Overview of the week commencing 7 August
Graham Cross, CEO
The Dow Jones hit an all time high last week. Our focus this week though is on the UK and China
Last week, saw the monthly Monetary Policy Committee (MPC) meeting coincide with the quarterly publication of the Inflation Report.
In so far as monetary policy is concerned, the MPC voted 6 -2 to maintain Bank Rate at 0.25 percent and hold the target for asset purchases at £425billion. It seems to us that there are one or two economics editors that feel a little let down by the Bank. Plenty were speculating on a rate rise.
Meanwhile the Inflation Report brought with it a downgrade in growth expectations for 2017 – from 1.9 percent in May’s publication to 1.7 percent. At the same time, the Bank made one or two minor alterations to the inflation forecast but it still expects inflation to hit something like 3.0 percent this year.
Last week also saw UK consumer confidence retreat to a post–referendum low. Moody’s expect confidence to ‘remain depressed in months to come as inflation rises, salaries stagnate and few answers regarding Brexit are provided’.
In China, the official Manufacturing Purchasing Managers’ Index fell a little in July, coming in at 51.4 compared with June’s 51.7. The unofficial version, put together by Caixin and focussing more on smaller, private enterprises, went in the other direction, rising from 50.4 in June to 51.1.
That’s good news. In fact, we think it’ll be good news so long as those surveys report results somewhere in the 50-to-54 band.
Back in Europe, across the English Channel it was reported that Eurozone unemployment fell faster than was expected. As a percentage of those willing and able to work, around 9.1 percent are currently out of a job. June represents the 14th consecutive decline in Eurozone unemployment. That improvement coincided with a 0.6 percent increase in output, as indicated by the preliminary GDP estimate for the second quarter. The Eurozone economy is growing at a year-on-year rate of 2.1 percent.