The Month That Was……August 2018

August 2018 saw the biggest social experiment of the year come to an end… It involved various ‘animals’ watching and reacting to other ‘animals’ courting rituals (many of which were spray tanned). The project was entitled ‘Love Island’ and the results of the scientific analysis were, well, unremarkable and really unimportant.  

 

I have never watched a single episode of Love Island. Yet, I am pleased to report that despite fears to the contrary, I am still alive, well and fully functioning.

 

So how else will August 2018 be remembered?

 

Jobbing On

UK unemployment fell by 65,000 to 1.36 million - the lowest for more than 40 years (according to the cardigan wearers at the Office for National Statistics).

 

Interestingly, the figures also showed the number of European Union nationals working in the UK fell by a record amount. The fall was the largest annual amount since records began in 1997 and continues a trend since the 2016 Brexit vote.

 

At a time when the size of the UK workforce is shrinking, vacancies for skills and labour are growing.

 

All those that voted ‘out’ during the Brexit referendum because the UK had an immigration problem (apparently), have actually caused a migration problem.

 

How very ironic!

 

Interesting

The Bank of England increased the interest rate for only the second time in a decade. The rate has risen by 0.25% (from 0.5% to 0.75%) to the highest level since March 2009.

 

In the red corner……the decision means that the 3.5 million people with variable or tracker mortgages will pay more.

 

In the blue corner……the rise will be welcomed by savers in the hope that there is an increase in savings rates.

 

The reality is, it will probably make very little difference in the grand scale of things for anyone……slightly positive for savers and slightly negative for borrowers.

 

So why are we seeing rates rise now? Here’s the economic bit……so pay attention……

 

The UK has near full employment, the economy is ticking along (albeit slowly) and wage pressures are expected to build due to Brexit affecting the labour supply (i.e. creating a shortage). This could all lead to costs going up (aka inflation), which the Bank is duty bound to limit to 2%. Higher interest rates send a message that high wage growth will not be tolerated and ‘nips it in the bud’.

 

The sceptic in me believes that the Bank of England is also convinced that Brexit is going to be an economic disaster and therefore we will need room to cut rates next year. The higher they are, the sharper (and more powerful) the cut can be to support the economy when required.

 

The even bigger sceptic in me thinks that Mark Carney has been warning of interest rates rising ‘soon’ for around 7 years and it’s all getting a bit embarrassing that he’s never raised rates yet.

Trumpton

Scratch beneath the whirlwind that is Donald Trump and there is clear evidence that the US economy is in a good place. The US economy grew at its fastest pace in nearly four years at an annualised rate of 4.1%

 

Due to his actions? Despite his actions? Hmmmmm…….that’s an interesting one!

 

I am not sure I agree with Trump proclaiming the acceleration as "amazing" and “we've accomplished an economic turnaround of historic proportions.”

 

However, there is certainly evidence that his actions relating to tax cuts, deregulation, increased Government spending and the continuing trade negotiations are having an impact.

 

There is no doubt that the world’s largest economy getting stronger can only be a good thing for so many in the world economy though.

 

Greece Is The Word

There is even good economic news coming out of Greece……yes Greece!

 

Emerging from a Eurozone bailout programme, Greece has successfully completed a three-year loan worth €62 billion (used to tackle its debt crisis). It was part of the biggest bailout in global financial history, totalling some €289bn, which will take the country decades to repay.

 

The upshot is, Greece can borrow at market rates for the first time in 8 years.

 

Despite the good news, it is worth remembering that the Greek economy is still 25% smaller than when the crisis began.

 

Irrelevant Fact of The Month: Only four countries have shrunk economically more than Greece in the past decade: Yemen, Libya, Venezuela and Equatorial Guinea.

 

Like I said, irrelevant.

 

August’s Biggest Loser……Option 1 – Boris Johnson (again)

Boris Johnson may have run away from the Prime Minister vacancy after the Brexit Referendum and then jumped from his Foreign Secretary role in the aftermath of a fallout with Theresa May last month, but his political standing is high in the UK……and overseas.

 

Which makes his latest ‘foot in mouth’ episode all the more worrying……saying Muslim women wearing burkas "look like letter boxes".

 

I really don’t know where to start with this……but it is appalling nonetheless. Perhaps most worryingly is that it wasn’t really surprising given his previous gaffes and the allowances that seem to be made for him (“well, it’s Boris isn’t it so it’s OK”).

 

At least he’s not representing the UK with foreign affairs any more.

 

August’s Biggest Loser……Option 2 – Jeremy Hunt (new entry)  

On the back of the spat with Theresa May, Boris Johnson was replaced by Jeremy Hunt as Foreign Secretary. However, it took him just 3 weeks to catch a bad dose of the ‘Boris’.

 

On an official visit to China, Hunt tried to get into his host's good books by mentioning that his wife is Chinese - but called her "Japanese" instead……an embarrassing gaffe that wrote many headlines instead.

 

You see, confusing China with any other country is bad if you're trying to carry favour with the Chinese Government. But of all the countries to get confused with, Japan is probably the worst due to a bitter relationship for decades.

 

Also, mixing up Chinese and Japanese fits a bad stereotype……he might as well have said “them lot all look the same”.

 

And that ladies and gentlemen is the current UK Foreign Secretary. I despair.

 

August’s Biggest Loser……Option 3 – Barclays

Barclays announced profits of £1.6 billion……and that was after it settled a £2 billion fine with the US Justice Department for wrong doing.

 

Just to give an idea of what £2 billion looks like…… £2,000,000,000 (for dramatic effect)

 

The narrative to this is that you take risks, make money and take any fines on the chin…..you’ll still be profitable.

 

10 years on and the behaviour theme really hasn’t changed.

 

And Finally……

Some 169 million old £1 coins have yet to be returned to the Royal Mint nearly nine months after they went out of circulation……with piggybanks and down the back of sofas being blamed as the main culprits!