9 August 2023 5 minute read
Author

We take a visual approach to explain what’s happening with UK inflation, web traffic for ChatGPT and Threads, and the slower-than-expected recovery of China’s economy.

Important information

Read this article to understand:

  • Why the UK is an outlier when it comes to inflation
  • Whether ChatGPT and Threads are here to stay
  • The reasons behind China’s sluggish recovery

Inflation is easing, but more in some places than others

The last couple of years have been difficult for consumers globally because of high inflation; the UK is no exception.

The spike in inflation was initially fuelled by supply chain bottlenecks

Initially, the spike in inflation was fuelled by supply chain bottlenecks, caused by pent-up demand as economies began to recover after COVID-19. The situation was exacerbated by the Russian-Ukraine war, which disrupted the supply of key commodities, particularly natural gas.

After hovering around the Bank of England’s two per cent target since 2017, UK inflation has surged since 2021, reaching a peak of 11.1 per cent in October 2022 (see Figure 1). According to the Rising cost of living in the UK report by the House of Commons, inflation has not hit such highs for more than 40 years.1

Figure 1: UK Consumer Price Index (per cent)

Source: Aviva Investors, Eikon. Data as of June 28, 2023.

Despite falling since then, inflation remains high at 7.9 per cent, as of the end of June.

But how does this compare to other economies? According to data from the Organisation for Economic Cooperation and Development (OECD), UK inflation has proved stickier than it has in other G7 countries (Figure 2).2

Figure 2: June inflation figures for G7 countries versus Eurozone average (per cent) 

Source: Aviva Investors, Eikon. Data as of July 27, 2023.3

A quick breakdown of the UK Consumer Price Index (CPI) illustrates the main reason for that stickiness. According to the Office for National Statistics (ONS), food inflation was 17.4 per cent in June.4 According to the International Trade Administration, the UK imports around 46 per cent of the food it consumes, making it vulnerable to price spikes in other countries.

Figure 3: UK CPI by sector, May versus June 2023 (per cent)

Source: Aviva Investors, ONS. Data as of June 2023.5

ChatGPT and Threads: Fad or fabulous?

ChatGPT, Open AI’s generative artificial intelligence chat box that can generate articles, code and much more besides, burst into the public consciousness on its launch last November. Its rapid rise has seen it become one of the most-visited websites in the world; according to Similarweb data, in the year to July 31, it was more popular than streaming giant Netflix and Microsoft search engine Bing.6

A similar story can be seen with Meta’s new social media platform, Threads, which launched on July 6. Threads, which defines itself as an app “for sharing text and joining public conversations” saw more than 49 million active users one day after launch.7,8

According to Statista, Threads and ChatGPT reached the one million user mark quickly – just one hour and five days after their launches, respectively.

Figure 4: Time taken to reach one million users 

Source: Aviva Investors, Statista. Data as of July 7, 2023.9

The big question is whether such interest is sustainable. Traffic on Threads almost halved in just a week, dropping to 23.6 million users on July 14, while June saw the first month of traffic decline for ChatGPT, down almost ten per cent on May’s numbers.10,11

Is China losing ground?

After decades of strong economic growth, which saw China rapidly catch up with major economies, a slower-than-expected recovery after the lifting of zero-COVID restrictions has raised questions about the country’s long-term trajectory.

In 2022, Chinese GDP grew three per cent, well short of the government’s official 5.5 per cent target.12 And while the numbers have improved in 2023, they are still below expectations.

Chinese GDP grew 6.3 per cent during the second quarter, far below the 7.3 per cent expected by the market. Signs of a more challenging environment can be seen in different parts of the economy. Unemployment among people aged 16 to 24 has hit a new record of 21.3 per cent, while long-term problems in real estate continue to manifest.13

Figure 5: China GDP annual growth (per cent)

Source: Aviva Investors, Trading Economics. Data as of July 2023.14

References

  1. Daniel Harari, et al., “Rising cost of living in the UK”, House of Commons, July 21, 2023.
  2. “Inflation (CPI)”, OECD, June 2023.
  3. ”Inflation (CPI)”, OECD, June 2023.
  4. “Consumer Price Inflation, UK: June 2023”, Office for National Statistics, July 19, 2023.
  5. “Consumer Price Inflation, UK: June 2023”, Office for National Statistics, July 19, 2023.
  6. “Top websites ranking”, Similarweb, June 2023.
  7. “Introducing Threads: A new way to share with text”, Meta, July 5, 2023.
  8. David F. Carr, “Threads usage drops by half from initial surge”, Similarweb, July 23, 2023.
  9. Katharina Buchholz, “Threads shoots past one million user mark at lightning speed”, Statista, July 7, 2023.
  10. David F. Carr, “ChatGPT drops about 10% in traffic as the novelty wears off”, Similarweb, July 3, 2023.
  11. David F. Carr, “Threads usage drops by half from initial surge”, Similarweb, July 23, 2023.
  12. “China GDP annual growth rate”, Trading Economics, July 2023.
  13. “China GDP annual growth rate”, Trading Economics, July 2023.
  14. “China GDP annual growth rate”, Trading Economics, July 2023.

Discover our multi-asset & multi-strategy solutions

With over four decades of managing multi-asset and multi-strategy portfolios, we offer bespoke and off-the-shelf actively managed solutions.

Find out more

View our full monthly series

We take a visual approach to illustrate topical data themes in economies, markets and beyond.

Learn more

The Little Book of Data

The world, including finance, is constantly changing and investors are always looking for an edge. Every year, we curate and create what we believe are some of the most relevant and thought-provoking charts and information graphics for our clients. In the fifth edition of our award-winning publication, The Little Book of Data, we use visualisations to bring to life the biggest trends in economies and markets.

Download your copy

Important information

THIS IS A MARKETING COMMUNICATION

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but, has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe, this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK, this document is issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material.  AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act 2001 and is an Exempt Financial Adviser for the purposes of the Financial Advisers Act 2001. Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

In Canada and the United States, this material is issued by Aviva Investors Canada Inc. (“AIC”). AIC is registered with the Ontario Securities Commission as a commodity trading manager, exempt market dealer, portfolio manager and investment fund manager. AIC is also registered as an exempt market dealer and portfolio manager in each province and territory of Canada and may also be registered as an investment fund manager in certain other applicable provinces. In the United States, AIC is registered as investment adviser with the U.S. Securities and Exchange Commission, and as commodity trading adviser with the National Futures Association.

The name “Aviva Investors” as used in this material refers to the global organisation of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom.