And in the other news…
While the world’s focus has understandably been on the eurozone brouhaha for the past week, a number of significant developments have happened in the rest of the world.
In the US, the Federal Reserve has left the target interest rate at 0.25%, suggesting that the economy is expanding moderately as global growth slows. Consumer sentiment appears to have improved along with spending, and Ben Bernanke has suggested that the economic backdrop “has continued to advance”, yet “financial strains still pose significant downside risks.” The FOMC statement stated explicitly that rates would remain exceptionally low until at least mid-2013. The markets echo this sentiment, with the first rate hike ‘priced in’ for Q1 2014.
On the other side of the Atlantic, the UK’s November retail sales figures have seen a fall of 0.4% from October, larger than the 0.3% drop forecast by economists. This comes alongside news that the unemployment rate in the UK has risen again to 2.64 million – the highest level since 1994. This equates to 8.3% at the end of October, a jump from the 7.9% in the previous quarter. Most worrying is that more than 40% on those unemployed have been that way for more than 6 months, and one in three for more than a year. Good news, though, is that inflation has fallen to 4.8% in November, down from 5% a month earlier.