Greenwood Trading has told clients that it expects the UK economic recovery to falter within the next six months as wages stagnate
Japan – Greenwood Trading has told institutional clients that it expects the credit-fueled economic recovery in the United Kingdom to falter within the next 6 months as wage stagnation bites deeper into consumer spending.
Recent data showed that annual food sales in the UK fell for the first time since records began in 1989 as consumers remained hamstrung by wages that have barely risen in several years and struggle to cope with the rising cost of fuel, energy and housing. Several commentators, however, are blaming the fall on “endless discounting” by supermarket chains trying to increase market share.
Total retail spending rose just 0.1% against broad economists’ expectations of a 0.4% increase.
“Like the US, some 70% of the British economy depends upon consumer spending,” said Simeon Kwanda, head of economic research at Greenwood Trading. “Despite the 3%+ growth rate the UK expects to post this year, huge swathes of the population are struggling to see the economic recovery reflected in their everyday lives,” he added.
The architects of the country’s recovery have been criticized for their reliance on stimulus and rising real estate values and failing to re-balance the economy to increase dependence on exports.
Greenwood Trading said it is cutting exposure to UK –based assets like equities but increasing them in companies that generate a large percentage of their income from mining and commodities.
“A significant proportion of the FTSE 100 is composed of companies sensitive to what we believe is set to be a resumption of the commodities supercycle,” added Mr. Kwanda.
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