Money Round Up – Mark Carney, UK GDP, US
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Luke and Claudia present the latest news from our investment team’s economic update. Subjects this week include Mark Carney, UK GDP, and the US economy.
Hello and welcome to this week’s money round up where we start this week the Governor of the bank of England Mark Carney.
On Tuesday, Canadian born Mark Carney met with the Monetary Policy Committee to discuss the length of his term as Governor of the Bank of England. Carney was originally appointed for 5 years back in 2013, but his contract has been extended to assist with an “orderly” exit from the European Union.
The announcement that Carney agreed to stay at the helm through to January 2020 came as a great relief to the Chancellor Phillip Hammond who was delighted to offer reassuring news to Parliament, and to the markets. The FTSE 100 rose 0.66% after the announcement showing that the market too thought this was a good move.
However, Carney is not without his critics. Some blame him for being too political over Brexit. They say he supports staying in the EU and uses his position to scaremonger. Critics also say that Carney panicked after the Brexit vote cutting interest rates in August 2016 by a quarter of one percent to 0.25%, the lowest level in history.
Carney, during his tenure, has overseen some important milestones. For example, the results of the 2017 Bank of England stress tests helped demonstrate that the UK banks are now very resilient. In fact, 7 UK banks, covering 80% of the banking system’s assets, are now expected to be able to cope and continue lending in a scenario more volatile than the 2008 financial crisis
Aside from the plusses and minuses around Carney, Chancellor Philip Hammond will not now be distracted by having to search for a new Governor. The extension of Carney’s contract to 2020 will allow a smooth hand over to his eventual successor during a period where a lot of today’s unknowns around Brexit will have been dealt with.
Another positive UK story, is GDP figures for the second quarter of this year, as the UK economy expanded by 0.6%, which is higher than initially forecast. Further data released by the Office for National Statistics saw UK wage growth reaching its joint-highest pace since 2008, as Regular take-home pay growth is up from 2.7% in April to 2.9% in July.
Likewise, workers in the US received similar good news as average hourly earnings expanded by 2.9% in August, their fastest pace since 2009.
Initial survey indicators suggest that wage growth could remain at 3% for the rest of the year. If the pool of skilled workers continues to shrink, wage growth may even accelerate further. After years of stimulus and initiatives from governments and central banks we are continuing to emerge from the long shadows cast by the 2008 global financial crisis. The lack of wage growth in developed countries is not such a puzzle, it seems it is operating with a long lag. Wages are now beginning to outpace inflation – a welcome sign for all.
That’s all for this week’s Money Round up, make sure to read our blog at blog.tpinvestor.com and subscribe to the True Potential investor YouTube channel.