MAGGIE PAGANO: Don’t strangle the green shoots of recovery
Here we go again. Following the lead of the International Monetary Fund (IMF), another influential forecaster has improved his previously gloomy forecasts for the UK economy.
The Organization for Economic Co-operation and Development (OECD) says that instead of the 0.2 percent decline it predicted in March, the country will grow by 0.3 percent this year and 1 percent in 2023.
The latest pirouette comes after the IMF made a similar turnaround last month.
In January, the IMF said we would be the worst performing major economy by 2023, with GDP down 0.6 percent, worse than Russia. It now expects a growth of 0.4 percent.
That’s the good news. But you would have been hard-pressed to find it among the headlines yesterday, which focused on forecasts for the UK’s stubbornly high inflation.
Revised figures: OECD says instead of the 0.2% downturn it predicted in March, Britain will grow by 0.3% this year and 1% in 2023
The OECD warns that UK inflation will average 6.9 per cent this year – on par with an OECD average of 6.6 per cent less than a million miles away.
It is true that UK inflation is higher than average, but that is mainly due to higher energy and labor costs.
Yet energy prices are falling rapidly, as are the prices of other commodities.
Core inflation, which excludes energy and food prices, is causing problems because of the cost of services.
And that is due to the tight labor market, where reforms must be accelerated if they are to have an effect.
These differences in forecasts may seem small. But they are important to highlight because the continued gloom has unfortunately set a far too pessimistic tone, eroding consumer and business confidence.
It can also delay domestic investment. Just a few months ago, the news was one-way: Britain was on the verge of a deep recession. Remember that?
It is not the time for gloating, but Germany is now the country that looks like the sick man of Europe.
But despite the slightly better growth prospects, it is a bit early to speak of green shoots, although they are sprouting.
Higher borrowing costs and higher prices will be here to stay, although the money supply will tighten sharply, suggesting that inflation will be curbed.
More pain is coming for millions of householders. Equifax reports that 7.7 million of its 10.7 million active mortgages are fixed rate and require remortgaging.
About 367,000 fixed-rate mortgages will reach the end of their five-year agreement this year. The average outstanding balance is £170,000, meaning homeowners who move to variable interest will find themselves paying a crippling £300 or so a month in repayments.
It is another reason why the Bank of England should leave rates unchanged when the monetary policy committee meets on June 22. It will take time for the recent increases to take effect.
Soft drink flow
WE Soda, the world’s largest producer of natural soda ash, is heading for the London Stock Exchange (LSE) and may top one of the FTSE indices.
It is part of the Turkish giant Ciner Group and is going for a free float of at least 10 percent of its shares, and maybe another 15 percent in the over-allotment process.
It’s a great catch for the LSE as Soda is a serious commodities company with huge growth potential – but also a great vote of confidence in the LSE as a serious player in the capital markets.
As the turbulence of the Covid lockdown on supply chains and the war in Ukraine has shown, access to raw materials such as fertilizers and minerals is essential for the smooth functioning of the global economy and the food we put on the table.
WE Soda is one of those vital raw materials: it supplies soda ash to the glass industry and is a key ingredient in a variety of industrial processes with no viable alternative.
It is used to make everything from architectural flat glass to washing powders and EV batteries.
The Ciner family, which already owns production sites in Turkey and the US, also wants to build production sites in the UK and Belgium, with the aim of doubling production.
Expect a flood of buyers for its shares.
Hats off to Marta
Almost a man, analysts went over the top with criticism of Marta Ortega’s appointment as chairman of Inditex last year.
They said it was far too premature for her to take over from her father, Amancio Ortega, founder of the extraordinarily successful Spanish fashion chain, which also includes Zara.
Marta. 39, just posted a 52 percent first-quarter profit increase and booming sales.
They should be made to eat their hats.
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