Financial optimism has generally reigned around the globe since the end of the financial crisis about a decade ago.
That's what makes these comments from Elliott Wave International's June Global Market Perspective all the more remarkable:
UK insolvency firm Begbies Traynor counts 484,000 companies that are experiencing "significant financial distress." 484,000! That's the number of British firms in distress even before the coming economic downturn plays out. Looked at another way, about one in seven economically active companies in the UK suffer under significant distress. In addition, the number of "critically distressed" firms, which often precedes formal insolvency, jumped 17%, year-over-year. Statistics like these are precisely why we spend so much time discussing the industries that got inflated by a generational trend toward optimism.
Also, the United Kingdom's retailers have had to grapple with deflationary forces.
Read this July 3 article excerpt from Internetretailing.net:
Shop Prices turned deflationary for the first time since October 2018 in June, according to the latest British Retail Consortium-Nielsen shop price index.
Last month, Shop prices fell by 0.1%, compared to May when prices increased by 0.8%. This is below the 12- and 6-month average price increases of 0.3% and 0.5%, respectively.
Non-Food prices were back in deflationary territory in June, recording a decrease of 1.2% from the 0.2% increase in May. This is below the 12- and 6-month average price decline of 0.6 and 0.3%, respectively. Food inflation was steady at 1.8% in June. This is in line with the 12-month average price increase, and slightly below the 6-month average price increase of 1.9%.
Fresh Food inflation eased in June to 1.4% from 1.5% in May. This is in line with the 12-month average price increase, but below the 6-month average price increase of 1.5%. Ambient Food inflation accelerated to 2.3% in June up from 2.1% in May. This is in line with the 12-month average price increase, but below the 6-month average price increase of 2.4%.
With Food inflation steady, June's headline inflation figure was driven by the sharp decline in Non-Food prices. Out of the seven Non-Food index categories, inflation eased for four of them and the remaining three were deflationary.
Shoppers' finances have been under significant strains. Real income grew by just 1.1% over the year to April 2019, whereas there was negative real wage growth in six of the last nine years. Consequently, non-food retailers catering to discretionary demands have been bearing the brunt. In June, prices of Clothing & Footwear, Furniture, Electricals, DIY, and Other Non-Food were all below the level of June 2015 prices. While technological changes have resulted in the long-term price decline seen in Electricals and Clothing & Footwear, weak consumer spend put significant downward pressure on prices for the other categories.
Read the free report, "What You Need to Know Now About Protecting Yourself from Deflation."