UK inflation falls

January 25, 2018

UK Inflation Falls

Data released last week showed consumer price inflation in the UK fell during December, falling to 3% from 3.1% in the month before. This has been the first fall in the headline rate since June 2017. Furthermore, core inflation, which removes the impact of fuel and food costs, fell to 2.5% from 2.7% in November. The reduction in inflation indicates that the impact of the fall in the pound following the Brexit vote has now flowed through into prices. In addition, the trade-weighted value of the pound is up around 5% since last August, which may begin to deliver minor deflationary forces over the next several months. The lower inflation figure is welcome news to workers who are now seeing the real erosion of earnings slow, with the expectation that these will turn positive in the second half of the year.


China Growth Accelerates

Official figures from China reported that the country’s economy grew by 6.9% in 2017, faster than the targeted rate of 6.5%. Statistics from the country have always been viewed with scepticism and there has previously been a suspicion that the authorities have been flattering figures, notably through a time of weak growth in 2016. However, there is now the possibility that, during a period of stronger growth, the authorities are underreporting to compensate. Additionally, stronger than expected growth has not come at the cost of increased borrowing. In fact, China’s total debt to GDP ratio fell during 2017 and targeting further reductions will continue to be a key priority for President Xi Jinping.


Apple to pay $38bn tax

Following in the wake of December’s US tax cut, Apple has announced that it will pay $38bn in tax as it repatriates overseas profits. The tax payment is expected to be the largest of its kind ever made. Furthermore, the company has also suggested that it will invest $30bn to expand its US operations, creating an estimated 20,000 new jobs and help make a $350bn direct contribution to the economy over the next five years. The impact of large companies such as Apple bringing back overseas cash hoards is yet to be seen; however, it is widely expected that dividends, share buybacks, investment and acquisitions will all increase over the coming year as companies have more cash to deploy.


Market Data


Index Open Close Change % Change
FTSE 100 7778 7730 -48 -0.62%
S&P 500 2786 2798 12 0.43%
Dax 13245 13434 189 1.43%
Cac 40 5517 5526 9 0.16%
Nikkei 225 23653 23816 163 0.69%
UK 10 Year Gilt Yield 1.34 1.34 0 0.00%