Some More Economic Thoughts

A Pre-Election Transparency Suggestion For Sunak That Could Win Votes

I have one very clear suggestion for Rishi Sunak and his Parliamentary colleagues – Copy The French.

That could sound like a really scary thing to suggest, however if the Conservatives put into immediate play my suggested edict – I believe that it could win over a mass of possibly losing votes.

For the last couple of years – ex Covid and Ukraine impacts – I have been complaining in these columns that the Government’s Rate of Inflation is inaccurate in its comparisons.

Simply because prices in the shops may be levelling out or even going lower at ‘purse level’ – but in quantity and quality there is still a massive dilution of value simply through ‘shrinkflation’.

Products may look similar on the shelves while prices have crept up BUT those items have been reduced in size, volume and quantity.

Chocolate bars, cereals, sweets, jams and preserves, sauces and the thousands of other shelf items have all been ‘shrunk’ and canny shoppers realise that it is all a bit of a ‘con’ and something should be done about the situation.

Ask any supermarket shopper and they will agree with what I am saying, I am sure.

Some of those reductions have been by upwards of 30% – which is far, far higher than the claim of the Government and its shopping baskets.

So, my idea is for Sunak to please the shoppers of the UK in one bold move and that is to follow the French, who have declared that retailers must declare when products have been shrunk in size and quantity.

Highest Level Of Properties On The Market

Is it a sign of the times?

It is reported by The Institute for Fiscal Studies that home ownership among the UK’s millennials is at its highest level in more than a decade.

Believe it or not the IFS suggests that the reason is that earnings among young people have risen three times faster than that of the general population.

The Nationwide Building Society has commented that house prices are now at their highest level for 18 months.

It reckons that the housing market is showing signs of resilience, despite the higher mortgage rates.

Robert Gardner, Nationwide’s Chief Economist, commented that consumer confidence has improved notably over the last few months, supported by solid wage gains and lower inflation, which in turn helps to offset affordability pressures.

The property search website Zoopla has stated that the number of homes for sale is at the highest level in eight years – which could counter-balance house price rises.

The website reckon that the average estate agency branch has 31 flats and houses on its books, which is the highest level since 2016.

Zoopla reckon that the latest number compares with 26 last year and just 16 in 2022.

In my view I wonder who is doing the counting for Zoopla – looking at any of the estate agency windows locally throws up an even greater number of properties available – but hey they are the experts.

Bank Rates

Against the backdrop that over 100,000 people will face higher mortgage rates from July onwards, there may well be some cheerful news.

This week could well be seeing interest rates in Europe being reduced, as the European Central Bank looks to lower borrowing costs.

That good news could well filter into our markets which in due course could help to influence the Bank of England to follow up in easing its rates.

Adults Not At Work

Did you know that the number of non-student households in the UK where no adult has ever worked is currently at its highest level since Spring 2012.

The Office for National Statistics reports that between January and March this year, there were 4.3m adults,16 to 64-year-olds, living in households where no adult was employed.

That is the highest level in seven years.

Across the nation there were some 9.4m work-age adults who were economically inactive at the start of 2024.

China Manufacturing Activity

I wonder what the figures are like elsewhere in the world for comparing our UK inactivity.

Over in China it has been reported that manufacturing activity in May was unexpectedly lower, bringing about reactionary calls for additional economic stimulus from the Chinese Government.

The property market over there has been somewhat shaky of late, which has not helped consumer confidence in the world’s second largest economy.

Post Office And Horizon Software

Just what is happening with the Post Office?

Did you know that it is said to have renewed it contract with Fujitsu for its faulty Horizon software system – for another five years.

The Japanese group is believed to want to rid itself of this connection but pressures over the scandal-hit system are ongoing.

General Election Leads To Uplift In Gold Investing

The Royal Mint has seen a surge in gold and precious metals since the snap election was called.

There has been a 49% increase in the number of customers buying precious metals bullion through The Royal Mint, while the volume of gold purchases has doubled (up 117%) from the previous week.

The Royal Mint’s bullion division has seen customer spend increase by 145% week-on-week while there has been a 10% uplift in first-time investors.

Physical investment products including 1oz gold and silver Britannia coins, large gold bars, and sovereign coins have proven to be particularly popular alongside The Royal Mint’s suite of digital products.

Due to gold’s safe-haven status and lack of correlation with other assets, The Royal Mint tends to see surges in the buying of gold coins and bars when investors are uncertain about the future.

In addition to the General Election, investors are keeping a close eye on whether interest rates will come down and when that might happen, as well as looking ahead to America’s elections in November.

Saudi Arabia Selling Down Its Aramco Stake

Goldman Sachs, HSBC and Citi are believed to be involved in handling a secondary sale of Aramco shares on behalf of the Saudi Arabian Kingdom.

The proceeds from the estimated $10bn worth of stock being placed with institutional investors could well be diverted into the State’s Public Investment Fund vehicle, its sovereign wealth fund.

It is suggested that the State wishes to invest substantially away from dependence on fossil fuels – Aramco accounts for about 10% of the world’s oil supply.

It is suggested that in an effort to prop up oil prices, Saudi Arabia and Russia will be persuading other Opec members to deepen their oil production cuts until the end of next year.

Such news could put pressure enough to push prices higher again.

NatWest Share Sale Abandoned But Bank Buying Back Its Own Stock

The Public Sale of the Government’s sale of its stake in the NatWest banking group is either off or just being delayed, pending the General Election.

The bank bought back a chunk of its own stock last week, taking the Government’s stake down to 22.5%.

That delay must be sad news for M&C Saatchi, the advertising agency involved in the anticipated Public Sell-Off expected for this month.

Perhaps the Government could place a big chunk with Saudi Arabia’s Public Investment Fund.