Déjà Vu                                                                                   05 July 2024

According to Dubai Land Department, over 80% of the new property units launched in Dubai since 2022 have been sold out – a sure sign that the off-plan sector is in rude health, and that demand is still ahead of supply. The DLD notes that, over the past two years, nearly two hundred and fourteen projects have been launched, of which one hundred and forty-eight are active. Dubai’s residential market continues to flourish, post-pandemic, with many developers selling projects within days of launching. The majority are owner-occupiers, many of late that have worked out that buying is currently a better financial option than renting, (mainly because renting is becoming more expensive in a property boom and that buying, even with relatively high mortgage rates, is still a more viable choice). There is also a healthy influx of high-net-worth individuals who are migrating to the emirate. According to CBRE, in May, the total volume of transactions stood at 15.8k, the highest monthly figure on record to date, marking an increase of 44.2% compared to the year prior, with prices also surpassing the previous peaks witnessed in 2014. Property Monitor also confirmed that May 2024 prices at US$ 371 per sq ft were 10.25% higher than seen in September 2014.

Only Dubai can think of mobile or floating villas that will cruise the clear blue waters of the Arabian Gulf. The El Bahrawy Group has launched ‘Neptune’, its first floating and mobile villa project, and part of the Kempinski Floating Palace resort project; it is ready and anchored at Dubai Palm Marina, with a further eight out of a total of forty-eight ‘Neptune’ villas currently in the final stages of completion. The scheme is basically a floating hotel surrounded by forty-eight luxury mobile ‘Neptune’ villas that will have an estimated market value of US$ 436 million upon completion. All villas will be 100% manufactured in the country and are being repurposed by a marine construction group. The two-bedroom, three-bedroom and four-bedroom villas will cost US$ 7.9 million, (5.8k per sq ft), US$ 8.7 million, (6.5k per sq ft), and US$ 12.5 million (10.4k per sq ft); they will feature a two-story layout plus a rooftop.

For example, a three-bedroom villa will weigh around two hundred and twenty tonnes, the ground floor having a living room, an open-concept dining area, a kitchen, a guest restroom, a crew chamber, a service room, a cockpit, an outdoor seating space, and a platform designed for storing and launching jet skis. The first floor will house the three bedrooms, walk-in closets, and two bathrooms, and the rooftop will have its own infinity swimming pool encircled by glass walls, alongside outdoor seating, a designated barbecue area, an external driving control station, and a display screen.

The buyer of a villa has two options – they can allow Kempinski to manage and rent out the villa, or they can choose to keep it for personal use. It is estimated that off-peak rent would be US$ 13.6k per night but would come with a total crew of six — one captain, who will sail the boat, along with three deckhands and two stewards – plus à la carte Kempinski services.

Despite relatively high mortgage rates, May Dubai mortgage transactions jumped by 57.9% to 3.4k – a fourteen-month high – as demand for residential property continues unabated. Whilst not yet a shoo-in, it is all but inevitable that the US Federal Reserve will start nudging rates lower in H1, which in turn will see Dubai rates fall in tandem. Allsopp & Allsopp’s May report indicates that finance buyers outpaced cash buyers by 55.8%, doubling figures from April, as well as noting that mortgage buyers were typically younger individuals who preferred being around popular lifestyles and social hotspots such as Downtown Dubai, Jumeirah Village Circle, Dubai Marina, Jumeirah Lake Towers, and Jumeirah Beach Residence for apartments and in The Springs, Arabian Ranches, Town Square, Al Furjan and Reem for villas/townhouses. Property Monitor said loans taken for new purchase money mortgages accounted for 53% of borrowing activity, with the average amount borrowed being US$ 504k, at a loan-to-value ratio of 76.6%. Loans for refinancing and equity release saw their market share decrease by 9.5% to 29.0%, with the balancing 18.0% taken by bulk mortgages.

To be developed on a 113.5k sq ft plot, DIFC has broken ground on DIFC Square which will comprise three interconnected buildings, (with eight, ten and thirteen floors, sharing one basement and three podia), and encompass nearly one million sq ft of built-up area. This landmark development and commercial project will feature offices, (covering 600k sq ft), and retail units, (17.2k sq ft), including a curated mix of shops and F&B outlets. Completion is expected by H1 2026.

Because of ongoing delivery delays, Emirates, has been forced to delay the deployment of its new fleet of Airbus A350 aircraft. Its first flight was scheduled for 15 September, (to Bahrain) but now it has been rescheduled for 04 November to Edinburgh; it has sixty-five Airbus A350-900 aircraft on order. The carrier confirmed “once we begin receiving our A350s, we will expedite their entry into service as quickly as possible and will work hard to minimise the impact of the delays.” In May, the airline had announced that the new A350 would service nine destinations, including Kuwait, Muscat, Mumbai, Ahmedabad, Lyon and Bologna and has posted that “there are no changes to flight frequencies to these destinations, only a change in the type of aircraft operating on the route.” Following the initial launch of the wide-body jets, on mainly regional routes, they will be utilised on ultra-long-haul destinations in the US, Latin America, Australia and New Zealand. The aircraft, which will replace the bigger Boeing 777s and Airbus A380s that will be then used on destinations that require larger passenger capacity, can accommodate up to three hundred and fifty passengers and flies efficiently on every distance from short-range segments to ultra-long-range routes of up to 18k km non-stop. Before the latest delays, Emirates had received assurances from Airbus that it will deliver its A350 aircraft on time in August.

It has been a rewarding Q2 for Emirates staff – April witnessed a twenty-week bonus for them and, at the end of June, it was reported that employees will receive a 4.0% pay hike in transport allowance and UAE national retention allowance, and for flight deck and cabin crew, there will also be a 4.0% increase in flying and productivity pay. Additionally, all employees will receive a 10-15% increase in housing allowance, depending on their grade within the company. These pay-related pay rises will not apply for employees who are on a final warning, those who are subject to disciplinary proceedings that may result in dismissal, those who have not completed probation as of 01 July 2024, and those who are serving notice. Furthermore, additional benefits will also be given to employees, such as an increase in paid maternity leave from sixty days to ninety days, a doubling in paternity leave to ten days, whilst new mothers will also see a doubling in nursing break hours to two hours. EK will pay the life insurance premium for all employees, who previously contributed to the scheme, who hold Grade 1 to Grade 5. In addition to this, employees of certain grades will receive an enhancement of long-term sick leave, as of 01 September 2024, along with education support allowance also being increased by 10% starting September.

An agreement between Dubai Municipality and DP World Dubai has unveiled plans to build the world’s largest car market, encompassing an area of twenty million sq ft, that will be involved in all aspects of the automotive sector and will also host major events and specialised conferences. The project is in tandem with the goals of the Dubai Economic Agenda D33, which aims to double the size of the emirate’s economy and transform it into one of the world’s top three cities by 2033. The market will be connected to seventy-seven ports and will offer comprehensive commercial, logistical and financial solutions.

7X, previously known as Emirates Post Group, announced on Wednesday key expansion plans as part of the brand’s new strategy introduced earlier this year. It aims to strengthen its portfolio and enhance its domestic and global reach of all its seven subsidiaries – Emirates Post, EMX, EDC, and FINTX, which includes Wall Street Exchange and Instant Cash. Emirates Post plans to optimise its retail network with new strategically located centres, that are no more than a five-minute drive away from customers, and will add new service centres to its eighty-five branches and two mall kiosks; its membership in the Universal Postal Union facilitates access to a global postal network spanning one hundred and ninety-two countries.

7X’s Courier, Express and Parcel’s arm, EMX, the Courier, currently uses six hundred vehicles and has six hundred couriers, operating from one primary airport hub at Dubai Airport and handles shipments from Abu Dhabi and Sharjah airports, along with ten delivery centres, ensuring reliable delivery and logistics solutions. aims to expand both to new destinations and its customer base, including consulates, government service centres, banks and eCommerce providers across the country. On the international stage, it plans to expand its current portfolio of two hundred destinations by augmenting new global strategic alliances. FINTX is the financial arm of 7X that includes Wall Street Exchange and Instant Cash, both providing financial services to more than one hundred destinations. WSE currently operates thirty-three branches across the UAE, whilst Instant Cash has become one of the fastest-growing global money transfer entities in the GCC region, with a global network of more than one hundred and forty-five agent partners, spanning over ninety countries. EDC, with more than ninety clients across ten countries and eleven industries, is a leading integrator and solutions provider under 7X. Abdulla Mohammed Alashram, Group CEO of 7X, commented, “by adding new service centres and branches, extending operating hours, and strengthening our regional and international partnerships, we aim to provide unparalleled convenience to our customers. Additionally, 7X has rolled out over 700 PUDOs, with the ambitious goal of increasing these pick-up and drop-off locations to 1,000 by the end of 2024, underscoring our commitment to customer accessibility and efficiency.”

In a bid to attract more than US$ 177 billion in foreign direct investment – and make it one of the world’s top three city economies by 2033 – the Dubai Executive Council has approved the FDI Development Programme which will allocate US$ 6.8 billion over the next decade to support the aims of the emirate’s D33 economic agenda. Sheikh Maktoum bin Mohammed, who chaired the meeting, announced that the Dubai Economic Model will use 3k performance indicators to closely measure Dubai’s development against its economic targets. It aims to “attract international companies and support the expansion of existing international companies with bases in Dubai”. The emirate already has certain inherent advantages such as its logistics infrastructure, strategic geographical location, talent pool, and its position as a competitive global commercial hub.

Eight years ago, the federal government liberalised fuel prices so that they could be aligned with market rates until the onset of the pandemic which saw prices frozen by the Fuel Price Committee. In March 2021, prices were amended to reflect the movement of the market once again. After three months of price hikes, they declined in June and in July, all but diesel, headed south again. The breakdown in fuel price per litre for July is as follows:

• Super 98: US$ 0.815, from US$ 0.856 in June (down by 4.8%)        up 6.2% YTD from US$ 0.768

• Special 95: US$ 0.785, from US$ 0.823 in June (down by 4.6%)       up 6.4%  YTD from US$ 0.738

• Diesel: US$ 0.787, from US$ 0.785 in June (by 0.3%)                         down 3.7% YTD from US$ 0.817

• E-plus 91: US$ 0.763, from US$ 0.804 in June (down by 5.1%)        up 6.1% YTD from US$ 0.719

The Dubai Financial Services Authority’s eighth Audit Monitoring Report, provided key findings from inspections of Registered Auditors, conducted in 2022 and 2023, during which time it completed a record number of inspections to ensure that audit quality within the Dubai International Financial Centre remained rigorous and reflective of global best practices. The report analysed financial statement audits, regulatory engagements, and anti-money laundering, and revealed a significant decline in audit quality, mirroring global trends. The body is committed to maintaining the highest standards of audit quality and regulatory oversight, whilst reinforcing the importance of integrity and reliability of financial regulations. Ian Johnston, Chief Executive of the DFSA, said, “Robust audit oversight is crucial for trust in our financial systems. This report outlines both the challenges we face and the proactive measures we are taking to ensure audit quality meets global standards. It is critical that the audit profession responds promptly and meaningfully to improve audit quality.”

Marking its second listing on Nasdaq Dubai, (and its first under their newly developed US$ 1 billion Sukuk programme), Arada’s US$ 400 million five-year fixed-rate Sukuk attracted strong demand and was 3.5 times over-subscribed. This listing brings the total value of Sukuk issuances, on the bourse, to US$ 93 billion, and a total value of US$ 129 billion in listed bonds and Sukuk, further enhancing Dubai’s position as a premier global hub for Sukuk listings. Local issuers contributed 44% of this value, while foreign issuers made up the remaining 56%, with significant participation from institutional investors, fund managers, high-net-worth individuals and banks.

The DFM opened the week on Monday 01 July, 52 points (1.3%) higher the previous four weeks gained 40 points (1.0%) to close the trading week on 4,070 by Friday 05 July 2024. Emaar Properties, US$ 0.17 higher the previous three weeks, gained US$ 0.03, closing on US$ 2.18 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.60, US$ 4.50, US$ 1.56 and US$ 0.35 and closed on US$ 0.63, US$ 4.50, US$ 1.59 and US$ 0.34. On 05 July, trading was at one hundred and forty-one million shares, with a value of US$ 193 million, compared to two hundred and twenty-eight million shares, with a value of US$ 64 million, on 28 June.

By Friday, 05 July 2024, Brent, US$ 6.83 higher (8.6%) the previous three weeks, gained US$ 0.14 (0.2%) to close on US$ 86.54. Gold, US$ 15 (0.5%) higher the previous week, gained US$ 61 (2.6%) to end the week’s trading at US$ 2,398 on 05 July 2024.

Q2 proved a good period for Tesla, with deliveries up 14%, to 444k vehicles, compared to Q1; even though it beat analysts’ expectations, it was still 5.0% lower on the year. The EV-maker has been impacted by increased competition, reduced demand and high borrowing costs. Its strategy of continuous price cuts has had limited success, as sales continued their downward trend in H1; in April, it announced that it was slashing its workforce by 10%. Some experts reckon that it is time for Elon Musk to update the fleet, including its mainstream Model 3 which was first released in 2017. Although the US market is at best flat, it is estimated that 20% of all vehicles manufactured this year will be electric, with 50% and 25% of the total for China and Europe respectively. The market seems to think that better days are ahead, with Tesla shares jumping 6.0% on Tuesday, with news that next month, it will introduce its robotaxis to the world.

Driven by the boom in AI technology, Samsung Electronics, the world’s largest maker of memory chips, smartphones and televisions, expects its Q2 profits, (expected at US$ 7.54 billion), to June 2024 to jump fifteen-fold on the year; Q1 profits were more than ten-fold higher, compared to a year earlier. Next week, the tech company faces a possible three-day strike, with unions demanding a more transparent system for bonuses and time off.

The International Air Transport Association posted a 10.7% hike in global passenger demand, measured in revenue passenger kilometres (RPKs), compared to a year earlier. Capacity, measured in available seat kilometres (ASK), was up 8.5% higher year-on-year with a May load factor of 83.4% (81.7% in May 2023)), a record high for the month. International demand rose 14.6% on the year, with capacity up 14.1% on the year and the load factor 0.3% higher on the year to 82.8%. Domestic demand rose 4.7% compared to May 2023, whilst capacity was up 0.1% YoY and the load factor 3.8% higher at 84.5%. Willie Walsh, IATA’s Director-General, noted that with May ticket sales for early peak-season travel up nearly 6%, the growth trend shows no signs of abating. However, he did warn of the impact of air traffic control delays which have already topped 5.2 million minutes in Europe alone – and the peak season has yet to start.

Following several months of discussions, Boeing has finally entered into a definitive agreement to take over its main supplier, Spirit Aero Systems in an all-stock deal at an equity value of US$ 4.7 billion, equating to US$ 37.25 per share; 0.18 Spirt share equals 0.25 Boeing share. The total transaction value is approximately US$ 8.3 billion, including Spirit’s last reported net debt. Dave Calhoun, Boeing’s president and chief executive, said “by reintegrating Spirit, we can fully align our commercial production systems, including our safety and quality management systems, and our workforce to the same priorities, incentives and outcomes – centred on safety and quality.” Boeing had divested Spirit AeroSystems in 2005 in order to cut costs and outsource some assets, and now it is hoped that this vertical integration will give Boeing more control over its own destiny.

At the same time, Airbus confirmed that it had entered into a binding term sheet agreement with Spirit AeroSystems for a potential acquisition of its major activities related to the European plane maker. These include the production of A350 fuselage sections in Kinston, North Carolina, and St Nazaire in western France, the A220’s wings and mid-fuselage in Belfast and Casablanca, and the A220 pylons in Wichita, Kansas. Airbus will pay a nominal price of US$ 1 for the assets and will be receiving US$ 559 million in compensation from Spirit AeroSystems, subject to an ensuing due diligence process.

It is reported that Reaction Engines, backed by the likes of Boeing, BAE and Rolls Royce Holdings, has appointed advisory firm Silverpeak to raise fresh capital, running into tens of millions of dollars, as it struggles with cash flow problems; the firm has admitted that its financial performance last year had “not been in line with our forecasts”. The Oxford-based company is aiming to pioneer hypersonic flight. The specialist entity in developing advanced propulsion systems, the company is developing a new type of engine aimed at powering aircraft to Mach 25 outside the Earth’s atmosphere.

The British Retail Consortium/ NielsenIQ Shop posted that May prices rose at an annual rate of 0.2%, but down from 0.6% in May 2023. The retail trade body indicated that discounted TVs, (ahead of the Euros football), along with cheaper butter and coffee helped. June prices of non-food goods dropped by 1.0%, compared to May’s 0.8% decline. Many food items and other goods are still more expensive than they were pre-pandemic, despite price rises having slowed to their lowest rate since October 2021. It is expected that price increases during summer will be minimal as retailers compete for market share in a sector where discretionary spending has been tightened. 

At this week’s British Grocer of the Year event, for the first time in twenty years, Sainsbury’s took the top position away from Marks & Spencer’s, followed by Tesco, Lidl, Aldi and social enterprise The Company Shop. It was also commended for being the only “big four” supermarket (Tesco, Asda, Sainsbury’s and Morrisons) to have gained shopper spend from both Aldi and Lidl amid the cost-of-living crisis. The judges noted that “restoring growth while increasing profits is not an easy thing to do at the best of times, but especially with the highest inflation in decades, and the discounters – and other rivals – also opening a significant number of new stores.” The award for being Britain’s favourite supermarket was won by Tesco for the tenth consecutive year who also won employer of the year for its “pioneering” work in supporting diversity and inclusion as well as its support to young people, competitive pay, and step up in maternity and paternity benefits. Waitrose won the award for customer service, with the Grocer Cup going to Greggs recognising the success Greggs has had going from a high-street bakery chain into the UK’s biggest fast-food chain.

A game of two sectors for Sainsbury’s. In Q2, its food sales jumped 4.8%, with Nectar offers and Aldi price matching helping to attract shoppers, whilst its ‘Taste the Difference’ premium own brand range had seen sales jump by 14%. This was offset by sales of its non-food items and Argos both dipping, attributable to the bad weather and shoppers still being cautious about spending on big ticket items. There are concerns that Argos results will continue to negatively impact Sainsbury’s group results, as electronics continue to suffer as customers prioritise essential purchases.

China’s State Post Bureau posted that it had handled more than eighty billion parcels in H1 – fifty-nine days earlier compared to achieving that figure in 2023. Last month, the average daily express delivery volume exceeded five hundred million pieces, while the monthly average topped thirteen billion parcels in the six months to 30 June.

Earlier in the week, Egypt’s sovereign wealth fund signed four green ammonia agreements, worth up to $33 billion, including an US$ 11 billion deal with Frankfurt-based DAI Infrastruktur, aimed at setting up a green ammonia project in East Port Said. Other deals included a US$ 14 billion agreement to team up with BP, UAE’s Masdar, Egyptian infrastructure company Hassan Allam Utilities and Infinity Power to invest in a green ammonia plant in Ain Sukhna Port on the western coast of the Gulf of Suez. The country is expecting to increase power generation from renewables to 42% by 2035, and 58% by 2040, as it steps up projects in alternative energy sources, such as solar, wind and green hydrogen, at a time when its natural gas production is dwindling. In March, the EU and Egypt, signed a deal which included up to US$ 8.0 billion, in support for Cairo’s economic reform programme and business environment, with it agreeing to assist the EU with several key issues, most notably stopping illegal migrants.

The Sri Lankan president, Ranil Wickremesing, estimates that by slashing interest rates, (to an average 2.1%), and introducing longer repayment schedules, (to 2028), Sri Lanka will save up to US$ 5.0 billion following the restructure of its bilateral debt, much of which is owed to China. The island nation reneged on its foreign borrowings in 2022 during an unprecedented economic crisis that precipitated months of food, fuel and medicine shortages. He said bilateral lenders led by China, the government’s largest single creditor, did not agree to take a haircut on their loans, but the terms agreed would nonetheless help Sri Lanka. Some of Sri Lanka’s loans from China are at high interest rates, going up to nearly 8.0%, compared to borrowings from Japan, the second largest lender, at less than 1.0%. Sri Lanka struck separate deals with China and the rest of the bilateral creditors, including Japan, France and India, which account for 28.5% of the country’s US$ 27.0 billion outstanding foreign debt. Wickremesinghe said the nation was bankrupt when he took over and he hoped the US$ 2.9 billion IMF bailout he secured last year would be the island’s last, following sixteen previous requests to the global body.

This week, the Japanese government raised the coupon rate for new ten-year government bonds from 0.8% to 1.1% for the first time since April 2012, reflecting recent rises in long-term interest rates because of the central bank’s slight amendments to its monetary policy. In 2013, the Bank of Japan launched its unorthodox monetary easing programme designed to lift Japan out of a period of chronic deflation.

A biennial report by the Australian Institute of Health and Welfare notes that for the first time in thirty years, the life expectancy of an Australian has fallen – by 0.1 years to 81.2 years for men and 85.3 years for women. (There’s been a greater decline in the United States – from 78.9 to 76.4 years – and the United Kingdom – from 81.3 to 80.4 years). For the first time in fifty years, an infectious disease has been in the top five leading causes of death in the country – Covid 19 in 2022. From the beginning of the pandemic to 29 February 2024, more than 22k people in Australia died from or with Covid-19. Furthermore, chronic conditions have contributed to around 90% of all deaths each year from 2002 to 2022, and about 60% of Australians currently live with chronic illness.  There is no doubt that Australia will need to spend more than its current 2022 figure of US$ 160.4 billion – equating to US$ 6.2k per person – on health, as its ageing population requires more primary care than ever with more people living with a chronic disease and spending more time in ill health. It is estimated that the number of years on average Australians suffer in ill health has risen by an extra year for both men and women. Depression, anxiety, dementia and chronic liver disease are emerging as some of the fastest-growing chronic conditions. Cardiovascular diseases and cancer were common causes of death among people over forty-five years of age, and dementia was the most common cause of death among people over eighty-five years of age. Probably replicated in all developed economies, the Australian report noted that people living in the lowest socio-economic areas had the highest rates of use of public health but had the lowest rates of service. Also in tandem would be the fact that life expectancy has started to drop, and that the days of more people living longer could be over.

June inflation in the twenty-nation eurozone dipped 0.1% to 2.5% on the month – still above the ECB’s 2.0% target with the bank seemingly in no hurry to add more rate cuts after a first tentative reduction in its benchmark rate last month. Then the Governing Council decided to lower the three key ECB interest rates by 25bp, with the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility decreasing to 4.25%, 4.50% and 3.75% respectively. However, key indicators point to the fact that inflation may stay at around the 2.5% mark for some time. Meanwhile, inflation in services prices remained flat at 4.1%. Earlier in the week, ECB President Christine Lagarde commented that the bank needed to first make sure inflation was firmly under control before cutting its key rate again.  Noting, that though growth in the eurozone was uncertain, the jobs market remained strong with low unemployment levels, she said “it will take time for us to gather sufficient data to be certain that the risks of above target inflation have passed,” adding that it was an indicator that the economy was holding up even with rates much higher than before. The ECB’s approach is almost in tandem with that of the Fed which has held off from tinkering with rates because they are unsure of how stubborn inflation actually is, and if cuts did not actually “break” the inflationary cycle, it would make it harder to rectify the “error”. If they proceeded in the other direction, it might well solve the inflation conundrum, but at the expense of the economy falling into recession.

The latest S&P Global purchasing managers’ index indicate that factory activity in the eurozone is contracting, even though there was a modest 0.3% uptick in the European economy after several quarters of near-zero growth, caused by higher energy prices following the Ukrainian crisis. This resulted in much lower consumer confidence and a huge reduction in their purchasing power which is slowly returning helped by new labour agreements and pay increases.

Eurostat posted that the eurozone unemployment rate held steady, still at a record 6.4% low in May, but 0.1% down on the year; there were 11.078 million unemployed people in May. Compared with April, unemployment increased sharply by 38k on the month and by 3k on the year. More worryingly was that the May jobless rate among young persons, aged below 25 years, was unchanged at 14.2%. However, the overall May unemployment rate – at 6.0% – in the EU27 also remained unchanged, while the youth jobless rate dipped 0.1% to 14.4%.

Wall Street took comfort from the words of Federal Reserve Chair, Jerome Powell,  after he acknowledged that some progress had been made in taming inflation but that he wanted more time – and confidence – to ensure that the time was right to flick the switch; he noted that recent data (showing headline and core inflation were down 0.10% and 0.20% to 2.60% and 2.60% respectively) “suggest we are getting back on a disinflationary path”. Following his announcement, the New York indices rallied, with the S&P 500, (closing above 5,500 for the first time), and Nasdaq both touching record-highs whilst the Dow Jones Industrial average nudged up 0.4%. However, he does not foresee US inflation climbing back down to 2.0% until 2026, but “the main thing is we’re making real progress”, but that “we want to be more confident that inflation is moving sustainably down towards 2.0% before we start the process … of loosening policy”, and that “we’re well aware that if we go too soon, that we could undo the good work we’ve done to bring down and if we go too late, we could unnecessarily undermine … the recovery.”

Although slowing in June to 206k new jobs, following May’s figure of 218k, US jobs growth was higher than the 190k expected by market experts. The US unemployment rate nudged up to 4.1%, while wage growth rose at its slowest for three years. However, the figures may make the Fed think of bringing in cuts earlier than expected, with one cut, (and perhaps two), at least happening in H2. Earlier in the week, the Fed’s meeting noted that the economy appeared to be slowing and that “price pressures were diminishing”. There is no doubt that the rate of price rises has been “stickier” than expected, and a strong jobs market, will leave the Fed having to consider in which direction to go – stick or twist

A BBC study indicates that 1.8 million people are currently in student debt of more than US$ 63k (GBP 50k), of which 61k owe more than US$ 127k (GBP 100k), and fifty with more than US$ 254k. The average balance for loan holders in England when they start making repayments is over US$ 61k. In 2023/24, some 2.8 million people in England made a student loan repayment.

Although earnings have risen faster than house prices of late, Nationwide still reckons that higher mortgage rates mean affordability is still “stretched” for many who have been impacted by more expensive mortgages. The building society noted that the average UK price is now US$ 337k (GBP 266k) and that prices were 0.2% higher on the month and 1.5% higher on the year; however, it said that external activity in the housing market had been “broadly flat”, over the past twelve months, with transactions down by about 15% compared with 2019. Across the UK, Northern Ireland saw the biggest price increases, up 4.1% from a year earlier, with Wales and Scotland at 1.4% and in England prices only nudging 0.6% higher. It is easy to see what rates have done to affordability – in late 2021, mortgage rates were at 1.3%, today they are nearer to 4.7%. It is reported that transactions involving a mortgage are down by nearly 25% over the past year, whilst the number of cash transactions for properties is about 5% higher than pre-pandemic levels. Despite some banks cutting rates last month, they are still far higher than pre-pandemic levels.

It was the Cameron/Osborne administration that first introduced ‘austerity’ to the UK public and unfortunately the word was still in use when the Tories were duly hammered in yesterday’s election. There is no doubt that the Conservatives had stayed too long in government and ended fourteen years of rule, bereft of ideas, infighting, ineptitude, arrogance and touched by cronyism, sometimes to the point of apparent fraud.  Furthermore, there is no doubt that all was not well with the UK economy that new Chancellor Rachel Reeves has inherited, and she was quick to point out the fact that she was taking over a depleted economy from the Conservatives that would create a “challenge” for the new Labour government. This is reminiscent of what happened fourteen years ago when the then Labour’s ex-Chief Secretary to the Treasury, Liam Byrne, left a note to his successor to reading “Dear Chief Secretary, I’m afraid there is no money. Kind regards – and good luck! Liam.” Déjà Vu