July 4, 2017

Pegler’s market report – 04.07.17: New survey highlights that British households are saving less than ever before

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (04.07.17) Business section under the title Pegler’s Market Report:

New survey highlights that British households are saving less than ever before

Recent data from the Office for National Statistics indicates that the UK’s household savings ratio has hit an all-time low of 1.7pc, which is considered in large part due to the squeeze on disposable income caused by flat average earnings and rising prices. Savings rates tend to fall when the economy prospers, and to rise in times of recession and uncertainty, as households cut back on consumption to build a rainy-day reserve. Monetary policy and the low returns available on cash may also be a factor.

Meanwhile, unsecured lending rose 10.3pc from a year earlier, the same as in April and close to its fastest rate since 2005. It grew £1.7bn on the month, the biggest increase since November last year. Borrowing on credit cards grew an annual 9.1pc in May, boosted by interest-free periods now lasting over 40 months in some cases as competition between providers intensifies. Of particular concern is car lending, which has grown by about 20pc a year since 2012.

The US President’s election pledges to splurge on infrastructure and to slash taxes, which gave such a welcome boost to stock markets and business confidence now show signs of faltering. Donald Trump’s failure to pass meaningful tax cuts or spending plans means early hopes that he could boost the US economy are likely to come to much and far from doubling the pace of economic growth as pledged, economists think the trend rate of growth in the US is now on the way down.

Shares in video games retailer Game Digital plunged nearly 25pc after warning that its profits would be substantially below previous expectations. The company blamed low supply of Nintendo Switch consoles for hitting sales. Game said demand for the Switch, which was released in March, has been “very strong”, but added that supply levels had been lower than expected. It is also facing continued softness in its core Xbox and PlayStation markets. Game has several stores in Sussex, including Brighton.

There was better news for Dixons Carphone, which is behind Currys, PC World and Carphone Warehouse, after it posted record full-year profits of more than half a billion pounds.

Online estate agency Purplebricks has halved its pre-tax losses and reported soaring revenues as it embarks on a quest to break America. In its first full year results since listing on AIM, the UK’s junior stock market, it reported a pre-tax loss of £6m, up from £11.9m last year. During this period it has also launched in Australia and is preparing to set up shop in California after a £50m round of funding from the City. The optimistic chief executive, Michael Bruce, claimed Purplebricks is on track to be the most successful estate agent in UK history. Apparently, the company now commands a 72pc market share of online agents.

By David Pegler, Brighton Capital Management