By DUNCAN SCOTT 13/08/2010
The Week in Words
A round up of the latest economic news and developments from the last week.
UK Inflation Report
This week saw the publication of Augusts UK Inflation Report by the Bank of England (BoE). In it they revised down growth from 3.4% in May 2010 to 2.5%. The BoE does not see inflation as a serious concern, although it does admit it will stay above target for longer, predicting Consumer Price Index (CPI) will fall below the 2% target by the end of 2011 and stay there through 2012. Whilst the trimming of growth was to be expected investors reacted with falls of 2.4% in the FTSE, drop in the value of sterling and rise in gilt prices as risk aversion returned.
Greek GDP shrinks further
This week reports were announced on second quarter economy figures for Greece which saw a further GDP reduction of 1.5%. This was much weaker than expected, with the rate of decline accelerating following the 0.8% reduction the first quarter of 2010. The sharp decline in public spending, including pay freezes for public sector workers has contributed to the accelerating pace of decline and rising unemployment. The Greek economy is expected to contract 4% this year according to the European Union and International Monetary fund.
Federal Reserve fails to improve confidence
On Tuesday the Federal Reserve stated that it would be buying treasuries with the proceeds earned from it’s mortgage banked securities. . In a statement they commented that the recession, which started in December 2007, is worse than estimated and the deepest since the 1930’s. Their then failure to clearly outline their upcoming objectives has led to uncertainty in the US markets and a fall in the S&P 500 of 3.5% this week.
Mixed signals from house prices
Last week halifax reported house prices were showing a slight increase through July, only for the Royal Institution of Chartered Surveyors (Rics) to this week state that in their they have seen a fall in house prices across the UK for the first time since July 2009. Overall demand is falling as buyers are continuing to struggle finding a mortgage. They also attributed the slight decline in continued unemployment fears in the labour market. The recent reports by Halifax and Nationwide still hold that the market is stabilising.
And finally, This week if you had walked past the Houses of Parliament you would have seen a couple of individuals with ear protectors checking for damage on Big Ben. However across in Mecca, Big Ben has been put to shame with the construction of the world’s largest clock that will now be Muslim’s world official timekeeper. The Mecca clock has four faces measuring 43 metres in diameter and is conveniently situated for all to see, 400 metres up on the world’s largest hotel.