Blackfriar: You just can’t ignore Asda’s Tracker report, Mr Osborne

Just two days after he boasted that his austerity drive has helped the economy to turn the corner with a rosy broad based, sustainable recovery ahead of us all, Asda’s research depicts a very different picture.

So who is right?

Mr Osborne isn’t alone in thinking that the economy is on the turn.

Yesterday Liberum Capital released its latest report showing that its consumer sentiment index has hit its highest point in four years.

Liberum analyst Ian Whittaker said: “UK Chancellor George ‘Turning-a-Corner’ Osborne doesn’t need more evidence of the country’s economy edging up. But Liberum Capital’s third-quarter UK Consumer Survey is here if he needs it.

“The confidence of the UK consumer is at its highest level in the four-year history of the survey, fed by a belief that an interest rate rise is at least a year away and house prices will climb some five per cent in the coming 12 months.”

Launching the Asda research yesterday, chief executive Andy Clarke pointed out that one of the most worrying trends is that while London and the South East is gearing up for growth, other parts of the country have a grim time ahead.

The research showed wide regional variations in expected discretionary income growth over the next five years.

London leads the table with a 3.3 per cent increase forecast in spending power, but at the other end of the scale the South West is expected to see a fall of 2.0 per cent, Wales will see a fall of 3.3 per cent and Northern Ireland is in for a truly grim time with a fall of 20 per cent.

Yorkshire’s data throws up some anomalies.

Taken as a county, Yorkshire is second only to London when it comes to future spending power, with a 1.6 per cent increase in income growth over the next five years. But this is where the regional variations come into play. Yorkshire has enormous wealth and enormous poverty.

According to the Local Data Company’s latest report, one in seven UK shops lie vacant and Yorkshire is one of the worst-hit areas.

Nearly 17 per cent of shops in Yorkshire and The Humber are empty compared with just nine per cent in London.

Within Yorkshire itself there are wide variations.

Dewsbury and Grimsby, which lies just south of the border in Lincolnshire, are among the worst performing towns, but York is the best performing large centre after Cambridge and Harrogate also put in a strong performance.

Mr Clarke pinpointed the former Humberside as an area that will be worst hit. In each county there will be pockets where people suffer far more than in other parts of the country.

The most important lesson to learn from this research is that a London-based recovery simply isn’t good enough.

Mr Osborne needs to acknowledge that.

Nor is a recovery based on areas such as York, Harrogate and Mr Osborne’s own prosperous constituency of Tatton doing well, while towns such as Dewsbury and Grimsby are left to rot.

An interesting part of the report that was mostly glossed over by commentators is that Asda believes unemployment won’t fall below seven per cent in the next five years.

Seven per cent unemployment is the magic figure set by new Governor of the Bank of England Mark Carney as being the trigger for interest rates to increase.

Asda said the continued weaknesses in the labour market will add to the squeeze, with wage growth unlikely to top pre-recession levels (four per cent) in the next five years.

The research claimed that although private sector job creation is expected to help bring down joblessness, further public sector cuts are forecast to prevent the unemployment rate from falling beneath seven per cent over the next five years.

So where does that leave the UK economy with no sign of inflation falling?

Indeed, all the signs are that high food inflation will become a fact of life over the coming decades.

Simplifying the workings of the Bank of England has to be welcome and indeed the man on the street seems to love Mr Carney and his low interest rate pledge.

The number of people expecting interest rates to rise in the next year has fallen to its lowest level since November 2008.

But here’s the problem.

Mr Carney expects unemployment to fall to seven per cent in late 2016, yet Asda isn’t predicting any fall until at least 2018 – the furthest it is willing to forecast ahead.

One of them is wrong.

While Asda can afford to get it wrong – its day job is selling groceries – Mr Carney will lose all credibility if he makes promises to the UK public that he cannot keep.