Inflation eases
Another drop
Inflation in the UK has continued its sharp reversal. The consumer prices index (CPI) measure of inflation dropped from 2.8 per cent to 2.4 per cent in June as falling fuel prices and the early start of high street summer sales contributed to a sharper-than expected-slowdown. The CPI measure has fallen from a high of 5.2 per cent in September and is now at its lowest level since November 2009. But there is growing concern in some quarters that recent hikes in soft commodity prices on fears of poor harvests in the US and Russia could feed through into renewed food price inflation in the months to come.
No defence for G4S
Reputation 'in tatters'
The reputation of global guarding specialist G4S is in tatters, that is what chief executive Nick Buckles admitted to MPs on Tuesday when he was hauled before the Home Affairs Select Committee to explain the company’s failure to deliver an Olympic guarding contract. Police and army members are being drafted in to make up the shortfall in staff numbers after G4S admitted it had only recruited 4,200 of the 10,000 security staff it was contracted to provide for the games. Mr says he is still the man to salvage some of the company’s reputation by delivering what it can of the contract, and second largest shareholder Neil Woodford of Invesco Perpetual backed this view on Tuesday.
Samsung dials up CSR
Patent war
The global mobile technology wars being played out between major operators such as Apple, Samsung and Nokia visited the UK this week when Samsung snapped up the mobile phone components business of UK-listed CSR. The Koreans also invested in a 5 per cent stake in CSR itself. The deal sees Samsung pick up 21 microchip patents in the US primarily concerned with wifi and Bluetooth connectivity. It represents a boon for CSR too as it had been suffering along with key customers such as Nokia and Blackberry maker Research in Motion. Samsung is hoping to shore up its components division, which saw operating profit halve in the first quarter of this year.
Rail revival
£9bn investment
The UK government has announced yet another infrastructure boost with a proposed £9bn investment in the rail network across England and Wales. Some of the projects had already been announced but nonetheless it is a significant boost to infrastructure spending, although it will not be seen on private contractors’ books for a couple of years yet. Among the major projects are electrification of lines in Wales and the north and a new link to Heathrow from the Great Western mainline. The government confirmed that ticket prices will rise at 3 per cent above inflation for the next two years to cover the cost.
Bernanke gloom
No hint at QE boost
The chairman of the Federal Reserve, Ben Bernanke, spelt out a gloomy vision of the US economy in a testimony to Congress this week. He said that economic activity "appears to have decelerated somewhat during the first half of this year" and that reduction in unemployment figures, which still stand at 8.2 per cent of the population, was proving "frustratingly slow". But equity geeks eager for news of the next round of quantitative easing were left slightly frustrated as Mr Bernanke simply reiterated the recent Federal Reserve statement that it would be willing to take further action "as appropriate" to promote a stronger economic recovery.
Dirty laundry
HSBC fingered
There was yet more heavy scrutiny of banking sector activities this week when a Senate Committee in the US hauled HSBC in to answer allegations that lax compliance left criminals free to launder funds through HSBC accounts. In a damning admission of failure, HSBC’s chief compliance officer David Bagley resigned from his post during the hearing. The allegations against HSBC suggest that drug proceeds from Mexico were laundered through HSBC accounts and that funds were also provided to dubious sources in the Middle East. HSBC could face fines of up to $1bn according to analysts. Twice before in the past 10 years HSBC has been warned to tighten up compliance in the US.
Olympic boost
Employment up
Unemployment in the UK fell by 65,000 during the three months to May, even as the economy was stagnating as the build up to the Olympic Games had a positive effect on the jobs market, leaving the overall jobless rate at 8.1 per cent. The number of people in employment surged by 181,000 to a shade under 30 million. Meanwhile the government tried to kick start investment in the economy by announcing a new 'UK Guarantees' scheme under which the government will act as a guarantor during the riskier construction phases of major infrastructure projects.
