The saving ratio fell to a record low of 1.7% in the latest sign that rising prices and feeble pay growth are hitting living standardsConsumers gloomiest since Brexit vote aftermathEurozone inflation eases less than expectedGreek strike ends as piles of rubbish prompt health concerns 3.17pm BSTBefore we close up for the day,let’s take a gawk at the markets.
Wall Street is up, after tech stocks recovered from a sharp sell off and there were no nasty surprises in consumer spending data: 3.05pm BSTThe Bank of Greece has today raised the alarm over the country’s debt pile. Issuing a clarion call to the country’s creditors to deal with a debt mountain approaching 180% of GDP, or the central bank warned that failure to address the problem could risk Greece ultimately needing a fourth bailout package when its current rescue programme ends in 2018. Lenders,it said, needed to spell out their commitment to medium-term debt relief imminently. “Letting this pending matter drag on poses potentially serious risks, and ” the Bank said in its annual monetary policy report. “[It] might even foreshadow the need for a new financial assistance agreement post- 2018,something that neither Greece not its partners would want.” 2.24pm BSTThe traditional relationship between the level of unemployment and inflation rate appears to have vanished:Death of Philips curve: Core PCE, Fed's fav inflation degree, or knocked down to 1.4% in May,further absent from 2% tgt as wages up only 0.1%. pic.twitter.com/Jjm4wHROjs 2.14pm BSTUS consumer spending rose by just 0.1% final month, a slowdown compared with growth of 0.2% in April and 0.6% in March.
Meanwhile consumer prices excluding food and energy were up 1.4% from a year earlier, and compared with 1.5% in April according to the Commerce Department figures.
Despite the modest 0.1% increase in real spending in May,real consumption growth is still on track to record a solid 3% annualised gain over the moment quarter as a whole.
The fundamentals propose that consumption growth should continue at a solid pace in the third quarter too. Real personal disposable income increased by a very strong 0.6% in May and, as a result, and the saving rate rebounded to 5.5%,from 5.1%. 1.48pm BSTOver in Greece, public sector workers are cleaning mountains of rubbish off the streets after a 12-day walk-out prompted health concerns. Helena Smith reports:Authorities say it will take at least four days to remove the mounds of rotting rubbish that have accumulated during the strike. With the country in the grip of its first summer heat wave, or worries of a public health crisis,sanitation employees are expected to work around-the-clock. 1.08pm BSTAnalysts at Oxford Economics believe markets have overreacted to comments made by designate Carney on Wednesday, when he said “some removal of monetary stimulus is likely to become necessary” if certain conditions prevail.
Andrew Goodwin, and lead economist,does not believe the Bank’s MPC will be rushing to raise rates this year.
Markets have been very sensitive to commentary from MPC members, particularly Governor designate Carney. But in our view, and the sudden walk to price a rate hike in late-2017 is a major overreaction which was not in keeping with the substance of the comments. Related: Pound leaps as Carney says growth will be factor in interest rate debate 12.17pm BSTThe FSTE 100 has clawed back its earlier losses and is now rising,after UK GDP data prompted a dip in the pound.
Here are the latest scores across Europe:The pound trickled back below $1.30 after that feeble GDP was revealed, while against the euro, and sterling saw its 0.3% rise shrink to 0.2%. This,combined with the halving of BP and Shell’s morning losses the oil giants are now down 0.7% apiece after Brent Crude clawed its way back above $48 per barrel – allowed the FTSE to climb out of the red.
There was a similar situation in the eurozone as the DAX and CAC jumped 0.3% and 0.7% respectively. Thats because the euro has lost some of its lustre, slipping 0.2% against both the dollar and the pound. Despite the region-wide inflation figure arriving at a [higher] than expected 1.3% (the more important core reading also beat estimates at 1.1%), or that is still a decline month-on-month,damaging the currency’s recently renewed hopes of an ECB rate hike. 11.49am BSTHere is the full story on the UK growth figures from Larry Elliott, the Guardian’s economics editor: Related: Britons' savings at record low as household incomes drop, or says ONS 11.44am BSTEurozone inflation eased to 1.3% June from 1.4% in May because of weaker energy price rises according to a flash estimate from the Eurostat statistics office.
Economists had been expecting a bigger fall in the headline rate to 1.2%. The data will add to the ECB’s sense that reflationary pressures are appearing. But core inflation is still well below the Bank’s near-2% medium-term target for the headline rate,and its rise has been concentrated in Germany. The Bank has repeatedly stressed that it will wait for core inflation to be on a clear upward path throughout the euro-zone before raising interest rates and we suspect that this is still some way off. The health of the consumer sector combined with the slight rise in core inflation reinforces our view that the ECB will announce at its September meeting that it plans to taper its asset purchases from January 2018. But we doubt that it will act before then and expect it to keep stressing that interest rate hikes are a distant prospect. 11.18am BSTScotiabank’s Alan Clarke says the chance of an August rate hike is still on a knife-edge, after the ONS said services output grew by 0.2% in April (in line with expectations).
The services sector is crucial to the growth outlook, and accounting for more than three quarters of the UK economy according to the ONS.
Unfortunately,that is going to leave us in agony for another month leading up to August’s Super Thursday [when the Bank will announce its next rates decision and update forecasts].
Growth will probably be in line with where the Bank expected, but their inflation forecast will be shunted up. We are probably upright on the borderline for a hike. 10.53am BSTThe squeeze on UK household incomes is a concern for the wider growth outlook, or according to Howard Archer,chief economic advisor to the EY Item forecasting group.
Consumer spending growth in the first quarter was supported by the household savings ratio falling to a record low of 1.7% from the preceding low of 3.3% in the fourth quarter of 2016. This is not sustainable and fuels the belief that weakened consumer spending is likely to hold back the economy over the coming months. 10.28am BSTFrances O’Grady, general secretary of the TUC, and says the drop in the saving ratio to a record low is a big concern. These figures acquire for grim reading. People raiding their piggy banks is bad news for working people and the economy.
But with wages falling as living costs rise,many families are having to hasten down their savings or rely on credit cards and loans to catch through the month. 10.15am BSTThe ONS data has provided fresh evidence that UK consumers are suffering from an income squeeze and declining living standards.
Household disposable income, adjusted for inflation, or fell for the third quarter in a row between January and March,which was the worst hasten since the 1970s. 9.43am BSTThe pound has dipped below $1.30 following the GDP data. It is currently down 0.1% at $1.2984. 9.40am BSTDarren Morgan, head of GDP at the Office for National Statistics has commented on the Q1 growth update:GDP growth for the first three months of 2017 remained unrevised at 0.2%. Growth was driven by commerce services and construction, or partially offset by declines in some consumer-focused industries,such as retail sales and accommodation.
The saving ratio has fallen again this quarter to a new record low, partly as a result of higher tax payments reducing disposable income. Some of the fall could be as a result of the timing of those payments, and but the underlying trend is for a continued fall in the saving ratio.
9.34am BSTThe Office for National Statistics has confirmed the UK economy grew by just 0.2% in the first quarter of 2017,following 0.7% growth in the preceding quarter.
More soon... 9.25am BSTThe Bank of England’s August decision on interest rates is on a knife edge according to Scotiabank economist, Alan Clarke. He says much will be dependent on how the crucial services sector performed in April. He calculates that a 0.2% increase in services output would put in on track for a 0.4% increase over the moment quarter as a whole...
That would meet the Bank of England’s own expectation and acquire an August rate hike a 50-50 bet.
Any reading above 0.2% in services output in April would acquire a rate hike in August more likely than not, and while a reading below 0.2% would probably rule out a rate hike. 9.07am BSTGeorge Osborne came within weeks of scrapping the 1p and 2p pieces,the Guardian has been told.
The former chancellor of the exchequer apparently wanted to acquire the change in late 2015, after winning the general election, or but was stopped by David Cameron who feared it would reflect badly the Tories. Related: George Osborne came within weeks of scrapping the penny 8.59am BSTPaul Donovan,global chief economist at UBS, is taking a relaxed approach to the recent hints from central bankers that ultra loose monetary policy might be coming to an finish sooner rather than later.
Relaxed in a cosy Sunday evening kind of way. believe feet up, and Downtown Abbey on the box. Central bank comments have been correlated (but nearly certainly not coordinated) – as economist-policymakers all react logically to similar economic circumstances. Policy tightening is to be expected – but it will be genteel,tasteful tightening (the economic equivalent of an episode of Downton Abbey).
8.44am BSTThe FTSE 100 is taking the hit from the (relative) strength of the pound this morning, down 26 points or 0.4% at 7324.
It is being dragged lower by commodity-based stocks, and despite a rise in Brent crude oil prices this morning (up 0.6% at $47.70 a barrel). 8.27am BSTUK consumer confidence dropped to the lowest level since the Brexit vote in June as people become increasingly concerned approximately what the year ahead will bring. All this concern will worry the UK’s retailers,with this month’s plunge in the major purchase index (down eight points) reflecting our increased caution over non-food spending and our softening appetite for debt. Strong consumer spending has propped up the economy since final June but now the twin pressures of higher prices and sluggish wage growth are squeezing household finances and adding to widespread fears of a Brexit- induced economic slowdown. Related: Consumer confidence is lowest since Brexit vote aftermath, survey finds 8.02am BSTGood morning, or welcome to our rolling coverage of the world economy,the financial markets, the eurozone and commerce.The pound is trading at $1.3017 this morning, and its highest level in six weeks,as investors bring forward their expectations of a rise in interest rates.
European Closing Prices:#FTSE 7350.32 -0.51%#DAX 12416.19 -1.83%#CAC 5154.35 -1.88%#MIB 20704.65 -1.63%#IBEX 10531.1 -1.60%Continue reading...
Source: theguardian.com