Total output is therefore 0.2 points greater than the previous peak in early 2008. Heck, even RBS is back in the black, as a result of fewer bad debts.
On the negative side, there is evidence from some surveys suggesting the economy might go off the boil in the second half of the year. For instance, retail sales rose by only a whisker in June (0.1 per cent) – much to everyone’s surprise. As consumer spending is powering the UK recovery, that is not good news.
The housing market could act as a brake on consumer spending in the next few quarters.
If the Bank of England (BoE) successfully slows the growth in property prices – mortgage lending is already down after a few growls from Mark Carney – there will be less of a wealth effect to spur homeowners to buy more stuff.
On the other hand, the high value of sterling this year has depressed import prices. This has raised real incomes and spending power. My guess is that as long as that continues, consumers will go on visiting the shopping malls. Any hiatus in spending has probably more to do with the World Cup than consumer fatigue.
What could happen to upset the economic apple cart (leaving aside a certain referendum)? The answer lies in one word: wages. If wages don’t go up, consumer demand must eventually falter and growth will stall.
Annoyingly, however, if wages do start to rise, then expect the markets to start panicking.
At the first sign of genuine wage pressure, the Bank of England will have to put up interest rates. That will trigger a major correction in equity prices. At the same time, higher real mortgage costs will bite.
The latest BoE monetary policy committee minutes indicate a sense of bewilderment with the UK labour market. Employment is at an all-time high of 73.1 per cent. Yet pay, excluding bonuses, is growing at a miserly 0.7 per cent – well below price inflation of 1.9 per cent.
If things stay this way, Mr Carney can safely hold off a rates rise till next year. Otherwise…
BSkyB expansion in Europe makes sense
Cash-rich BSkyB is forking out some £5 billion to take over Rupert Murdoch’s pay TV empire in Germany and Italy, as I suggested last week.
With 11.5 million subscribers, BSkyB is running out of room to grow. Plus, competition from uppity BT is raising the cost of securing the rights to broadcast sporting events.
So it makes excellent sense for Jeremy Darroch, BSkyB’s chief executive, to expand into Europe, where pay-TV still has potential to attract customers.
Murdoch’s US-based Fox group, which owns the majority of Sky Germany and Sky Italia outright, gets the cash to bid for Time Warner. And Fox keeps a sizeable minority share in BSkyB Europe.
Potential spoilers? Other BSkyB shareholders might not be happy if it means paying over the odds to aid Murdoch’s empire building.
And minority shareholders in Sky Germany, including Crispin Odey, Murdoch’s former son-in-law, are demanding a premium paid for yielding total control. Keep viewing.