Something very strange is happening to the economy. We are limping along, not quite at the bottom of the G7 growth table as we were but still not good. Yet, unemployment has hit a new record low of 4%. We should accept this is a problem for those of us who thought Brexit would start to appear in the economic statistics in a far more prominent way and well before now. But, somehow we are still growing and this allows Brexiteers like Ross Clark to write an I told you so piece like this (HERE).
The recent jobs data is described as mixed (HERE) because in spite of unemployment being at a record low we see wage growth actually falling back to 2.7% barely above inflation.
The economy is definitely stuttering from the uncertainty over Brexit, there is no doubt about it and sterling was under pressure again last week as fears of a no deal outcome rise. Some economists think the pound has further to go on the downside. If this happens imports become more expensive and inflation begins to take off. Labour shortages are already beginning to drive up wages and this will add to our economic woes.
A little noticed report from the ONS (HERE) looks at consumer spending and, it seems to me, sounds some alarm bells.
In 2017 consumers spent more than they earned. This last occurred in 1988, thirty years ago and the difference between earnings and spending then was a tiny and manageable £300 million. But in the last year we spent a huge £25 billion more than our combined incomes. This came from a mixture of more borrowing and using our savings. Of course, not everyone was in that position but this means for those that are, the numbers are worrying. We can't do this for ever can we? It is not sustainable.
This is not a healthy state to be going into what will probably be the biggest upheaval to our trading, legal, political and constitutional order in history. Trump is doing his level best to destabilise international trade, business is paralysed by uncertainty and many companies are triggering contingency plans to move operations to mainland Europe. EU nationals are returning in record numbers. Unfilled vacancies are at a high. These are not good signs for the future.
The economy is holding up well, we should acknowledge that - but it's starting to creak as we get to the business end of Brexit and one wonders when it will turn - it cannot be too long. When it does, we can throw Ross Clark's article back in his face.
