Economic Review – January 2017

Theresa May announced in mid-January that she is initiating a new ‘Industrial Strategy’ which will be specifically designed to boost the UK economy post-Brexit and that the government will be “stepping up to a new, active role. . .” that will “align central government infrastructure investment with local growth priorities.” Among these “priorities” would be transport, energy and broadband projects to boost industrial effectiveness across the UK.

Price inflation, as measured by the Consumer Prices Index (CPI) rose from the previous month’s level of 1.2% to 1.6% in the year to December 2016, according to the Office for National Statistics (ONS). Represented by a theoretical basket of goods and services which would have cost £100 in December 2015 increasing to £101.60 in December 2016.

2017 ushered in fresh impetus to the global bull market, as investors digested further the implications of the ‘Trump Bump’ in the USA and ‘Brexit’ here in the UK.
The FTSE100 continued its stellar late December rally to notch up 9 consecutive all-time-high closes in the first fortnight of the new year’s trading, to reach 7,337.81 at its zenith on January 13th, before easing back slightly to close the month at 7,099.15 showing a 0.61% fall on the month. The wider FTSE250 maintained positive territory gaining a modest 0.39% to close at 18,147.77, whilst the junior AIM market fared better finishing at 883.58 for a month’s gain of 4.64%.

The UK can boast that it was the fastest growing economy in the western world in 2016. In its latest preliminary estimate of Gross Domestic Product (GDP), the ONS revealed that the economy grew by 0.6% in Q4, the same rate as the previous two quarters. This is slightly higher than the 0.5% increase forecast by most economists. Therefore, the economy as a whole grew by 2% in the calendar year, which was only slightly lower than the 2.2% recorded in 2015.

In their latest UK labour market bulletin, for the three month period to November 2016, the ONS reported that average weekly earnings for workers within the UK saw an increase in nominal terms (not adjusted for price inflation) of 2.7% excluding bonuses and by 2.8% including bonuses, compared with a year earlier. Good news for employees as current inflation, as measured by the Consumer Prices Index (CPI), is currently sitting at 1.6%.