About Damn Time!                                                                 27 July 2023                                               

The 3,030 real estate and properties transactions totalled US$ 2.89 billion, during the week, ending 27 July 2023. The sum of transactions was 319 plots, sold for US$ 523 million, and 2,137 apartments and villas, selling for US$ 1.57 billion. The top three transactions were all for plots of land, one in Palm Jumeirah, sold for US$ 41 million, Al Hebiah Fourth for US$ 25 million and in Saih Shuaib 4 for US$ 16 million. Madinat Hind 4 recorded the most transactions, with ninety-six sales, worth US$ 36 million, followed by sixty-nine sales in Al Hebiah Fifth for US$ 51 million, and sixty sales in Wadi Al Safa 3, valued at US$ 19 million. The top three transfers for apartments and villas were for two apartments – the first in Marsa Dubai, valued at US$ 72 million and the other in Al Goze First for US$ 15 million, and a villa in World Islands for US$ 19 million. The mortgaged properties for the week reached US$ 69 million, whilst 283 properties were granted between first-degree relatives worth US$ 135 million.

According to ValuStrat, in Q2, Dubai’s affordable residential market grew by 11.7% on the year, and 3.4%, on the quarter, to 91 points; villa prices rose by 15.8% annually and 4.3% on the quarter, while apartment prices rose 8.1% and 2.6%. Prices increases were noted in Discovery Gardens, (4.5%), Motor City (4.3%), The Greens (3.9%) and Dubai Production City, (3.4%). For villas, the biggest quarterly increases were to be found in Jumeirah Islands, Palm Jumeirah, Dubai Hills Estate and Arabian Ranches with increases of 5.5%, 5.2%, 5.1% and 4.6% respectively. Prices in the prime segment of the residential market rose by 13.1% annually and 3.9% quarterly. The VPI for prime villas hit a new decade high, registering 125.1 points with capital gains of 16.0% annually and 4.4% quarterly. Knight Frank estimated that over H1, Dubai edged past Hong Kong and New York to become the world’s top market for US$ 10 million-homes, as sales hit US$ 3.1 billion; H1 sales equated to 79% that of the whole of 2022.

JLL’s Q2 Market overview report confirmed that Dubai’s off-plan transactions rose by 38% and 30% in value, indicating continuing resurgent investor confidence and robust absorption of newly launched projects. 57% of the transactions in the category were recorded between US$ 136k (AED 500k) and US$ 545k (AED 2.0 million), with investors primarily focusing on studios and 1BR units in areas like JVC, Dubailand, and MBR City.  In Q2, 7.3k residential units were delivered bringing the total stock in Dubai to just over 700k; a further 21k is slated to be added in H2. Residential market performance continued to improve in Dubai, with a 16% uptick in sales prices and 24% in rentals in May 2023 when compared to the same period last year,

H1 was a record half year for the sector, with sales transactions of 60.4K, valued at US$ 48.31 billion, as recorded value of registered real estate mortgages reached US$ 16.81 billion, including grants worth US$ 3.71 billion; the total H1 real estate transactions in Dubai in the first six months of this year amounted to US$ 68.86 billion. Ready properties accounted for 30.1k of transactions, worth the majority share of real estate sales in Dubai in H1, recording 30,116 sales transactions, with a value of US$ 29.29 billion, compared to 25.4k sales transactions with a value of US$ 21.69 billion in H1 2022.

Mudon Al Ranim, which comprises 182 3B/R-4 B/R townhouses was unveiled last week by developer Dubai Properties – its last phase of its Mudon master development. The townhouses will be available in either ground plus one or ground plus two floor plans. No prices were readily available. Each townhouse in Mudon Al Ranim will be designed in a single-row configuration, with the development featuring fitness centres, children’s play areas, picnic spots, barbecue areas, swimming pools and jogging tracks, among other amenities. Dubai Properties, a subsidiary of global investment company Dubai Holding, has also developed projects in Jumeirah Beach Residence, Business Bay and residential projects in Dubailand.

In Q2, off-plan sales volumes jumped 75.7% annually, with the average ticket size of off-plan homes rising by 14.9% to US$ 657k, with ready home sales transactions up 11.8% on the year, equivalent to investments worth US$ 8.72 billion; the number of new build residential units entering the market this year was estimated at 53.3k homes, with the average ticket size of ready-to-move-in properties increased by 4.2% on the year to US$ 730k. In H1, total projects completed came to 12.6k apartments and 1.2k villas – equivalent to only 26% of preliminary estimates for the whole of 2023. Key off-plan projects launched include Sobha Reserve in Dubailand with three hundred villas, Como Residences by Nakheel with 76 properties, Fashionz by Danube with seven hundred apartments and Azizi Grand in Dubai Studio City with 431 units. Additional launches include Damac Bay 2 by Cavalli, Azizi Amber in Al Furjan, Morocco Cluster at Damac Lagoons and Armani Beach Residences on Palm Jumeirah. Office space in Dubai also recorded the highest annual capital gains of 26.2% during the period.

Local reports indicate that the Azizi Group is planning to build the world’s second tallest building after the Burj Khalifa. Currently, the second and third tallest buildings are Merdeka 118 in Kuala Lumpur, (678.9 mt), and the 632 mt Shanghai Tower. The only detail released to date is that it will be built on SZR, but the name, specific height, and unit mix of the new tower are unknown. The company was founded by Afghani, Mirwais Azizi, in 1989, who started the company with US$ 500 – now it has an impressive portfolio worth over US$ 12.26 billion and more than two hundred projects at various stages of development in the emirate.

In H1, Dubai Customs posted a 10.0% hike in the amount of customs transaction to fourteen million – a strong indicator of business recovering post the pandemic. Meanwhile, business registration request service recorded a 7.7% rise to 143k requests, while customs data recorded 12.3 million declarations, accounting for 88% of the total number of transactions. The number of intellectual property dispute cases amounted to 194, which included 10.7 million pieces of counterfeit goods, with a total value of about US$ 14.51 million.  

The Ministry of Finance issued its Q1 UAE Government Finance Statistics Report, indicating revenues amounted to US$ 31.50 billion, with its expenditures US$ 6.30 billion lower at US$ 25.20 billion. Revenues comprised US$ 17.30 billion of tax revenues, US$ 1.06 billion of revenues from social contributions, and US$ 13.13 billion of other revenues from property income, sales of goods and services, fines and penalties, and transfers. The value of total expenditures consisted of net investment in non-financial assets and current expenses, including employees’ wages, use of goods and services, consumption of fixed capital, paid interest, subsidies, grants, social benefits, and other transfers. The value of net lending/net borrowing, a summary measure of a governments’ ability to lend or their need to borrow, amounted to US$ 6.32 billion.

The Dubai Media Office confirmed that the emirate’s government is actively exploring the application of Common Law, within Dubai’s free zones, to enhance the city’s business environment and boost its economic appeal and efficiency. It added that “this potential adoption aligns with Dubai’s progressive approach to cultivating a dynamic, responsive legal framework that caters to investors’ aspirations and bolsters global competitiveness.” It also added that the initiative supports the objectives outlined in the Dubai Economic Agenda D33, which aims to position Dubai among the top three global economic hubs.  ‘D33’ includes one hundred transformative projects, doubling Dubai’s foreign trade to US$ 8.72 trillion, and adding four hundred cities as key trading partners over the next decade.

Following the US Federal Reserve’s decision to increase its Interest on Reserve Balances by 25 bp to 5.40%, the Central Bank of the UAE followed suit and has decided to raise the Base Rate applicable to the Overnight Deposit Facility by the same amount to 5.40%. The CBUAE also decided to maintain the rate applicable to borrowing short-term liquidity through all standing credit facilities at 50 bp above the Base Rate.

This week, Dar Al-Arkan Sukuk Company Ltd placed its fourth Sukuk with Nasdaq Dubai – a US$ 600 million, six-year issue and part of its US$ 2.5 billion Trust Certificate Issuance Programme. With this latest listing, the largest publicly listed Saudi Arabian residential property developer’s listed securities on Nasdaq Dubai amounts to a total value of US$ 2 billion. This brings the total value of sukuks listed in Dubai to US$79 billion, with US$76 billion listed on Nasdaq Dubai alone.

Union Properties recorded a marked increase in Q2 net profit, at US$ 1.47 million, compared to just US$ 78k a year earlier, driven by a booming property market and high demand. In H1, the developer posted a US$ 4.8 million profit, compared to a loss of US$ 3.3 million in the same period last year. Revenue from contracts with customers in H1rose by about 18% annually to US$ 66 million. It also realised a gain on the sale of investment properties during the period amounting to US$ 8.8 million, compared to US$ 463k last year.

Emirates Islamic saw its H1 profit 73.0% higher, at a record half-yearly US$ 330 million, attributable to higher funded and non-funded income reflecting improved business sentiment. Operating profit was 77.0% higher on the year, with a net margin of 4.74%, as expenses increased by 63.0%. There were increases noted in Total Assets, Customer Financing and Customer Deposits by 6% to US$ 21.52 billion, 5% to US$ 13.90 billion and 3% to US$ 15.80 billion respectively.

The Dubai Financial Market posted a Q2 113% hike in profit to US$ 21 million, (and H1 profit by 31% to US$ 59 million), partly attributable to the input of new investors; revenue came in 48.2% higher at over US$ 34 million. Total expenses were flat at almost US$ 14 million. The emirate also announced a US$ 545 million market maker fund to encourage the listing of more private companies from sectors such as energy, logistics and retail. In H1, DFM attracted 25.7k new investors, 74% of whom were foreign investors. During the period, DFM’s trading value reached US$ 12.53 billion, and market capitalisation increased 12% to US$ 14.2 billion. Institutional investors accounted for nearly 57% of trading value in H1.

The DFM opened on Monday, 24 July 2023, 507 points (16.1%) higher the previous seven weeks, gained 51 points (1.3%) to close the week on 4,037, by 28 July 2023. Emaar Properties, US$ 0.12 higher the previous fortnight, gained US$ 0.02 to close on US$ 1.83 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.74, US$ 4.46, US$ 1.54, and US$ 0.44 and closed on US$ 0.72, US$ 4.52, US$ 1.56 and US$ 0.44. On 28 July, trading was at 235 million shares, with a value of US$ 84 million, compared to 186 million shares, with a value of US$ 74 million, on 20 July 2023.

By Friday, 28 July 2023, Brent, US$ 6.18 higher (8.3%) the previous three weeks, gained US$ 3.89 (4.8%) to close on US$ 84.50.  Gold, US$ 31 (1.6%) higher the previous fortnight, shed US$ 3 (0.1%) to US$ 1,959 on 28 July 2023.  

Shell posted a Q2 profit 56% plunge, to US$ 5.07 billion, on the year, as hydrocarbon prices slumped, and sales volume dipped, but the petro giant confirmed it would buy back shares worth US$ 3.0 billion before the end of Q3, and that it would raise its dividend by 15% to $0.33 a share. Last year, the Ukraine crisis saw Brent skyrocket to US$ 140 but recently it has been hovering around the US$ 80 level. Lower natural gas prices impacted earnings which fell from US$ 3.76 billion to US$ 2.5 billion but oil/gas production rose 2%. Meanwhile, French energy group TotalEnergies reported a 49% slump in adjusted net income to US$ 5.0 billion, with earnings from its integrated LNG division slumping by about 40%, year on year, to US$ 1.33 billion in the second quarter.

Mainly because of an increase in user numbers and a 34% surge in advertising impressions across its range of apps, (including Facebook, Instagram, Messenger, WhatsApp and other service), Facebook’s parent company Meta reported an annual 16% surge in Q2 net profit, to US$ 7.8 billion – and 36.4% higher on the quarter. Revenue was 11% higher on the year, and 12% on the quarter, at US$ 31.12 billion – the first time the company has reported double-digit revenue growth since the last quarter of 2021. Facebook’s cash, cash equivalents and marketable securities stood at $53.45 billion at the end of Q2. The stock has gained nearly 140% YTD, with Meta’s market value at over US$ 765 billion at the close on Wednesday. The tech giant, which employs 71.5k, expects this quarter’s quarter total sales to be in the range of US$ 32 billion to US$ 34.5 billion.

Boeing reported that it expects the delivery of its first 737 Max 7to be delayed until next year, but the plane maker still expects the model to be certified this year by  the US regulatory body, the Federal Aviation Administration. The plane maker must first gain approval from the FAA for its smaller 737 Max 7 model before the 737 Max 10, with both aircraft having faced major delays amid increased regulatory scrutiny after criticism of the earlier certification process for the 737 Max 8, following two fatal crashes involving that model in 2018 and 2019. Boeing, which has struggled to increase production, as travel demand rebounds in the post-Covid era, posted a Q2 loss of US$ 149 million, (following a US$ 160 million profit in 2022), after delays and cost issues in its defence and space programme, despite an 18% revenue increase.

IAG, the parent company of BA and Iberia, posted a record H1 operating profit at US$ 1.41 billion, following a US$ 573 million loss in H1 2022; its after-tax profit for the first half stood at US$ 1.02 billion, compared to a net loss of US$ 722 million one year earlier. Revenue expanded 45% to US$ 17.47 billion, driven by a strong resurgence in leisure travel. The company reported that capacity for flights had been restored to 94% of pre-pandemic levels, and that the premium leisure segment performed a lot better than expected. It also posted that 80% of passenger revenue for Q3 had already been booked.

Following a US judgement that Ripple had not violated any securities law by selling its XRP token on public exchanges, Bitcoin moved higher, nearing its highest so far this year on Friday; Bitcoin hit its highest price, in over a year, earlier, touching US$ 31.8k, before nudging lower to US$ 30.1k today. This case marks the first win for a cryptocurrency company in a lawsuit brought by the US watchdog, the SEC. The second-biggest token Ether had its best session since March on Thursday and XRP, which the US judge ruled could be legally sold on public crypto exchanges, soared 73%. Following the decision, several major cryptocurrency exchanges, including Coinbase and Bitstamp, resumed trading of XRP on their platforms, after having suspended trading of the token in 2021 due to the SEC’s lawsuit.

Unilever posted a 21.0% jump in H1 pre-tax profits to US$ 4.31 billion, despite the number of goods sold having actually declined – a probable sign that the profit increase was driven by raising its prices; its volume of goods dipped 2.5%, with prices 11.2% higher, as its turnover came in 2.7% higher at US$ 33.62 billion. However, its chief executive, Hein Schumacher, said it had not passed on higher costs to its customers, but Sharon Graham, general secretary of the Unite union, thinks differently arguing that “Unilever’s profits are greedflation in action,” and “this isn’t about the company shifting more stock – sales volumes have fallen.” Supermarkets, who themselves have been accused of so-called “greedflation” – exploiting high inflation to increase their profits – have also accused suppliers of hiking prices. Unilever’s H1 profit margin edged higher to 17.1% on the year but is lower than the 19% margins seen in pre-pandemic times. There is no doubt that the maker of Magnum ice cream has seen its profits boosted because of the surge in inflation but it has to be borne in mind that one of the main aims of a company is to optimise the return for its shareholders – and if consumers are upset with a more expensive Magnum, they do not have to buy.

On the other hand, a recent investigation by the Competition and Markets Authority, into grocers’ pricing, found no evidence of profiteering by UK supermarkets but said it was important to keep the market “under review” and would now look into the wider supply chain. Food costs have been one of the biggest drivers behind high UK inflation and by last month, food and soft drink price inflation had slowed to 17.4%, on the year, as the overall inflation eased to 7.9%. Last week, Premier Foods, the maker of Mr Kipling cakes and Oxo stock cubes, said it believed recent input cost inflation was “past its peak”, and confirmed it would not raise prices for the rest of 2023.

MasterCard posted a 17% rise in Q2 net profit to US$ 2.8 billion, with net revenue 14% higher at US$ 6.3 billion on an annual basis – and 17% on a quarterly basis. The New York-based company’s net profit jumped to US$ 2.8 billion in the three months to the end of June. It was up almost 17% on a quarterly basis. Earnings per share increased 28% to US$ 3.00. The global payments company attributed much of the improvement to increased consumer spending and recovery in global tourism. Its total operating expenses increased 5% on the year to US$ 2.6 billion, primarily due to higher personnel costs, while operating income surged 21% to US$ 3.7 billion. Mastercard’s rival company Visa reported a 22% yearly jump in its 2023 fiscal third-quarter net profit to US$ 4.2 billion.

With more than 300k full- and part-time workers, UPS has the biggest unionised workforce of any company in the US, represented by the International Brotherhood of Teamsters union. This week, the conglomerate averted a strike, with both parties agreeing to a deal that would “set a new standard” for all delivery workers, granting raises, more full-time jobs and “dozens” of new workplace improvements and protections. The company, which shifts about 25% of all parcels in the US, has also increased starting pay to US$ 21 per hour for new part-time workers., full- and part-time workers – such as drivers – represented by the International Brotherhood of Teamsters union. Part of the deal sees UPS agreeing to spend US$ 30 billion more on workers as a result of union pressure, with the union confirming that existing full- and part-time members will get US$ 2.75 more per hour in 2023, and US$ $7.50 more per hour over the five years of the contract; over the next five years, pay for part-time workers – would rise 48% on average for existing staff.

By the end of 2023, Mobile operator Virgin Media O2 is to slash up to 2k UK jobs, equating to 12% of its total workforce, including eight hundred positions that had already been announced. The company follows its two rivals, BT, (which announced the loss of 55k jobs by the end of the decade), and Vodafone, (that confirmed 11k redundancies over the next three years), who announced in May that they were also cutting jobs. The company was only formed two years ago in 2021, by a merger between mobile operator O2 and broadband giant Virgin Media – and these cuts are a by-product of the integration and the need to improve efficiencies. All telcos face the same problems of flat revenue growth and the marked hike in costs, including the need to upgrade to 5G and to fibre and all of that requires.

With a slower demand for its glyphosate-based products, including the controversial weedkiller Roundup, Bayer AG says it expects to take a US$ 2.8 billion hit, as the German conglomerate lowered its outlook for the year; it posted that it expects a US$ 2.0 billion loss in Q2, and that its pre-tax profits could fall by US$ 2.5 billion to as low as US$ 12.5 billion this year. Although it has denied wrongdoing, to date, it has set aside over US$ 15 billion to settle lawsuits, alleging its herbicides are linked to non-Hodgkin’s lymphoma and other cancers; Bayer has denied wrongdoing but said the pay-outs would end “uncertainty”.

Introduced in 1976, Roundup was originally launched by US firm Monsanto and. It became the world’s best-selling weedkiller. Bayer acquired Monsanto in 2018 for US$ 63.0 billion, which allowed the German buyer to control of more than 25% of the global supply of seeds and pesticides. In the same year came the first lawsuits linking Roundup to non-Hodgkin’s lymphoma and other cancers. and awarded substantial compensation to claimants. In 2020, the company confirmed a US$ 10.9 billion settlement to resolve tens of thousands of claims and in March 2022 said it had resolved 107k out of around 138k cases involving Roundup. In the UK, there is no nationwide ban on glyphosate, although some councils in the country have stopped using it due to safety concerns.

In Australia, Wesfarmers announced a merger of its Kmart and Target discount department stores; the stores and branding will remain separate. One of the main aims of the merger is to save costs, as it will be run as one business, with a value of US$ 6.8 billion, (AUD 10 billion), with a resulting cost saving. The new set-up will improve productivity, consolidate internal reorganisation and enhance economies of scale, with no direct impact on Kmart or Target stores, and “for store networks and 50k store team members it’s business as usual as we continue to focus on providing the best value products to the thousands of customers in Australia and New Zealand who choose to shop at Kmart or Target every day.”

This week, the Australian Securities and Investments Commission has accused investment firm Vanguard of “greenwashing”, by marketing a fund to investors seeking an ethical option, but fossil fuels were among the fund’s investments. The corporate watchdog is suing Vanguard and accusing it of misleading conduct and statements, who have commented that it moved quickly to inform investors and improve its product disclosure statement and has fully cooperated with ASIC.

According to latest CoreLogic figures, Australia’s June housing values increased in June, albeit at a slower pace; having risen 1.2% a month earlier, last month the increase was at 1.1%. Sydney was again at the top end of the scale, rising 1.7% in June and by 6.7% YTD – this equates to a weekly hike of US$ 2,858 for a median-value house in the city. At the other end of the scale came Hobart, the only location to record falling house prices – down 12.9% since its May 2022 high. Brisbane saw a 1.3% rise last month, whilst Perth recorded record high home prices, with Adelaide only 0.3% below record highs. The main reason behind these high values continues to be the paucity in available supply, with total inventory levels more than a quarter below average.

National rents continue to head north – up 2.5% in the June quarter, (but down from the 2.8% figure posted in Q1), driven by the triple whammy of overseas migration, a chronic shortage of available properties and tight vacancy rates. Sydney remained the most expensive capital city, with Canberra and Hobart the only capital cities that saw rents fall for homes and units. All regional markets saw a rise in rents during the June quarter except for regional Tasmania, which declined by 0.4%.

The Xinhua state news agency posted that Jiangsu Province’s GDP was at US$ 840 billion in H1 – 6.6% higher on the year. The values of Jiangsu’s primary, secondary, and tertiary industries stood at US$ 23 billion, US$ 371 billion and US$ 446 billion – all higher on the year by 3.5%, 7.1% and 6.3% respectively. There was year on year growth recorded in various other economic sectors including fixed-asset investment (5.5%), manufacturing investment (10.1%), and infrastructure investment (3.2%). There was a 10.0% expansion noted in total retail sales of consumer goods, reaching US$ 322 billion, with the catering sector growth with at an impressive 23.4%.

The US economy grew faster than expected in Q2, as economists begin to backtrack on forecasts of any early recession. Federal Reserve Chairman Jerome Powell confirmed that the central bank’s staff had dropped recession predictions they set in March. The Q2 GDP rose 2.4% on the year, whilst consumer spending at 1.6% was well down on the 3.2% Q1 figure. Despite higher borrowing costs having had an impact on consumer spending, the US economy appears to be set to avoid being driven into a recession and that the economy may well have a soft landing. While headline inflation is still above the Fed’s 2% target, it has fallen to 3.0%, after peaking at 9.1% in 2022. Despite the Fed’s rate rises, the job market continues to march along at a pace and unemployment remains low at 3.6%, whilst consumer confidence moves to its highest level in over two years.

NatWest seems to have taken on more than they expected when they decided to close the account of Nigel Farage. The former UKIP leader claims his account at Coutts – a private bank owned by NatWest – was shut down because of his political views but the bank did not give any reason, so he requested a copy of information held on him by the bank; under UK’s data protection law; this is known as a subject access request, from which he obtained information  including minutes from a meeting in November 2022 reviewing his suitability as a client. It stated continuing to have Mr Farage as a customer was not consistent with Coutts’s “position as an inclusive organisation” given his “publicly stated views”, giving several examples. The bank was also concerned about the reputational risk of having Mr Farage as a client. Last week, the chief executive of NatWest apologised for what she called the “deeply inappropriate” comments and admitted a “serious error” in talking about Nigel Farage’s relationship with its private banking arm Coutts. Last Thursday, Dame Alison Rose said she was wrong to respond to questions from the BBC about Mr Farage’s account being closed and resigned. By Friday, 28 July 2023, its chairman Sir Howard Davies, (who earns US$ 840k a year), refused to quit, and this despite Rishi Sunak refusing to back him a day earlier.  Mr Farage implied that thousands of others had also had their accounts closed by NatWest – and urged them to file their own subject access requests – and it is reported that the number of such requests has markedly increased. (Latest figures show the bank posting a H1 pre-tax profit of US$ 4.6 billion – a major improvement compared to the US$ 3.3 billion reported for year).

Harvey Nichols has become latest UK luxury department store to voice concerns to the UK administration about the negative impact of the government reintroducing VAT for items bought in UK shops. Before Brexit in 2020, tourists used to receive a VAT refund on items bought in shops on Britain’s high streets, at airports and other departure points from the country, which they exported in their personal luggage. Now Harvey Nichols has joined others to warn that. that foreign visitors are spending less time and money in the UK, and that foreign shoppers who used to come to the UK to shop “VAT free” are getting into the habit of buying their luxury goods in Paris or Milan – and not London. The fall of this type of visitor numbers has a knock-on effect on the hospitality and travel sectors to the detriment of the economy. This is borne out by numbers from the tax-free shopping data company, Global Blue, which reckons that tourists form the US are now spending more than triple the amount on duty-free goods in France and Spain than they did before the pandemic in 2019. Earlier in the year, Burberry also accused PM Sunak of a “spectacular own goal” over the issue but the UK government has said it is not interested in reintroducing the VAT refund scheme, which would cost the public coffers somewhere in the region of US$ 1.8 billion.

In its ninth straight increase, the ECB raised interest rates to 3.75% to its highest since May 2021 – following the lead of the US Federal Reserve – in its battle against inflation. ECB President, Christine Lagarde, said that the eurozone’s economic outlook has deteriorated and added that another rise could take place next month, and added that “inflation continues to decline but is still expected to remain too high for too long”. May inflation was at 7.1%, down 1.0% in the month and 0.7% lower on the year, and at 5.5% last month. Weaker domestic demand and high inflation are dampening supply and weighing on manufacturing. However, the problem facing the ECB is that the average rate covers the fact that the three members, with the highest rate are, Hungary, Poland and Slovakia – at 20.1%, 11.5% and 10.9% – and the three with the lowest being Greece, Cyprus and Spain, with 1.8%, 1.9% and 2.3%. The problem facing Mme Lagarde is how can one rate benefit all twenty-seven nations?  It cannot.

Because is it seems that UK inflation levels are higher than other rich nations, there are some analysts that consider that this will result in the high inflation levels remaining for longer. Latest figures see rates in the UK, US and EU at 7.9%, 3.0% and 5.5%. There is no doubt that the UK bore the brunt of the double whammy of surging energy and food costs, prompted by the war in Ukraine, and a post-pandemic shortage of workers. UK mortgage holders seem to have suffered more from rising interest rates than others, in as much in the US and some of Europe, fixed rate mortgage deals tend to typically run for twenty-five or thirty years and in some cases, mortgage holders can switch deals with minimal penalty. The French government also effectively caps rates, so a new thirty-year mortgage deal may cost 3.5%. The best the UK mortgagee can hope for is a fixed two-year deal followed by variable loan for the rest of the tenure. The UK is still suffering because it was one of the last governments to introduce energy support, with price movements taking time be reflected in the cap on energy bills; since the UK imports a lot of energy, the impact of the fall back in wholesale gas prices is taking longer to show in inflation numbers.

Not before time, the BoE has called in the cavalry – in the form of the ex-head of the US Federal Reserve, Ben Bernanke – to lead a review of its dire forecasting, in its belated bid to control soaring prices and failure to predict their surge. In December 2001, it had forecast that inflation would peak at 6% – but, twelve months later, it actually hit 11.1% and still remains high at 7.9%, almost quadruple the BoE’s 2.0% target. Bank Governor Andrew Bailey said the review would allow the institution to “step back and reflect on where our processes need to adapt to a world in which we increasingly face significant uncertainty.” In May, he also commented that there were “very big lessons” to learn about how the central bank had dealt with the economic shocks of recent times and that the bank’s internal forecasting failures had led it to look elsewhere for help setting policy. About Damn Time!