Economic Update 29th February 2012
Decline in European freight rates
The fourth quarter of 2011 saw a further drop in European road freight charges. The main cause seems to have been over-capacity at the end of the year.
At the start of 2011 there was strong demand for road freight, but following a deterioration in the market, haulage capacity remained available and this seems to have lead to the drop in rates.
The findings come from Transporeon and Capgemini Consulting’s latest ‘Transport Market Monitor’ report.
GB diesel prices highest in Europe
Road diesel in GB is the most expensive in Europe due to the taxation element – fuel duty and VAT make up 57% of the total using the pump price quoted on our fuel survey 24.02.12.
The costs related to the oil, delivery and retailer margin and these add up to nearly 62 pence per litre with almost 82 pence per litre being duty and VAT. Whilst for petrol the taxation comes to 59.25% with duty and VAT running at 80.63 pence per litre.
FairFuel UK reports that British fuel prices are around 20 pence per litre more expensive than the European Union average. Our survey fuel Q&A advises that GB is 35% more expensive that the cheapest country – Luxembourg.
CBI reports manufacturing boost
Manufacturing growth continued ticking upwards in February, continuing the January trend.
A Confederation of British Industry (CBI) industrial trends survey found that 21% of businesses in the sector anticipate more growth. It was reported that total order books were up on normal levels. 23% reported orders below expectations. These figures are a major improvement on the 2011 survey results.
With exports, 22% of survey respondents said that orders were normal, while 24% said that they were below expectations. Again, this was better than previous returns.
Now manufacturers anticipate increased production over the next three months.
Will high oil costs de-rail a recovery?
Commentators fear that European economies will fall back into recession if the surge in crude oil prices is sustained.
In the UK, the Bank of England has been basing its actions on an assumption that inflation will continue to fall. However if oil prices go up sharply, then businesses and households could be further squeezed as high fuel costs might lead to increased transport and goods prices. This would then hit the economy, and possibly reduce economic growth.
Minimum wage freeze?
Commentators are speculating that the minimum wage for young people may be frozen in the hope that such a move would encouraging more businesses to hire some of the 1.04 million, young people in the UK currently registered as unemployed.
Youth unemployment is now at its highest level since 1986/87.
The current rate for people aged 18 to 20 is £4.98, with the minimum wage for adults standing at £6.08 per hour. Freezing the adult rate may also be under consideration.
The government is expected to make a decision on raising the minimum wage rate in the next two months.