Arthur BeverlyPWP IFA FU June14 econupd
FINANCE UPDATES
JUNE 2014
Economic update: June 2014 Here we look at some key economic indicators and the UK’s economic prospects for the coming months.
The UK economy remains on the road to recovery. Most sectors and regions are showing positive growth trends, suggesting the recovery is broadening too. Whether the recovery is secure is difficult to tell at this stage, particularly as a possible housing boom continues to cast a shadow.
Industry growth
Inflation
Three of the four main industry groups - construction, production and services showed growth trends in the first quarter of 2014. The largest contribution came from the services sector, which increased by 0.9% and displayed widespread growth across its main areas, including:
CPI inflation crept back up to 1.8% in April after falling to 1.6% in March, but remains below the target rate of 2%. The Bank of England expects this to continue to creep up towards 2% in the coming months, particularly as the fall in petrol prices in spring 2013 drop out of the annual comparison. Meanwhile, average wage growth in March briefly outstripped inflation for the first time since Q1 2009 as annual growth of weekly wages including bonuses stood at 1.7%.
GDP GDP is set to exceed its pre-recession 2008 peak in the next few months, according to the National Institute of Economic and Social Research. This is bolstered by the latest Office for National Statistics (ONS) figures, which show that GDP increased by 0.8% in the first three months of 2014, compared with growth of 0.7% in the last quarter of 2013. GDP is now 3.1% higher than it was in Q1 2013. Furthermore, the Office for Budget Responsibility’s update for the Budget in March revised its growth forecast for 2014 up to 2.7%.
2 Stewart Street Milngavie Glasgow G62 6BW 0141 956 5525 [email protected]
Economic UPDATE
•
distribution
•
hotels and restaurants
•
transport
•
storage
•
communication
•
business services
•
finance.
Production industries grew by 0.8% and construction increased by 5.1% compared to Q1 2013. Agriculture output decreased by 0.7% but, overall, positive growth is looking widespread and encouraging.
Unemployment The unemployment rate fell to 6.8% for January to March 2014, according to the latest ONS figures. This is below the level at which the Bank of England said it would consider raising interest rates from their record low of 0.5%.
www.abfm.co.uk
Economic update: June 2014 Interest rates
Savings
While the economy has performed strongly and unemployment has dropped below 7%, the Monetary Policy Committee voted to keep interest rates at 0.5% in May. The Governor of the Bank of England, Mark Carney, has made it clear that they will not be raised any time soon.
Savers were hit hard by the economic crisis and there hasn’t been much respite since. Savings account rates remain at rock bottom while the base rate has been at 0.5% for so long that finding a savings account that pays enough to counteract the impact of inflation is a challenge. Saving into a ISA can help to balance the impact of inflation and news of the New ISAs, which launch this July, means that you can save even more without being hit by income tax.
Introducing May’s Inflation Report, he said that when interest rates will rise will depend on the level of ‘spare capacity’ and the evolution of the economy. Comparing securing the recovery to making it to the qualifying rounds of the World Cup, he said: “That is an achievement, but not the ultimate goal. The real tournament is just beginning and its prize is a strong, sustained and balanced expansion.” Many economists now predict interest rates will remain at 0.5% until the beginning of 2015.
The housing market Mark Carney has warned that the housing market has deep structural problems that could impact on the UK’s economic recovery. House prices have increased by 8.5% in a year, according to the latest House Price Index from Halifax, while there are 29% more homes being sold than there were in March 2013. A shortage of homes is exacerbating the situation, while mortgage lending criteria continues to toughen.
Financial planning during an economic recovery
Important information The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. This document is solely for information
When it comes to saving at the moment, it is important to shop around, but also to keep an eye on existing accounts. If you joined an account with a bonus rate make sure you review it regularly to ensure that your savings aren’t languishing. Likewise, the best rates tend to be on accounts that keep your money locked away for longer. You may wish to consider when you will need access to your funds to decide what type of account to choose.
Investments Diversification is key in these circumstances, ensuring that your portfolio is balanced and structured to reflect your attitude to risk. If the recovery can be sustained, there may be opportunities for investors. When it comes to choosing investments it is a case of looking for companies that have the capacity to grow as the economic recovery filters through to earnings and profits. Actively managed funds will be looking to do this.
be a priority when choosing your investments. Investments carry risks and if you are unsure of the risks involved it is vital that you seek professional advice.
Pensions Budget 2014 saw a series of announcements aimed at making pensions more flexible. From April 2015 anyone aged 55 or over will be able to take their pension however they want, regardless of its size. Changes that came into effect on 27 March include increasing the overall pension amount you can take as a lump sum to £30,000, if the total value of all of your pension pots is worth this amount or less, and reducing the amount of guaranteed income needed in retirement to access flexible drawdown to £12,000 a year. You can also take individual small pension pots to a value of £10,000 as a taxed lump sum, regardless of your total pension wealth, subject to a restriction that you can only do this three times. This means that as a pension saver there are more options available and you will have more choice at retirement. Now may be the time to review your investments and restructure your retirement portfolio.
Seek advice
The New ISA limit of £15,000, which comes in from July should, as always,
We can help to ensure that your investments are structured in the best way to suit your circumstances in the current economic climate. Please contact us to find out more.
purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments and pensions can fall as well as rise and you may not get back the amount you originally invested.
Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. E & OE.
Arthur Beverly Financial Management is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 485198. Registered in Scotland Number 342744. Registered Office: 22 Backbrae Street, Kilsyth, G65 0NH
JUNE 2014
Economic update: June 2014 Here we look at some key economic indicators and the UK’s economic prospects for the coming months.
The UK economy remains on the road to recovery. Most sectors and regions are showing positive growth trends, suggesting the recovery is broadening too. Whether the recovery is secure is difficult to tell at this stage, particularly as a possible housing boom continues to cast a shadow.
Industry growth
Inflation
Three of the four main industry groups - construction, production and services showed growth trends in the first quarter of 2014. The largest contribution came from the services sector, which increased by 0.9% and displayed widespread growth across its main areas, including:
CPI inflation crept back up to 1.8% in April after falling to 1.6% in March, but remains below the target rate of 2%. The Bank of England expects this to continue to creep up towards 2% in the coming months, particularly as the fall in petrol prices in spring 2013 drop out of the annual comparison. Meanwhile, average wage growth in March briefly outstripped inflation for the first time since Q1 2009 as annual growth of weekly wages including bonuses stood at 1.7%.
GDP GDP is set to exceed its pre-recession 2008 peak in the next few months, according to the National Institute of Economic and Social Research. This is bolstered by the latest Office for National Statistics (ONS) figures, which show that GDP increased by 0.8% in the first three months of 2014, compared with growth of 0.7% in the last quarter of 2013. GDP is now 3.1% higher than it was in Q1 2013. Furthermore, the Office for Budget Responsibility’s update for the Budget in March revised its growth forecast for 2014 up to 2.7%.
2 Stewart Street Milngavie Glasgow G62 6BW 0141 956 5525 [email protected]
Economic UPDATE
•
distribution
•
hotels and restaurants
•
transport
•
storage
•
communication
•
business services
•
finance.
Production industries grew by 0.8% and construction increased by 5.1% compared to Q1 2013. Agriculture output decreased by 0.7% but, overall, positive growth is looking widespread and encouraging.
Unemployment The unemployment rate fell to 6.8% for January to March 2014, according to the latest ONS figures. This is below the level at which the Bank of England said it would consider raising interest rates from their record low of 0.5%.
www.abfm.co.uk
Economic update: June 2014 Interest rates
Savings
While the economy has performed strongly and unemployment has dropped below 7%, the Monetary Policy Committee voted to keep interest rates at 0.5% in May. The Governor of the Bank of England, Mark Carney, has made it clear that they will not be raised any time soon.
Savers were hit hard by the economic crisis and there hasn’t been much respite since. Savings account rates remain at rock bottom while the base rate has been at 0.5% for so long that finding a savings account that pays enough to counteract the impact of inflation is a challenge. Saving into a ISA can help to balance the impact of inflation and news of the New ISAs, which launch this July, means that you can save even more without being hit by income tax.
Introducing May’s Inflation Report, he said that when interest rates will rise will depend on the level of ‘spare capacity’ and the evolution of the economy. Comparing securing the recovery to making it to the qualifying rounds of the World Cup, he said: “That is an achievement, but not the ultimate goal. The real tournament is just beginning and its prize is a strong, sustained and balanced expansion.” Many economists now predict interest rates will remain at 0.5% until the beginning of 2015.
The housing market Mark Carney has warned that the housing market has deep structural problems that could impact on the UK’s economic recovery. House prices have increased by 8.5% in a year, according to the latest House Price Index from Halifax, while there are 29% more homes being sold than there were in March 2013. A shortage of homes is exacerbating the situation, while mortgage lending criteria continues to toughen.
Financial planning during an economic recovery
Important information The way in which tax charges (or tax relief, as appropriate) are applied depends upon individual circumstances and may be subject to change in the future. This document is solely for information
When it comes to saving at the moment, it is important to shop around, but also to keep an eye on existing accounts. If you joined an account with a bonus rate make sure you review it regularly to ensure that your savings aren’t languishing. Likewise, the best rates tend to be on accounts that keep your money locked away for longer. You may wish to consider when you will need access to your funds to decide what type of account to choose.
Investments Diversification is key in these circumstances, ensuring that your portfolio is balanced and structured to reflect your attitude to risk. If the recovery can be sustained, there may be opportunities for investors. When it comes to choosing investments it is a case of looking for companies that have the capacity to grow as the economic recovery filters through to earnings and profits. Actively managed funds will be looking to do this.
be a priority when choosing your investments. Investments carry risks and if you are unsure of the risks involved it is vital that you seek professional advice.
Pensions Budget 2014 saw a series of announcements aimed at making pensions more flexible. From April 2015 anyone aged 55 or over will be able to take their pension however they want, regardless of its size. Changes that came into effect on 27 March include increasing the overall pension amount you can take as a lump sum to £30,000, if the total value of all of your pension pots is worth this amount or less, and reducing the amount of guaranteed income needed in retirement to access flexible drawdown to £12,000 a year. You can also take individual small pension pots to a value of £10,000 as a taxed lump sum, regardless of your total pension wealth, subject to a restriction that you can only do this three times. This means that as a pension saver there are more options available and you will have more choice at retirement. Now may be the time to review your investments and restructure your retirement portfolio.
Seek advice
The New ISA limit of £15,000, which comes in from July should, as always,
We can help to ensure that your investments are structured in the best way to suit your circumstances in the current economic climate. Please contact us to find out more.
purposes and nothing in this document is intended to constitute advice or a recommendation. You should not make any investment decisions based upon its content. The value of investments and pensions can fall as well as rise and you may not get back the amount you originally invested.
Whilst considerable care has been taken to ensure that the information contained within this document is accurate and up-to-date, no warranty is given as to the accuracy or completeness of any information. E & OE.
Arthur Beverly Financial Management is authorised and regulated by the Financial Conduct Authority. Financial Services Register number 485198. Registered in Scotland Number 342744. Registered Office: 22 Backbrae Street, Kilsyth, G65 0NH
