Economic confidence is a fragile thing. The more that our politicians fill the airwaves with dire warnings about the jump in the cost of living, the more likely they are to create conditions for a serious downturn.
As it happens, the first quarter output data could have been a great deal worse. Growth in the first quarter came in at 0.8 per cent.
That is above the 0.7 per cent rate required to drive UK output back to pre-Covid levels and compares favourably with the 0.4 per cent loss of output in the US in the first quarter, a flat France and a 0.2 per cent gain in Germany.
Taxing times: Chancellor Rishi Sunak (pictured) could do a trade off by postponing the 2023 rise in the corporation tax from 19% to 25%
As one of the most open economies in the world, the UK has no room for complacency.
Our trade balance is deteriorating as a result of the high cost of imported energy and continued adjustment to Brexit.
Much of the focus is on the 0.1 per cent estimated loss of output in the March in a nation mesmerised by fears of energy bills bursting through the price cap.
And it is impossible to ignore harrowing tales of families having to choose between food and boiling a kettle.
Nevertheless, if the social security bureaucracy were doing a better job in identifying the needy, stress could be avoided since there are £15billion of unclaimed means-tested benefits there to be distributed.
Before people become too anxious, it is worth glancing at forward-looking data. Since the pandemic, the Office for National Statistics is helpfully monitoring early indicators of what is going on in Britain.
In the week to May 12, several consumer measures were up. Credit and debit card purchases jumped 8 per cent, dining in restaurants and cafes was up 8 per cent and visits to retail and recreation centres increased by 4 per cent.
Even though there are citizens struggling, the squeeze on real incomes isn’t having a dramatic impact as yet.
Similarly, data from the transport sector – ranging from flights in and out of the UK (we have all seen airport queues) to cargo and tanker calls at UK ports – are higher. That parallels recent US data suggesting that post-Covid supply kinks are levelling out.
Many factors are driving the cost of living up with the war on Ukraine and its impact on wheat, energy and fertilizer prices hurting. Free markets do adjust.
In a U-turn, the International Energy Agency now reports that contrary to previous forecasts, the market is adjusting to the loss of Russian output and that only one-third of the 3m barrels a day of lost oil output has happened.
Non-Russian producers are adjusting to the new world. In parallel, gas prices on UK wholesale markets are tumbling as liquefied natural gas from Qatar and the US arrives in abundance.
If we could count on the main domestic and business suppliers to abandon the ‘rocket and feather’ approach to pricing, so that price drops are passed on as swiftly as rises, then maybe when the cap is renewed in the autumn the shock could be less than predicted.
The political clamour for windfall taxes on big oil and energy is rising, and the Chancellor Rishi Sunak and Boris Johnson know the strength of the prevailing wind as the squeeze on real incomes, projected by the Bank of England, looms into view.
HM Treasury, having already baked the highest tax take since the 1940s into the cake, will find it hard to resist the pressure.
If the Chancellor was smart, he would do a trade off by postponing the 2023 rise in the corporation tax from 19 per cent to 25 per cent, which could be a serious obstacle to business and inward investment.
Sunak is unlikely to spike the national insurance hike, which directly affects most employees and employers. Instead, he should think again on company taxation.
That would be an enormous bonus for enterprise, entrepreneurship and growth.
One inward investor who has been a huge disappointment to Britain is Masayoshi Son, the proprietor of Japanese conglomerate Softbank.
Far from being the reliable owner of Cambridge-based chip maker Arm Holdings, as the Government of Theresa May believed, he has proved a mercurial speculator.
In the latest letdown Softbank’s Vision Fund has reported record losses of £21.3billion.
Small wonder he is seeking to float Arm in New York as quickly as possible and recoup losses. The Johnson government must prevent this happening.