7 March 2023

It’s only a number, after all.

Food inflation, Northern Ireland protocol fallout and the upcoming budget have impacted markets.

Markets have trundled on during recent weeks, neither making nor losing much in the way of ground. Our own FTSE 100 Share Index did succeed in breaching the 8000 barrier, but has found it difficult to hold on to this level. Should we be concerned about this? The truth is that there is something about a nice round number that, if breached, can help build confidence. Arguably, the failure of the Footsie to top 7000 more than two decades ago led to a period of relative stagnation in market terms.

Elsewhere, company news has been faltering as the results season draws to a close and economic data is similarly thin on the ground. This is a fallow period for hard statistics. The year-end company results period is all but finished, while being just two thirds of the way through the first quarter means that little of significance is likely to emerge in terms of national statistics. True, there are surveys, like house prices and Purchasing Managers’ Indices, but these are indicative, rather than hard facts.

But there is much happening elsewhere that could have implications for investors. More supermarkets are restricting how much of certain, mainly salad based, products individual customers can by, with the fall in production in places like Spain coming at a time when British farmers are also likely to be cutting back their growing plans. It all looks to be adding to supply problems which are hardly likely to restrain inflation in the food area.

Indeed, food price rises are taking centre stage at present, with milk, oils, fats and pasta all rising faster than the headline inflation rate. Inflation may be coming down, but it seems as though those less able to withstand these cost of living pressures will be the hardest hit by current trends. In America the inflation rate is falling more dramatically than here, but the recent weakness of the pound has not helped matters.

On the plus side, sterling did receive a boost from the new arrangements being put in place to deal with the problems created by the Northern Ireland protocol. While the fine print is still being worked upon by civil servants and not all will greet this development positively, it does appear to have thawed relations with the EU somewhat. Sadly, a recent speech by the Bank of England’s Governor, Andrew Bailey, did bring sellers of the pound out again, not that he said anything controversial.

Meanwhile, we have the Budget to look forward to later this month, not that Chancellor Jeremy Hunt is likely to have much of cheer to deliver to an expectant public. But while rising interest rates do appear to be holding back the residential property market, the economy appears to be performing better than feared, if recent surveys are anything to go by. It remains to be seen if our benchmark index can challenge the big figure again anytime soon.

Brian Tora                                                                                 


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