UK and US Retail Sales Fall, Fed Raises Interest Rates, UK Pay Growth Weakens, more…

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Evidence of an economic downturn has continued this week. As declining US retail sales and falling inflation were being reported, news broke of House of Representatives Majority Whip Steve Scalise having been shot during baseball practice. Neither data points were therefore covered extensively. The Federal Reserve’s confirmation of a third rake hike in six months and detailed plans to ‘normalise’ their balance sheet also garnered scant coverage outside of the financial broadcasters.

It is a similar story in the UK. Since Wednesday news outlets have been running 24 hour coverage of the Grenfell Tower block fire in West London. As worse than expected retail sales were being reported on Thursday, again mainstream media sources such as Sky and the BBC were not reporting on it.

Coincidence or not, these two incidents have provided enough of a distraction for dreadful economic data to pass by largely unnoticed.

Meanwhile, the Bank of England now appears to be bearing down on an interest rate hike in the near future, to follow on from the Fed’s programme of ‘normalising’ rates. The unchanged rate of 0.25% for June was approved by only 4 members of the committee, with 3 supporting an immediate increase in rates. This level of dissension is not a surprise, despite the likes of Bloomberg trying to sell it as such. What it proves is how the perceived political ‘chaos’ in Westminster following last week’s hung parliament is not a primary factor when it comes to the central bank’s objective to begin raising interest rates. Chaos or not, the globalist mandate is clear on the steady withdrawal of support for markets and consumers alike. The ‘normalisation’ narrative began circulating two months ago, in particular by Bank for International Settlements General Manager Jaime Caruana. Political upheaval is a distraction from the ultimate aims of the financial elites.

Note once again how The Independent is attributing negative economic data in the UK as a result of the Brexit vote. This has been their narrative for the past couple of months and rather conveniently overlooks the fact that the downturn we are seeing is global and not restricted to British shores. It is the same situation in the US with several outlets reporting rising consumer debt as a symptom of ‘Trump’s America’.

Donald Trump and Brexit are ultimately scapegoats that are allowing the central banks a free pass to begin increasing rates and cutting back on monetary stimulus. When both begin to take hold and the economy degenerates as a result, eyes will turn to Trump and Brexit long before they engage the real culprits.


Bloomberg: BOE Policy Split Deepens as Three Officials Seek Rate Hike

  • The split among Bank of England policy makers widened this month as two officials joined Kristin Forbes in her call for a rate increase, warning that inflation could rise more than previously thought.
  • In the biggest division on interest rates in six years, the Monetary Policy Committee voted by five members to three to maintain the key interest rate at a record-low 0.25 percent. Michael Saunders and Ian McCafferty broke ranks to demand an immediate hike to 0.5 percent.

 


Brexit: UK retail sales fall more than expected in May as inflation bites

  • Retail sale volumes fell 1.2 per cent in May, worse than the 0.8 per cent decline City economists had expected, according to the Office for National Statistics.
  • This followed a 2.5 per cent jump in the index in April, mainly owing to the timing of Easter and the month’s unusually warm weather.
  • The annual rate of growth in May slipped to 0.9 per cent, the weakest since April 2013, and well below the City consensus expectation of a 1.7 per cent expansion.

CNBC: Fed hikes interest rates despite declining inflation, sets plan for balance sheet reduction

  • In addition, the Fed provided more detail on how it will unwind its $4.5 trillion balance sheet, or portfolio of bonds that includes Treasurys, mortgage-backed securities and government agency debt.
  • “The committee currently expects to begin implementing a balance sheet normalization process this year, provided the economy evolves broadly as anticipated,” the post-meeting statement said.
  • The roll-off cap level will start at $6 billion a month for the level of principal payment proceeds from Treasurys it will let run off without reinvesting. The remainder will be reinvested.
  • The Fed will increase that cap level at a pace of $6 billion each quarter over 12 months until the cap reaches $30 billion a month.
  • For agency and mortgage debt, the cap will be $4 billion a month initially, with quarterly increases of $4 billion until the level reaches $20 billion a month.
  • Once both targets are met, the total runoff per month will be $50 billion. Several Fed officials have said publicly they expect the runoff program to continue until the balance sheet declines to about $2 trillion to $2.5 trillion.

CNBC: Fed rate hike this week to hit millions of borrowers

  • The quarter-point interest rate increase expected this week will impact millions of borrowers, many of whom will find it difficult to make monthly payments on credit card and other types of debt that’s about to become more expensive.
  • While it may not sound like much on paper, the Federal Reserve‘s anticipated move Wednesday to hike its benchmark interest rate target up a quarter point will have ramifications.
  • Financial information services firm TransUnion found that when the Fed made a similar move back in December 2016, some 8.6 million consumers could not absorb the hit. Though the move cost the average debt-holder just $18 a month, it “caused a financial challenge to millions of consumers” in the three months after it hit.

Market Watch: Inflation falls again in May as CPI recedes from recent high-water mark

  • The cost of goods and services for American consumers fell in May for the second time in three months as inflation continued to recede from a recent high-water mark.
  • The consumer price index, or cost of living, fell by a seasonally adjusted 0.1% last month, the government said Wednesday.. A big drop in gasoline prices played a big part.
  • More important, the rate of inflation over the past 12 months slowed to 1.9% in May from a five-year high of 2.7% just four months ago. Annual inflation is now running a tick below the Federal Reserve’s goal of 2%.

Market Watch: U.S. retail sales in May are weakest in 16 months

  • U.S. retailers in May reported the biggest decline in sales in 16 months, largely owing to lower gasoline prices and fewer Americans buying new cars and trucks.
  • Sales at retailers nationwide sank 0.3% last month, the biggest drop since January 2016, the government reported Wednesday. The May sales report was generally weak across the board.

Independent: UK pay growth rate misses expectations as worker real wages turn negative

  • Average wages grew by just 2.1 per cent in the three months to April, well below the 2.7 per cent rate of inflation in that month, according to the Office for National Statistics.
  • That means after adjusting for inflation wages fell by 0.6 per cent, representing the biggest real wages decline since August 2014.
  • The figures confirm a return of the squeeze on households’ living standards thanks to the post-Brexit vote slump in sterling and a wariness of employers about increasing pay in a climate of heightened uncertainty for firms.

Reuters: UK consumer spending falls for first time in nearly 4 years: Visa

  • British consumers cut their spending for the first time in nearly four years last month, figures from credit card firm Visa showed, as households turned more cautious even before last week’s shock election result.
  • Consumer spending in May was 0.8 percent lower than in the same month in 2016 after adjusting for inflation, the first year-on-year fall since September 2013, Visa said on Monday.

Alt-Market: Peak Economic Delusion Signals Coming Crisis

  • It is unfortunate that so many people only track stocks when accounting for economic health. They have crippled themselves and their own observations, and actually condescend when confronted with counter-observations and data. They help globalists and international financiers by perpetuating false narratives; sometimes knowingly but often unconsciously. And, when the system does destabilize to the point that they actually realize it, they will blame all the wrong culprits for their pain and suffering.

The Great Recession Blog: Is the Central Bank’s Rigged Stock Market Ready to Crash on Schedule?

  • It is no secret, of course, that central banks were attempting to create a wealth effect by pumping up stocks through their own member banks — buying US bonds back from banks with free overnight interest with the proviso that banks use the income to buy stocks. As I wrote during last year’s stock market plunge, even central bankers finally admitted to that.
  • What is a secret is the fact that they have started buying stocks directly in order to pump up stock indexes. Federal Reserve chair, Janet Yellen, began talking openly about the possibility of doing that last year when it became obvious that the stock market was failing, and I speculated that the Fed actually started to do what they were talking about covertly through proxies so it wouldn’t show up on their own balance sheet…

IWB: The Real Economic Predicament Trump Inherited from Obama

  • President Trump has said on multiple occasions that he inherited an economic mess from his predecessor. The mainstream media fact checkers moved quickly to disprove him, pointing to the grossly misleading low unemployment rate as all the proof you need. While the current economy looks better on the surface compared to 2009, there are still many danger signs pointing to perhaps a second Great Recession coming much sooner than you think.
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