Finance Matters

Posts Tagged ‘rise’

The Office for National Statistics (ONS) has today revealed UK retail sales beat forecasts in September, led by spending on electrical goods such as laptop computers.

According to the Statistics Office, sales rose by 0.6% last month, reversing the 0.4% fall in August.

Furthermore, the figure was 0.6% higher on an annual basis.

Retail sales have been struggling over recent times as households continue to be squeezed by higher inflation, rising unemployment and sluggish wage growth.

As a result, conditions are expected to remain challenging for retailers in the medium term.

Last week, the ONS revealed UK unemployment rose to a 17-year high in the three months to August, while earlier this week, it revealed that inflation surged to 5.2% in September, from 4.5% in August.

These pressures are making consumers cautious about spending, according to analysts.

In order to stimulate the economy and aid the recovery, the Bank of England last week announced it would embark on a fresh round of quantitative easing (QE).

There have been fears that the UK could enter a double-dip recession after a recent series of bad news from the economy and the ongoing debt crisis in the euro zone and the majority of economists expected the central bank to introduce a further round of QE.

However, while the Bank hopes the QE scheme will revive the sluggish economy, leading think tank, the Ernst & Young Item Club, warned earlier this week that the QE measures are unlikely to boost the recovery.

Its comments came just a week after the British Chambers of Commerce (BCC) said the fresh round of QE may not be enough to prevent the economy from slipping back into recession and “more radical measures” are required.

In other news today, UK consumer confidence rose for the first time in four months in September, according to GfK NOP research company.

The Chartered Institute of Purchasing and Supply (CIPS)/Markit manufacturing purchasing managers’ index (PMI) has today revealed UK manufacturing activity bounced back last month.

The closely-watched CIPS/Markit manufacturing PMI rose to 51.1 in September from August’s reading of 49.4.

Activity has contracted for the last three months and today’s survey means the index has moved back above the crucial 50 mark – which separates growth from expansion.

The reading was also better than forecasts of 48.6.

The pick-up means the Bank of England is likely to keep interest rates on hold at the historic low of 0.5% when its rate-setting committee meets later this week.

However, Markit revealed that new export orders contracted at the fastest rate since May 2009, while employment fell for the third consecutive month.

Commenting on the figures, Markit economist Rob Dobson, said: “The modest return to growth of UK manufacturing output in September is a positive, but it is hard to escape the fact that the sector’s performance has weakened substantially since the opening quarter’s growth surge.

“The data suggests that the positive contribution of manufacturing to the broader economic recovery is likely to remain modest, at best, through the remainder of the year.”

The manufacturing sector accounts for around 13% of economic output.

Construction activity and service sector activity figures will be published later this week.

In other news today, it emerged that manufacturing in the euro zone contracted at the quickest pace in two years last month.

Markit’s PMI fell to 48.5 in September from August’s reading of 49 – meaning the index is below the crucial 50 level.

The news comes as the 17-member nation struggles with the debt crisis and shares have fallen this morning as fears grow that Greece will be unable to avoid defaulting on its debts.

Manufacturing activity in Greece contracted for the 25th consecutive month, Markit said, while powerhouse Germany, also saw activity grind to a halt.

Japan’s industrial output recovered further last month after a record drop in March due to the earthquake and tsunami.

Disruptions caused by the twin disasters resulted in carmakers being forced to halt production as a result of parts shortages.

However, it looks as if the situation continues to improve after output rose by 0.8% last month compared with July, figures from the Finance Ministry showed today.

August represented the fifth consecutive monthly increase but was lower than analysts had expected.

However, the outlook remains uncertain as the yen continues to strengthen, and threatens the recovery of the world’s third largest economy.

A strong yen makes Japanese exports more expensive to overseas buyers.

The currency has been appreciating for some time as global investors see it as a safe haven at a time of economic uncertainty.

However, it has implications and it is forcing manufacturers to consider relocating and some have even suggested moving their operations overseas.

The Government announced it will continue to monitor foreign exchange traders’ positions in order to deter currency speculation – which is the latest intervention by the Government as it seeks to weaken the currency.

In related news this week, Japan’s retail sales slumped last month, which has led many analysts to question the strength of the recovery.

Retail sales fell 2.7% in August on an annual basis – much worse than the 0.6% expected by analysts.

In other news, Japan’s core consumer price index (CPI) rose 0.2% in August on an annual basis, and was up 0.1% compared with July, official data showed today.

Analysts had been expecting an annual rise of 0.1%.

In the meantime, the country’s unemployment rate fell to 4.3% from July’s 4.7% – forecasts were for the rate to remain unchanged.

In comparison, unemployment in the US stands at 9.1%, the UK’s rate is 7.9%, while in the euro zone, it is 10%.

According to Spencer Dale, the Bank of England’s chief economist, UK inflation is set to accelerate due to soaring energy bills.

The latest figures from the Office for National Statistics (ONS) revealed UK Consumer Price Inflation (CPI) rose to annual rate of 4.5% in August from July’s rate of 4.4% – more than double the 2% target.

Higher inflation continues to be led by rising food costs but the main reason behind last month’s rise was a 5.1% annual increase in the housing, water, electricity and gas component – which rose the most in more than two years.

Utility companies recently hiked their prices – some by almost 20%.

The Bank of England has previously warned that inflation could reach 5% later this year but Mr Dale, who is also a member of the Bank’s Monetary Policy Committee (MPC), said households will be financially squeezed even further this autumn as energy bills surge.

A recent study by supermarket giant Asda warned that households are already £728 a year worse off than they were this time last year due to soaring living costs and in an interview with the Daily Mail, Mr Dale said families should be prepared for further hardship in the next few months.

Mr Dale warned that inflation could exceed the 5% mark and should it rise to 5.5%, it would represent the highest level since 1992.

However, he is predicting that inflation will fall “very sharply” next year, while the Bank of England has previously reiterated that inflation will fall back to its target by 2013.

For several months, Mr Dale voted for interest rates to be lifted from their historic low of 0.5% in an effort to tame stubbornly high inflation but in July, he joined his fellow Committee Members by opting to keep rates low as the UK economic recovery appeared to be losing momentum.

The Bank of England has today revealed mortgage approvals picked up significantly in August to a 20-month high.

According to the Bank, there were 52,410 loans approved in the month – almost 3,000 more than the level seen in July and the highest figure since December 2009.

The figure was also higher than the 49,500 expected by analysts.

However, approvals still remain well below levels seen prior to the financial crisis.

Since the early 1990s, mortgage approvals have averaged around 90,000 a month but the credit crunch saw a tightening of lending criteria and many have been unable to secure a mortgage unless they have a significant deposit.

In other news today, the latest house price index from the Nationwide Building Society has revealed prices rose by just 0.1% in September on a monthly basis.

On an annual basis, house prices are now 0.3% lower than this time last year with the average UK home costing £166,256.

Meanwhile, when comparing prices in the three months to the end of September with the previous quarter (which is a more reliable indicator), prices were unchanged.

The latest figures suggest the housing market will remain subdued as a lack of buyers, together with the ongoing lack of mortgage availability, means demand for housing is weak.

The Nationwide’s chief economist, Robert Gardner, comments: “Sentiment towards major purchases is depressed, as a result of weak labour market conditions and ongoing pressure on household budgets from above-target inflation.”

Mr Gardner expects prices to remain relatively stable throughout the remainder of the year but cautioned that the outlook had “darkened” due to the euro zone sovereign debt crisis which is denting confidence and driving up banks’ funding costs.

Also this week, HM Revenue & Customs (HMRC) revealed a fall in the number of homes sold in August in the UK.

According to HMRC, 78,000 homes worth at least £40,000 or more were sold in the month – 6,000 less than the previous month and 3,000 lower than in August 2010.

However, August is traditionally regarded as a quieter month due to the holiday season.

At the height of the housing boom in July 2007, 151,000 homes were sold.