Neutral mode
But shop sales soar
Weaker shop prices as well as a renewed reversal in the oil price pushed UK inflation back into neutral in June. The brief return to positive territory in May proved short-lived and economists expect inflation to remain around this level for several months until last year's precipitous oil price declines fall out of the equation. But low inflation and rising wages have proved a boon for UK retailers, with the British Retail Consortium reporting continued strengthening in sales in June, buoyed by the good weather, with total sales up 2.9 per cent and like-for-like sales 1.8 per cent higher.
China steadies
GDP holds up
Actions by China's authorities to shore up it tumbling stock markets worked, temporarily, and it appears that wider actions to shore up its economy may have also worked, at least according to official figures. GDP grew by 7 per cent in the second quarter, matching the stated ambition of the government for 7 per cent growth this year. Stimulus efforts appear to have had some beneficial effect, with industrial output and retail sales figures showing some positive momentum. Meanwhile, Chinese equity market , after a temporary lull, fell again following the GDP figures.
Greek drama
Late night sessions
Greek politicians are getting used to burning the midnight oil. After overnight negotiations in Brussels yielded a potential deal with the eurozone last weekend, Greek politicians were set for a late night debate on Wednesday evening in an effort to push through some of the drastic reforms demanded of them by their paymasters. Meanwhile, a schism could be opening up between the International Monetary Fund (IMF) and European Union (EU) over the terms of the third Greek bailout, with the IMF calling for debt relief for the beleaguered Greek nation as part of the bailout, something which the EU has refused thus far.
Lamborghini time?
Withdrawals rise
The first 100 days since the UK's pensions reforms saw £1.8bn withdrawn from pensions. The cash windfalls were taken via a combination of £1bn-worth of withdrawals and £800m taken through income drawdown arrangements. During the same period, pensioners put £630m into annuity policies and £720m into income drawdown products. The Association of British Insurers reported that almost half of those buying products in the period chose a different provider, suggesting that pensioners are willing to shop around to get the best deal.
Wages surge
Jobs stall
One of the most notable correlations in the recovery of the UK economy has reversed. Until now the recovery had been characterised by rising unemployment but subdued wage growth. The latest data suggests that those in work are now seeing wages rise faster than at any time in the past five years, with a 3.2 per cent rise in average weekly wages in the three months to May. But job creation has stalled, with unemployment ticking up from 5.5 to 5.6 per cent in the same period, the first rise in two years. Whether this could lead to a long-awaited improvement in the UK's productivity will be shown in data over the coming months.
Rising volatility?
Hikes coming
On both sides of the pond monetary policy wonks are considering interest rate rises ever more seriously. Bank of England governor Mark Carney this week told parliamentarians that conditions were beginning to come together for the UK to consider rate rises in the coming months, while in the US there are signs that the economy may finally be on a stable enough footing to stomach the first tightening in six years. The chair of the Federal Reserve, Janet Yellen, hinted to US law makers on Wednesday that the US economy was strong enough for a rate rise this year. Previous hints at rate rises have resulted in serious increases in volatility, especially in emerging markets equities, and this time is unlikely to be any different.
Private debt in the UK has risen to its highest level in almost five years. The surge in borrowing using credit cards, personal loans and overdrafts reflects "strong consumer confidence", according to the British Bankers' Association (BBA). Well, they would say that, wouldn't they; the BBA can hardly be relied upon as a dispassionate voice. You could alternatively take the view that, after years of negative real wage growth, more and more British families are simply funding non-discretionary spending through debt. But even secured debt in the UK gives cause for concern, particularly if interest rates start to creep up.
