Every Friday the Current rounds up the biggest business stories of the week. This week; inflation is in decline in Europe, Canada and the US; Ghana receives an IMF bailout; oil prices leave speculators scratching their heads; Greece’s woes continue but German economic output holds strong; Japan’s stock market hits record highs; and cyber thieves steal billions.
Inflation in Canada is at a 14 month low and we may even be heading to a period of deflation . Overall inflation sits at 1% in Canada due to tumbling gas prices, but food prices rose 4.6%. While low inflation usually translates into lower goods prices, the drop isn’t uniform across different industries and consumers are being hit hard. The loonie may be buoyed however as low inflation generally also strengthens the value of a currency.
The Royal Bank of Scotland (RBS) reported a £3.5bn loss in 2014 down from a £9 billion loss the year before. RBS was bailed out and taken over during the 2007 credit crunch and is slowly but surely turning its fortune around.
Ghana’s struggling economy has been given a boost thanks to a $1 billion (USD) loan from the IMF (International Monetary Fund). Economic growth in the West African country should rise to between 5-6%.
Low gas prices have contributed to the first annual drop in inflation the United States has seen in 5 years. According to the Department of Labor the Consumer Price Index (used to gauge inflation) dropped 1% between January 2014 and January 2015. In the last quarter of 2014 the US economy fell short of expectations, gorwing a rate of 2.2% instead of the 2.6% many predicted. Despite this, the Federal Reserve still expects inflation to rise in the coming months. On Friday Feburary 27 the S&P 500 rose to 5.5% for its best monthly gain in almost 5 years.
Inflation stands at 0.3% in Britain with the Bank of England predicting that it could experience deflation in the coming year. Low inflation and deflation mean that the price of consumer goods will remain low and the value of the pound could rise.
The Japanese economy finally came out of recession thanks to a rise of 0.6% in the last quarter of 2014. In response the Nikkei 225 (a stock market index) hit a 15 year high. Nevertheless, the Bank of Japan intends to maintain its quantitative easing policy in the hopes of further boosting growth.
In mid January, Brent Crude prices nearly dropped to a 6 year low but have since rebounded almost 35% to reach $60 a barrel. Oil prices remain volatile and big swings may be the new norm. It is becoming more and more difficult to predict the future price of oil. Prices probably won’t break the $100 mark any time soon but could continue to fall and surge unpredictably.
Kaspersky, a Russian cyber security company, revealed that a group of hackers stole up to $1 billion from banks in 30 different countries. Cyber-security is a growing priority for the worlds financial institutions but cyber criminals continue to adapt and evolve.
The euro zone’s GDP rose by 0.3% in the final quarter of 2014 while Germany’s GDP rose to 0.7% – despite pessimistic predictions suggesting that the European powerhouse could see its economy shrink. France saw growth of only 0.1%, Italy saw no growth at 0% and Greece’s woes continued with negative 0.2% growth. Despite difficult negotiations and widespread unpopularity, the German parliament voted to extend financial aid to Greece. Poor economic performance will continue to hurt the value of the euro.
So there you have it, the biggest story this week is inflation – or a lack thereof. Canada, Britain and the UK have all experienced low or negative inflation. Low inflation usually leads to lower prices for consumer goods but, as Canadians know, the price of food actually increased. Lower inflation could help bolster the loonie, the pound and the US dollar while the euro may continue to struggle.
Remember: no one is right all the time. Any speculation regarding future currency exchange rates in this article should not be taken as investment advice.
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