Dust was still settling from Theresa May’s Brexit-grenade attack on Brussels, when a neat trio of economic indicators slipped out on Thursday.
May’s outlandish claim that European politicians want to rig Britain’s election, overshadowed a substantial slump in new car sales, a six-month low on mortgage approvals and a quiet slowdown in consumer credit.
That so little attention was paid during an election period – when the economy should be front and centre – speaks to the Prime Minister’s success at framing 2017’s election as all about Brexit.
She said in April it was the unacceptable challenge to Brexit from rivals in the months ahead that forced her to call the vote, in a speech that uttered not a single word about what the same period holds for the economy.
Yet Tory insiders have admitted to The Independent that there can be little doubt May had one eye on the economic warning lights when she stepped out to announce her intention to take the country to the polls.
One prominent Conservative MP said: “Theresa has always said she is, and has shown herself to be, someone who thinks carefully about what she does.
“With something as big as this, it would be odd if she hadn’t taken account of whether the economics were in her favour or not.
“Brexit may be at the front of her mind, it’s certainly at the front of her campaign, but she has clearly taken account of what may come down the line.”
On Thursday the Society of Motor Manufacturers announced new car sales had plunged 19.8 per cent year-on-year in April. There were some extenuating factors, but the size of the drop clearly pointed to consumers’ purchasing power falling and a more challenging time ahead for the industry.
The Bank of England also reported that mortgage approvals for house purchases dropped to a six-month low in March, the second successive drop and evidence the housing market is also being pinched by the squeeze on consumers.
The Bank’s data then showed the growth rate in net unsecured consumer credit slowed to an eight-month low in the same month.
Another senior Tory said: “The economic indicators have all been there and must have been a factor in the election. The financial crash seems recent, but it was years ago and we are due a downturn anyway.
“Rising inflation means people are beginning to feel the squeeze. They are seeing their money buy less in the supermarket and wages are still not rising that fast. If you get an inflation [wage] rise, that’s better than nothing.
“Philip [Hammond, the Chancellor,] would have looked at the data and said ‘if you are going to go, this is the best time’.”
They added: “If you are trying to untie your hands, it’s because you need them to deal with something that’s coming.”
There was a time when May’s party said the “strong and stable” governance it could provide was about the economic pitfalls ahead – at conference last year Mr Hammond even said the economy faced a Brexit “rollercoaster” ride.
But warnings about the economic impacts of EU withdrawal have fallen away as May took ownership of the issue, in particular since her Lancaster House speech.
Dr Howard Archer, chief European and UK economist at IHS Markit, said life for May’s “hard working families” is set to get increasingly challenging, adding that the squeeze has already begun to hit consumers, otherwise known as voters.
“If you look at the fourth quarter figures for last year for household disposable income, they are the latest available, real disposable income fell by 0.4 per cent quarter-on-quarter and was flat year-on-year,” he said.
“The savings ratio fell to its lowest rate on record. In the first quarter of this year, you had inflation rising further. Even though the pound has rallied recently, it still looks as though inflation will rise and could get up to 3 per cent later this year, while wage growth is being held down.”
He went on: “The squeeze on consumers is probably going to intensify further in coming months. It certainly isn’t going to ease.”
The three months to March 2017 showed a decrease of 1.4 per cent in retail sales, the third consecutive fall. The deterioration was mirrored in GDP estimates for the same period released by the Office for National Statistics last month.
Growth was estimated to have increased by just 0.3 per cent in the first quarter, the slowest rate since the same period a year earlier.
Dr Archer said he also believed the previously robust labour market, which has long been the Conservative government’s trump card, would start weakening.
He explained that with the economy slowing and consumers reining spending in, businesses will become more careful not just about employment, but about investment, weighing down on growth further.
He added: “The slowdown would have happened anyway because consumers are being increasingly squeezed, that was the main reason for the slowdown in the first quarter.
“But I do think that the more fraught the Brexit negotiations are – we’ve already seen the posturing, some not helpful comments on both sides – the more that it is likely to upset the economy and lead to business caution.”
As she gave her statement outside No 10 on Wednesday, announcing the dissolution of Parliament for the election, May mentioned the economy only in the context of what will happen after Brexit if she is not elected to secure Britain’s deal.
“If we don’t get the negotiation right, your economic security and prosperity will be put at risk and the opportunities you seek for your families will simply not happen,” she said.
Nothing was said of the “rollercoaster” that both Mr Hammond and the economic indicators are promising before 2019.
But it went unnoticed again after May unexpectedly turned her fire on European politicians, sensationally accusing them of attempting to swing the election, the type of charge usually reserved for the likes of Vladimir Putin.
Even the Russians saw the funny side, with Moscow’s embassy in London tweeting a picture of a national newspaper headline declaring, “Brussels is meddling in our election, warns May”.
The diplomats dryly added: “Praise God it’s not Russia this time.”
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