. Around 60% of UK economic growth is driven by consumer spending and this served to propel growth in gross domestic product (GDP) to a year-on-year rate of 1.9% in the last quarter of 2016. However, the underlying trends are more troubling. Quite simply, UK consumers are increasingly spending more than they are earning. As you can see from the chart on the following page, the savings ratio, i.e. the proportion of income that UK earners save rather than spend, has fallen to a level not seen since the 1960’s (as shown in chart 1).
Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission.