Economic Review – July 2017

According to initial estimates from the Office for National Statistics (ONS), in the second quarter of 2017 the UK economy continued to grow. They calculate that the UK saw growth of 0.3% in the three month period ending 30 June, an improvement from the Q1 figure of 0.2%. However, the ONS did caution of a “notable slowdown” since last year, where in the final quarter of 2016, Gross Domestic Product (GDP) grew by 0.7%.

The Society of Motor Manufacturers and Traders (SMMT) recently reported that UK car production fell by 13.7% in June, compared to a year earlier. This is the third consecutive month that output has fallen, following a period of record growth. This fall in production parallels a decline in UK car sales, which can be partly attributed to uncertainty over Brexit.

Given the global political machinations seen in July, it is no surprise that the FTSE100 had a volatile month with 10 trading days seeing falls and 11 days of gains. However, the UK’s benchmark index managed to end the month in positive territory gaining 0.81% to finish at 7,372.00. The wider FTSE250, which represents a broader church of constituent UK based companies, fared better, gaining 2.28% to close at 19,781.14 whilst the junior AIM market followed suit finishing at 983.93 for a 1.86% improvement.

The latest figures from the ONS revealed a surprise dip in inflation in June, with the Consumer Price Index (CPI) dropping to 2.6% from the previous month’s figure of 2.9%.
The CPI figure has risen since last June’s referendum, partly as a result of the fall in the sterling exchange rate and the implied increase in imported goods and material costs, the fall came as a surprise to many economists, some of whom believe this month’s figures may be a blip rather than a trend. Many economists are keeping their powder dry on the future trend of inflation as they believe that the country has not yet reached the peak of inflationary pressure.

The UK think-tank, the Institute for Fiscal Studies (IFS) has published a research paper – ‘Living Standards, Poverty and Inequality in the UK’ – funded by the Rowntree Foundation. The paper covers the political hot-potato of income inequality across the UK and has concluded that London is the most unequal region of Great Britain.