Directors’ Weekly News – 9th October 2017

Dear All,

Detailed below is the Weekly News for 9th October.

Have a good week.

Gordon Polson – Director

Economic News

CBI Economic summary:

  • The ONS’ third estimate of Q2 GDP growth was unrevised at 0.3%. However, some revisions to its composition revealed more broad-based support than previously estimated
  • Surveys continue to point to stronger growth ahead
  • Clear communication shift from the Bank of England’s MPC committee towards hiking rates in the coming months



Third estimate of Q2 GDP points to more momentum from net trade and investment…

The ONS’s third estimate of Q2 GDP growth was unchanged at 0.3%, but revisions to quarterly and annual data suggest GDP growth has been more broad-based than previously estimated. Net trade was estimated to have boosted GDP over the quarter, by +0.4ppts (against a flat contribution previously). Business investment was also revised up (growth of 0.5% versus 0.0% previously), though its contribution to GDP was still minimal. Meanwhile, growth in household spending – the largest component of GDP – remained weak, at its weakest in two-and-half years (0.2%, albeit revised up from 0.1%).

Alongside the Q2 national accounts the ONS published annual revisions dating back to 1997, which, while doing little to change the UK’s “economic history”, may have some implications for the economic outlook. First, the household savings rate is believed to have been significantly higher than previously estimated. Changes over the last few years were particularly stark: the ratio of household savings to disposable income is thought to have averaged around 8% since 2013, compared with 6% previously. This reflects the inclusion of new data on income from dividends into household sector income. Upward revisions to the savings ratio and household income suggest a little more upside risk to household spending ahead: in the face of an ongoing squeeze on real earnings, consumers may have more scope to reduce savings to finance spending.

Second, business investment over the recent past also looks a little healthier; growth since 2011 has mostly been revised up, and the decline over 2016 is now slower (-0.4%) than previously expected (-1.5%). Since the EU referendum business investment is thought to have risen by an average of 0.6% per quarter, compared with no growth previously. But while this suggests slightly more impetus in private sector investment, the pace of growth has still been modest compared with preceding years. Anecdote from our members continues to suggest that uncertainty is putting the brakes on larger capital spending projects. Furthermore, there have been large downward revisions to corporate financial balances since the early 2000s, with private non-financial companies now shown to have been net borrowers since 2013, rather than persistent net lenders. This contrasts with previous belief that firms have been sitting on sizeable “cash piles” since the financial crisis, with potential implications for the funds available for investment further ahead.

And finally, the UK’s current account deficit is now estimated to be larger, hitting a record low of around 6.0% of GDP in 2016 (compared with 4.4% previously), before narrowing to 4.6% in Q2 2017. A larger current account deficit is a concern to the extent that it leaves the UK economy more vulnerable to a weakening in capital inflows – something that is a growing worry following Brexit.

…and CBI surveys suggest growth continued to hold up in Q3

The CBI’s business surveys suggest that economic activity has held up reasonably well during Q3. In the year to September, retail sales volumes grew at the fastest pace in two years according to the Distributive Trades Survey, with the outlook for growth remaining solid. And while manufacturing growth eased in the three months to September (in comparison with July and August), it remained well above the long-run average, with expectations pointing to an acceleration in output over the next three months. By contrast, demand in the services sector was unchanged over last quarter, with business and professional services reporting flat volumes and consumer services seeing a small decline. Taken together, however, the surveys point to fairly steady growth for the UK economy in Q3, with the pace of expansion expected to pick up in the next three months. (It’s worth noting that for much of 2017 CBI and other business surveys have been consistent with a somewhat stronger pace of economic growth than that seen in the official data.)

MPC assess that a rate rise may be necessary over the coming months…

At its September meeting, the Bank of England’s Monetary Policy Committee voted 7-2 to maintain the Bank Rate at 0.25%, with Ian McCafferty and Michael Saunders once again dissenting by calling to raise the key policy rate to 0.50%. The committee was unanimous in voting for no change to the level of quantitative easing. Nevertheless, the minutes of the meeting reported that a majority of the committee believed that some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target (2.0%). This marked a clear shift in tone by the Bank of England’s MPC committee, reflecting a slightly higher outturn for inflation than it had expected and the continued tightening of the labour market. On the face of it, this suggests that the first increase in interest rates in over a decade may come sooner than we had previously expected (our June forecast assumed H2 2018), although policymakers will of course continue to monitor incoming data for signs that spare capacity in the economy is being absorbed in line with expectations.

Brexit: The CBI are surveying companies on how they are preparing for Brexit. The insight it will provide will be used to support the many thousands of businesses who do not have the capacity to plan and help them to protect jobs and investment as we progress through the negotiations, and will provide us with real-time evidence that we can use with government to help get the best deal for prosperity.  A full write up and analysis of the results will be available in November. The link to the survey is:

It consists of around 20 questions and should take no longer than 10 minutes to complete. It will close on Monday 16 October.

Other News

Wheat Quality report from AHDB (Via nabim) On 15 September, AHDB announced the preliminary quality results for winter wheat from harvest 2017. They stated that for the 2,858 wheat samples analysed by 31 August, the provisional average protein level was a record for the first release at 13.2 per cent. This compares to the three-year average at this stage of 12.1 per cent.Hagberg Falling Numbers (HFN) for all of the wheat sampled to date averaged 259s, some way below last season when they averaged 319s at the same point in the survey. The provisional result this season is also lower than the provisional result for the 2012 harvest (267s). However, it is worth noting that the average of the nabim Group 1 samples is above the level required to meet full specification requirements for bread wheat. There has been a high level of variation in HFNs across the wheat crop, with samples ranging from 79s to 432s. However, because the samples so far are biased to the earlier-harvested regions, the average HFN level may fall further. Later harvested regions were hit harder by summer rainfall which led to a challenging stop-start harvest for many.Specific weights this season are broadly in line with the same stage last year. At 76.8kg/hl they are the lowest since 2012, but not far off last year’s first provisional average of 77.2kg/hl. Of the nabim Group 1 samples analysed to date, Crusoe appears to be the most affected by the drop in HFNs, falling from 306s in last season’s provisional results to 247s in the 2017 first provisional estimates.The first provisional results have a regional bias towards the East and South East, representing 36 per cent and 38 per cent respectively of the total sample, with nabim Group 1 varieties accounting for 62 per cent of the samples analysed to date. Looking at these early data, AHDB estimates that 31% of grain met the full Group 1 specification (13% protein, 76 kg/hl, 250 HFN), but that this is likely to decline closer to 20% as later results are taken into account.  The final figure for the 2016 harvest was 45% (see below).The second provisional and final results will provide a much clearer picture of UK wheat quality, addressing the regional and varietal biases. This will give further clarification as to the extent to which grain quality was affected by the rain during harvest.

BBC Food Unwrapped: FDF have been approached by the production team behind the BBC’s Food Unwrapped who are putting together their Christmas episode. With this in mind we would like to collate some figures on the production of Christmas related food and drink.These would be used reactively and proactively for media engagement around the festive season.

Information of interest would include:

Sales figures (Based on 2016):
Tonnage or individual products sold (w/ illustrative examples e.g. ‘Enough mince pies to stretch to the North Pole’):
When does Christmas-related production start? (E.g. What month does product first go into production, or what month does product with Christmas related packaging go into production/what month does Christmas-related increase in production take place:
Other relevant or illustrative statistics (e.g. extra staff required to deal with festive production):
 Please let me know if you have any such information to share, either now or in the coming weeks.


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