We got a rude jolt last week on the possible direction of interest rates. The rate at which banks lend to themselves, known as the Libor rate, crested fresh highs partly on eurozone debt contagion fears. If it continues to rise that will put pressure on credit. Meaning more expensive deals, very possibly, for first time buyers. But it is "no longer unreasonable to think of Bank Rate remaining at 0.5% until 2014," says Ray Boulger of Charcol Mortgages. Good news if you're on a low standard variable rate.
InvestingLate summer and autumn market volatility lost serious money for many investors. However for dividend investors, things are looking up. Vodafone is a good example. It has just hiked its dividend by 7% to 3.05p a share. In fact, dividends from the UK's largest 200 companies are set to climb by 12% this year, according to Shore Capital stockbrokers. The power of dividend income is not to be underestimated, long term.
JobsNot good. The eurozone crisis is hitting growth and employment. Around 50'% of our trade is with the eurozone. Today the Chartered Institute of Personnel & Development (CIPD) published an index of U.K. employers' hiring intentions - which have weakened significantly. The gauge fell to minus 3 in the fourth quarter from minus 1 in the previous three months. "There is no immediate sign of U.K. labor-market conditions improving in the short or medium term," said CIPD public-policy adviser Gerwyn Davies. Even Australian back-packers are heading home: the number of Australians entering Britain for work has crashed 35% to 17,100 since 2007.
InflationWe'll know more tomorrow when the Office of National statistics publishes the numbers. It's thought that UK inflation may have been dented last month due to - at last - slipping food costs and retailer discounting. However this is coming on hard climbs, not helped by the VAT rise in January. But the medium term outlook is more hopeful with some analysts predicting inflation will see hard falls by March 2012. Factory gate inflation has also slightly slipped.
Growth/ConfidenceAgain, we'll know more tomorrow. It's likely the Bank of England will slash its UK growth forecast from 1.5% to 1% with next year's growth prediction sharply down. Part of the problem with UK growth is that there is so little money in the kitty to promote it. George Osborne is planning a £50bn building boom in an attempt to ignite the construction sector. But this is 'borrowing', in effect, from future planned works.
UK consumer confidence continues on its downward path, however the recession is not bad for all.Pub and restaurant groups saw collective like-for-like sales up 0.9% in October. "People may be reluctant to go out and buy more 'stuff', but they are still willing to go out to eat and drink," said Peter Martin of Peach Factory, which produces its sector Tracker report, in partnership with KPMG, UBS and the Coffer Group. "It's about the experience, especially if it's good quality and great value."