GM free
With new boss too
The US government this week offloaded its final stake in General Motors, more than four years after an injection of government funds helped to shore up the country's biggest auto maker during the aftermath of the financial crisis. The rescue of GM and other Detroit-based automotive manufacturers was at the time estimated to have saved up to 1.5 million jobs in the industry and its supply chain. The government made a loss of around $10.5bn on its initial $49.5bn GM investment, but estimates suggest the jobs saved preserved more than $100bn in personal and social tax payments. Meanwhile, GM is poised to appoint 30-year veteran Mary Barra as chief executive to replace Dan Akerson, the first woman to head one of America's major auto companies.
Calm Carney
Dovish comments
The governor of the Bank of England, Mark Carney, this week hinted that he will hold off using interest rates as a hand brake for controlling the UK housing market for as long as possible. Although mindful that the Bank needs to avoid the housing market moving from 'stall speed to warp speed' in a short space of time, Mr Carney hinted that he will resist the temptation to hike interest rates too early even if unemployment rapidly dips below the 7 per cent level, which has been identified as an indicator that interest rates should be considered. What Mr Carney is more concerned about is the quality of lending going on and the rigour banks will be applying to new lending.
Hot housing
Prices purring
Further evidence that UK house prices are in a period of sustained rises came this week with news that members of the Royal Institution of Chartered Surveyors (RICS) are at their most optimistic about house prices for 14 years. In the November RICS survey, 59 per cent more surveyors expect house prices to rise in the coming months than those who expect them to fall, as demand is likely to heavily outstrip supply in the coming months. This survey followed hot on the heels of the Halifax house price survey, which showed a 7.7 per cent leap in house prices in November alone.
Italy stabilises
But IMF warns EU
Hope for further stabilisation in the eurozone rose this week with news that the Italian economy ended its long period of contraction in the third quarter of this year when its economy merely stagnated with 0 per cent growth. The revised GDP figure marked the first quarter since the start of 2011 during which the Italian economy did not shrink. But the head of the International Monetary Fund, Christine Lagarde, this week warned the eurozone that it should not be complacent about its recovery, and the European Central Bank should step in with pre-emptive action to boost lending to small businesses and mitigate the risk of deflation setting in.
China surge
Doubters defied
Chinese economic data has continued to defy predictions of a slowdown with the latest figures suggesting a solid end to the year for most parts of the economy. In particular, the retail sector enjoyed a solid November, with sales rising 13.7 per cent during the month, up from 13.3 per cent in October. Industrial output rose by 10 per cent during the month, down slightly from 10.3 per cent the previous month. This better-than-expected data raised expectations that the final quarter may be able to match the 7.8 per cent GDP growth of the third quarter and allow China's leaders to maintain their growth target at 7.5 per cent for 2014 rather than trimming it back to 7 per cent, as was expected until recently.
Pay gloom
Happy new year?
With many workers hoping for a potentially better pay review in January, the Office for Budget Responsibility has shattered such expectations by predicting that it will take another two years for annual pay rises to return to their historic norm of 2 per cent. OBR chairman Robert Chote told the House of Commons Treasury Committee that the slow pick up in productivity growth means real incomes will not pick up quickly and the growth in real earnings will remain subdued for the next couple of years yet.
