Here is the Director’s weekly news for week commencing 8th May.
Economic News
Barclays Economic Update: The UK economy began to show signs of post-referendum slowing as the preliminary estimate of q1’17 GDP growth stood at 0.3% (q⁄q), down from 0.7% (q⁄q) in q4’16. This weakness was driven primarily by the services sector with growth decelerated by 0.3pp to 0.4% (q⁄q), resulting in a +0.23pp contribution to headline GDP growth, otherwise 0.37pp less than in q4’16. Construction output and industrial production both grew by 0.3% (q⁄q), down from 1.0% (q⁄q) in q4’16 and broadly unchanged, contributing +0.01pp and +0.04pp, respectively. It is expected that the easing in economic growth was driven primarily by a slowing in private consumption growth. This would be broadly consistent with the latest retail sales data, where volumes contracted by 1.4% (q⁄q) in q1’17, resulting in a -0.3pp contribution to household consumption (retail sales make up 20% of household consumption in the quarterly national accounts), the first time retail sales have detracted since q4’13. furthermore, the latest public finances data showed that vat receipts in q1’17 came in at £32.2bn, or £2.8bn less than in q4’16, confirming a reduction in purchases in nominal terms, while the ascent in headline CPI over the same time implies the same will ring true in real terms.
Finally, while consumer confidence remained elevated, it is nonetheless in negative territory, and importantly, consumers’ intent to make purchases fell by 3pts to +7 in q1’17. It is expected that fixed investment to be a drag on headline GDP growth, which would be consistent with the latest surveys on investment intentions, all of which are in contractionary territory. it is also expected that net trade to contribute positively, driven largely by the depreciation in GDP since end-2015.
Meanwhile, the contribution from government spending is likely to be muted. The UK has only now begun to feel the beginning of the post-referendum slowdown. Given the ascent of headline CPI, the increasing likelihood of negative real wage growth in the coming months, the likely tightening of unsecured consumer credit over the coming quarters, as well as the lowest savings ratio since records began, UK GDP growth is expected to continue to decelerate over the course of 2017 as households are forced to tighten their belts.
This continued slowing would be consistent with the latest CBI industrial trends survey. It reported that business optimism had declined, and consequently expectations with regard to capital investment had fallen. Equally, on elevated BREXIT uncertainty, firms had no intentions to increase payroll over the coming months. Furthermore, firms expect new orders to decline in q2’17, relative to q1’17, driven primarily by anticipated weakness in domestic demand. Consequently, volume output is expected to decline in q2’17.
The slowing in the UK economy already seen in q1’17 and the increasing likelihood that it will continue over the course of 2017, strengthens expectations that the BOE MPC will leave monetary policy stance unchanged until end of 2018.
Other News
FDF General Election Manifesto: The FDFs five-point manifesto included securing the best possible Brexit deal, tackling obesity, increasing exports, supporting an industrial strategy sector deal and developing home grown talent. Almost one third of the sector’s 117,000 workforce are non-UK EU workers and the FDF urged the next government to guarantee the right of those workers to remain in the UK. it also wanted a special trade deal with the Republic of Ireland and a tariff-free trade agreement with the EU.
Increasing export support to take advantage of increased demand for UK products overseas was the FDFs third policy. ‘Turbo-charging’ sector-specific exports support would help smaller businesses to take advantage of the new opportunities that Brexit was expected to create.
Coeliac UK: Coeliac UK gluten free campaign, backed by the FSA, was launched yesterday. It is aimed at trying to ensure a greater understanding for consumers avoiding gluten when eating out of home. You can find more info on the campaign here, including some videos with advice for front of house and tips for caterers – and this is the link to download their guidance for caterers.
Whole Grain Summit 2017 – Vienna, 13-15 November 2017: There is more information available on the registration fees for attending this conference here https://www.wholegrainsummit.com/registration but the registration are not yet open.
Environmental Cost of Producing Bread: This is a link to a study which attempts to set out how to calculate the environmental cost of producing a loaf of bread. http://grantham.sheffield.ac.uk/weve-calculated-the-environmental-cost-of-a-loaf-of-bread-and-what-to-do-about-it/
Gordon Polson – FOB Director