Archive forJune, 2016

UK consumer confidence remains steady in June

As per GfK, UK consumer confidence remained at -1.0 in June, unchanged from the previous month and better than the market expectation of -2.0. GfK conducted the survey prior to Brexit, and plans to conduct an additional mid-month survey to gauge the impact of UK’s decision to leave the EU.

UK would have to increase taxes : Osborne

Chancellor George Osborne has said that Britain would have to increase taxes and cut spending this year to stabilize public finances in the wake of the country’s exit from the EU. Furthermore, he ruled out succeeding Prime Minister David Cameron.

Volkswagen reaches settlement with US car owners

German carmaker Volkswagen has reached a settlement of US$15bn with US car owners after admitting to cheating on emission tests. As per the deal, Volkswagen would offer to repair or buy back the affected diesel vehicles and pay owners compensation. According to news sources, the legal settlement reserves US$10bn to repair or buy back around 475,000 affected vehicles with 2-litre diesel engines and compensate owners with a payment of up to US$10,000.

UK’s credit outlook changed to negative: Moody’s

Credit rating agency Moody’s changed the UK’s credit rating outlook to negative after the country voted to leave the EU. The agency stated that moving out of the EU would have negative impact on the UK’s medium-term growth outlook. The lower rating would lead to higher borrowing costs, which would hamper the government, businesses and households.

Forward diary: 27th June – 1st July 2016

Company and economic announcements planned for the week commencing 27th June 2016

Britain votes to leave EU

Britain has voted to leave the European Union after 43 years. The results of the Brexit referendum held yesterday showed that 51.8% voted in favour of leaving the EU compared with 48.2% that voted for the UK to continue as a part of the bloc. Voter turnout was recorded at 71.8%, or more than 30 million, the highest turnout at a UK election since 1992. London and Scotland voted in favour of staying in the EU; however, this was offset by poor results in the north of England.

Britain votes on EU membership today

Britain will vote on a referendum today on whether the country should leave or exit the EU. About 46,499,537 people will cast their votes, a record number for a UK poll. The results are expected to be announced tomorrow morning.

UK factory orders strengthen in June

As per a survey by the Confederation of British Industry, the order balance in the UK rose to -2.0 in June from -8.0 in May, better than the market expectation of -10.0. However, a measure of export orders remained steady at -14.0. Additionally, the agency forecasts factory orders in the three months ahead to improve to +23.

Eurozone construction output falls for third consecutive month

As per data published by Eurostat, construction output fell 0.2% m-o-m in April, after a 1% drop in March, marking the third successive month of decline. On y-o-y basis, construction output slid 0.4% compared with 0.5% increase in March. Production in building decreased 0.4%, while that in civil engineering rose 0.9%.

UK house prices increase in June

As per property tracking website Rightmove, house prices in the UK rose 0.8% m-o-m to £310,471 in June, following a 0.4% rise in the previous month. On a y-o-y basis, prices surged 5.5% in June after a 7.8% rise in May. However, prices fell 0.2% in London on impact from a new property tax regime and the upcoming EU vote.

BoE maintains interest rates

The Monetary Policy Committee of the Bank of England (BoE) voted 9-0 to retain the bank’s benchmark interest rate at 0.5%. The rate has remained at this level for seven years. The committee also voted to maintain quantitative easing at £375bn.

Forward diary: 20th – 24th June 2016

Company and economic announcements planned for the week commencing 20th June 2016

UK’s unemployment rate drops to lowest level since 2005

As per the Office for National Statistics, the UK’s unemployment rate fell to 5.0% in the three months to April, its lowest level since the three months to October 2005. The number of unemployed people declined 20,000 to 1.671 million. The number of people in work rose 55,000, with the employment rate remaining at a record high of 74.2%.

UK inflation unchanged in May

As per the Office for National Statistics, the UK’s consumer price index (CPI) remained at 0.3% in May, following a similar reading in April. The CPI remained stable as a rise in transport costs largely offset the decline in clothing and footwear prices. On m-o-m basis, consumer prices rose 0.2% compared with 0.1% in the previous month.

ECB may cut interest rates in 2016: S&P

According to Standard & Poor’s (S&P), the European Central Bank (ECB) could reduce the deposit rate further if the US Fed decides to maintain its interest rate. The agency stated ECB’s failure to meet the inflation target may also lead to an interest rate cut. The ECB dropped the deposit rate to -0.4% earlier this year.

UK’s construction output improves in April

According to the Office for National Statistics, the UK’s construction output, which accounts for 6% of the economy, grew 2.5% m-o-m in April after a 3.6% fall in March. This was the highest monthly increase since January 2014. On a y-o-y basis, output fell 3.7% in April after a 4.5% drop in the previous month.

UK trade deficit narrows in April

As per data from the Office for National Statistics, trade deficit in the UK narrowed to £3.29bn in April from £3.53bn in March, the lowest since September 2015. This is ascribed to an 11.2% rise in goods export volumes in April, the highest since first being recorded in 1988.

Forward diary: 13th – 17th June 2016

Company and economic announcements planned for the week commencing 13th June 2016

UK house price balance tumbles in May: RICS

According to the Royal Institution of Chartered Surveyors (RICS), the UK house price balance declined to +19 in May from a revised +39 in April. The decline was due to the uncertainty surrounding the potential for a British exit from the European Union in referendum on 23rd June 2016.

World Bank cuts global growth forecast for 2016

The World Bank reduced its global growth forecast for 2016 to 2.4% from the estimated 2.9% in January. The primary reason for the downgrade was ascribed to low commodity prices, weak demand in major economies and poor business sentiment in advanced economies. Moreover, the bank lowered its growth forecast for 2017 to 2.8% from 3.1%.

UK retail spending picks up in May: BRC

As per the British Retail Consortium (BRC), retail spending in the UK rose 1.4% y-o-y in May following a flat reading in the previous month. The increase was ascribed to higher clothes sales. On a like-for-like basis, sales expanded 0.5% in May, compared with a 0.9% fall in April.

UK services sector advances in May

As per Markit, the UK’s Purchasing Manager’s Index (PMI) for the services sector increased to 53.5 in May from 52.3 in April, better than the expectation of 52.5. Furthermore, the agency expects subdued economic growth of 0.2% in Q2 2016, mainly due to slowdown in the manufacturing and construction sectors. The vote on Brexit is also negatively impacting consumer confidence.

ECB raises growth and inflation forecasts for 2016

The ECB upwardly revised the inflation forecast for 2016 to 0.2% from the earlier projection of 0.1%. The bank maintained the inflation projections for 2017 and 2018 at 1.3% and 1.6%, respectively. ECB also raised the growth forecast for 2016 to 1.6% from 1.4%. The projection for 2017 was retained at 1.7%.

Forward diary: 6th – 10th June 2016

Company and economic announcements planned for the week commencing 6th June 2016

UK house price growth remains weak in May

According to Nationwide, house prices in the UK rose 0.2% m-o-m in May, following a similar rise in April, but lower than the expected increase of 0.3%. The slowdown in growth was primarily due to a tax surcharge on the purchase of property for rental and second homes. On a y-o-y basis, prices rose 4.7% after increasing 4.9% in April.

UK shop prices continue downslide in May: BRC

As per the British Retail Consortium, shop prices in the UK fell 1.8% y-o-y in May, following a 1.7% decline during the previous month. The decline was primarily due to a 2.7% drop in non-food prices in May and a 0.8% fall in food prices.