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November 28, 2017

Pegler’s market report – 28.11.17: Consumer confidence slips

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in Insights Press Releases

As published in the Brighton Argus (28.11.17) Business section under the title Pegler’s Market Report:

Consumer confidence slips

Consumer confidence in the UK has slipped to its lowest level since the aftermath of the Brexit vote as household concerns over the recent interest rate hike and slowing housing market mount.

The survey by YouGov and the Centre for Economics and Business Research showed that confidence in household finances over the past month has plunged to its lowest level since January 2014 while house values fell to their lowest since July 2013.

Further wobbles came from last Wednesday’s Budget statement, which was accompanied by a big downgrade in the outlook for the UK economy, with growth forecasts over the next five years slashed by up to a quarter.

The Office for Budget Responsibility (OBR) reduced its projection for GDP growth in 2017 from 2% to 1.5%, and forecast that growth will slow to a trough of 1.3% in 2019 and 2020.

However, the cut in stamp duty for first-time buyers was the Chancellor’s headline-grabbing announcement. The cut applies to first-timers buying properties costing less than £500,000, with no stamp duty payable on properties costing up to £300,000.

Critics argued the move will push up prices, with the OBR predicting it would lead to only an additional 3,500 purchases a year. The Chancellor did however also announce a package of measures aimed at increasing the number of homes built to 300,000 a year by the mid-2020s.

Other concerns were voiced by the Resolution Foundation thinktank, which warned that, based on the Budget projections, average earnings would not return to their 2008 peak until 2025 in real terms.

Retailers had a good November, according to the latest monthly survey by the Confederation of British Industry (CBI). Almost 40% of survey respondents said sales volumes were higher than last November, with a similar proportion optimistic that volumes would pick up again next month. Only 13% said sales were down, with even fewer expecting a drop in December.

Price growth was also strong. Three quarters of respondents said they had seen average selling prices increase over the past 12 months — the most widespread increase reported since 1991.

There was some good cheer for the consumer goods giants Reckitt Benckiser, Unilever and Diageo after taxes on imported goods in China on a range of goods from Whiskey to cashmere knitwear were lowered from an average of 17.3pc to 7.7pc. The Chinese Ministry of Finance said that the changes were designed to make goods in the Asian powerhouse more affordable and boost domestic consumer spending.

Other news for the week – alongside other popular alcoholic beverages such as gin, craft ales and Negroni, sherry is becoming the millennial drink du jour, with sales up 46pc since January. While sales of sherry plummeted two years ago, according to latest figures new drier premium styles are enticing more hip audiences to the world of fortified wine.

By David Pegler, Brighton Capital Management