Economic News

CBI Economic Update: UK economic growth stronger than expected in Q4.The ONS’ preliminary estimate of UK Q4 GDP came in stronger than expected while CBI surveys indicate some variation in sector performance at the start of 2018. Meanwhile, the household squeeze continues as real wages fall for the tenth month running. The ONS’ preliminary estimate of Q4 2017 GDP showed that UK growth edged higher at the end of 2017, to 0.5% (up from 0.4% in Q3). This was higher than both consensus expectations and our “nowcast” of 0.4% growth. The uptick was driven by a broad-based pick-up in growth in the services sector, which grew at the fastest pace in a year.

Meanwhile, growth in manufacturing was solid which chimes with the strong performance in manufacturing suggested by business surveys. However, consumer-facing businesses such as distribution, hotels and restaurants observed a weakening in growth, likely reflecting the ongoing squeeze in households’ real disposable incomes. The CBI’s growth indicator for January suggest that growth in activity eased somewhat. The CBI’s business surveys for January broadly echo the mixed sectoral conditions seen in the Q4 GDP data. The CBI’s Industrial Trends Survey continued to show strong growth in manufacturing, but elevated costs pressures drove the strongest expectations for domestic price inflation since 1984.
Additionally, capacity pressures are biting hard with the proportion of firms working below capacity the lowest since 1989.

And, firms continue to air concerns over skills shortages in the sector, with the number citing skills shortages as a factor to limit output the highest since 1974. Meanwhile, growth in the retail sector was tepid in the year to January while consumer services saw growth ease over the last quarter. This highlights that challenges remain for the consumer-facing sector as the squeeze on household incomes continues. The ONS’ latest release of labour market statistics showed that employment returned to growth (rising by 102,000 to 32.2 million), following a decline in the previous two rolling quarters. However, unemployment was little changed compared with the previous quarter with the unemployment rate remaining at 4.3% and the lowest level since 1985. CPI inflation edged down in December to 3.0%, from 3.1% in November, in line with consensus expectations. However, the pressure on wages continues: real wages fell for the tenth month running, with CPI inflation once again higher than nominal wage growth

Consumer Confidence: Barclays report that according to GFK consumer confidence improved in January 2018. According to the survey from GFK, consumer confidence in the UK showed mild improvement and climbed to -9 in jan’18 after -13 in the previous month. In jan’18, headline consumer confidence rebounded following months of steady declines. Households appear more positive on their financial prospects, general economic outlook and intentions to make major purchases. However, at -9, sentiment is still much weaker than a year ago (-5) and still in negative territory. Though, increased household caution can still be seen in the rise in plans to save over the next 12 months, which now stands at the highest level since jun’16.

Despite the rebound, consumer confidence remains on a weakening trend and the off trend number could be a temporary problem given there may be further uncertainty in store. The overall outlook over the past year has been of weaker household confidence together with falling retail sales and point to a further slowdown in consumption. They are also in stark contrast with the rebound in consumption in q3’17 and likely to support this rebound as quarterly volatility rather than an underlying reversal in trends with consumption growth expected to be positive at 0.1% (q⁄q) in q4’17.

Summary: following months of steady weakness, GFK consumer confidence rebounded with households stating greater optimism across personal finances, general economic outlook and intentions to make major purchases in jan’18. However, at -9, sentiment is still much weaker than a year ago (-5) and remained in negative territory.

Brexit: CBI calls for greater clarity and urgency on Brexit trade and on transition. The CBI has set out a new vision for the future UK-EU economic relationship, and on Monday, the efforts to secure transitional arrangements took another step forwards. Monday saw agreement reached by EU27 Ministers on the directives that will give European Chief Negotiator, Michel Barnier the mandate to formally negotiate a time-limited, status-quo transition period with the UK. However, despite this welcome news there remains concerns about the prospect of the UK becoming a rule-taker in this period, with the CBI’s Head of EU Negotiations, Nicole Sykes, reflecting the importance of the UK maintaining a voice at the table where possible during the transition period. Under the EU’s guidelines, the UK will be able to continue trading with the EU as it does today, until the start of 2021, members can read more here. But the years beyond 2021 matter the most. To support the government in taking these momentous decisions on the long-term future relationship, last week Carolyn set out the business vision for a good Brexit deal; a plan where evidence trumps ideology. The CBI drew on extensive member outreach over the past 18 months to reach two main conclusions. First, neither the Canada nor the Norway models for a future relationship between the UK and the EU are ambitious enough. The second conclusion is on the possibility of a future customs union between the UK and the EU. Carolyn outlined the importance of decisions being taken on the basis of evidence with the answers being found through a hard-headed spreadsheet assessment of pros and cons. On this balance of advantage, the majority of businesses believe that, unless and until an alternative solution is found, the benefits of a comprehensive customs union outweigh the benefits of FTAs outside the EU. The EU is by far the UK’s largest trading partner, accounting for 43% of exports and 53% of imports. Carolyn reiterated that any new customs arrangement would be subject to negotiating a good deal but the EU market remains a priority for the majority of businesses as a practical, real world answer that could help resolve some of the complex issues raised by Brexit.

Other News

Food and Drink Sector Council Holds First Meeting: This week the Food and Drink Sector Council held their first meeting – co-chaired by the Defra Secretary Michael Gove. The Food Minister George Eustice was also present, as well as a number of officials from Defra, DIT, and BEIS, and was constructive and positive. The Government’s release on the meeting have also announced the membership of the Council, which can be found here.

FSA’s Biannual Public Attitudes Tracker (November 2017) results have been published. FSA conduct this tracking survey with consumers in England, Wales and Northern Ireland, in order to monitor changes in consumer attitudes towards the Agency and food-related issues. This wave included 16 new questions.

Food issues of concern.

The top food safety issues of concern for respondents were:

Food hygiene when eating out (36%)
Food poisoning (30%)
Chemicals from the environment, such as lead, in food (29%)
Food additives (26%)

The top wider food issues of concern were:

The amount of sugar in food (52%)
Food waste (48%)
Food prices (46%)
Animal welfare (43%)

Concern about food safety in UK food outlets

45% of respondents reported concern about food safety in UK restaurants, pubs, cafes and takeaways. 42% of respondents reported concern about food safety in UK shops and supermarkets. The general overall trend for concern for food safety in both restaurants and shops has decreased since Wave 1.

Awareness of hygiene standards

84% of respondents reported being aware of the hygiene standards in places they eat out at or buy food from. The most commonly reported ways of knowing about hygiene standards were via hygiene stickers / certificates (61%) and the general appearance of the premises (60%).

Awareness of the FSA

Findings demonstrate that 78% of respondents reported being aware of the FSA, similar to previous waves. Of those aware of the FSA, 70% trusted the FSA to do its job, and 75% reported that they trust the FSA to tell the truth in the information it provides. Ensuring that food was safe to eat was the main issue respondents (88%) reported the FSA to be responsible for.

Awareness of food poisoning

Salmonella and E-coli were by far the most commonly known types of food poisoning (total awareness of 89% and 82% respectively). Perceived most likely sources of food poisoning were raw chicken or turkey (79%), followed by shellfish (54%), reheated take-away food (47%) and eggs (38%).

Awareness and incidence of allergens

18% of respondents were aware of specific rules about allergens, and 10% reported that they have a food intolerance and / or allergy themselves. Most people (70%-77%) reported feeling confident to ask members of staff at food outlets for more information about ingredients in food because of a concern about possible allergens/food intolerance.

Attitudes towards food production, sale and labelling

The majority reported that they trust that food is what it says it is and is accurately labelled (75%) and 74% trusted the authenticity of ingredients / origin / quality of food. Findings also demonstrated that 44% of respondents trusted that people who produce and sell food have their best interests at heart.

Background

Fieldwork for this wave took place in November 2017 when a representative sample of 1,989 adults in England, Wales and Northern Ireland were interviewed face-to-face.

Biannual Public Attitudes Tracker November 2017

The FSA conducts a tracking survey with consumers, in order to monitor changes in consumer attitudes towards the Agency and food- related issues