Scrolling Down the News: How Do You Spell 'Recession'? With an L, V or W?

Posted on Sep 16, 2022. by NTI

We in the NTI newsroom have had to scroll and keep scrolling to catch up on 'other news' this week. References to the '£150 billion payout to individuals and businesses towards their energy bills' could be found beneath the weekend weather for Windsor on page 9 this morning.

We just about heard on Wednesday that the UK had enjoyed a surprise fall in the inflation level in August, which left Goldman Sachs with easy-over egg on their faces, having predicted it would peak at about 22 per cent next year. Data from the Office for National Statistics showed annual consumer price inflation fell to 9.9 per cent in August, down from 10.1 per cent in July, defying lugubrious economists’ expectations of another monthly increase to 10.2 per cent. The retail price index, the benchmark linked to rail fares and mobile phone contracts, was unchanged at 12.3 per cent in August.

This came about mainly due to a sharp fall in world oil prices and it is now thought that UK inflation should peak at about 10 per cent this year once the energy cap is in place (see page 14).

Everyone's favourite comedy MP, Jacob Rees-Mogg, the UK business secretary, has put the Government’s 'energy security bill' on hold, with an option to scrap it, in order to prioritise legislation to provide emergency help for businesses with a new state energy support scheme. The price guarantee for households can be implemented under an existing regulatory system, but support for businesses is more complicated, requiring new legislation and it is this which is occupying Mr Rees-Mogg.

Under previous plans, ministers intended to add an amendment this autumn to the energy security bill to enable the decoupling of wholesale electricity prices from gas, in order to reduce energy costs, but it now seems its original plans will be squeezed into different legislation. (Expect the Dangerous Animals Act to have an interesting twist.)

Meanwhile this morning (Friday 16 September), sterling slid to its lowest level since 1985, affected by bleak August retail sales figures. Our famed currency fell to $1.137, the first time it has breached the $1.14 mark for four decades. Some are blaming the weather and bank holidays for retail sales falling by 1.6 per cent between July and August. Economists had forecast a drop of 0.5 per cent, but we have already pretty much established that they have no idea what the time is.

It is official; high inflation and energy prices are affecting consumer confidence and the downward trend will almost certainly continue. Recession is seen by all as a certainty and it is now just a question of the letter attached to it? 'V'? 'L'? 'W'? What is your letter of choice?

Not to pick on retail, all of the main sectors fell during the month of August (notably sports equipment, furnitire and lighting, demonstrating the choices consumers are (not) making. Even online sales fell by 2.6 per cent (which is the equivalent to your kid's school second team beating the All Blacks, in terms of seismic numbers). We need a flurry of snow to distract us now, as nothing else will.

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