THE FINAL WORD, SPECIALIST ADVICE
The Eurozone is currently a bit spooked about its ability to mount a sustainable recovery, as any sign of a recovery is still very weak and fragile. With money flow stalling the ECB decided to keep interest rates on hold, spoke about previous non-standard support measures and took a bold step, as the central bank will begin buying covered bonds as soon as possible and asset-backed securities later this year with a potential of around one trillion euros over a two-year period.
With manufacturing data in September almost at a standstill, any support to ease monetary flow is welcome. Of the Eurozone countries who struggled in September the greatest surprise came from Germany, where the PMI recorded a 15-month low, followed by Greece, where the indicator stood at a 11-month low.
With other countries across the zone also experiencing recent lows the economic malaise appears to be spreading. The bigger concern this time is, can Germany avoid a technical recession, although in fairness it’s probably a bit too early to be talking about this happening. None-the-less, with “tit for tat” sanctions with Russia across the zone and falling domestic demand, the signs are there.
France has also managed to keep itself on the radar, as under the latest plan it will not meet the previously agreed budget deficit and will even see it rise to 4.4% in 2015 before falling a little in 2016 – hopefully back on track in 2017! How the Eurozone will deal with this is interesting. Not least if it provides the leeway to France: will the floodgates open?
If we are looking for good news from the zone then lets take heart that the number of people out of work did not increase and remains at 11.5%, although Ireland did see a fall in the number of people out of work as it continues to be a bit of a bright light since exiting the bail-out.
In the UK it was no surprise that the Bank of England again confirmed the base rate would remain at 0.5%, as the UK has only seen a slight slowdown in economic growth during the last month.
There is one thing that is worrying, and that is that it’s not just Tesco having “accounting errors” but also the statistics office in the UK, as they decided the recession was not as bad as originally thought. They now say GDP only fell by 6% and not 7.2%. They also suggest, with revised figures, that the recovery was slightly better than expected.
More recently we did see data that showed the service sector in the UK fell to a three-month low, and the big concern is this a sign of things to come.
Housing is still on the agenda as we hear that the number of mortgage approvals fell to just 64.212 and was down on City expectations. The Bank of England reported that the number of people re-mortgaging also fell. Lenders are suggesting they may experience a slowdown in new mortgage approvals as the tighter lending criteria hits, as well as concern over increasing interest rates.
With Nationwide reporting a fall in house prices for the first time in 17 months, does this have any bearing on the future? However, don’t worry if you live in St Albans as it has the fastest growing property prices in the UK.
Consumers were out in force as new car sales again hit a record high and, with 31 months of growth, the car industry is doing well although a lot of this is down to discounts and relatively low-cost finance deals.
Back in the USA
Stateside, President Obama has got tough on tax, introducing rules for companies locating overseas to reduce tax liability, and this will certainly make any inversion deals harder to arrange.
Pending home sales took an unusual dip last month and fell by around 1%, having previously hit a 11-month high, and consumer confidence took a bit of a knock as a high percentage of Americans suggested the economy was not quite so bright and were concerned about job prospects – which dies not tally with the fact that more Americans are continuing to return to work thanks to the creation of new jobs. Unemployment now stands at 5.9%.
With the talk of a possible interest rate rise in the future then this could just be the unsettling confidence issue.
All in all, whether “trick or treat” we just don’t know – although the IMF has revised global growth downwards.
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Exchange rates for the period 10 September-10 October 2014:
|£ to $||1.6519||1.6120|
|£ to €||1.2871||1.2702|
|€ to $||1.2977||1.2692|