The economy stalled in April, which is a misfortune for Rishi Sunak. The failure to grow over the month is being interpreted as a blow to the Tories: as if they needed another.
Headline numbers matter in election campaigns as Labour’s late political wizard Harold Wilson reminded us.
He argued that the import of a couple of jumbo jets, distorting the trade figures, cost his party the 1970 election and put Edward Heath into Downing Street.
Trade figures don’t register much any more except among unreformed Remainers. Instead, there is an intense focus on the nation’s total output or gross domestic product (GDP).
Indeed, critics of Tory rule have discovered a new measure in GDP per capita designed to demonstrate how rotten their period in power has been. The impacts of the financial crisis, the pandemic and Russia’s war in Ukraine are dismissed.
The April output data is far from an economic disaster. Services, driven by IT and science, expanded by 0.2 per cent. Manufacturing and construction suffered setbacks.
Forward-looking indicators from the purchasing managers suggest both making things and building are recovering. Wet weather hurt retail and is among the main reasons for output flatlining.
There is a fix for that, whoever is in power. The Bank of England needs to get behind recovery by cutting interest rates from 5.25 per cent to 5 per cent ASAP.
It should be not fazed by the upcoming election any more than the European Central Bank was before the troubling EU parliamentary votes.
Speedy action by Governor Andrew Bailey and the Monetary Policy Committee, as early as next week’s June 20 session, would do consumption, construction and business a power of good.
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The squeeze on credit has gone on too long and the country could face a double whammy of higher tax and an overzealous monetary squeeze if Labour triumphs.
Focusing on one month’s data is always foolish and it is worth noting that in the three months to April output grew 0.7 per cent.
Forecaster EY Item Club suggests a solid second quarter amid rising real incomes and buoyant consumer confidence.
The National Institute of Economics and Social Research projects 0.5 per cent growth in the second quarter. An interest cut would be icing on the cheesecake.
Corporate killer
At 81, activist Nelson Peltz shows no sign of slowing down. This week, he was among financiers defending Elon Musk’s proposed £44billion payout at Tesla.
In the UK he has been a mixed blessing. Influential in reshaping Unilever, where he has a boardroom seat, he so far has failed to inject oomph into the share price.
His latest target is the world’s largest rat-catcher Rentokil which, over the years, has been a big presence at the royal palaces. Shareholders will welcome the 13.7 per cent lift in Rentokil’s share price.
That is an illustration of how neglected London-quoted shares have been.
Peltz’s plan for Rentokil is unknown. No one should regard him as a friend of Britain in spite of a family alliance with national treasure David Beckham.
The American interloper will never be forgiven for allowing Kraft to gobble up Dairy Milk champion Cadbury, now buried within Mondelez.
Rentokil has a big US presence as a result of its purchase of Terminix in 2021.
That should not be an incentive for chairman Richard Solomons to exterminate a London listing.
New broom
Unleashing investment in Britain is a core goal of Legal & General’s freshly minted chief executive Antonio Simoes.
At the centre of his strategy is the merger of Legal & General Investment Management with its alternative platform L&G Capital, which should bring dynamism to the way it manages £1trillion of assets.
Simoes plans to fire up investment in infrastructure, private and unquoted companies and exciting growth assets.
He is discarding unwanted offshoots such as housebuilder Cala.
In spite of a £200million share buyback the market was unimpressed.
Investors shouldn’t forget that insurance and pensions are for the long term.
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