Week ended 20 December 2008 – A rise in consumer confidence returns

Posted by admin on 21 December, 2008 under Weekly business news summary | Be the First to Comment

Official figures from the Office for National Statistics reported this week that UK retail sales rose last month with total sales volume rising by 0.3% in November 2008 and are up by 1.5% from the same time last year.

Sales had been predicted to fall in November and in the same week we see shoppers out in force, so it looks like Christmas might not be as bad as predicted for retailers. However, shops have been discounting their prices heavily and staying open late to entice shoppers in. A survey has also shown that UK consumer confidence has improved for two months running with the reduced VAT rate, lower interest rates and lower petrol prices helping.

Low interest rates in the US

This week also saw the US cut interest rates to below 1% this week and now stand at 0.25%. This was a surprise move, as the rate was expected to be dropped to 0.5%. However, the US Federal Reserve is so concerned about the state of the US economy that it felt the step was necessary. We wait to see what the UK’s Bank of England will do next month with UK interest rates.

Major fraud hits banks and investors at a bad time

HSBC has emerged as one of the worst hit by alleged $50 billion (£33.5 billion) fraud by Bernard Madoffs at a time when banks and investors are already struggling to cope with the credit crunch. It amazes me that financial systems and controls can allow this sort on situation to arise in the first place. It just shows that world governments need to review their financial controls with what has happened in the banking sector and their abuse of sub-prime loans and with this recent alleged fraud.

Credit to remain tight until 2010

John Varley, Barclays Bank head, has told the BBC that although credit remains available to households and businesses, the amount is shrinking. He has also said that both consumers and businesses will continue to find it difficult to obtain credit for until up to 2010. During this period the amount of debt in the economy will reduce and will be hard on a number of individuals, but will be a necessary process to go through in order to get back to a healthy economy again.

Help for the US car-makers approved

President Bush has approved a US government loan of $17.4 billion (£11.7 billion) to help US car manufacturers General Motors and Chrysler in order to help them survive. However, Barack Obama has urged these carmakers to reform their ways and become more efficient and to “not squander this chance to reform”. However, it is very likely that these firms will be knocking on the Whitehouse door in early 2009, as this is a loan to see them through and to help them avoid immediate collapse.

End of the week saw:
Stock exchanges:
FTSE 100: 4,287
DOW: 8,579
S&P: 887.88
Nikkei: 8,589

Currencies
UK Sterling £ to US Dollar $ 1.49195
UK Sterling £ to Euro € 1.07165
UK Sterling £ to Aus $ 2.18563
US Dollar $ to Euro € 0.718290

Commodities
Nymex Crude oil – $42.94
Gold – $838.70