Join our community of smart investors
OPINION

SEVEN DAYS: 16 November 2012

SEVEN DAYS: 16 November 2012
November 16, 2012
SEVEN DAYS: 16 November 2012

Inflation rebounds

UK CPI up

The downward trend in the rate of UK inflation was reversed in October when consumer prices index inflation leapt to 2.7 per cent from the previous month's lowly 2.2 per cent. The biggest single factor was the rise in university tuition fees from £6,000 to £9,000 across many institutions, which accounted for 0.3 points of the rise. And the index could be set for further rise in the coming months as the effect of recent energy price rises feeds through to inflation figures. Rising inflation means interest rates, and hence savings rates, look set for a prolonged period at low levels.

Greek tragedy redux

IMF-EU row

The main bodies currently propping up the stricken Greek economy, the International Monetary Fund and the European Union, have fallen out publicly over the speed at which Greece must slash its debts. The European Union's Jean-Claude Juncker this week said it was willing to let Greece push the target for reducing debt to 120 per cent of GDP from 2020 to 2022, but IMF head Christine Lagarde disagreed. The two need to agree to concurrently release funds to Greece. Meanwhile on Tuesday, Greece proved it is still able to raise some funds of its own accord by raising €4bn in short-dated bonds towards payment of a €5bn debt repayment due Friday.

Mind the £48bn gap

More pain to come?

Fears have been raised that a further £48bn of spending cuts need to be found by the chancellor George Osborne. The Royal Society for the Arts and the Social Market Foundation claim that the forthcoming budgetary review by the Office for Budgetary Responsibility, to be published alongside the Autumn Review in early December, will show a growing black hole caused by deteriorating economic conditions. This requires a further £48bn of cuts to be found beyond the 2010 emergency budget which ushered in the current age of austerity. The two bodies estimate that some government departments could be forced to cut their budgets by another 23 per cent.

Miracle over?

BRIC fear

Forecasting body the US Conference Board has poured cold water on hopes that the leading emerging markets economies, the BRICs, will lead the global economy through the next stage of sustainable growth. It claims that growth in all four BRIC economies will slow down markedly in the coming years to the point where by the early 2020s China's growth rate will be around 3.9 per cent as its ageing population takes effect; in India, growth will be 3.9 per cent and in Brazil around 2.7 per cent. Of equal concern, the Board forecasts anaemic growth in European countries such as the UK for years to come.

Fixing fear

Energy inquiry

The energy regulator Ofgem and the Financial Services Authority are both investigating claims from whistleblowers of price fixing in the wholesale gas sector. The claims, most of which originate from energy price reporting agency ICIS Heren, suggest that price rigging has been widespread between participants in the wholesale gas markets in recent years - something that could have led to inflated prices being charged to consumers. In the current febrile environment, politicians including energy secretary Ed Davey condemned the actions.

US rising

Set for top spot

The International Energy Agency has predicted that the US is likely to become the biggest single oil producer in the world within the second half of this decade. Bolstered by growing production of shale oil, the US will outstrip Saudi Arabia in terms of oil production by 2017, according to IEA estimates. And its burgeoning shale gas production means it will become a net exporter of gas before 2020, by which time the US could even be self-sufficient compared with its current position, where it imports 20 per cent of its fuel energy needs.