Our monthly economic review is intended to provide background to recent developments in investment markets as well as to give an indication of how some key issues could impact in the future.
Overview
STRONG SECOND QUARTER GROWTH
The latest gross domestic product (GDP) figures showed that the UK economy grew strongly in the second quarter, although more recent survey evidence does suggest the recovery is losing momentum.
COST PRESSURES TRANSITORY SAYS BOE
Despite raising its near-term inflation forecast,
the Bank of England (BoE) has again reiterated its expectation that any price pressures emerging this year are likely to prove short-lived.
MARKETS
Although many major indices dipped on the last day
of the month, they largely finished August in positive territory. In the US, the Dow Jones ended the month up 1.22% to close on 35,360.73 and the NASDAQ recorded a gain of 4.00%. On 31 August, US stocks slipped from record highs reached the day before, as investors grew more concerned about the surge in Delta variant cases. Prior to that, market confidence was supported by the Fed Chairman’s announcement that interest rates would not be raised immediately following the tapering of stimulus and would only be changed once inflation is under control and the US economy approaches full employment.
COVID DISTORTIONS SEND EARNINGS SOARING
Although official figures suggest average earnings are now rising at their highest rate since records began 20 years ago, survey data continues to tell a different story.
GOVERNMENT BORROWING LEVELS DOWN
The latest public sector finance statistics show borrowing continues to fall from last year’s mammoth levels, although the Institute for Fiscal Studies (IFS) believes the Chancellor still faces ‘some very difficult decisions.’