August 15, 2023 - Taking Stock

August 15, 2023September 12, 2025

UK strike action and wage growth – repeats

Wages grew at a record annual pace between April and June 2023, according to new figures from the Office for National Statistics (ONS).

Regular pay grew by 7.8%, the highest annual growth rate since comparable records began in 2001.Inflation, which measures the pace at which prices are rising, has eased but remains relatively high at 7.9%. Thhe ONS suggested these latest figures demonstrates ‘people’s real pay is recovering‘ and that basic pay is growing at its fastest since current records began’.

However, wage growth is still not quite outstripping the pace of price rises and inflation is still high. Figures suggest that, taking into account the Consumer Prices Index (CPI) measure of inflation, average regular pay fell by 0.6%.

There are signs in the ONS’s data that the UK employment market is easing. The jobless rate rose from 4% to 4.2%, while the number of people in employment ticked lower.

Backward stats..?

The fall in employment in the three months to June and the further rise in the unemployment rate will be welcomed by the Bank of England as a sign labour market conditions are cooling. These comments from an analyst were presented as welcome news – but they are odd really when an economy needs good levels of employment (not unemployment). We live in weird times! Good news! Bad news!

The Bank of England is still generally expected by many pundits to increase its key interest rate again to 5.5% before ending the current run of rate rises.

The number of vacancies in the UK jobs market fell again, down 66,000 between May and July 2023. However, there are still more than one million vacancies.

Strike action adds to inflationary pressure

List of workers striking for higher pay

Teachers
Tube staff
Railway workers
Doctors
Nurses
NHS staff
Ambulance workers
Passport Office workers
Border control staff
Airport workers
Civil servants
University staff
Barristers

This is by no means an exhaustive list – just a sample of the demands placed on resources through strike action that impacts inflation through a period of fast wage growth.

August 15, 2023September 12, 2025

Japan outperforms as GDP up 6% August 2023

Japan’s economy beats expectations with 6% annualised growth in Q2

Japan’s economy posted its third straight quarterly expansion, latest government data showed 15th August 2023, as robust export growth contributed to an annualised 6% expansion in the second quarter, easily beating market expectations.

Economists had reportedly expected the world’s third-largest economy to produce a 3.1% growth in the April-June quarter. The GDP data translated to a more modest quarterly expansion of 1.5%, topping expectations for 0.8% growth.

The strong performance was mainly driven by a surge in exports, especially in the auto sector, as global demand recovered from the impact of the COVID-19 pandemic. Japan also benefited from an increase in inbound tourism, as travel restrictions eased and the Tokyo Olympics boosted visitor arrivals.

Outlook

However, the outlook for the Japanese economy remains uncertain, as the country faces a resurgence of COVID-19 cases and a sluggish consumer recovery. The government has extended a state of emergency in several regions, including Tokyo and Osaka, until the end of August, which could dampen domestic spending and business activity.

Quarterly expansion came in at a more modest 1.5%, versus expectations for 0.8% growth.

Optimism was tempered by muted domestic demand, given a surprise drop in private consumption expenditure despite the first employee compensation sequential increase in seven quarters.

Historically low interest rates

The Bank of Japan has maintained its ultra-easy monetary policy stance, keeping its key interest rate at -0.1% and pledging to support the economy with massive asset purchases.

The central bank has also introduced a new lending scheme to encourage green and digital investment for the future.

August 15, 2023September 12, 2025

Russia surprises with massive interest rate hike hit of 3.5%

Interest rate pushed to 12%

Russia’s central bank has announced a surprise hike in its key lending rate by 3.5%, from 8.5% to 12%, as the country’s economic recovery loses steam amid a resurgence of COVID-19 cases and weak domestic demand.

The decision was announced after an emergency meeting of the bank’s board of directors was called a day earlier as the ruble declined. The fall comes as Moscow increases military spending and Western sanctions weigh on its energy exports.

The Russian currency passed 101 roubles to the dollar on Monday, losing more than a third of its value since the beginning of the year and hitting the lowest level in almost 17 months. It had recovered slightly after the central bank announced the meeting.

The central bank blamed the weak ruble on ‘loose monetary policy‘, suggesting that bank has ‘all the tools necessary‘ to stabilize the situation.

More imports, less exports

By raising borrowing costs, the central bank is trying to fight price spikes as Russia imports more and exports less, especially oil and natural gas, with defense spending going up and sanctions taking a toll. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.

The bank also made a big rate hike of 1% last month, saying inflation is expected to keep rising and the fall in the ruble is adding to the risk.

After Western countries imposed sanctions on Russia over the invasion of Ukraine in February 2022, the ruble plunged to a low of 130 to the dollar, but the central bank enacted capital controls that stabilized its value.

August 15, 2023September 12, 2025

China cuts interest rates to boost economic recovery

Surprise cut

China’s central bank has announced a surprise cut in its key lending rates as the country’s economic recovery loses steam amid as domestic demand remains weak.

The PBOC trimmed the interest rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans from 2.65% to 2.50%.

The People’s Bank of China (PBOC) said on Monday 14th August 2023 that it would lower the one-year loan prime rate (LPR) by 10 basis points from 3.55% to 3.45%, and the five-year LPR by 10 basis points from 4.2% to 4.1%. The LPRs are benchmark rates that reflect the cost of borrowing for banks and businesses.

Easing domestic contraints

The rate cuts are aimed at easing the financial constraints on households and businesses to boost their financing demand and stimulating economic growth, which slowed to 5.2% year-on-year in the second quarter, down from 6.8% in the first quarter.

Analysts said the rate cuts also indicated a shift in China’s monetary policy stance from neutral to moderately easing, as the PBOC faces increasing pressure to support the economy amid rising deflationary risks, falling producer and consumer prices, and subdued real estate activity.

The PBOC reportedly said it would continue to implement a prudent monetary policy and maintain reasonable and sufficient liquidity in the market.

August 15, 2023September 12, 2025

Britain to unlock £50 billion in pension funding for tech startups

UK to unleash £50 billion in pension funding for tech startups

The U.K. government has unveiled a series of reforms that will allow pension funds to invest more in private and high-growth companies, especially in the tech sector. The move is expected to boost economic growth, support innovation and increase returns for future retirees.

The reforms include an agreement with the country’s largest defined contribution pension schemes to allocate 5% of assets in their default funds to unlisted equities by 2030. This could unlock up to £50 billion of investment in high-growth firms if all other defined contribution pension schemes follow suit, according to the government.

AI

The government will also create new investment vehicles that will give pensioners a stake in homegrown private companies, such as fintech and biotech startups, that have increasingly snubbed the London Stock Exchange and turned to foreign investors for cash. The aim is to make the U.K. a more attractive market for technology and a global leader in emerging fields like artificial intelligence.

The Treasury claimed that the reforms would not only help burgeoning industries, but could also result in higher returns for workers’ retirement funds. The government estimates that the average earner’s pension pot could rise up to 12% to as much as £16,000 with defined contribution pension schemes committing to more effective investments.

Unlock

The announcement comes amid criticism that the U.K. is losing its edge in technology and innovation, as evidenced by the recent decision of U.K. chip design giant Arm to list in New York rather than London. The chancellor, Jeremy Hunt, reportedly said that he wanted to make the U.K. ‘the world’s next Silicon Valley and a science superpower’ by unlocking investment from the U.K.’s £2.5 trillion pensions sector.

The reforms were welcomed by industry groups and experts, who said that they would help address the funding gap faced by many U.K. startups and scale-ups, and create more opportunities for long-term growth and value creation.