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from MacroScope:

Key to UK interest rate hike, pay data, still a muddle

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Bank of England rate setters meeting this week should be in cordial agreement that Britain's economy is growing at a decent pace, and that price pressures look mostly in check at the moment.

But when it comes to gauging how quickly slack in the labour market is disappearing – a key question deciding when they should raise interest rates – the surveys look a lot less joined-up.

Two reports on Tuesday were far apart on the issue and underscore just how tough it is to get a grip on one a threat in any economy to future inflation – the pass-through effects from higher wage deals, which tend to feed upon each other.

One from the Recruitment and Employment Confederation and KPMG showed British firms upped salary offers for new permanent staff at the fastest rate in almost 17 years as the pool of suitable candidates dwindles rapidly.

from Hugo Dixon:

How to fix the UK’s housing mess

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The Achilles’ heel in Britain’s strong economic recovery is the mess in the housing market.

from Hugo Dixon:

Do national champions merit protection?

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The French always protect their national champions, while the British have a laissez-faire approach to foreign takeovers of their top companies, right? That is certainly the caricature. Witness how France deterred PepsiCo from bidding for Danone in 2005 on the grounds that yoghurt was a strategic industry, while the UK allowed U.S.-based Kraft to move ahead with its hostile bid for Cadbury, the confectioner, in 2010.

from Breakingviews:

Astra has small tactical advantage over Pfizer

By Christopher Hughes and Neil Unmack
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Time often benefits bidders rather than targets – that’s why U.S.-based food group Kraft left Cadbury flailing for months after making a takeover approach for its UK competitor. But the dynamics of Pfizer’s interest in rival pharmaceuticals group AstraZeneca are unusual. Pfizer has good reason to seek a quick, agreed deal.

from MacroScope:

Deconstructing UK job numbers

On the face of it, the good news for the British government keeps on coming. Britain’s economy grew surprisingly fast last year and inflation fell below the Bank of England’s target for the first time in over four years in January. The government this month even got a nod from the International Monetary Fund which only last year criticized its austerity programme.

The latest confidence boost came from jobless figures on Wednesday. Not only did the unemployment rate fall to a five-year low of 6.9 percent but pay growth caught up with  inflation for the first time in nearly four years. That provides Prime Minister David Cameron’s government with another lift ahead of the 2015 elections, after it has come  under fire from the Labour opposition for overseeing a fall in living standards.

from Photographers' Blog:

After the deluge

Somerset, Britain

By Toby Melville

After a wet and windy December, in January it rained. And rained. And rained. And it kept on raining. Pretty much for the whole month in southern parts of Britain.

February was no better, bringing heavy storms and high winds. The extreme weather claimed a handful of lives, and flooded thousands of homes.

from The Human Impact:

What to make of the Daily Mail campaign to spend foreign aid on UK flood victims?

Earlier this week, the right-wing British tabloid the Daily Mail launched a campaign for the government to divert cash  from the foreign aid budget to help victims of the catastrophic floods wreaking havoc in southern England and Wales.

Populist campaigns are nothing new for the Mail, and this one – which attracted more than 100,000 signatures in 48 hours – followed a similar call by populist right-winger Nigel Farage, whose small UK Independence Party (UKIP) wants Britain to quit the European Union and who enjoys thinking up fringe policies which irritate the ruling Conservatives.

from MacroScope:

Relief from UK services inflation seen fleeting

British inflation dipped to 2 percent  in December – its lowest since November 2009 and within the Bank of England’s target. Part of the move was driven by a fall in prices in Britain’s services sector – which constitutes more than three quarters of the country’s output.

Services inflation, which makes up around 47 percent of the consumer price index, eased to  2.4 percent in December – also its lowest since November 2009. Goods inflation – which is more sensitive to global markets than domestically generated services inflation – edged up to 1.7 percent last month. But it has also come down in recent months as a strengthening sterling pushed down import prices.

from Breakingviews:

Tesco’s mediocre plan may be as good as it gets

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Investors’ patience with Tesco, the UK’s largest supermarket operator, is justifiably wearing thin. Shares in the group rose in early trading on Dec. 4, as the company published third quarter sales figures. But that was probably because the numbers were no worse than expected. The stock price slipped back later in the day. Over the last two years Tesco shares have fallen 16 percent while the FTSE 100 has risen 17 percent.

from MacroScope:

The big questions on the UK housing market: what the analysts say

Although UK house prices will head steadily higher in the next two years, analysts polled by Reuters are divided over whether the Bank of England can restrain the market if it overheats. Here's what they said in the latest Reuters poll, taken this week: How confident are you in the BoE's ability to moderate the housing market if necessary?

PETER DIXON, COMMERZBANK: "Not very. A cynical interpretation would be that the government wants to see a decent rise in house prices over the next couple of years and would not be best pleased to see the BoE take the steam out of it. Nor is it clear that the BoE has the policy instruments to target the housing market without causing collateral damage elsewhere in the economy. Finally, it would call into question the thrust of policy if Help to Buy is giving to the housing market with one hand whilst the BoE is taking away with another."

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