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Eurozone inflation eased to 2.4% in March 2024, as indicated by preliminary figures released on Wednesday 3rd April 2024.
This decrease has increased expectations that interest rate cuts may start in the summer 2024.
Market analysts anticipate that the central bank will commence reductions in interest rates starting in June 2024, reflecting recent communications from the ECB.
Referring to the stronger-than-anticipated price pressures at the year’s onset, Powell reportedly stated that he and his colleagues are not in a hurry to relax monetary policy.
Market expectations are leaning towards the FOMC initiating policy easing this year, although adjustments to the anticipated timing and scale of reductions have been necessary due to persistently high inflation.
Meanwhile, other economic indicators, especially in the U.S. labour market and consumer spending sectors, remain robust, affording the Fed the opportunity to evaluate the prevailing situation prior to taking action.
The target rate is 2%.
The Office for National Statistics (ONS) has released updated UK GDP figures, confirming that the UK entered a technical recession in the last six months of the previous year.
The new data shows the economy contracted by 0.1% in the three months from June to August 2023, with a further decline of 0.3% in the subsequent financial quarter from September to December 2023. The overall economy grew by 0.1% throughout 2023.
However, early signs suggest that the UK began to recover in January 2024, with initial data indicating some growth, and surveys suggesting this trend may have gained momentum into February and March 2024.
The Federal Reserve’s decision to maintain interest rates in 2024 could have significant implications for the U.S. economy.
Fed cred – credibility would be the first to go!
The cost of borrowing would remain unchanged. This could discourage businesses from taking out loans for expansion or investment, potentially slowing economic growth. Consumers may also be less inclined to take on debt for major purchases, such as homes or cars, which could impact sectors reliant on consumer spending.
Value of the U.S. dollar could strengthen relative to other currencies. A higher interest rate typically attracts foreign investors seeking better returns, increasing demand for the dollar. While a strong dollar can benefit consumers by making imports cheaper, it can hurt exporters whose goods become more expensive for foreign buyers.
The decision could signal the Fed’s confidence in the economy’s health. By not lowering rates, the Fed may be indicating that it believes the economy can withstand higher borrowing costs without slipping into recession. This could boost investor confidence and potentially lead to increased market activity.
However, the decision could also exacerbate wealth inequality. Those with investments tend to benefit from higher interest rates, as they can earn more from savings and bonds. Conversely, those living paycheck to paycheck may not see any immediate benefit and could face higher costs if they need to borrow.
In conclusion, should the Federal Reserve decide to maintain interest rates in 2024 this could have a mixed impact on the U.S. economy.
The effects would likely be felt across various sectors, influencing everything from business investment and consumer spending, credit to the strength of the dollar and wealth inequality. As always, the actual outcome would depend on a multitude of factors, including the overall health of the global economy and domestic fiscal policy decisions.
Chinese government agencies are now required to choose ‘safe and reliable’ domestic alternatives for these chips. The sanctioned list features processors from Huawei and the state supported firm Phytium, both of which face bans in the U.S.
In addition to processors, China is now also restricting Microsoft Windows on government devices, opting instead for domestically produced operating systems.
These guidelines are part of a broader tech trade battles between China and the U.S. While the impact on Intel and AMD remains to be seen, it’s clear that China is taking aggressive steps to reduce reliance on U.S. built technology.
The global tech landscape continues to evolve, and these decisions have far-reaching implications for both countries and the industry as a whole.
U.S. and China trade tensions are unlikely to recede anytime soon.
Japan’s Nikkei 225 index briefly surpassed 41000, reaching a new all-time high on Friday 22nd March 2024, as the nation’s inflation rate reportedly accelerated in February 2024. Other Asia-Pacific markets experienced declines.
The headline inflation rate in Japan for February 2024 was reported at 2.8%, an increase from the 2.2% recorded in January 2024. The core inflation rate, which excludes the cost of fresh food, also rose to 2.8% from the 2% reported the previous month.
In its monetary policy statement, the Bank of Japan (BoJ)stated that it aims to achieve the price stability target of 2% in a sustainable and stable manner.
The Dow Jones Industrial Average surged 401.37 points to close at 39,512. The S&P 500 finished at 5224, breaching the 5200 level for the first time. The Nasdaq Composite climbed 1.25% to end at 16369.
The Federal Reserve kept rates steady but announced plans for three reductions before the year’s end, echoing its previous projection from December 2023. However, the central bank noted that it requires more substantial evidence of inflation subsiding before commencing any interest rate cuts.
Futures continued their historic ascent into Thursday21st March 2024.
Thank you Fed.
This reduction signifies that the cost of living is increasing at its least rapid rate since September 2021, when it was recorded at 3.1%.
Since reaching a peak of 11.1% in October 2022, the highest in 40 years, inflation has been on a steady decline. In the big inflation picture, that’s a pretty good result.
It has only taken around 16 months to move the rate from 11.1% (a 40-year high) down to just 1.4% above the BoE’s target of 2%.
The primary factor contributing to this decrease, as reported by the Office for National Statistics (ONS), is the deceleration of food price inflation.
In a move that reverberated across global financial markets, the Bank of Japan (BOJ) recently bid farewell to its negative interest rate policy – the last of its kind in the world. This decision marks a pivotal moment in the realm of central banking and has far-reaching implications for economies and investors worldwide.
To understand the significance of this shift, let’s rewind the clock. Japan, grappling with deflation for years, embarked on an ambitious economic experiment known as ‘Abenomics’ in 2013. The strategy combined massive government spending with unconventional monetary measures. The BOJ, under the leadership of then-Prime Minister Shinzo Abe, injected liquidity into the system by purchasing bonds and other assets. The goal? Achieve a 2% inflation target and kickstart growth.
Among these measures was the adoption of negative interest rates. The idea was simple: discourage banks from hoarding excess reserves and encourage lending. However, the path to higher inflation proved elusive, and the BOJ found itself navigating uncharted waters.
Fast forward to 2024. Japan’s economy has experienced a moderate recovery, prompting policymakers to reassess their strategic options. The Bank of Japan (BOJ) has elevated its short-term interest rate from minus 0.1% to a range between zero and 0.1%. This adjustment marks the first increase in rates since 2007, representing a significant, even a ‘seismic’ policy shift.
As the BOJ takes its first step toward policy normalization, questions abound. Will further rate adjustments follow? How will markets adapt? And what does this mean for global liquidity?
One thing is certain: The decision of the Bank of Japan resonates beyond the confines of the nation. It heralds the beginning of a new era in which central banks adjust their strategies, economies establish stability, and investors once more chart a course through unfamiliar territory.
Within the chronicles of monetary history, the cessation of negative rates at the Bank of Japan will be marked as a pivotal moment. As the final details of this policy transition are solidified, the global community observes, prepared for the forthcoming developments.
Disclaimer: The views expressed in this article do not constitute financial advice. Readers are encouraged to consult professional advisors before making any investment decisions.
The economic inactivity rate during the period from November 2023 to January 2024 stood at 21.8%, a slight increase compared to the previous year. This means that approximately 9.2 million people aged between 16 and 64 are neither employed nor actively searching for jobs. The total figure has risen by over 700,000 since before the onset of the coronavirus pandemic.
Long-Term Illness: Approximately one-third of the working-age population not participating in the labour force cite long-term illness as the primary reason for their inactivity. Health-related issues have kept a significant portion of the population away from work.
The pandemic: of 2020 caused work flight. 700,000 extra out of the workplace since the coronavirus pandemic Covid 19 hit the UK in 2020.
Students and Education: Students pursuing education are often classified as economically inactive. Their focus on studies and lack of job-seeking activity contribute to this category.
Care Responsibilities: Individuals who care for family members or manage household responsibilities fall into this bracket. Caring duties can be time-consuming and prevent active job hunting.
People with Disabilities: Those with disabilities may face barriers in accessing employment opportunities. Accommodations and inclusive policies are essential to address this issue.
Early Retirement: Some adults choose early retirement, and once retired, they rarely express a desire to return to work. This group contributes significantly to the inactive population.
Discouraged Workers: Individuals who have given up on job searches due to discouragement or lack of suitable opportunities are also part of this category.
Gender Gap: Historically, more women have been classified as economically inactive compared to men. However, this gap has narrowed over the years as more women have entered the workforce.
Age Trends: Recent data indicates that while the number of economically inactive individuals due to illness has decreased, there has been an increase among those aged 16 to 34. Mental health issues are believed to be a contributing factor in this age group.
The persistently high level of economic inactivity poses challenges for the UK economy. As the country emerges from the pandemic, addressing workforce shortages becomes crucial. Measures such as reducing National Insurance Contributions and extending free childcare services aim to encourage people to seek employment or increase their working hours.
More effort is needed to further incentivise workforce participation, if not, the UK economy will suffer for many more years than would otherwise be necessary.
Hopefully this means the UK is on its way out of recession.
The Office for National Statistics (ONS) said the services sector led the bounce back.
This is an early dataset, but demonstrates how the UK, which entered recession at the end of 2023, is faring.
The annual rate was marginally higher than expected. The monthly rate was slightly above the forecast of 0.3%. This may likely direct the Federal Reserve to hold off on an interest rate reduction, at least until the summer of 2024. What will Wall Street make of it?
The core Consumer Price Index increased by 0.4% monthly and recorded an annual rise of 3.8%. Both figures exceeded forecasts by one-tenth of a percentage point.
An increase of 2.3% in energy costs contributed to the rise in the overall inflation figure. Food prices remained mostly unchanged for the month, while housing expenses saw a further increase of 0.4%.
UK chancellor Jeremy Hunt revealed the British ISA as part of the Spring Budget 2024.
The British ISA aims to boost demand for UK businesses and encourage investment in UK-focused assets.
The British ISA provides a separate £5,000 annual allowance in addition to the existing £20,000 ISA allowance.
Like other ISAs, investors in the British ISA will not pay tax on capital gains or income.
While it’s not yet clear whether the new ISA will be exclusively for UK shares, it is expected to support UK-focused funds and investment trusts.
The inclusion of UK gilts or UK corporate bonds remains uncertain.
The consultation period for the British ISA runs until June 6, 2024.
The British ISA aims to revive interest in the UK stock market, which has faced challenges since the Brexit vote in 2016.
By providing tax-free savings opportunities, the ISA encourages investment in UK businesses.
Fund management firms, including Premier Miton, lobbied for the British ISA’s creation.
The British ISA draws parallels with its predecessor, the personal equity plan (PEP), which focused on UK shares and funds.
ISAs replaced PEPs in 1999.
In summary, the British ISA introduces an additional allowance for UK-focused investments, supporting savers and UK companies alike. Its impact on the stock market and investor sentiment remains to be seen, but it represents a step toward bolstering the UK’s economic landscape
By ensuring that companies are valued fairly, a stronger stock market will facilitate the capital raising process for companies that seek to grow and attract more listings. This will have a positive impact on the economy and employment and is ultimately in everyone’s interest.
According to this revision, the economy avoided a technical recession, which is usually defined as two successive quarters of negative growth.
On Monday 11th March 2024, Japan’s Cabinet Office released figures that indicated a 0.3% decline in private consumption for the quarter. Private consumption accounts for about 60% of the economy.
Nevertheless, the updated figures fell short of expectations, as some economists had predicted a higher revision in Q4.
To fight inflation, which reached a rate of 9% in the summer of 2022, the central bank has significantly increased interest rates in recent times. However, prices are still stubborn, especially for things like housing and groceries.
Due to the robust economic performance in early 2024, the expected reduction in interest rates has been postponed. Instead of taking place this month, the rate cuts are now more probable in May or June 2024.
Powell reportedly said: ‘The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.’
He reiterated the pledge to lower inflation to the 2% target and keep long-term inflation expectations stable.
On Thursday 7th March 2024 Powell also said: the Fed is ‘not far’ from the point of cutting interest rates
U.S. debt permanently crossed over $34 trillion on 4th January 2024 according to data from the U.S. Department of the Treasury.
It reached $33 trillion on 15th September 2023, and $32 trillion on 15th June 2023. Before that, the $1 trillion move higher from $31 trillion took about eight months.
The U.S. national debt is the total amount of money that the federal government owes to its creditors. That can include, individuals, other countries and corporation. It is composed of two main components: federal debt held by the public and federal governmental debt.
The national debt has grown over time due to various factors, such as recessions, defense spending, and tax cuts. The debt-to-GDP ratio gives insight into whether the US has the ability to cover all of its debt. It also shows how it affects economic growth.
The national debt increased by 13.3% under President Biden. Up from $27.77 trillion as of 1st March 2020 to $31.46 trillion as of 1st March 2023. The debt also grew by $1.5 trillion, or 5.6%, between the end of 2020 and the end of 2021.
The gross domestic product (GDP) measures the annual economic output of the entire country. The national debt exceeds this amount, which is very high.
As of the end of February 2024, the U.S. debt is almost $34.4 billion. This is the money that the federal government has to borrow to pay for its operating expenses.
The World Bank found that if the debt-to-GDP ratio exceeded 77% for an extended period, it slowed economic growth.
Euro zone inflation eased to 2.6% in February figures showed on Friday 1st March 2024, but both the headline and core figures were higher than expected.
Core inflation, removing the volatile elements of energy, food, alcohol and tobacco was 3.1% above the 2.9% rate expected.
The February figures will be a headache for EU policymakers, as core inflation is still holding above 3% even as the headline rate moves toward the ECB’s 2% target.
At 8.4%, India’s economy expanded at its fastest pace in six quarters, data showed late Thursday, on strong private consumption and upbeat manufacturing and construction activity. Reuters estimates had pegged growth in the October to December period at 6.6%.
Prime Minister Narendra Modi posted on the social media platform X, that it shows ‘the strength of Indian economy and its potential.’
India is forecast to leap ahead of Japan and Germany as the world’s third biggest economy in the next few years.
The better-than-expected growth was led by a strong performance by the country’s manufacturers, with the sector expanding by 11.6% in the period.
Private consumption, which makes up almost two-thirds of the country’s gross domestic product (GDP), also rose by 3.5%.
India is on a tear.
The personal consumption expenditures (PCE) price index, excluding food and energy costs, increased 0.4% for the month and 2.8% from a year ago, as expected according to analyst’s predictions.
Headline PCE, including the volatile food and energy categories, increased 0.3% monthly and 2.4% on a 12-month basis according to the numbers released Thursday 29th February 2024 by the Commerce Department’s Bureau of Economic Analysis.
The data was released amid an unexpected jump in personal income, which rose 1%, well above the forecast for 0.3%. Spending decreased 0.1% vs. the estimate for a 0.2% gain.
U.S. inflation target is 2%.
The rally was propelled by electronics, banking and consumer stocks as robust earnings and investor-friendly measures fuel a blistering rally in Japanese equities.
The Nikkei 225 jumped 2%, surpassing the previous record high of 38,915.87 reached in 1989.
Both the Nikkei and the broader Topix have been standout performers in Asia up more than 10% so far in 2024 after surging more than 25% in 2023. Their best annual gains in at least a decade.
Japan Inc’s solid third-quarter corporate earnings have prompted Bank of America analysts to upgrade their 2024 year-end forecasts for the Nikkei 225 to 41000 from 38500. They raised their forecasts for the Topix to 2,850 from 2,715.
The rally has also been supported by a weaker yen.
The Office for National Statistics noted that the country’s public finances usually run a surplus in January, unlike during other months, as receipts from annual self-assessment tax returns come in.
Combined self-assessment income and capital gains tax receipts totaled £33 billion in January, the ONS noted, down £1.8 billion from the same period of last year.
Total government tax receipts came in at a record £90.8 billion, up £2.9 billion compared to January 2023.
Government borrowing during the financial year spanning to the end of January 2024 was £96.6 billion, £3.1 billion lower than over the same 10-month period a year ago and £9.2 billion lower than the £105.8 billion previously forecast by the independent Office for Budget Responsibility.
That’s the fear spreading through Wall Street as another inflation reading on Friday 16th February 2024 came in hotter-than-expected.
The producer price index rose 0.3% in January 2024. The largest increase since August 2024 and higher than the 0.1% forecast. Excluding food and energy, core PPI jumped 0.5%, again well above consensus.
It is yet another sign of stubborn price pressures across the broader U.S. economy. And it came just days after an unexpectedly hot CPI reading, which gave markets a nasty jolt.
Both data have stoked investor worries on whether inflation is firmly under control. The latest developments also reinforce the Fed’s caution that it will need to see more evidence of disinflation before committing to lower rates.
Mohamed El-Erian, Allianz chief economic advisor, posted on X that like the CPI data, the PPI report was a further indication that the last mile of the inflation battle is more complex than many had assumed (and still assume).
Some economists even argue the jump in Friday’s data will likely push January’s personal consumption expenditures price index, the Fed’s preferred inflation gauge.
The PPI data means we can finalise our core PCE forecast for January, at 0.32%. That would be the biggest increase since September. But the three months since then all saw much smaller gains.
But investors will have to wait until later this month for PCE data when it’s released on 29th February 2024.
ONS figures revealed a 3.4% jump in sales following a drop in December 2023.
Food sales at supermarkets rose strongly while department stores reported a good impact from January sales.
The Office for National Statistics (ONS) said that the value of goods people bought in January went up 3.9%, compared to the 3.4% increase in the volume of products purchased.
Inflation, which measures the pace of price rises, has slowed significantly but at 4% it remains higher than the Bank of England’s (BoE) 2% target.
Sales increased across nearly all retail sectors, and it was a particularly strong month for supermarkets according to the ONS.
The Office for National Statistics said U.K. gross domestic product shrank by 0.3% in the final three months of the year, giving the second consecutive quarterly decline.
That follows a fall between July and September 2023. The UK is considered to be in recession if GDP falls for two successive three-month periods.
All three main sectors of the economy contracted in Q4, with declines of 0.2% in services, 1% in production and 1.3% in construction output, the ONS reported.
A technical recession is a term used to describe two consecutive quarters of decline in output. It is measured by the Gross Domestic Product (GDP), which is the overall output of goods and services in a country.
A ‘technical’ recession is usually caused by slowing growth or an isolated event rather than a major underlying cause.
High inflation affected domestic demand and private consumption in what’s now the world’s fourth-largest economy.
Provisional gross domestic product contracted 0.4% in the fourth quarter compared with a year ago, after a revised 3.3% slump in the July-September period. This was below the estimate of a 1.4% growth.
The Japanese economy also contracted 0.1% in the fourth quarter from the previous quarter, after shrinking a revised 0.8% in the Q3. This was also weaker than the expected 0.3% expansion.
Japan has lost its spot as the world’s third-largest economy to Germany, as the country unexpectedly slipped into recession.
A technical recession is a term used to describe two consecutive quarters of decline in output. It is measured by the Gross Domestic Product (GDP), which is the overall output of goods and services in a country.
A technical recession is usually caused by slowing growth or an isolated event rather than a major underlying cause.
January U.K. inflation held steady at 4% year-on-year benefitting from easing prices for furniture and household goods, food and non-alcoholic beverages.
According to the latest figures from the Office for National Statistics (ONS), prices for food and non-alcoholic beverages fell on a monthly basis by 0.4%, marking the first decrease since September 2021.
The core CPI figure excluding volatile food, energy, alcohol and tobacco prices annual reading was 5.1%, below the 5.2% estimate – but only a micro 0.1% difference.
The latest inflation data is a reflection of what is happening in the labour market: a tight labour supply is sustaining high wage growth and thus underlying inflationary pressure.
Inflation still sits double the BoE target of 2%.