THE UK economy seems to have caught a winter chill but will Dr Osborne feed it enough tax antibiotics to stage a recovery in time for May’s general election? New readers start here.
The latest wodge of official data shows industrial output and construction activity both weakened in November, after a year in which the UK economy has been growing above trend.
One way of reading this information is that there is nothing particular to worry about, and that fundamentals remain sound. The economy could just be tweaking as the eurozone slides into deflation and the slump in the North Sea oil sector kicks in. From that perspective, growth in 2015 should be on trend.
On the other hand, the latest purchasing managers’ surveys for December indicates multi-month lows. There are definite signs of a slowdown in the UK housing market, which has started to weigh on builders’ share prices – Taylor Wimpey, Barratt Developments and Persimmon were all under the cosh on Friday.
Consumer spending, the engine of growth, turned a mite volatile in the fourth quarter of 2014, suggesting consumer confidence is not as strong as it was earlier in last year. True, Tesco, Sainsbury’s and Morrisons saw their share prices rise on Thursday. Don’t be fooled: all three are countering their German discounter rivals by permanently slashing prices. Deflation here we come.
My bet lies on the pessimistic side. Despite yesterday’s bonanza employment numbers in America, global deflation (including the fall in oil prices) heralds the end of the great asset boom of the past 35 years. Translated: UK house prices are no longer slated to rise like an elevator. Even London could see a Japanese-style property collapse if impoverished oil sheikhs and Russian oligarchs pull their money out. That spells bad news for automatic rises in consumer spending, which are highly correlated with rising property values.
Nostalgia TV driven by admen’s dream audience
Over the New Year I ran into serial private investor Julian Leiper, who is based here in Edinburgh. Leiper was enthusing about his latest venture: Vintage TV.
Free to air on Sky, Virgin and Freeview, Vintage is a sort of Radio 2 of television. It broadcasts music, concerts and significant new programming featuring classic rock and pop of the Fifties to the Nineties. We all like to relive our salad days but is this the stuff of sit-down television?
Despite TV land being over-crowded TV land, Vintage is proving a surprise hit. In less than four years it has built a solid brand, amassing a dedicated audience in the 35-plus age group. The latest official BARB viewing figures show Vintage TV doubled its average daily audience in the past year to 309,000. In the niche world of cable channels, that counts as success. Sky Arts One, with its big bucks, gets 665,000, while Discovery pulls in 550,000.
Better still, Vintage is reaching more viewers than traditional music channels such as MTV Hits, VH1, Kerrang, Heat, or Kiss.
The point about Vintage is that its core audience consists of the well-heeled, retired professionals who are a marketeer’s dream. Plus Vintage is a prime choice for pubs, clubs and university bars. The channel has now launched a new online, streamed service and a view-on-demand library with 500 hours of music. Next comes the international roll-out. Who says nostalgia isn’t what it used to be?
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