There was a brief moment of schadenfreude when it was revealed that Germany entered recession in the first quarter of this year.
For some time now we have been hearing from proponents of the euro, including the Labor leadership, a version of events that says the Tories have crashed the economy.
It doesn’t look as bad as Berlin, with the UK avoiding a crisis and the Bank of England and IMF rapidly revising UK expansion projections for 2023.
True, the differences are fractions of a percentage point.
Yet the resilience of UK businesses and consumers in the face of the energy price shock is remarkable.
Response weakness: Bank of England performance on inflation looks as toxic as the Liz Truss-Kwasi Kwarteng mini-budget last year
The latest rapid data from the Office for National Statistics shows retail footfall is up 105% from the previous week, energy prices are down 16% and job vacancies are strong.
There is evidence that the number of the left behind – 16 to 24 year olds who are not in education, employment or training – fell in the first quarter, with 26,000 finding jobs.
Before anyone celebrates loudly, the public should pay attention to the gilt market. The Bank of England’s sluggish performance on inflation looks as toxic as the Liz Truss-Kwasi Kwarteng mini-budget last year.
Yields (the yield on interest rates) on UK two-year bonds rose half a percentage point this week, leading L&G, the UK’s leading asset manager, to put in caution against investing in gilts, which should be considered the safest investment to make.
Nationwide wasted no time in raising the cost of new trackers and fixed rate mortgages by 0.45 percentage points, effective today.
Rising yields are an arrow aimed at financial stability.
People whose fixed-rate mortgages end face a price shock – we can expect renewed attention on liability-driven investments used by pension funds and rumblings outside the banking system regulated.
Stress can pass. After all, a US debt default is on the horizon.
But there can be no complacency.
arm injury
The fate of Cambridge-based Arm Holdings had it been bought by US advanced semiconductor champion Nvidia for £32bn is impossible to know.
Competition authorities were concerned that Arm’s open architecture model, allowing all comers to license its smart chips, could be harmed by Nvidia.
What is now clearer is that if Nvidia had prevailed, it would have scooped up Arm’s intellectual property and the gateway to artificial intelligence (AI) at a bargain price and would likely have disappeared into a giant semi- drivers.
Nvidia shares soared after surprising Wall Street with a stunning second-quarter forecast of revenue 50% higher than anyone else estimated.
Wall Street has failed to connect the sudden escalation in interest in AI, the chips needed to enable it, and Nvidia’s ability to produce advanced semiconductors.
Nvidia chief Jensen Huang elevated it from a darling of chip design to the burgeoning game of computer games, long before AI and ChatGPT were on everyone’s lips.
Wall Street broker Bernstein described the outlook upgrade as “cosmological” and the shares rightly soared into the stratosphere, attributing a value of nearly $1 trillion to the company.
As part of SoftBank, it’s hard to understand what all of this means for Arm. It says on its website that it has the ability to process data in a way that extends the benefits of AI to all connected devices.
If so, it’s hard to imagine there will be anything other than voracious demand for Arm shares when they go public in New York.
The opportunity to become a technological superpower has been hopelessly mishandled by successive and inattentive Conservative governments.
life savers
Recognition of the life sciences is essential as Britain seeks to revive the economy.
So thank you to Chancellor Jeremy Hunt for recognizing the opportunity for the UK to accelerate clinical trials and bring new compounds to market.
It’s debatable whether the £650m pledged is enough to make a real difference.
It is also disappointing that the government was nowhere to be found when UK pharma and oncology champion AstraZeneca decided in February to move its next manufacturing plant from Macclesfield to Dublin.
This is the cost of high overall tax rates.
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