Happy days are here again – or are they?

Last week seemed to be bursting with good news for the UK, rugby and tennis wins, house prices on the up and reports of economic upturns and corners turned. Add to this the fact that summer has apparently decided to make a long overdue appearance then the overall effect is a resounding “feel good” one.

However (you knew that was coming didn’t you?) if we delve not too far beneath the veneer of good news about the economy then things in the garden are not at all as rosy as some would have us believe.

If things are really as good as they appear on the surface why has the Bank of England not raised interest rates and in fact intimated that they will not rise in the foreseeable future? Low interest rates are a huge sign of an economy in trouble (just take a look at Japan’s recent history).

The fact remains that much of the good news or “recovery” revealed in recent figures is being driven by consumer debt – AKA credit-driven spending.

The recent positive results revealed by the SMMT on new car registrations should also, I’m afraid, be viewed with the same scepticism.

As we said back in February (Is there something seriously wrong with the UK new car market?) just why is it that the UK new car market is doing so well when every other market in Europe is doing so badly? In fact new car sales in May for the EU fell 5.9% year on year to their lowest level since 1993.

Could the answer be the UK consumer’s poisonous relationship with debt? Could a car related sub-prime toxic bubble be about to burst.

Let’s hope not!

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One Response to Happy days are here again – or are they?

  1. Ron Rodney July 9, 2013 at 9:08 am #

    Your reference to the subprime market is perfect here.

    What you’ve been saying over the last few months reminds me of what a few solo voices said back in 2008.

    In the end banks got burnt and some went bust because they ignored who to give credit to. Car dealers haven’t learnt from that and it’s inevitable some major names will collapse in the future.

    The industry needs to set up vigorous credit guidelines and stick to them.

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