Fast news? More like fake news

Apologies to all our international readers out there, but this particular headline was directed at the UK; however, it is very much an international problem.

On Wednesday morning I received an alert from Bloomberg News that epitomises what is wrong with ‘fast news’. A headline is there to grab your attention, but this one almost gave me whiplash.

It simply stated:

FTSE 100 Live: Stocks Set for Worst Month Since October in Miserable January for UK Assets

I nearly fell off my chair. Worst month since October for UK assets?

It’s not been a great January but a ‘miserable January’ seems a lot bleaker than I was aware of. I quickly checked all asset classes starting with equities to see what I’d missed, because as far as I knew: the FTSE had had a rather slow month, house prices had surprised to the upside and UK gilts hadn’t done much. It had been a fairly quiet January.

Upon closer inspection, I noted that the FTSE 100 was down -0.52% in January (at the time) – hardly worth mentioning let alone shouting doom and gloom about. UK government bond prices were slightly higher for the 6-month bond and slightly lower for the 10-year bond, so which duration or assets exactly were they referring to?

I guess they don't really care, and that's the problem. Throw a statement like that out there and people will click on it; I did.

Once the gravity of the statement had passed, I realised ‘October’ was only 2 months ago and November and December had been positive months for equities so yes, of course it was the worst month since October. But that didn’t make it a bad month, just a bit flat – but flat doesn’t get people to click.

Such dramatisation of the news will eventually make everyone insensitive to it. Technically, it wasn’t a lie, it had been the worst month for stocks since October, it just hadn’t been a bad one and we’ve only had two months since then, so why not make it SOUND awful?

The problem is, a lot of people may only read the headline and they are now under the impression that the UK economy must be in dire straits! It’s not.

We’re here to tell you that right now, everything is ok.

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With this in mind, we thought we would make sure that you all know the truth. Here is a list of UK economic indicators released this month so you can make up your own mind:

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Monthly GDP: 0.3%

Full Year GDP Growth: 4.1%

Unemployment rate: 4.2% (no change)

Wage Growth: 6.5%

Month-over-month inflation: 0.4%

6 month total inflation: 0.6%

YoY inflation rate: 4%

YoY producer price inflation: 0.1%

Energy Inflation: -17.3% (biggest drop since 1989)

House Price Index MoM: 1.1%

House Price Index YoY: 1.7%

Pretty good really. Not a lot to comment on. We could do with wage growth slowing a bit more which should in turn help bring down that inflation figure, but the month-over-month inflation figure has averaged 0.1% for the last 6 months. If this continues for the next 6 months then by May, inflation will be 1.2% which is well below the Bank of England’s target of 2%.

If this continues, we might start to see rate cuts around then. We actually don’t think that figures will continue to be as low as 0.1% for the next 6 months but it might not be far off. The most likely scenario is that they average closer to 0.2% - 0.3% which will subsequently mean inflation in May will actually come out around 1.8 - 2.4%.

This is bang on target and this is what the Bank of England are hoping for. If they don’t need to lower rates, why would they? We are still of the opinion that this will happen around July of this year if current conditions continue.

A year ago, inflation was high. With those numbers still appearing in the Year-over-Year inflation figures, it distorts where we are now.

So we have compiled the data for inflation around the world over the last 6 months to give a truer measure, of where we are today, not where we were:

_{To get the annualised figure, assuming conditions for the next six months remain the same, just double it.}

China:              0.2%

France:            0.3%

Italy:                0.3%

Germany:        0.5%

UK:                  0.6%

US:                   1.6%

Russia:             4.4%

Australia:         7.7%

Europe seems to have dealt with inflation and assuming that it doesn’t have a resurgence over the next few months, and there is no reason for that, then Central Banks will have done all they need to do. If they don’t start to retreat, then we will no doubt end up in deflationary territory. That’s actually worse and signals economic contraction, and then those headlines will be flying!

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