The New Year has not been especially happy, so far, in the world of business and finance. The FTSE is down, China is chaotic, oil is plumbing new depths, and even desperate retailers are replacing their top execs or trying to snap up rivals.
But it’s worth remembering that there are two sides to every coin, and that many of today’s negative business stories have a positive flip-side.
Asda confirmed yesterday that it would invest another half a billion pounds into the price war that is causing so much strife for the country’s supermarkets.
While the situation may be bearish for some listed stocks, and thus pension funds, it marks an astonishing period of good luck for shoppers (ie. all of us). Shop prices have been falling since the summer of 2013 according to the British Retail Consortium, while official data shows that inflation has been virtually flat or negative for nearly a year. The consumer price index has been below the Bank of England’s target for two years.
The ongoing commodity slump and the incredible drop in global oil prices are hammering the FTSE 100 – but will also weigh on inflation longer than had been expected for most of last year.
Lower prices in the shops, and on the forecourts, are saving Britons huge amounts of money every week, while lower inflation expectations have pushed back the date at which City investors believe the Bank of England will lift interest rates. Ultra-low rates may be dangerous, with the potential to inflate asset bubbles, but as far as most people are concerned they are keeping down borrowing costs.
So, reasons to be cheerful: 1. Cheaper mortgages; 2. Cheaper petrol; 3. Cheaper shopping. And then there are our record levels of employment. It’s easy to see why a collection of business surveys, published today by BDO (see page 17), has found that “UK consumers are enjoying their best start to the year since the financial crisis”.
Just a few years ago, newspapers (including this one) were printing stories about the UK’s worryingly high “misery index” score (the misery index adds the rate of inflation to the rate of unemployment). It is only fair, therefore, that we acknowledge when such economic measures of misery are pleasingly low. For the average Joe or Jane on the street, it's been a pretty good start to 2016.