Here we go again. Following on from the International Monetary Fund, (IMF) another influential forecaster has upgraded its previously gloomy predictions for the UK economy.
The Organisation for Economic Co-operation and Development (OECD) says that instead of the 0.2 per cent downturn it predicted in March, the country is set to grow 0.3 per cent this year and 1 per cent in 2023.
The latest pirouette comes after the IMF executed a similar about-turn last month.
Back in January the IMF said we would be the worst-performing major economy in 2023, with a 0.6 per cent fall in GDP, worse than Russia. It now expects growth of 0.4 per cent.
That’s the good news. But you would have been hard-pressed to find it among the headlines yesterday, which concentrated on forecasts for the UK’s stubbornly high inflation rate.
The OECD warns that Britain’s inflation rate will average 6.9 per cent this year – that compares with an OECD average of 6.6 per cent, not a million miles away.
It’s true that UK inflation is higher than the average, but that’s mainly because of higher energy and labour costs.
Yet energy prices are falling fast, so are other commodity prices. Core inflation, which strips out energy and food prices, is the one causing problems because of the cost of services.
And this is due to the tight labour market, where reforms should be hurried up if they are to have any impact.
These differences in forecasts may seem tiny. But they are important to highlight because the persistent gloom has unfortunately set far too pessimistic a tone which dents consumer and business confidence.
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It can also put off inward investment. Only a few months ago, the news was all one-way: Britain was about to collapse into a deep recession. Remember that?
It’s not the moment for schadenfreude but Germany is now the country which looks like the sick man of Europe.
Yet despite the slightly better growth outlook, it’s a little early to talk of green shoots although they are sprouting.
Higher borrowing costs and higher prices are here to stay although money supply is tightening sharply, suggesting inflation will be curbed.
For millions of householders, there is more pain to come. Equifax reports that 7.7m out of the 10.7m active mortgages are on fixed-rates and will have to be remortgaged.
Around 367,000 fixed-rate mortgages reach the end of their five-year deals this year. The average outstanding balance is £170,000, which means home-owners who switch to variable rates will pay a crippling £300 or so a month in repayments.
It’s another reason why the Bank of England should keep rates as they are when the monetary policy committee meets next on June 22. Time is needed for the recent rises to have their effect.
Soda stream
WE Soda, the world’s biggest producer of natural soda ash, is heading for the London Stock Exchange (LSE) and will possibly make it to one of the FTSE indices.
Part of Turkey’s giant Ciner Group, it is going for a free float of at least 10 per cent of its shares, and maybe another 15 per cent in the over-allotment process.
It’s a great catch for the LSE as Soda is a serious commodity firm with huge growth potential – but also a great vote of confidence in the LSE as a serious capital markets player.
As the turbulence of the Covid lockdown on supply chains and war in Ukraine have shown, access to commodities such as fertilisers and minerals is essential for the smooth functioning of the global economy and the food we put on our table.
WE Soda is one of those vital commodities: it supplies soda ash to the glass industry and is a key ingredient in a variety of industrial processes with no viable substitute.
It is used to make everything from architectural flat glass to powdered detergents and EV batteries.
The Ciner family, which already owns production sites in Turkey and the US, is also looking to build manufacturing sites in the UK and Belgium, with the aim of doubling production.
Expect a stream of buyers for its shares.
Hats off to Marta
Almost to a man, analysts went over the top criticising the appointment of Marta Ortega 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 includes Zara.
Marta. 39, has just turned in a 52 per cent rise in profit for the first quarter and booming sales.
They should be made to eat their hats.
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