Time To Pay The Fiddler

Time To Pay The Fiddler                                                           19 August 2022

The 3,149 real estate and properties transactions totalled US$ 2.81 billion during the week ending 19 August 2022. The sum of transactions was 344 plots, sold for US$ 695 million, and 2,239 apartments and villas, selling for US$ 1.07 billion. The top three transactions were for land in Al Wasl, sold for US$ 109 million, one for US$ 56 million in Hadaeq Sheikh Mohammed Bin Rashid and the third in Palm Jumeirah for US$ 35 million. Al Hebiah Fifth recorded the most transactions, with 173 sales transactions worth US$ 130 million, followed by Jabal Ali First, with 70 sales transactions worth US$ 77 million, and Al Yufrah 2, with 28 sales transactions, worth US$ 10 million. The top three transfers for apartments and villas were all apartments, one sold for US$ 163 million in Business Bay, another for US$ 119 million in Palm Jumeirah, and the third sold for US$ 111 million in Burj Khalifa. The sum of the amount of mortgaged properties for the week was US$ 1.02 billion, with the highest being for land in Al Mamzer, mortgaged for US$ 272 million.  Eighty properties were granted between first-degree relatives worth US$ 30 million.

Knight Frank estimate that there will be at least a 15% growth in Dubai’s ultra-prime residential properties, (properties over US$ 10 million), driven by increased demand, allied with restricted supply, with the consultancy noting that just eight new homes are expected to be completed between 2023 and 2025 in ‘Prime Dubai’ area that includes the Palm Jumeirah, Emirates Hills and Jumeirah Bay Island. This shortage – and booming demand – has seen prices jump over 70% in the past twelve months, with prices in the region of US$ 790 per sq ft; at this level, Dubai prices are in fact four times cheaper than prime neighbourhoods in New York or London. Knight Frank indicated that last year, it posted a record ninety-three ultra-prime sales, equating to nearly 40% of all ultra-prime home sales ever recorded in Dubai; in H1, it has already negotiated eighty-three sales. It also noted that “those that are in search of yields are finding a market where rental growth has kept pace with capital value increases, meaning there has been no yield compression”.

Following unprecedented growth in 2021, Knight Frank says values are growing at a more sustainable rate, and expect prices to be up to 7% higher by the end of the year – and are currently 10.1% higher on the year, with average prices at US$ 300 per sq ft. Villa prices were 19.3% higher on the year at 30 June – slowing from previous levels of 20.0% and 21.0% as at the end of Q1 and as at 31 December 2021.

CBRE’s latest Dubai Residential Market Snapshot posted twelve-month average rents to 31 July jumped 23.7%, with average apartment and villa rents increasing by 23.5% and 24.8% respectively. Over the period, the highest average annual apartment and villa rents were in Palm Jumeirah and Al Barrari at US$ 59.9k and US$ 252.0k respectively. In the same period, off-plan sales increased by 59.0% and secondary market sales by 57.1%, as total transaction volumes neared 45.8k – the highest total recorded since 2009 – and 6.5k in July, (58% higher than a year earlier). With average prices rising 9.9%, split between villas up 17.8%, to US$ 364k and apartments by 8.7%, at US$ 303k – but still 25.1% and 7.6% lower than witnessed at the sector’s 2014 peak. Knight Frank estimated a 10.1% rise in average residential prices across at the end of Q2 and noted that “values are growing at a more sustainable rate”.

Luxhabitat Sotheby’s International Realty reported the single biggest residential land sale, since its 2009 launch in Jumeirah Bay Island at US$ 50 million; it encompasses 46.1k sq ft of prime beachfront. The consultancy expects that prices could rise to US$ 1.36k per sq ft over the next two years, driven by its luxury beach front location and scarcity of land in that sector. The island, located between the World Islands and Downtown, encompasses 6.3 million sq ft, with low-rise apartments, villas, a boutique resort, and a marina, also featuring the five-star Bvlgari Hotel.  Plot sizes on the island, at between 16k sq ft – 37k sq ft, are four times the size of similar plots on Palm Jumeirah – and there are only 128 plots available, of which forty-six plots face the inner bay and eighty-two plots further inland.

Binghatti Developers has announced early completion of three of its projects in Jumeirah Village Circle – Binghatti Rose, (170 apartments), Binghatti Mirage, (160 apartments) and Binghatti Gems (77 apartments)– with a total investment value of US$ 109 million. It has also launched in the same location – Binghatti Luna, Binghatti Gate, Binghatti Jasmine and Binghatti Heights – which will bring the total number of units launched in the JVC area to more than 1.5k apartments. The Dubai-based developer hopes to launch more projects in several regions this year which will enhance the value of its Dubai real estate portfolio.

This week, Damac Properties launched a range of penthouses and luxury units, in its Skylofts Collection, at three of its luxury developments – Safa One de Grisogono, Safa Two de Grisogono and Cavali Tower in Dubai Marina. The three projects will have their own special features. Safa One, located between the 40th and 60th floors, will have access to a tropical garden and a rainforest on the top floor, plus an artificial beach pool on the podium level. Safa Two, located between the 73rd and 84th floors, will provide access to a fog forest and have adventure experiences through the Edge Walk and Glass Slide amenities. It will also boast a floating pool on the 60th floor, as well as an artificial beach pool and gym on the 11th floor. Meanwhile, skylofts in Cavali Tower will be found between the 68th and 71st floors, with residents able to use an infinity set within a sky garden and the tower’s Malibu Bay beach. The developer confirmed that prices for the Cavali penthouses will start at US$ 17 million and Safa at US$ 12 million.

Dubai’s Northacre Properties announced that it had completed ‘The Broadway’, its London-based wellness centre. The development, comprising an area of 75k sq ft and located in Westminster, is on the former site of the Metropolitan Police headquarters and had been acquired for US$ 370 million by its owner, Shuua Capital, in 2016. The six-tower development, built by Multiplex, will be home to 258 luxury apartments and will have 355k sq ft of residential, including 16k sq ft of health and wellness amenities, as well 116k sq ft and 27k sq ft for office and retail.

A new codeshare agreement between Emirates and Aegean will give the Dubai carrier’s passengers increased connectivity to eight Greek cities, (including Kerkyra, Chania, Irakleion, Mikonos, Thira, Rhodes, Thessaloniki and Alexandropoulos), via Athens, with a single ticket. It will also see the network encompassing other European cities, serviced by Greece’s largest carrier, including Bucharest, Belgrade and Naples. More interestingly, the codeshare network will also expand westward on Emirates’ flights to New York Newark from Athens and New York JFK from Milan.

In order “to limit further losses” over “blocked funds”, Emirates has announced its decision to suspend all flights to and from Nigeria from next month and regretted the inconvenience caused to their customers, but stressed that the “circumstances were beyond their control”. The airline confirmed that it would help affected passengers to “make alternative travel arrangements wherever possible” or provide them with a full refund, and that “we remain keen to serve Nigeria, and our operations provide much needed connectivity for Nigerian travellers”.

Blocked remittances have bedevilled international airlines for years and it is reported that the balance owed by twenty countries totals US$ 1.6 billion, of which twelve African counties owe 67% of that total, with Nigeria the biggest offender, with related debts, including that of Emirates, of US$ 450 million. Making up the top five are Zimbabwe, Algeria, Eritrea and Ethiopia, with outstanding payments due of US$ 100 million, US$ 96 million, US$ 79 million and US$ 75 million respectively.

DP World posted a year-on-year 52% increase in H1 profits, as revenue climbed by over 60% to US$ 7.9 billion, with adjusted EBITDA 30.8% higher at US$ 628, driven by growth in high margin cargo, feed through services and acquisitions made by the group: capex was 7.9% higher at US$ 741 million. Guidance recorded up to US$ 1.4 billion for the full year with investments planned in UAE, Jeddah, London Gateway, Sokhna (Egypt), Senegal and Callao (Peru). However, the port operator noted that “the near-term outlook remains uncertain due to the more challenging macro and geopolitical environment. Consequently, we expect growth rates to moderate in the second half of 2022”. 

A new law, introduced by Sheikh Hamdan bin Mohammed, will give heads of government entities the power to decide whether to allow payments of outstanding public funds by instalments, only if applicants can prove their inability to pay the total outstanding amount in one payment. Other conditions include public funds must be due by the date on which the application for payment by instalment is submitted, and the amount of public funds to be paid by instalments must not be less than the minimum amount prescribed by the Department of Finance. Furthermore, the initial payment must be at least 25% of the outstanding balance. The instalment period must not exceed five years, or the period in which the public funds are due, whichever is shorter, and instalments must be paid by bank cheques or similar instruments.

It is expected that by the end of next year, Dubai International’ passenger traffic will near pre-pandemic levels, as traffic, at a monthly 7.8 million for the rest of the year, with global air travel surging. This year, annual numbers should come in at around 62.4 million and up by 24.7%, to 77.8 million, by the end of 2023, still somewhat short of the 2019 return of 86.4 million. Despite a forty-five-day closure of one runway, Q2 passenger numbers almost tripled to 14.2 million, compared to the same 2021 period – the   ninth consecutive quarter of continued growth, since the start of the pandemic; H1 traffic was at 27.9 million. The top source countries were India, Saudi Arabia and the UK with four million, two million and 1.9 million passengers, with the top three destination cities being London, Riyadh and Mumbai with numbers of 1.3 million, 910k and 726k. Dubai may not suffer as much as other cities from the triple whammy of higher oil prices, rising inflation rates and a global economic slowdown. Over the coming years, it is expected that DXB’s capacity will increase to 120 million passengers, as the new airport DWC will be utilised by foreign carriers that handle more point-to-point traffic.

Magnitt reported that the UAE is the leading country for venture capital financing in the Mena region, with its local companies raising US$ 699 million in H1; the remaining top  places went to Saudi Arabia, Egypt, Bahrain and Tunisia, with total deals valued at US$ 584 million, US$ 307 million, US$ 116 million and US$ 36 million respectively. The data platform also noted that the country was the leader in terms of deals, up by 10%, compared to a year earlier as well as hosting the region’s biggest deal — a $181m convertible note mega-round for Abu Dhabi-based Pure Harvest in June. In 2021, it attracted more than US$ 1.47 billion in venture capital. Early-stage funding remained the dominant trend in the UAE at 80%, which is at similar levels, compared to the previous four years. Series A rounds were next at 11%, followed by Series B with 8%.

Earlier in the week, there were reports that Emaar Properties’ board was considering the divestment of its Emaar Malls’ subsidiary Namshi, its e-commerce fashion business. The developer, which has the Dubai government as its principal shareholder, with a 24% stake, through its sovereign wealth fund, acquired a 51% share in Namshi in 2017 for US$ 151 million, from Rocket Internet’s Global Fashion Group and the 49% balance for US$ 129 million two years later. (In 2017, it made an 11th-hour bid to acquire rival platform Souq.com, which was eventually sold to Amazon for US$ 580 million in 2017). By the end of the week, it was revealed that the buyer, paying US$ 335 million in cash, would be e-commerce company Noon, a company that was launched in 2017 by Mohamed Alabbar, (who founded Emaar Properties and, was the chairman, back in 1997), as a US$ 1 billion e-commerce platform, with the help of Saudi Arabia’s sovereign wealth fund. It is estimated that UAE’s e-commerce retail market grew 53% in 2020 to US$ 3.9 billion, equating to 8% of the overall retail market, with Amazon the biggest player with 2021 net sales of US$ 500 million, followed by Namshi’s US$ 249 million and Noon with a US$ 169 million share. (E-commerce licences issued by the Department of Economic Development jumped 63%).

Having upgraded its latest products, Chinese auto brand Chery plans to soon enter the Dubai market, introducing Tiggo8 Pro Max, Tiggo7 Pro Max and several other new models, and are in discussions with several of the country’ s leading automotive groups. In 2021, it posted a global sales increase of 31.7% to 961.9k vehicles, including exports of 269.2k. Launches have already been carried out in Saudi Arabia, Kuwait and Qatar, with the UAE being introduced to the range of vehicles before the end of 2022.

UAE car dealers are facing up to six-month delays for delivery of new stock, attributable to semiconductors and supply chain issues. It seems that the problem is more pronounced when it comes to higher performance vehicles and that some base vehicles have quicker delivery schedules. The delay affecting luxury vehicles that come up with high specifications because they are equipped with more semiconductors, of which there is an ongoing global shortage that has been evident for the past two years. On top of that, because of recent lockdowns in major Chinese manufacturing centres, such as Shanghai, there have been major disruptions in supply, with factories having to close. Furthermore, there are European delays caused by delays due to the Russia-Ukraine crisis because of raw material being sourced from the two countries. Semiconductors and logistics issues will remain problems in the foreseeable future. It is estimated that overall UAE vehicle sales are recovering, up by 9% on the year, but still 5% lower than at pre-pandemic levels.

It is reported that the net investments of non-Arab foreigners in the local bourses reached US$ 511 million by the end of H1, with purchases of US$ 5.11 billion offset by sales of US$ 4.60 billion, driven by the country’s investment attractiveness and the strong performance of listed companies, supported by the strength and robustness of the country’s economic foundations. YTD to 08 August, non-Arab foreign investors’ net investmentof US$ 4.23 billion.

Driven by a one-off merger transaction with National Takaful Company and rising inflation, the federal Securities and Commodities Authority is to allow the twenty-one Dubai Gold and Commodities Exchange (DGCX) licensed brokerage firms to become DFM derivatives members and to provide their services in the market for the first time. DGCX’s brokerage companies can acquire a range of DFM derivatives membership licences, including trading brokerage, trading and clearing brokerage or trading and general clearing brokerage.

Dar Al Takaful posted a Q2 US$ 4 million loss, compared to a US$ 7 million profit a year earlier. The H1 loss was US$ 3 million after a US$ 4 million in H1 2021. H1 gross written contributions were 4.4% lower at US$ 109 million, whilst it posted total assets in excess of US$ 545 million.

The DFM opened on Monday, 15 August, 78 points (0.6%) higher on the previous fortnight and closed, up 25 points (0.7%) on Friday 19 August, at 3,420. Emaar Properties, US$ 0.06 higher the previous week, was up US$ 0.08 to close Wednesday on US$ 1.61, (trading was closed on Thursday because of the sale of Namshi to Noon). Dewa, Emirates NBD, DIB and DFM started the previous week on US$ 0.71, US$ 3.79, US$ 1.62 and US$ 0.48 and closed on US$ 0.70, US$ 3.72, US$ 1.61 and US$ 0.49. On 19 August, trading was at 81 million shares, with a value of US$ 22 million, compared to 113 million shares, with a value of US$ 74 million, on 12 August 2022.  

By Friday 19 August 2022, Brent, US$ 3.51 (3.7%) higher the previous week, lost US$ 2.21 (2.3%) to close on US$ 95.76. Gold, US$ 112 (6.6%) higher the previous four weeks shed US$ 59 (3.2%), to close Friday 19 August, on US$ 1,760.

Saudi Aramco Q2 profits soared 89.8% on the year to a record US$ 48.4 billion – and 23.8% higher than in Q1 – driven by higher crude prices, volumes sold and higher refining margins; H1 net income increased 86% to US$ 87.9 billion on the year. The world’s largest oil-producing company has announced that the Q2 dividend of US$ 18.8 billion would be paid in the next quarter and is the same amount as paid in Q2.

Although Boeing said it was not aware of any plane that had been affected by a digital vulnerability in the computer systems used on some of its aircraft, that could have allowed malicious hackers to modify data and cause pilots to make dangerous miscalculations, it has confirmed that a software update to address it has been released. It appears that older versions of a digital tool, used to calculate landing and take-off speeds on some aircraft, could be tampered with by hackers with direct access to an “Electronic Flight Bag,” and could cause pilots to make dangerous miscalculations. It is noted that the likelihood of this impacting flight safety is incredibly low, and pilots are trained to handle unusual situations.

In a futuristic move, American Airlines has not only signed an agreement with Boom Supersonic, but also put down a non-refundable deposit, to purchase twenty supersonic jets, with the option of a further forty Overture aircraft. The Colorado-based plane maker commented that the planes will fly at twice the speed of the current fastest commercial aircraft and is forecast to start operations by 2029; it will run on 100% sustainable aviation fuel. Carrying up to eighty passengers, the Overture could travel from Miami to London in five hours at Mach 1.7 over water. It is almost twenty years since BA and Air France grounded their Concorde fleet, citing US political pressure, high operating costs and reduced ticket sales. Last year, United Airlines agreed to a similar deal purchasing fifteen Overture jets, once safety, sustainability and operating requirements were met, with the option to purchase an additional thirty-five supersonic jets. It is reported that Boom is in discussions with Rolls Royce and others, and have yet to decide an engine manufacturer.

Today, Joules issued a profits warning saying trading in the five weeks to 14 August had “softened materially” because of the extremely warm and dry weather, which hit sales of outerwear, rainwear, knitwear and wellies. The clothing and homeware retailer, which has its roots in country and equestrian shows, commented that it had been badly hit by “ongoing subdued consumer demand due to the well-documented cost-of living crisis”. Although it confirmed “positive discussions” were continuing with rival retailer Next about the latter taking a US$ 18 million stake in it, Joules said there could be “no certainty that these discussions will lead to any agreement”.

Struggling with US$ 5.0 billion worth of debt, and falling attendances, shares in Cineworld, the world’s second largest cinema chain, (with 28k employees in ten countries and 9.2k screens across 750 sites), tanked over 60%, with reports that it would be filing for bankruptcy. The company, which also owns the Picturehouse chain in the UK, has been badly impacted by the pandemic and posted that post-Covid attendance levels have been lower than expected, blaming “limited” film releases. The firm had hoped blockbusters, such as the latest Bond film, Top Gun: Maverick and Thor: Love And Thunder, would draw audiences back after Covid restrictions, but noted that “despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations”, citing that Hollywood has released fewer major films than would have been typical in a pre-pandemic summer. Consequently, total box office takings this year are 32% lower, compared with the equivalent period in 2019. Another disrupting factor is competition from streaming services, with the likes of Netflix investing millions of dollars making films and releasing them straight into subscribers’ homes.

Calm was co-founded in the US in 2012 by UK tech entrepreneurs Michael Acton Smith and Alex Tew, and was one of many such tech companies to benefit from a demand surge at the onset of Covid-19 in Q1 2020 that saw its guided meditation and bedtime stories for all ages, being downloaded more than 100 million times globally and attracting over four million paying members by the end of that year, with the company valued at US$ 2 billion. This week, it was announced that meditation app Calm has axed over 22% of its workforce, becoming the latest US tech company to announce job cuts, in line with similar tech companies which are facing investor pressure to rein in expenses, with revenue streams drying up, as demand falls. It is reported that over five hundred US start-ups have laid off staff in 2022 after a massive recruitment campaign seen last year.

In a bid to enhance the socio-economic diversity of its workforce, one of the country’s largest graduate employers will now accept applicants with lower second-class degrees; to date, PwC would only accept new recruits with a first or 2:1 degree. It is estimated that about 17% of university graduates receive a second-class classification or below, with the firm now accepting that “talent and potential is determined by more than academic grades.” The firm posted that this change of tack is about “opening our roles to students from a broader range of backgrounds, including those from lower income households.” Traditionally, most of the big professional firms have required students to have a 2:1 or above, and this move may see other professional firms follow suit

In a bid to help with their food shop prices climbing higher, amid soaring inflation, Iceland will offer customers interest-free loans of up to US$ 122, after successfully trialling the scheme in Huddersfield and Rhyl.  The retailer will use loans, provided by charity-owned lender ‘Fair For You’, and would only be offered to those who can afford them, with repayments set at US$ 12 a week.  This comes in the week that inflation hit double-digits, at 10.1%, ensuring real pay dipped 3.0% in Q2.

The Republic of Türkiye’s central bank surprised the market (yet again) by a 1.0% reduction in its benchmark rate to 13.0% to try and combat the double trouble of surging inflation, now floating around the 80% level and a sinking lira at 0.055 to the greenback, which a year ago was trading at US$ 0.012. The central bank is looking at inflation nudging up to 85% by the end of Q3 before declining to 60% by the end of December. The economy’s foreign reserves have been helped by more than US$ 10 billion – a Russian payment for the construction of a nuclear power station, more so because of the authority’s belief that inflation will soon head lower. The central bank also commented on the importance of a stable and supportive financial environment to maintain “the growth momentum in industrial production and the positive trend in employment in a period of increasing uncertainties regarding global growth as well as escalating geopolitical risk.”

An indicator of the slowdown in the Chinese economy is that tech giant Tencent reported its first ever quarterly deficit, with revenue dipping 3.0% to US$ 19.8 billion, as profits tanked 56% to US$ 2.75 billion. With about 50% of its revenue emanating from online advertising, financial and business services, it has been badly impacted by the economic downturn, as other revenue streams from cloud and other offerings slowed sharply, with ad sales plunging 18%. The owner of WeChat has also been hit by a government clampdown on online gaming. Furthermore, it has cut 5k jobs and shut down parts of its business including online education, e-commerce and game live streaming. Other companies have also taken a hit, including e-commerce giant Alibaba, which like Tencent, posted no quarterly growth for the first time. Last year, the firm faced challenges since the Li Keqiang government tightened restrictions on children’s game playing and halted approvals of new games, and although those approvals have resumed, Tencent has yet to see one of its games given a green light, forcing it to rely on older titles.

Hit by the triple whammy of its continuing property crisis, slowing consumer spending and Beijing’s zero Covid policy, July marked a slowdown in the national economy, with industrial 0.1% lower on the month at 3.8%, resulting in China’s central bank surprising the market by cutting key lending rates for the second time this year to revive demand. Analysts had expected a 4.6% hike and they were also disappointed to see retail sales 0.4% lower on the month at 2.7%, well short of their 5.0% forecast. July property investment noted its fastest rate decline this year, sinking 12.3%, while there was a massive 28.9% fall in new sales. As fresh lockdowns were seen in many parts of the country, because of outbreaks of the more transmissible Omicron variant, the chances of missing its official 5.5% growth target this year appear more likely, with some experts looking at figures hovering around the 4.0% level.

Following China’s decision to reduce key lending rates on Monday, along with the prospect of gas rationing, of up to 20%, in Germany, eurozone government bonds slipped lower with the benchmark, Germany’s ten-year bond, falling 0.04% to 0.899%, whilst fears of a recession grew. The markets are pricing in at least a 0.50% rate increase by the ECB next month. When Mario Draghi’s government collapsed last month, the spread between the ten-year bonds of Italy and Germany widened to 260 bp but this has since narrowed to 209 bp. The two factors behind this move were the support of the Pandemic Emergency Purchase Programme reinvestments, the ECB’s first line of defence in these circumstances, and the fact that the Italian right-wing coalition leaders said they would stick to EU budget rules.

Whilst the UK and other countries are raising rates at historic increases, with the UK almost certain to introduce a 0.5% hike next month, Argentina’s central bank has raised its main rate of interest for the eighth time in 2022, by 9.5%, (and 8.0% just two weeks earlier), to 69.5%, as it tries to contain soaring inflation, now above the 70% level. It is expected that this could top 90% by year end. There is little hope that the country’s latest economy minister, Sergio Massa, its third economy minister in six weeks, will be able to control soaring prices, tackle high debt levels and rein in government spending but he has promised that he would not be requesting the central bank to print more money this year to fund government spending. Earlier in the year, the country avoided defaulting on a US$ 44 billion IMF loan, but still has to meet conditions of the deal which are highly unpopular with the Argentinians.

The OECD, comprising thirty-eight countries, saw its May inflation rate for the bloc climb to 9.6%, 0.4% higher on the month, driven by international events such as supply chain interruptions, the pandemic and the war in Ukraine.  This was the sharpest price increase since 1988. The following table sees individual countries posting different results when analysing their inflation, average housing and fuel prices.

InflationAvg HousingFuel per litre
Australia6.80%US$ 517kUS$ 1.46 
New Zealand7.30%US$ 627kUS$ 1.90
UK10.10%US4 354KUS$ 1.85
Germany7.90%US$ 301kUS$ 1.72
USA8.50%US$ 345kUS$ 1.06
Canada8.10%US$ 515kUS$ 1.29

Prices of food, gas, petrol and rent have skyrocketed, attributable to a twenty-one year high inflation rate. With the ABS posting a 2.4% hike in annual wage growth, real wages in Australia continue to head south, down 3.6% on the year. In New Zealand, the main factor behind the hike in inflation is driven by housing construction and rentals for housing. In Q2, prices for the construction of new dwellings increased 18% on the year, with the usual suspects being supply-chain issues, labour costs, and higher demand; the previous two quarters had registered rises of 18% and 16%. July food prices had increased 7.4%, on the year.

In the UK, the June CPI figure of 9.4%, (that had risen to double-digits by August) was the highest annual CPI inflation rate since 1997, with a leading driver being the soaring price of fuel, (42.3% higher on the year), and electricity. Food, (including milk, cheese and egg), and non-alcoholic beverage prices rose 9.8% on the year – the highest rate ever since March 2008. Since May, the German CPI, at 7.5%, has been steadily dropping month by month, but still relatively high for the country. However, this remains higher than normal, with the main reason for the high inflation still being price rises for energy products which would have been higher if it were not for fuel discounts and the introduction of a nine-euro monthly train travel pass.

In June, Canada’s CPI was at its highest level, at 8.1%, since 1983, with the main driver being the 54.6% increase in petrol, whilst on a monthly basis, demand for passenger vehicles rose 1.6% and used cars by 1.3%. Prices for service like rent also rose 5.2% in the same period.

In the quarter to 31 July, UK retail sales volumes fell by 1.2%, with consumer confidence hitting a record low in August due to the soaring cost-of-living and bleak economic prospects; however, overall retail sales were still above pre-Covid levels. The Office for National Statistics noted that people were continuing to cut back on non-essential spending, in particular clothing and household goods, and an indicator that there has been a trend that 20% of people are postponing major purchases such as electricals and furniture. The ONS noted that consumers were cutting back on spending because of “increased prices and affordability concerns”. There is a growing trend that sees 33% of the consumers buying their main food shop at a discounter, compared to 28% a year earlier.

In a scheme covering sixty-five developing countries, the UK government is to cut import taxes on hundreds of more products from some of the world’s poorest countries to boost trade links. This is in addition to the thousands of products which developing nations can already export to the UK without tariffs and will affect around 99% of goods imported from Africa. It is reported that products such as clothes, shoes and foods, (not widely produced in the UK), will benefit from lower or zero tariffs, and is part of a wider push by the UK to use trade to “drive prosperity and help eradicate poverty”, as well as to reduce dependency on aid. It also simplifies the rules for which items, such as some textiles, qualify for preferential treatment which, in turn, could save importers millions of pounds.

According to Rightmove, UK home prices have dipped for the first time this year, down US$ 5.8k because of a summer lull in activity, with the typical asking price declining 1.3% to US$ 441.1k. The 1.3% drop in August is in line with the average drop seen every August since 2013. The actual impact of the double whammy of the rising cost of living, allied with mortgage rates moving higher, is unknown but they are both considered drag factors in the market. The consultancy expects “price changes for the rest of the year to continue to follow the usual seasonal pattern, which means we’ll end year at around 7% annual growth, even with the wider economic uncertainty.” Moneytfacts.co.uk indicates that the average five-year fixed rate mortgage has now breached 4%, which will obviously climb higher when the BoE move rates further north.

The UK government has announced that regulated train fares, (which cover some 45% of all fares), in England will rise below the rate of inflation which will help a little to cushion the impact of the cost of living crisis The government uses the formula RPI plus 1%, with the June index being 11.8% – but it is not known what next year’s increase will be;  the increase  will also be delayed for two months and be introduced next March. The June rate of RPI figure was the highest rate in more than forty years. Passenger numbers have yet to return to pre-pandemic levels, with a recent survey indicating that many are still working from home for at least three days a week.

Official data indicates that UK workers’ pay lags behind inflation, with the Office for National Statistics noting regular pay, excluding bonuses, grew by 4.7% in Q2, and still lagging behind rising inflation rates, touching 9.4%. The ONS reported that this resulted in a 3% drop in regular pay for employees once inflation is taken into account, representing the biggest slump since records began in 2001. Official figures also showed that the number of UK workers on payrolls rose by 73k between June and July to 29.7 million, with the total number of hours worked each week appearing to have stabilised very slightly below pre-pandemic levels. The number of job vacancies, still at historically high levels, dipped for the first time in two years, but still sees a vacancy for every person unemployed. The way inflation is moving – now to a possible 15% within months – and actual pay increases heading in the other direction, it must be Time To Pay The Fiddler.

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