Inflation and Brexit Concerns Hold Back U.K. Economy
A picture of inflation-squeezed consumers and Brexit-wary companies emerged in the U.K.’s latest overview of its economy. Annual growth in the third quarter slowed to 1.7 percent, slightly higher than previously estimated but still the weakest pace in 4 1/2 years, the Office for National Statistics said on Friday. The economy expanded an unrevised 0.4 percent from the second quarter, well below the rates seen before the European Union referendum 18 months ago. Separate figures showed the dominant services industry, which provided almost all of the economy’s growth in the third quarter, rose 0.2 percent in October. Taken together with a mildly positive manufacturing performance in the month, it suggests the economy has been steady this quarter as the Bank of England raised interest rates for the first time in a decade last month. Bloomberg Economics estimates the economy will maintain its pace this quarter, expanding 0.4 percent. But it says there’s no reason for the central bank to rush though with more tightening. “Similar gains are likely over 2018 but they won’t be fast enough to put a rocket under the dormant wage growth figures,” said BE’s Dan Hanson.
U.S. Capital-Goods Orders Fell Last Month After Robust October
Orders placed with U.S. factories for business equipment fell in November after a sharp upward revision to the previous month, consistent with an upswing in corporate investment that’s helping propel the economy. Bookings for non-military capital goods excluding aircraft eased 0.1 percent last month, data from the Commerce Department showed Friday. The decline followed a 0.8 percent increase in October that was more than double the previously reported 0.3 percent advance. The median forecast in a Bloomberg survey for November called for a 0.5 percent gain. Orders for all durable goods — items meant to last at least three years — increased 1.3 percent as bookings for commercial and military aircraft rebounded. Core capital goods orders advanced at an 18 percent annualized rate in the three months through November, while those shipments moved ahead at a 14.9 percent pace. The data indicate spending on equipment will provide more fuel for economic growth after a third-quarter contribution that was the most in two years. Increased investment may be sustained in 2018 as lower corporate tax rates, from a bill awaiting President Donald Trump’s signature, give businesses the wherewithal to boost capital spending at the same time the global economy shows signs of firming.
China curbs lender-trust cooperation in fight against shadow banking
China’s banking regulator on Friday banned lenders from using trust firms to skirt regulations and cover up risk in Beijing’s latest effort to crack down on shadow banking. In a statement on its website, China’s Banking Regulatory Commission (CBRC) said commercial banks must not divert funds into real estate, local government financing vehicles or the stock market through partnership with trust firms, or sign any under-the-table deals with them to skirt rules. China’s trust industry has been a key part of the country’s massive shadow banking business, which helps channel deposits into risky investments via products often designed to dodge capital or investment regulations. At the end of June, assets managed by China’s trust industry totalled 23.1 trillion yuan ($3.51 trillion), nearly five times as big as five years ago. CBRC on Friday pointed out that there were “hidden dangers” lurking in the rapid growth of business between commercial banks and trust firms and urged trust companies not to grow “blindly”. The regulator also urged banks to fully assess their risk exposure to their investment via trust firms, and set aside adequate provisions for potential losses.