Oil prices are becalmed at well over $100 a barrel and most of the shipping still hoping to make it through the Strait of Hormuz remains similarly stuck. The energy shock triggered by Donald Trump shows no sign of abating, and signs of getting worse. Only one party in this conflict seems relaxed about letting it drag on, and it is not America.<\/p>\n
Yet for all the storm clouds and warnings, including warnings from our own government, the UK economy seems so far remarkably unaffected. If there is an effect, as there surely will be, it looks to have been delayed.<\/p>\n
The just-published new car registration figures from the Society of Motor Manufacturers and Traders, for example, showed remarkable strength last month. They showed an increase of 24 per cent<\/a> on a year earlier, driven by both private sales, up 20.2 per cent, and those to fleets, up 26.8 per cent.<\/p>\n A boom is under way in sales of battery electric vehicles<\/a>, up 59.1 per cent year-on-year, for understandable reasons, but sales of petrol cars were also up, by 8.2 per cent. Both comparisons were helped by the fact that April last year was a weak month due to tax changes.<\/p>\n You could argue that cars are not bought on a whim and that many of last month\u2019s registrations reflect decisions made \u2014 and orders placed \u2014 before the Iran war began in late February.<\/p>\n Other data, however, supports the idea that so far activity is holding up much better than feared. Official figures for retail footfall, supplied by BT Active Intelligence to the Office for National Statistics, show a significant weakening during March<\/a>, as people digested the effect of the war on their finances, but a strong recovery since.<\/p>\n Retail footfall in the week to April 26 was 2 per cent up on the previous week and 11 per cent higher than in the week to March 22, its low point. It should be noted, of course, that most household energy bills have not yet been pushed higher, which will not happen until July, when the energy price cap rises<\/a>.<\/p>\n Stock markets have shown a similar pattern, reaching a low point<\/a> three to four weeks after the war started, but experiencing a patchy recovery since.<\/p>\n Another picture of an initial hit followed by a recovery was provided by one of the most-watched business surveys, the purchasing managers\u2019 index (PMI). Final figures for the service sector component of the PMI are due shortly but the \u201cflash\u201d reading for last month was strong. It showed that, after falling to 50.5 in March<\/a> as the war hit confidence, the composite PMI, covering services and manufacturing, rebounded to 52 last month.<\/p>\n A few days ago, the final April PMI for manufacturing, rather than slumping in the wake of the energy shock, showed a surprise jump to a near four-year high of 53.7. Output, new orders and employment were all up. A score of 50 is the dividing line between expansion and contraction on these measures.<\/p>\n Business newsletter<\/p>\n The business editor\u2019s exclusive analysis of all the latest financial and economic news.<\/p>\n \t\t\t\t\tSign up with one click<\/p>\n A note of caution is justified, as Rob Dobson, director at S&P Global Market Intelligence, pointed out. There were, he said, \u201cseveral catches\u201d in the figures.\u00a0\u201cRestrictions on transit through the Strait of Hormuz<\/a> are causing substantial disruptions to input deliveries, with supplier lead times lengthening to the greatest extent in almost four years,\u201d he said. \u201cIt should also be noted that the gain in production is partly the result of clients bringing forward purchases to mitigate expected price uplifts and supply disruptions.\u201d<\/p>\n The better-than-expected run of data is not confined to business. Nationwide Building Society reported that house prices rose by 0.4 per cent last month<\/a>, and the annual rate accelerated to 3 per cent, from 2.2 per cent in March.<\/p>\n While acknowledging that the rise was surprising in the context of very weak consumer confidence, Robert Gardner, Nationwide\u2019s chief economist, pointed to other, more fundamental, factors at work.<\/p>\n \u201cThe market is likely being supported by the relative strength of household finances,\u201d he said. \u201cIn aggregate, household debt is at its lowest level relative to income for around two decades, and sizeable savings buffers have been built up in recent years<\/a>, although these have not been evenly distributed across households.<\/p>\n \u201cMoreover, housing affordability had been improving steadily in recent years due to a combination of income growth outpacing house price growth by a wide margin and a modest decline in mortgage rates.\u201d Those mortgage rates were rising again now, but the \u201cswap\u201d rates that determine them were below the levels reached three years ago, after the Liz Truss<\/a> premiership.<\/p>\n Gardner suggested that the economy and housing market had been \u201cremarkably resilient\u201d in the past few years, and he had a point. Many feared the worst when interest rates rose sharply in 2022 and 2023, but the economy avoided outright recession.<\/p>\n Last year, despite Trump\u2019s tariffs which hit world trade, the UK achieved growth of 1.4 per cent, the third fastest in the G7<\/a> after America and Canada \u2014 so, faster than France, Germany, Italy and Japan.<\/p>\n This year it appears that first-quarter GDP growth will easily exceed the eurozone\u2019s 0.1 per cent expansion and match or even exceed America\u2019s 0.5 per cent rate. The Bank of England<\/a> expects 0.5 per cent first quarter growth<\/a>, though it fears a sharp slowdown in the second quarter to 0.1 per cent.<\/p>\n The National Institute of Economic and Social Research expects 0.6 per cent growth in the first quarter, followed by 0.4 per cent in the second. That would be remarkable in the context of the energy shock.<\/p>\n It could also, however, be a prelude to a repeat of the pattern of recent years, with strong growth in the first half of the year followed by a sharp slowdown in the second half. Last year and the year before, that slowdown could largely be blamed on the uncertainty leading up to Rachel Reeves\u2019s<\/a> budgets. This time the culprit would be the Iran war energy shock which, for the moment, is being felt more keenly in other parts of the world. That may turn out to be small comfort.<\/p>\n David Smith is economics editor of The Sunday Times<\/p>\n","protected":false},"excerpt":{"rendered":"Oil prices are becalmed at well over $100 a barrel and most of the shipping still hoping to…\n","protected":false},"author":2,"featured_media":376169,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":["post-427088","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/427088","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=427088"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/427088\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/376169"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=427088"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=427088"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=427088"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}