UK Inflation Rises to 0.1% in July, yet EWU Falls 0.27%
Housing Numbers Lift US Economic Sentiment, UK Inflation Rises
Investors in the United Kingdom are not convinced yet
Economic indicators from the United Kingdom are all turning favorable. Labor market conditions are improving, wage growth is strong, and growth rates are all positive. To add to these factors, consumer prices also finally picked up steam. However, it looks like it will take more than just a positive inflation reading for investors in the United Kingdom to have positive sentiments towards the region’s growth.
European equity, as tracked by the iShares MSCI United Kingdom (EWU), was down 0.27% on August 18. The British equity stock BP (BP) was down 0.79% and GlaxoSmithKline (GSK) fell 0.50% at the close of trade on August 12. Vodafone (VOD) was up 0.27%. The Eurozone slowdown and the crash in oil prices have been restricting growth in this European economy. EWU is down 3.03% over the past month.
Inflation readings turn positive in the United Kingdom
The inflation rate in the United Kingdom picked up in July. The year-over-year inflation rate stood at 0.1% in July. Consumer prices in the United Kingdom had remained unchanged in June. The core inflation rate, which excludes prices of volatile items such as food and oil, came in strong at 1.2% in July compared to a 0.8% rise in the core CPI (consumer price index) in the previous month. The UK inflation rate is measured as the year-over-year percentage change in the consumer price index.
British banks waiting for a lift-off
Banks and financial services institutions stand to gain when interest rates rise. Their margins increase, as they’re able to charge a higher rate on their loans. The UK economy (EWU) is heavily service-based in terms of employment and output. The service sector accounts for 77% of the United Kingdom’s GVA (gross value added) and 83% of jobs in the country.
At an industry level, knowledge services account for 35% of the United Kingdom’s GVA and about 30% of total employment in the country. UK-based banks such as Barclays (BCS), Lloyds (LYG), Standard Chartered (SCBFF), Royal Bank of Scotland (RBS), and HSBC (HSBC) all stand to gain when the MPC (Monetary Policy Committee) decides to lift rates.
However, with economic indicators still needing to gather steam, a lift-off in the near future seems unlikely.
Let’s move on to take a look at Russian industrial production figures, which came out on August 17 for July.
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