The FTSE 100 index is hovering around a one-year high, which possibly puts Brexit fears into context.
Then again, saying the FTSE 100 is representative of the UK economy is a bit like saying the Premiership is representative of the England football team.
The gross domestic product (GDP) measurement is meant to be representative of the health of the UK economy, even if it is difficult to be totally sure of the data.
This morning’s second quarter numbers indicated that the economy grew slightly faster than economists had expected, accelerating to a 0.6% growth in the quarter from a 0.4% rise in the first quarter.
Economists are never satisfied with the numbers as they stand, however, and many have rushed to point out that barely a week of the period covered by the GDP figure is post-Brexit.
The EY ITEM Club reckons the better-than-expected showing – economists had pencilled in a figure of 0.4% for second quarter growth – may represent a last hurrah before the Brexit slow-down emerges.
“The monthly figures point to a significant loss of momentum through the quarter which means that the launch pad for Q3 was already soft, even before we factor in any Brexit effects. The strong Q2 reading was almost entirely due to the exceptional April performance across the three main sectors,” EY addio’d.
Adrian Lowcock, head of investing at AXA Wealth, warns against reading too much into the first stab at measuring GDP, as the first pass only uses about 44% of the data and a forecast for June.
“Whilst it does show the UK recovering from a slow down earlier in the year and solid growth in our services sector, given the result of the EU referendum this data is a historical figure. The true impact of the decision to leave the EU on GDP is unlikely to be seen until October when we get the first estimate for the 3rd quarter covering the first three months after the vote. By that time we may have a better understanding on its impact and the outlook for the UK economy through unemployment, consumer and business confidence figures,” Lowcock said.
Retail sales slump
What to make, then, of the slump in retail sales in July, as indicated by the Confederation of British Industry’s (yes, British industry still exists!) Distributive Trades Survey?
Sales volumes declined more rapidly than at any time since January 2012, with weaker consumer confidence a likely factor in the immediate period following the EU referendum, the Confederation of British Industry (CBI) revealed.
Companies expect sales volumes to decline at a broadly similar pace as this month in the year to August.
It never rains but it pours, except in the case of Rain Newton-Smith, the CBI’s chief economist.
“While conditions in the retail sector have weakened, we should be careful about reading too much too soon, as consumers were likely to err on the side of caution in the immediate period following a vote to leave the EU,” Newton-Smith opined.
“Current low levels of inflation and high overall employment should support consumer spending in the near term, although the impact of lower sterling is likely to feed through to higher inflation over time,” he added.
Not seeing eye-to-eye anymore
While everyone and his wife is giving the usual lavish free publicity to tAXAtion specialist Apple Inc (NASDAQ:AAPL) after its results last night, we here at Proactive Investors prefer to focus on another company not exactly short of free publicity.
No, not Nintendo.
Tesla Motors Inc (NASDAQ:TSLA).
Self-driving car technology supplier Mobileye NV (NASDAQ:MBLY) disclosed it will not be extending its partnership with the electric car manufacturer beyond the EyeQ3 processor currently used in Tesla’s Model S and Model X.
It seems like the companies are not seeing eye-to-eye, though the bad publicity over the Tesla autopilot system may have something to do with that;
Back in May, Joshua Brown became the first known fatality caused by a self-driven car after colliding with a tractor trailer.
At the beginning of this month another of Tesla’s self-driving cars was involved in a crash; fortunately this time the driver survived, but it did not help quell the deluge of negative headlines to hit the electric car company in recent weeks.
Talking of Apple, let’s stop doing so…
Whoa! I'm going to Ibiza
Everyone here in the Proactive office – and by everyone I mean about one in six – seems to be off to Ibiza next week, possibly to an office party I’ve not been told about.
Recent events, such as the Brexit vote, the collapse of the Lowcosttravelgroup, and terrorist attacks, may have quelled the enthusiasm of Britons for overseas holidays, but online holiday booking firm On the Beach PLC (LON:OTB) said it still remains on track to achieve profitability in line with the board’s expectations this year.