United Kingdom Interest Rate
During its August 2023 meeting, the Bank of England took decisive action by increasing its policy interest rate by 25 basis points, reaching the rate of 5.25%. This move marked the 14th consecutive rate hike and propelled borrowing costs to levels not seen since 2008. This resolute step came as the central bank persisted in its battle against persistently high inflation levels.
The decision garnered the approval of the Monetary Policy Committee by a vote of 6-3. Among the members, two advocated for a consecutive 50 basis points increase, while one member favored maintaining rates at their existing level. The committee acknowledged the significant escalation in interest rates since the inception of the tightening cycle, thus acknowledging the present state of monetary policy as restrictive. Nevertheless, the committee expressed its commitment to ensuring that the Bank Rate remains suitably restrictive for an extended duration, with the goal of reinstating inflation to the sustainable medium-term target of 2%.
Concurrently, the central bank's outlook encompassed expectations of a substantial decline in inflation, projecting a decline to approximately 5% by the year's end. This rate of descent was foreseen to be more rapid than initially anticipated in May. Furthermore, the central bank's projection outlined a return to the 2% inflation target by the second quarter of 2025.
United Kingdom Inflation Rate
In July 2023, consumer price inflation in the United Kingdom exhibited a decline, settling at 6.8%, a notable drop from June's 7.9%. This figure marked the lowest level recorded since February 2022, and this movement aligned closely with market consensus. This deceleration was primarily attributed to a significant slump in fuel prices, which exerted downward pressure on the overall inflation rate.
Meanwhile, the core inflation rate, which excludes volatile components such as energy and food, remained at 6.9%, holding steady from June's reading. Despite this steadiness, the core rate continued to stand above the Bank of England's 2.0% target. This situation provides the central bank with flexibility to maintain its ongoing trajectory of policy tightening.
Within the breakdown of components, transport prices sustained a further decline, dropping by -2.1% (compared to June's -1.8%). This downward trend was primarily influenced by a substantial 24.9% decrease in the cost of fuels and lubricants. Moreover, other categories contributing to the overall drop in inflation included food and non-alcoholic beverages (declining to 14.8% from 17.3%), furniture and household goods (reducing to 6.2% from 6.5%), recreation and culture (falling to 6.5% from 6.7%), and miscellaneous goods and services (diminishing to 6.0% from 6.5%).
On a monthly basis, consumer prices demonstrated a contraction of 0.4%, marking the first decrease observed since January. This decline outperformed consensus expectations of a 0.5% decrease and contrasted with the 0.1% increase noted in June.
United Kingdom GDP Growth Rate
In the second quarter of 2023, the British economy displayed a growth of 0.2% compared to the previous quarter. This expansion follows a growth of 0.1% in the first quarter and surpassed expectations of a stagnant reading, as per preliminary estimates.
Within the sectors, services advanced by 0.1%, with notable contributions from motion picture, video, TV program production, computer programming, and food and beverage services. The favorable weather and a rise in live events played a role in this growth. The production sector experienced a more substantial increase of 0.7%, supported by manufacturing which grew by 1.6%. This manufacturing growth was primarily driven by the manufacture of motor vehicles, trailers, and semi-trailers. Construction also witnessed an uptick of 0.3%, while mining declined by 4.3% due to decreases in the extraction of crude petroleum and natural gas.
On the expenditure side, household consumption demonstrated strong growth at 0.7%, buoyed by sectors such as transport, recreation and culture, restaurants and hotels, and gas consumption. Government consumption surged significantly by 3.1%. Conversely, gross fixed capital formation experienced no growth, as a 3.4% rise in business investment was counterbalanced by a notable 6.7% decrease in government investment. Additionally, exports contracted by 2.5% while imports rose by 1%.
United Kingdom Unemployment Rate
During the three-month period ending in June 2023, the United Kingdom experienced an uptick in its unemployment rate, reaching 4.2%. This rate marked the highest recorded since late 2021, surpassing both market projections of 4% and the preceding period's 4%. The rise in unemployment was primarily propelled by individuals who had been without work for up to 6 months.
A notable shift was observed from economic inactivity to unemployment, with the rate of economic inactivity contracting by 0.1 percentage points to 20.9%. This change was largely influenced by individuals who were previously inactive due to family or home responsibilities. However, individuals categorized as inactive due to long-term sickness attained a record high during this period.
Concurrently, the employment rate experienced a slight decrease of 0.1 percentage points, settling at 75.7%. This dip was driven by changes in both full-time employees and self-employed workers.
Furthermore, data from July 2023 estimated a monthly increase of 97,000 payrolled employees, bringing the total to 30.2 million.
Between May and July 2023, the estimated number of job vacancies experienced a decline of 66,000.
United Kingdom Current Account
In the first quarter of 2023, the United Kingdom witnessed a substantial widening of its current account gap, which reached £10.8 billion. This figure represented a significant expansion from the previous period's £2.5 billion gap, and it surpassed forecasts of a £8.5 billion deficit.
Within the breakdown of components, the goods gap demonstrated a notable reduction of £8 billion, settling at £55.8 billion or 8.6% of GDP. This decline was attributed to a decrease in imports, largely influenced by finished manufactured goods, semi-manufactured goods, as well as oil and other fuels.
Simultaneously, the services surplus experienced a reduction of £2.1 billion, declining to £36.4 billion or 5.6% of GDP. This shift was propelled by increased purchases in other business and travel services.
The primary income account registered a surplus of £6.6 billion, which represented 1% of GDP. Moreover, the secondary income deficit saw a decrease, reaching £4.1 billion or 0.6% of GDP. This reduction was attributed to a decline in other payments made by general government, which decreased by £1.3 billion.
United Kingdom Government Budget
During the fiscal year 2022/2023, the United Kingdom documented a Government Budget deficit equivalent to 5.50% of its Gross Domestic Product.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Federal Government Budget
In 2022, it is anticipated that the United States will exhibit a Government Budget deficit that corresponds to 5.8% of the nation's Gross Domestic Product.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
🚀 If you appreciate my work and effort put into this post, I encourage you to leave a like and follow on my profile 🚀
During its August 2023 meeting, the Bank of England took decisive action by increasing its policy interest rate by 25 basis points, reaching the rate of 5.25%. This move marked the 14th consecutive rate hike and propelled borrowing costs to levels not seen since 2008. This resolute step came as the central bank persisted in its battle against persistently high inflation levels.
The decision garnered the approval of the Monetary Policy Committee by a vote of 6-3. Among the members, two advocated for a consecutive 50 basis points increase, while one member favored maintaining rates at their existing level. The committee acknowledged the significant escalation in interest rates since the inception of the tightening cycle, thus acknowledging the present state of monetary policy as restrictive. Nevertheless, the committee expressed its commitment to ensuring that the Bank Rate remains suitably restrictive for an extended duration, with the goal of reinstating inflation to the sustainable medium-term target of 2%.
Concurrently, the central bank's outlook encompassed expectations of a substantial decline in inflation, projecting a decline to approximately 5% by the year's end. This rate of descent was foreseen to be more rapid than initially anticipated in May. Furthermore, the central bank's projection outlined a return to the 2% inflation target by the second quarter of 2025.
United Kingdom Inflation Rate
In July 2023, consumer price inflation in the United Kingdom exhibited a decline, settling at 6.8%, a notable drop from June's 7.9%. This figure marked the lowest level recorded since February 2022, and this movement aligned closely with market consensus. This deceleration was primarily attributed to a significant slump in fuel prices, which exerted downward pressure on the overall inflation rate.
Meanwhile, the core inflation rate, which excludes volatile components such as energy and food, remained at 6.9%, holding steady from June's reading. Despite this steadiness, the core rate continued to stand above the Bank of England's 2.0% target. This situation provides the central bank with flexibility to maintain its ongoing trajectory of policy tightening.
Within the breakdown of components, transport prices sustained a further decline, dropping by -2.1% (compared to June's -1.8%). This downward trend was primarily influenced by a substantial 24.9% decrease in the cost of fuels and lubricants. Moreover, other categories contributing to the overall drop in inflation included food and non-alcoholic beverages (declining to 14.8% from 17.3%), furniture and household goods (reducing to 6.2% from 6.5%), recreation and culture (falling to 6.5% from 6.7%), and miscellaneous goods and services (diminishing to 6.0% from 6.5%).
On a monthly basis, consumer prices demonstrated a contraction of 0.4%, marking the first decrease observed since January. This decline outperformed consensus expectations of a 0.5% decrease and contrasted with the 0.1% increase noted in June.
United Kingdom GDP Growth Rate
In the second quarter of 2023, the British economy displayed a growth of 0.2% compared to the previous quarter. This expansion follows a growth of 0.1% in the first quarter and surpassed expectations of a stagnant reading, as per preliminary estimates.
Within the sectors, services advanced by 0.1%, with notable contributions from motion picture, video, TV program production, computer programming, and food and beverage services. The favorable weather and a rise in live events played a role in this growth. The production sector experienced a more substantial increase of 0.7%, supported by manufacturing which grew by 1.6%. This manufacturing growth was primarily driven by the manufacture of motor vehicles, trailers, and semi-trailers. Construction also witnessed an uptick of 0.3%, while mining declined by 4.3% due to decreases in the extraction of crude petroleum and natural gas.
On the expenditure side, household consumption demonstrated strong growth at 0.7%, buoyed by sectors such as transport, recreation and culture, restaurants and hotels, and gas consumption. Government consumption surged significantly by 3.1%. Conversely, gross fixed capital formation experienced no growth, as a 3.4% rise in business investment was counterbalanced by a notable 6.7% decrease in government investment. Additionally, exports contracted by 2.5% while imports rose by 1%.
United Kingdom Unemployment Rate
During the three-month period ending in June 2023, the United Kingdom experienced an uptick in its unemployment rate, reaching 4.2%. This rate marked the highest recorded since late 2021, surpassing both market projections of 4% and the preceding period's 4%. The rise in unemployment was primarily propelled by individuals who had been without work for up to 6 months.
A notable shift was observed from economic inactivity to unemployment, with the rate of economic inactivity contracting by 0.1 percentage points to 20.9%. This change was largely influenced by individuals who were previously inactive due to family or home responsibilities. However, individuals categorized as inactive due to long-term sickness attained a record high during this period.
Concurrently, the employment rate experienced a slight decrease of 0.1 percentage points, settling at 75.7%. This dip was driven by changes in both full-time employees and self-employed workers.
Furthermore, data from July 2023 estimated a monthly increase of 97,000 payrolled employees, bringing the total to 30.2 million.
Between May and July 2023, the estimated number of job vacancies experienced a decline of 66,000.
United Kingdom Current Account
In the first quarter of 2023, the United Kingdom witnessed a substantial widening of its current account gap, which reached £10.8 billion. This figure represented a significant expansion from the previous period's £2.5 billion gap, and it surpassed forecasts of a £8.5 billion deficit.
Within the breakdown of components, the goods gap demonstrated a notable reduction of £8 billion, settling at £55.8 billion or 8.6% of GDP. This decline was attributed to a decrease in imports, largely influenced by finished manufactured goods, semi-manufactured goods, as well as oil and other fuels.
Simultaneously, the services surplus experienced a reduction of £2.1 billion, declining to £36.4 billion or 5.6% of GDP. This shift was propelled by increased purchases in other business and travel services.
The primary income account registered a surplus of £6.6 billion, which represented 1% of GDP. Moreover, the secondary income deficit saw a decrease, reaching £4.1 billion or 0.6% of GDP. This reduction was attributed to a decline in other payments made by general government, which decreased by £1.3 billion.
United Kingdom Government Budget
During the fiscal year 2022/2023, the United Kingdom documented a Government Budget deficit equivalent to 5.50% of its Gross Domestic Product.
United States Fed Funds Rate
In July of 2023, the Federal Reserve implemented an anticipated move by raising the target range for the federal funds rate by 25 basis points, reaching the bracket of 5.25% to 5.5%. This decision, aligning with market projections, propelled borrowing costs to their loftiest point since January 2001.
Amidst this decision, policymakers reiterated their commitment to vigilant monitoring of incoming data's implications on the economic outlook. This proactive approach would enable them to make necessary adjustments to the monetary policy stance in case emerging risks could potentially hinder the achievement of both inflation and employment goals. Policymakers emphasized their consideration of a broad spectrum of factors, encompassing labor market conditions, inflationary pressures, inflation expectations, as well as global financial dynamics.
The release of meeting minutes on August 16th revealed that a majority of participants maintained their perspective on considerable upward risks to inflation. This perception suggested a potential requirement for additional tightening of monetary policy.
United States Inflation Rate
In July 2023, the annual inflation rate in the United States picked up momentum, reaching 3.2%, a rise from June's 3%, albeit slightly below the forecasted 3.3%. This shift marked an interruption in the twelve consecutive months of decrease, largely attributed to base effects. Notably, a year prior, inflation had initiated a descent from its peak of 9.1%.
During July 2023, the energy sector saw a decrease of 12.5% in costs, a less pronounced drop compared to June's 16.7%. This decline was less severe for fuel oil (-26.5% compared to -36.6%), gasoline (-19.9% compared to -26.5%), and utility gas service (-13.7% compared to -18.6%). Conversely, the cost of apparel increased by 3.2% (up from 3.1%), along with a larger uptick in transportation services costs, which rose to 9% (compared to 8.2%).
On the other hand, electricity prices experienced a more modest increase of 3%, a decrease from June's 5.4%. Inflation rates decelerated for food (4.9% compared to 5.7%), shelter (7.7% compared to 7.8%), and new vehicles (3.5% compared to 4.1%). Medical services witnessed a decline in cost by 1.5% (as opposed to the previous -0.8%), and prices for used cars and trucks dropped by 5.6% (compared to the previous -5.2%).
Meanwhile, core inflation, which excludes food and energy, eased to 4.7% in July from June's 4.8%, slightly below the projected 4.8%.
United States GDP Growth Rate
In the second quarter of 2023, the U.S. economy exhibited a robust annualized growth of 2.4% quarter-on-quarter, surpassing the 2% expansion of the previous period and exceeding market predictions of 1.8%. This revelation emerged from the advance estimate.
A notable driver of this growth was the sharp acceleration in nonresidential fixed investment, which soared by 7.7% (compared to the earlier 0.6%). This surge was led by a notable recovery in equipment investment, which posted a remarkable 10.8% growth (rebounding from the previous -8.9%), and intellectual property products, which increased by 3.9% (up from 3.1%). Additionally, private inventories contributed positively to growth, adding 0.14 percentage points, a notable reversal from the negative contribution of -2.14 in Q1.
In contrast, consumer spending experienced a significant slowdown, registering at 1.6% growth (in contrast to the previous 4.2%). This deceleration, despite surpassing market expectations, reflected a moderation in inflation and continued tightness in the labor market. While spending on goods witnessed a sharp deceleration (0.7% compared to the earlier 6%), expenditure on services remained robust, growing at 2.1% (compared to 3.2%).
Public expenditure increased at a much softer pace, posting a growth of 2.6% (compared to 5%). However, net trade exerted a negative impact on growth, subtracting 0.12 percentage points, primarily due to a 10.8% drop in exports and a comparatively smaller decline of 7.8% in imports. Notably, residential investment continued its downward trajectory, declining by 4.2% (compared to the previous -4%).
United States Unemployment Rate
In July 2023, the unemployment rate in the United States experienced a marginal decline, settling at 3.5%, compared to June's 3.6%. This figure notably surpassed market expectations, which had anticipated a rate of 3.6%. The ranks of the unemployed saw a reduction of 116,000 individuals, bringing the total to 5.841 million. In tandem, employment levels displayed a positive trajectory, rising by 268,000, culminating in a total of 161.262 million employed individuals.
The broader measure of unemployment, encompassing those who desire employment but have ceased searching, as well as those working part-time due to the inability to secure full-time positions, was indicated by the U-6 unemployment rate. This gauge fell to 6.7% in July, a decrease from June's 6.9%.
The labor force participation rate, a key indicator of workforce engagement, remained stable at 62.6%. Importantly, this rate held its ground at the highest level recorded since March 2020.
United States Current Account
In the first quarter of 2023, the United States registered a current account deficit amounting to $219.3 billion. This figure stood higher than the upwardly revised deficit of $216.2 billion noted in the preceding quarter, as well as surpassing expectations of a $217.5 billion deficit. This deficit, equivalent to 3.3% of the current-dollar Gross Domestic Product (GDP), reflects the balance of trade and financial flows.
Examining the components, the secondary income gap expanded to $49.6 billion from the prior $40.7 billion. This shift was propelled by a decrease in receipts attributed to general government transfers, particularly fines and penalties, while payments increased due to a surge in private transfers, primarily insurance-related transfers.
Meanwhile, the primary income surplus narrowed to $31.3 billion, a decrease from the previous $38.1 billion. This shift resulted from a scenario where payments outpaced receipts. The surge in payments was mainly attributed to interest on loans and deposits, owing to elevated short-term interest rates.
In contrast, the goods and services gap contracted to $201 billion from the previous $213.5 billion. This was influenced by a surge in exports, notably of medicinal, dental, and pharmaceutical products, along with goods transferred through the Presidential Drawdown Authority. Imports, on the other hand, experienced a reduction, largely due to a decrease in petroleum and related products, as well as chemicals.
United States Federal Government Budget
In 2022, it is anticipated that the United States will exhibit a Government Budget deficit that corresponds to 5.8% of the nation's Gross Domestic Product.
📈 The scenario I am playing out assumes continue of increases in current week. I do not exclude changing the scenario in case of a sudden change in the market situation. I am aware of the possibility of a correction at any time, this should be taken into account, In case of a change of outlook I will publish an update in the next post
🚀 If you appreciate my work and effort put into this post, I encourage you to leave a like and follow on my profile 🚀
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💲 To keep up to date with all my activities I invite you to visit my Telegram 💲
💲 www.t.me/Investmatez 💲
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