As the holiday season starts, Britons heading abroad are being hit by the poorest exchange rates for ten months. Last week, the pound briefly dipped below $1.30 for the first time since last September, and an 8-month low against the euro, due to a surprise fall in retail sales in June. The Office for National Statistics (ONS) announced that sales fell 0.5% last month, against a forecast of a 0.2% rise. Shoppers kept away from the high street despite food and drink sales being boosted by the hot weather and the World Cup. Retail sales volumes had grown 1.3% in April and 1.4% in May. The Bank of England had been expected to raise interest rates in August but following the fall, the unchanged inflation figure of 2.4% for June, and wage growth slowing to 2.7%, economists were divided on whether it would do.
The rate fall was also due to the strengthening dollar. US Federal Reserve chair, Jerome Powell, was upbeat in his view of the US economy. This, and solid earnings figures, helped boost US stocks. However, the continuing trade war concerns have kept markets in check and there was no movement over the week on either side of the Atlantic.
Government borrowing for the first three months of this year has fallen to its lowest level since before the financial crisis, and considerably below the Office for Budget Responsibility’s forecast for 2018/19. Public sector net borrowing was £16.8bn between April and June, some £5.4bn lower than the same period last year, and the lowest since 2007. This fall could give Philip Hammond, Chancellor of the Exchequer, room to ease austerity measures in the November budget as he tries to find extra funding for the NHS.
The International Monetary Fund (IMF) said the global economy is on course to grow 3.9% this year and next. This would represent the best back-to-back years of growth since 2010/11 when the world rebounded from the financial crisis. The IMF, however, also noted that growth has become less evenly spread among countries compared to last year.
