Every week we bring you the world’s biggest currency, travel, and business news. This week: more visitors to the UK while unemployment falls, IMF and China, Canadian inflation, NAFTA, and CIBC.
More UK visitors
The number of UK visitors rose 7% year on year in June thanks to the falling value of the GBP. Visitors spent cumulatively GBP 2.2 billion, 2% more than a year ago. Despite the low pound Brits still set a new all time high for foreign travel themselves, 7.2 million, up about 4%. The lower pound however meant that they spent about 15% more.
UK unemployment down
Unemployment in the UK fell to just 4.4% marking the lowest level since 1975. Weekly earnings also rose by 2.1%, up from 2% last month. Inflation however, stands at 2.6% meaning that real wages actually fell by 0.5%. While the low unemployment figure is welcome, critics argue that wage growth is still too low. Relatively high inflation and low unemployment could encourage the Bank of England to raise rates, which would strengthen the GBP.
IMF’s Red China Blues
The IMF has warned that China’s credit bubble could burst with catastrophic consequences. China’s level of growth has slowed from a blistering pace of about 10% per year to closer to 6.7% – but it would be even lower (by as much as 2%) if not for the credit bubble. The IMF has called for China to take drastic action in order to slowly deflate the bubble rather than let it burst. A major economic downturn in China could send the global economy to a screeching halt. The IMF’s research indicates that out of the last 43 credit booms with similarities to China only 5 were not followed by major economic downturns.
Canada’s inflation rises
Canada’s inflation rate has risen to 1.2% in July, up from a two-year low of 1% in June but still well below the 2% that most central banks target. Natural gas prices were up 9.7% and gasoline was also up by 4.6% year on year. Electricity fell by over 9% following another 5% drop the previous month thanks to Ontario legislation aimed at reducing costs. Economists expect another rate hike in June.
President Trump’s promise to renegotiate NAFTA has come to fruition as representatives from Canada, Mexico, and the US all met on Wednesday to begin what will no doubt be a lengthy and controversial process. Despite much controversy when it was introduced a majority of Canadians both support NAFTA and believe that it has helped our economy. In the US, however, skepticism is much greater, not least of all because of President Trump’s own rhetoric. If Canada can get a continuation of the current deal it will likely be viewed as a success – and most early signs indicate that it will go relatively smoothly. Mexico, which has been the target of Trump’s ire, may fair much worse in the negotiations.
CIBC takes over PC Financial
More than 2 million PC financial clients will be heading to CIBC who have acquired and rebranded the former as “Simplii”. Loblaws will retain its credit card points system, but daily banking will now be under CIBC’s control. CIBC was responsible for running much of the system behind PC financial, which along with ING, was one of the largest online alternative banking options available in Canada.
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