“British households spent around £900 more on average than they received in income during 2017, pushing their finances into deficit for the first time since the credit boom of the 1980s.
“The Office for National Statistics said the shortfall amounted to nearly £25bn – equal to almost a quarter of the NHS budget – and the overspend was mostly paid for with borrowed money, though households also ran down savings.
“The figures pose a challenge to the government, which was warned last year that a dramatic rise in debt-fuelled spending since 2016 has taken place against the backdrop of the Brexit vote, which triggered a rise in inflation at a time of weak wage-growth.
“Analysts warned that a squeeze on household incomes from benefit cuts, lacklustre wages and high inflation would continue to force poorer households to borrow more to pay basic bills.”
“Anti-poverty charities warned that millions of low income households were the worst affected.
“StepChange, which provides advice for indebted households, said the poorest were in constant need of credit to keep their heads above water.
“The charity’s chief executive, Phil Andrew, criticised the ONS for saying that households were living beyond their means, which he said implied they could cut back if they wanted to.
““It’s really unfortunate that this very useful data is so heavily sprinkled with the phrase that households are ‘living beyond their means’. The reality is that too many households, here in Britain, in 2018, simply cannot make ends meet, however hard they try.””
So the perfect time for an interest rate rise then:
“The Bank of England looks set to pass a post-financial crisis milestone next week by finally raising interest rates above their emergency levels set more than nine years ago.”
Tapped out consumers and conceivably a no-deal Brexit. What could possibly go wrong?
“We need to talk about UK banks…
“Berenberg is: “Concerned that borrowers that have accessed low-cost credit during recent years will be unable afford repayments as these fall due. Recent tightening of lending terms may also make refinancing more difficult.”
“…a disorderly no-deal Brexit is no one’s central expectation. But the risk of it has just risen significantly. And if that starts to appear the likely outcome, UK banks will be uninvestable.”
“This is definitely new for many [Turkish] companies — to deal with high inflation and the fluctuating currency,” said Mr Saydam. “It’s a big challenge for all of us.” That challenge deepened this week as the lira plunged by as much as 4.2 per cent after the central bank shocked markets by keeping interest rates on hold.”
“Iran’s President Hassan Rouhani has replaced the governor of the central bank as the national currency, the Iranian rial, continues to decline.”
“A new government under Pakistan’s incoming leader Imran Khan will need to move quickly to tackle a brewing economic crisis. The former cricket star’s party claimed victory in Wednesday’s election after preliminary results showed it had the most votes. Khan said in a televised address he’ll focus on improving the lives of the poor and fighting corruption.”
“Saudi Arabia is pushing Aramco to raise tens of billions of dollars in debt now that the state oil giant’s initial public offering has stalled, as the kingdom pursues other ways to fund an economic transformation.”
“Global financial markets are growing concerned about China’s debt excesses… it is business borrowing, particularly borrowing by the country’s massive state-owned enterprises, that has upset the country’s financial balance. Debt from SOEs has soared more than 20 percent a year, on average, for the last ten year.”
“Chinese corporate debt swelled on infrastructure and other projects funded by Beijing’s 4 trillion yuan ($589 billion at current rates) stimulus package in the aftermath of the 2008 global financial crisis. State-run enterprises account for about 80% of the total debt owed by Chinese companies.”
“Squeezed at home by razor-thin margins and negative interest rates, both major and regional [Japanese] banks have been on a spree abroad. Banks have more than doubled borrowing and lending in dollars since 2007. Dollar-denominated assets of Japanese banks topped $3.5trn at the end of 2016, according to the Bank for International Settlements (BIS) in Basel. That leaves them vulnerable to currency swings and external shocks, it warns.”
“The decline in [US] house construction was reported across many regions. “Every region posted a decline so this wasn’t about a regional weather report,” says David Rosenberg of Gluskin Sheff… The constraints encountered by developers coincide with a squeeze on demand… Price rises have been “easily outpacing wage gains”, says Katia Dmitrieva on Bloomberg… Half of the US housing markets in the country are now above their 2006 peaks, according to The Wall Street Journal.”
“In June, the Congressional Budget Office estimated federal debt held by the public will rise from 78 percent of GDP at the end of this year to 96 percent in 2028. That would mark the highest percentage since 1946. The report warned such high and rising debt due to higher spending and lower revenues would have “serious negative consequences for the budget and the nation.”
“”As debt gets higher, it becomes harder and harder to stimulate the economy to generate growth,” said Sonja Gibbs, senior director of the Capital Markets and Emerging Markets Policy Department of the Institute of International Finance, to CNBC via telephone.”
“It’s the biggest ever one-day drop in a company’s market value, falling from a record high of $619bn on Wednesday to just $501bn in early trading on Thursday.”