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In the first of a new monthly column from Ravenscroft, David Le Cornu and Jamie Mourant look ahead to 2024
THE wonderful Simply Red song released in 1985 is the inspiration for the title to this commentary. 2023 was a tough year for many people as expenses rose at a faster rate than their income, leaving them with less money for the fun things in life and for their savings.
To put this in perspective, the average rate of inflation in the UK in 2023 was expected to be in the region of 7.5% (Jersey will be higher than this) and as many, perhaps most, people will not have seen their income rise by anything like this amount, they will be feeling worse off than they did a year ago.
The big question is: Will 2024 be kinder? The answer will differ from person to person, as our financial positions are unique and have different sensitivities.
In brief, a combination of the movement in inflation and interest rates, the strength of the economy, the thrust of government policy and the buoyancy of the employment market will be the key influences on most of our personal finances during 2024.
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Inflation
Thankfully, inflation is falling and is no longer in double-digit territory, but we must bear in mind that this doesn’t mean prices are falling; it means they are rising at a slower rate than they previously were.
It also seems likely that inflation will fall slowly from present levels.
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Interest rates
It is generally accepted that GBP interest rates have peaked and will begin to move lower in 2024 although investment markets and central banks disagree on the pace and extent to which they will fall over the next 12 months.
In America, policy action by the Federal Reserve may be determined by politics and a desire to avoid, at all costs, Donald Trump returning to the Oval Office. Elsewhere, central banks are expected to drag their feet as they are more concerned about letting the inflation genie out of the bottle again than they are about a recession.
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Strength of the economy
The OECD has recently revised its forecast for UK economic growth downwards for 2024 to 0.7%. This is flirting with recession, and with many retailers having to slash their prices ahead of Christmas, this suggests that consumers are worried and are reining in their expenditure, leaving us thinking the OECD forecast may be too optimistic.
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Government policy
The challenge is that their cupboard is bare. They have no money to spend on expansionist policies.
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Employment market
There are early signs that the employment market is getting tougher, so wage bargaining power is likely to weaken.
We wish that the 2024 economic outlook was more attractive. It seems too early to engage Ian Drury mode and sing about “reasons to be cheerful”. For investors, the good news is that investment markets are forward-looking discounting machines so, they are already looking past 2024 towards better times.
