From today’s RBS Chief Economist Weekly Brief
If your business depends upon discretionary spending take note:
Buy now, pay later. The retail sector has had a tough start to the year with some big names heading into administration. Last week’s snow will have made things even worse as shoppers stayed away from the high street. So it is unfortunate timing that January’s lending data showed even more spending is occurring on credit. Credit card balances rose at almost 10%, suggesting consumers are still keen to buy now and pay later. Whether this is from renewed confidence in their future finances or because the cash ran out over Christmas remains to be seen but will have big consequences for future growth.
Turning tide. Consumer credit might be threatening double digit growth, but companies are being much more cautious with their finances. Borrowing in January by UK businesses was only 1% higher than a year ago. That’s quite a slowdown given that growth of 2-3% was typical through most of last year. Even more striking is the behaviour of different sized firms. Broadly speaking, large companies are still borrowing, but SMEs now owe no more than they did in January 2017. Is this Brexit uncertainty finally beginning to bite, or a gradual response to the Bank of England’s message that we should expect rates to rise? Either way, the contrast to the behaviour of households is stark.
and if you’re in your 40s and feeling chipper you’re bucking the trend.
Happiness. Like Churchill on democracy, GDP is the worst way to measure an economy, apart from all the others. One criticism is GDP fails to measure the things that matter, like happiness or anxiety. So the ONS produces a ‘personal wellbeing index’. The good news is that we were slightly chirpier in 2017 than in 2016 – and we’ve getting steadily more perky since the index began in 2012. Women tend to feel happier, more worthwhile and yet also more anxious than men. Oh, and we’re most happy in our 60s and 70s, least happy in our 40s. Sounds about right.