Investment & Economic Market Commentary for October 2023
Introduction
Our Investment & Economic Market Commentary for October 2023 showed sluggish growth and high inflation have stubbornly persisted across much of the globe.
However, some major economies are performing better than others as they grapple with global economic headwinds. Emerging markets in Asia are bucking the prevailing trend by enjoying strong growth rates.
As always, let’s take a look at the details…
UK Market
The UK market shrank by 0.5% in July, according to the Office for National Statistics (ONS). This was worse than many analysts had predicted and was driven by factors including ongoing industrial action and poor weather.
However, there was some good news to be found elsewhere, as inflation fell from 6.8% in July to 6.7% in August. This was the third consecutive month in which inflation has come down.
Nevertheless, the Bank of England suggests there is no room for complacency. It warned prices will rise faster in the UK this year than in any other advanced economy.
August’s surprise fall in inflation influenced the Bank of England’s unexpected decision to keep interest rates on hold at 5.2% following 14 consecutive rate hikes.
Chancellor of the Exchequer |Jeremy Hunt has announced the Autumn budget will be given on the 22nd of November. Read here for the key March Budget points.
Property and Retail
According to Nationwide, property values in August 2023 were 5.3% lower than 12 months earlier. This was the most significant year-on-year decline since 2009 and was partly attributed to higher borrowing costs.
Read more here about the Nationwide Property index.
The property and retail commentary also showed the retail sector recently took a knock with the collapse of high-street retailer Wilko.
However, it has now been confirmed that Poundland owner Pepco Group will take on the leases at up to 71 Wilko stores. Wilko staff are being given priority when applying for jobs at these outlets.
Ukraine
Ukraine’s President Volodymyr Zelensky addressed the UN General Assembly in New York in September. He called on the world to unite behind his country in the face of the ongoing Russian invasion.
He also visited Canada during his latest round of international diplomacy, which comes at a time when discussions of “war fatigue” are growing in many nations that have, thus far, backed Ukraine, such as Poland.
In a reflection of solidarity, the US has agreed to a £265m military package with Ukraine. However, this came after a Congress disagreement about how much money it would spend.
Europe
The Investment & Economic Market Commentary for October 2023 saw the European Central Bank raise eurozone interest rates for the tenth time in a row from 3.75% to 4%.
The move, taken in response to continuing high inflation, takes interest rates to a record high.
Germany continues to struggle in the face of the weak global economy and inflationary pressures, as it slipped into a technical recession in the first quarter of 2023.
The German Bundesbank agrees that Germany’s reliance on China is partly behind its current problems and said this is one reason why its “business model is in danger”.
In France, supermarket chain Carrefour has taken the unusual step of naming and shaming products where packet contents are getting smaller while prices increase.
The company is putting stickers on the shelves of offending products, including Vienetta ice cream and Lipton Ice Tea.
They are warning customers of “shrinkflation” and inform them if the packaging is smaller or the contents are lighter.
Politics
September also saw an exciting development as the UK’s opposition leader, Sir Keir Starmer, met with French President Emmanuel Macron in Paris. The meeting, described as “very constructive and positive”, comes as Sir Keir’s Labour Party is riding high in the opinion polls at home.
US
Gross domestic product in the US grew by 2.1% in the second quarter of 2023. This was thanks in part to increased consumer spending, as well as an increase in state, local and federal government spending.
US Treasury Secretary Janet Yellen said: “We’re investing in America in ways we haven’t seen for decades.”
However, she acknowledged a “disconnect” between how the economy is performing and how the American public feels about how President Joe Biden has handled it.
A poll of registered voters by the Wall Street Journal revealed three-fifths of people disapprove of Biden’s handling of the economy.
Meanwhile, The Federal Reserve kept its key interest rate on hold at 5.25% to 5.5%, aiming to bring inflation under control.
Tech Sector
The ongoing drama surrounding X, formerly known as Twitter, continued in the tech sector.
The Investment & Economic Market Commentary for October 2023 discovered Elon Musk suggested that users may soon be charged monthly to use the platform. Meanwhile, Apple’s share valuation took a hit after reports that government workers in China were banned from using iPhones.
Far East
China’s economic recovery remained sluggish, reflected in a fourth consecutive monthly export fall. According to official figures far east, exports in August 2023 were 8.8%, down from the previous year, while imports fell by 7.3%.
Nevertheless, a poll of 78 economists by Bloomberg suggested that China will meet its economic growth target of 5% this year.
One significant drag in the Chinese economy has been the crisis-hit property market.
