Everything seems to be falling into place ahead of the election for the Tories. Today’s data shows high street spending rising at the fastest rate for more than 13 years – and this is not a freak. In fact, it’s part of a broader picture which is more impressive (and promising) than George Osborne seems to realise. The Chancellor is a wee bit slow off the mark when it comes to recognizing the radical effect of his own tax cuts. He is still banging on about fiscal position when the consumer story is the one he should be telling. Here’s why:
1. Shops are busier than ever. Brits spent £331bn in the shops in 2014 (excluding fuel) – more than they've ever spent before. And sales were up 2.3 per cent in the last quarter – that's the fastest rate of increase in more than ten years. Here's the graph, from CitiGroup, published today:-
2. More people are in work than ever – so the population of earners is at an all-time high. They have money to spend.
And most jobs created since the election have been full-time ones...
3. British business is getting healthier. Corporations’ return on capital is at 12 per cent – the highest rate since 1998.
4. That’s partly because the government has cut their taxes year after year…
5. Allowing them to hire more people…
6. So our employment rate is now higher than the USA's for the first time since the 1970s
7. Lower taxes and regulatory restraint encourage businesses to compete with each other, forcing the price of goods down.
8. ...And CPI inflation down to a fourteen-year low of 0.5pc – with the price of goods (as opposed to services) down 1pc. Gloomster economists say that inflation means shoppers stay at home, waiting until things are cheaper still. Evidence from Spain–and the last few weeks here–challenges this orthodoxy.
9. Even pay is beginning to nudge ahead, up 1.7pc last month (against that 0.5pc inflation).
10. And lower taxes and low inflation make disposable incomes rise faster than nominal pay.
11. Mortgages are now the cheapest in history
12. And rates are expected to stay low – in fact, the gilt market believes that real interest rates will be below zero for not less than 40 years: