EQ Weekly Roundup 22-5-18

Fuel hikes threaten consumer spending 

The price of fuel has hit a three-and-a-half-year high as the price of oil continues to climb, putting more pressure on consumers. 

The average price of petrol has risen to 127.22p a litre and diesel to 129.96p a litre, following a rapid rise in oil price. 

Earlier this month, government figures indicated wages grew at an annual rate of 2.9% in the three months to March, whereas over the same period the inflation rate was 2.7%. 

As a result, for the first time in a year, real incomes grew, although they remain lower than they were before the financial crisis. However, rising fuel prices threaten to prevent inflation slowing. 

Alan Clarke, UK economist at Scotiabank, said that while filling the tank represents only around 3% of household expenditure on average, fuel price rises could still dent consumer confidence. 

‘The sentiment is important,’ he said. ‘You really notice [price rises] for things you buy frequently like petrol and food.’ 

He said by July, petrol and diesel prices were likely to be 14-15% higher than a year earlier. 

FTSE 100 surges to fresh second high 

On Monday this week, the FTSE 100surged to a fresh record high for the second time in less than a week. 

The index closed over 1% higher at 7,859.17, comfortably above its previous high of 7,787 on 17 May. 

An easing of trade tensions between the US and China cheered investors, analysts said. 

The dollar rose after the deal, boosting UK-listed miners, oil firms and banks which earn much of their money in dollars. 

The pound was down 0.3% against both the dollar and the euro, trading at $1.3431 and €1.1406 respectively. 

Retail firms were some of the biggest risers in the FTSE 100 on Monday.Marks and Spencer, Sainsbury and Next rose between 2 and 4%, putting them among the top ten biggest risers.  

Only eight firms (including BT, drugs firm Shire and consumer goods firm Reckitt Benckiser) on the index ended the day lower.

US and China trade war fears ease 

The US has pulled back from starting a trade war with China that could have sent shockwaves through the global economy. 

At the weekend the US agreed to put proposed tariffs on Chinese imports ‘on hold’ after Treasury Secretary Steven Mnuchin said negotiations with the Chinese had progressed. 

It means any moves by Washington and Beijing to impose tariffs on each other’s exports has been stalled. 

Mnuchin said that despite not getting China to reduce its overall trade surplus with America by a specified amount, US officials had thrashed out a number of commitments on a framework for reducing the deficit over time. 

These include large increases in purchases of farm products and a doubling of purchases of US energy products. 

Mnuchin said: ‘We are putting the trade war on hold, right now, we have agreed to put the tariffs on hold while we try to execute the framework.’ 

In a statement, the two sides said they had reached a consensus on taking effective measures to cut the US trade deficit in goods with China. The US is to send a team to China to thrash out the details. 

Mobile banking to ‘overtake online by 2019’ 

More consumers will use apps on their smartphone than a computer to do their banking by as early as next year, according to forecasts. 

Last year, 22 million people managed their current account on their phone according to banking industry analyst CACI. 

CACI has predicted that 35 million people – or 72% of the UK adult population – will bank via a phone app by 2023. 

By then, customers would typically visit a branch only twice a year, it said. 

CACI added that rural areas and smaller coastal towns would see the biggest increase in mobile users between now and 2023, owing in part to frustration over broadband access pushing customers towards mobile networks. 

‘With so much more functionality, mobile is rapidly becoming the digital channel of choice, and replacing traditional online banking for many customers,’ said report author Jamie Morawiec. 

‘Whilst the number of internet log-ons is decreasing, so are the numbers of users. In fact, CACI predicts that 2019 will be the year in which mobile banking overtakes internet banking in terms of users.’