Advisa Insights – May 2024

Newsreaders welcome

Welcome to our May edition of our client newsletter, as always, we’re here to bring you a comprehensive outlook on what’s happening nationally and locally. We delve deep into our economic calendar of events for April to provide you with a clear view of the national economic trends and how they might affect your financial planning.

In addition, you will find this month’s features:

  • Balancing Financial Health: Tips to gauge and improve your financial stability.
  • Personal Finance Management: Customise strategies that fit your unique lifestyle and financial goals.
  • Retirement Planning (Part 3): Explore the different income streams in retirement.

 

Best Regards,

Advisa Wealth Team

National Outlook

The UK economy has shown signs of a tentative recovery, recording a modest growth of 0.1% in February. This slight increase, driven by a boost in production and manufacturing sectors such as the car industry, signals a potential emergence from the recession experienced at the end of 2023. Despite the challenges posed by wet weather impacting the construction sector, overall economic activity grew for the first time since last summer over the three-month period to February.

However, the employment landscape presents mixed signals. The unemployment rate rose unexpectedly to 4.2% in February, up from 3.9%, indicating that high interest rates may be prompting employers to reduce their workforce. This increase in unemployment coincides with a cooling labour market, where higher interest rates have discouraged hiring and led to more redundancies.

On a positive note, wage growth excluding bonuses was stronger than anticipated, at 6% over the three months to February, highlighting the ongoing complexities in monetary policy decisions facing the Bank of England. Inflation remains a significant concern, with the annual consumer price rise at 3.2% in March, slightly down from 3.4% in February but still above the central bank’s target of 2%. These figures suggest that the path to reducing interest rates could be longer than initially expected.

Retail sales in March were stagnant, reflecting the first non-growth month since December, despite a reduction in inflation and a 2% cut in National Insurance starting in January. The lack of a sustained recovery in consumer spending marks a disappointing first quarter for many retailers.

This mixed economic landscape illustrates the resilience of the UK economy while also highlighting the challenges it faces as it seeks to navigate out of recession and stabilise in a fluctuating global environment.

Balancing Financial Health: Are you financially fit?

In today’s fast-paced world, financial health is often reduced to the figures in one’s bank account. However, a deeper understanding reveals that true wealth is not merely about accumulation but finding a balance that fosters mental, physical, and financial well-being. This comprehensive approach to financial health is becoming increasingly relevant as individuals worldwide strive to redefine what it means to be truly wealthy.

Read more on Financial Health

 

Personal Finance Management: Tailoring Strategies to Your Life Stages

In the journey of life, our financial needs and goals evolve. From the first paycheck to the golden years of retirement, each stage brings new challenges and opportunities. Effective personal finance management is not a one-size-fits-all solution but rather a dynamic process that adapts to our changing circumstances. Understanding how to manage your finances at each life stage is crucial for long-term financial health and security.

Read more about Personal Finance Management

 

Retirement Planning (Part 3): Understanding Retirement Income: What’s Coming In?

Identifying Your Retirement Income Sources
State Pensions: What You Need to Know

For many, the state pension forms the backbone of retirement income. In Jersey, eligibility and the amount received depends heavily on the number of years you have worked here, although there are also some qualification exceptions to be aware of.  You need 47 years of contributions to receive a full Jersey state pension.  For any Jersey residents who also have a UK National Insurance contribution record, there may also be an opportunity to pay additional Class 2 or 3 contributions to build this entitlement up.  If you are in this situation and have not already started this process you need to act quickly as the rules may be changing in 2025.  You need 35 years of contributions to gain a full UK state pension.

Read more about Retirement Planning

 

Local News Highlights

Jersey Police and Banks Intensify Efforts Against Rising Spoofing Scams

Jersey’s police, led by Deputy Chief Officer Scott Hall, are collaborating with banks to tackle an increase in sophisticated “spoofing” scams that deceive individuals by impersonating legitimate banks like HSBC. These scams have led to significant financial losses, with one recent incident affecting 68 victims across the Channel Islands, costing over £2 million. The police are enhancing public awareness and urging caution, particularly regarding suspicious links on social media, as part of their strategy to combat these increasingly complex fraud schemes.

Cautious Optimism Amid Falling Food Prices, Future Hikes Loom

The CEO of Channel Island Coop, Mark Cox, has expressed cautious optimism due to a recent decline in food inflation, calling it a “glimmer of hope” for consumers. Despite the positive trend, Cox warns of potential price increases in the near future due to expected rises in the costs of oils, fats, and cocoa. The latest data indicates that the overall inflation rate on the Island has dropped to 5.7%, assisted by a cooling housing market and a decrease in food price inflation. However, challenges such as the war in Ukraine, climate change, and supply chain issues continue to pressure food costs. Cox remains hopeful that the trend of cost reductions will continue, mitigating some impacts on consumers.

Jersey Faces Demographic Dilemma as Birth Rates Continue to Decline

Jersey’s future economic and social landscape is under scrutiny as the latest Public Health report reveals a continuing decline in the Island’s birth rate. The Births and Breastfeeding Profile for 2023 indicates that the total fertility rate in Jersey has fallen to 1.29, significantly below the replacement level of two children per woman, signalling potential long-term challenges in sustaining the population without relying on migration. The proportion of births among women aged 20 to 29 has dropped dramatically, reflecting broader concerns about economic stability and housing affecting family planning decisions. Authorities express the need for a holistic approach to address these trends, including revising policies like IVF funding to encourage higher birth rates. Additionally, demographic shifts may necessitate changes in infrastructure and social services to accommodate an aging population, highlighting the urgency for strategic planning to manage the economic and social implications of these changes.

Jersey’s Inflation Eases but Economic Strains Remain

Jersey’s Retail Prices Index (RPI) indicates a decrease in inflation to 5.7% for the year ending March 2024, marking the lowest rate since March 2022. Despite this positive trend, with inflation falling from a high of 10.1% in September 2023, the cost of living, particularly housing, continues to drive inflation, though at a slower pace. While vulnerable groups such as pensioners and low-income households see some relief, economic pressures persist as summer approaches. The situation is slightly more severe in Jersey compared to the UK due to different housing cost calculations.

 

Next month’s Economic Calendar

What may impact your money?

Key events, explained:

BoE Interest Rate Decision: An interest rate tells you how high the cost of borrowing is, or high the rewards are for saving.

Unemployment Rate: The unemployment rate is one of the primary economic indicators used to measure the health of an economy. It tends to fluctuate with the business cycle, increasing during recessions and decreasing during expansions. It is among the indicators most commonly watched by policy makers, investors, and the general public.

Inflation Rate: Inflation is the rate at which prices are rising over time. For example, if a loaf of bread costs £1 and that rises by 10p, then bread inflation is 10%. Price rises have been getting faster since February 2021, when the CPI rate was just 0.4%.

The Office for National Statistics (ONS) tracks the prices of hundreds of everyday items in an imaginary “basket of goods”. The basket is regularly updated to reflect shopping trends, with the most recent changes adding frozen berries and removing alcopops.

GDP Growth Rates: Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.

Retail Sales: The primary purpose of the Retail Sales Index (RSI) is to produce a short-term measure of the changes in the volume and value of sales of goods by retail businesses in Great Britain, providing a timely indicator of economic performance and strength of consumer spending.