Is the UK in a Japanese Style Lost Decade?
Markets are starting what will be a very busy week for both corporate earnings and economic data releases with a mildly cautious tone, having previously been expected to open higher.
The equity market
remains in rather a bullish upward trend and any moves to the downside continue to be short lived.
Even the consolidation phase that the German DAX
went through during the middle part of January turned into a spike higher on Friday.
All this bullishness has come at a time when headlines are still making for tough reading.
This morning, many front pages are presenting reports of the never ending consumer squeeze and this is something that is expected to last for several more years.
The UK seems to be suffering from a Japanese style lost decade in terms of consumer spending. You only have to see the recent high street casualties to understand that we are simply not reaching for the plastic anymore and are instead paying off our debts.
When we are spending, most of us are trading down and finding new ways to save money. This is playing into the hands of some supermarkets that would normally not be considered by many people.
Inflation remains above par and wage inflation isn't keeping up so the pressure on disposable income continues.
The only good thing is that if we are to suffer a lost decade from the time that the credit crunch commenced in 2007, we are now just over halfway through it.
Unfortunately this is not a particularly fulfilling thought. It also means that we are likely to see GDP continue to flat line, with last Friday's negative Q4 following the big jump in Q3.
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
By Simon Denham, 28 January 2013