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The FTSE 100 index at the close was down 9. According to Adrian Lowcock, an investment director at Architas, said: ‘Whilst we believe inflation looked to have peaked, any drop is likely to be gradual. With the global economy continuing to grow and indeed the UK only growing slightly slower there is a growing pressure on the Bank of England to raise interest rates soon. Something the Governor, Mark Carney, has indicated could happen.
Investors should ensure their portfolios are well protected against mild inflation and for a world of slightly higher interest rates. Typically, equities have been a good place to be in this environment. Is a March interest rate rise in the US now a given? As expected, US markets on Wall Street have begun trading on the back foot. The Dow Jones is 85 points down already, a slide of 0.
39 earlier today after the latest ONS report revealed inflation stuck at the same level as December. Consumer spending entered the New Year on a downbeat note, falling for the eighth time in the past nine months, as Britons continued to cut back on spending. Clothing, furniture and household goods bore the brunt of consumers’ caution yet again, while spending on the British high street in general fell sharply as the traditional January sales failed to bring shoppers out in numbers this year. It wasn’t all doom and gloom in January though. Britons tackled the January blues with evenings out and early holiday bookings, giving a boost to hotels, restaurants and bars. Spending on jewellery, beauty products and trips to hair salons recorded strong growth too, as consumers continued to prefer small treats over big tickets items. Household spending continued to decline in real terms at the start of 2018, according to the latest Visa UK Consumer Spending Index data.
The latest reduction was the quickest seen since last October, and indicates that spending has now fallen in eight of the past nine months. UK January sales dip for the first time since 2013. US Futures as investors remain nervous about wages, inflation, deficits, and yields and the relationship between yields and stock multiples. Yesterday’s recovery for US stocks already looks like it has faltered as pre-market trading put Dow Jones futures more than 100 points lower.
Dow futures hinted at a -0. P 500 futures trading suggested it would drop 0. Most importantly this means that the pay squeeze continues. Prices are rising faster than wages, and although we expect inflation to subside, real wages are unlikely to rise much before well into 2018 pic. Following last week’s falling share prices, today’s figures will further dampen spending ability, particularly for those who are invested in the stock market. Despite edging closer towards another rate hike as suggested in last week’s MPC meeting, today’s figures means a continuation of the record lows.
Even if the Bank of England is to raise interest rates, there are misconceptions as to when consumers will actually see the results, particularly as some banks are failing to pass this on. That said, rates would need to be hiked significantly to make a real noticeable difference to consumers. Wage growth is currently running at 2. We’ll be looking for an increase when the ONS reports next week. The Bank of England has said it expects pay growth to accelerate in 2018, and this is yet another reason higher interest rates are on the table.