Every week at the Current we round up the worlds biggest business stories. This week; the Bank of England holds rates, Australia’s housing boom, South Korea beats expectations while Canada slumps, house prices in Canada skyrocket, Pinterest cashes in, the IMF warns the Fed and the US saves soccer.
British interest rates hold
The Bank of England has held interest rates at 0.5% in a widely predicted decision that caused little market movement. It was over 6 years ago that the record low rate was introduced and results have been debatable.The Bank’s £375bn bond-buying program also remained unchanged. Until there are stronger signs of growth in Britain’s economy, don’t expect rates – and the strength of the pound – to rise sharply.
Australia’s housing boom
The Australian dollar is one of the world’s most popular reserve currencies. The OECD (Organisation for Economic Cooperation and Development) has warned Australia to be cautious when cutting interest rates. Further cuts could weaken the AUD and add fuel to what is already a red-hot housing market. The OECD has cautioned that the housing market may face a “sharp correction” in the near future.
South Korea surpasses expectations
South Korea’s economy has defied the experts’ predictions by growing at a rate of 2.5% in the first quarter of 2015. Many had predicted growth of just 2.4% in Asia’s 4th largest economy.
Canada’s GDP has been hit hard by low oil prices and is predicted to fall to a paltry 1.5% according to the OECD. Last fall the OECD had predicted Canada’s growth would be as high as 2.6% before ratcheting down expectations to 2.2% and, now, to just 1.5%. The loonie, like oil prices, could remain low for the foreseeable future.
House prices rise
Despite Canada’s lower than predicted GDP results house prices continue to soar across the country. In Greater Vancouver the composite price for all residential properties jumped 9.4% in May to $684,400 while prices in the GTA jumped an astonishing 11% to $649,599. Since last year the price of a detached house in Toronto has rocketed 18% to $1,115,120 while the same house would cost $1,104,900 in Vancouver, a 14% jump.
Pinterest cashes in
Fans of social media site Pinterest will soon be able to purchase items directly from the website thanks to a Canadian company. Shopify, based in Canada, is the e-commerce company responsible for developing ‘buyable pins’. Keep an eye out as the company rolls out its unique money making scheme in the coming weeks.
IMF warns the Fed
The IMF (International Monetary Fund) is cautioning the Federal Reserve to delay raising short-term interest rates until the first half of 2016. Although the US has made a remarkable economic recovery – particularly compared to Europe – raising interest rates could put too much of a damper on recent growth. The IMF has said that some sectors of the US economy remain vulnerable. Manufacturing and exporters have been hurt of late due to the relative strength of the USD, and raising rates could boost the dollar further and harm these industries.
US saves soccer
The United States has become an unlikely hero of the soccer world. Seven corrupt senior members of FIFA were arrested in a raid in Zurich. They, along with 5 business executives and several others, are accused by the US state department of bribery and other offenses dating back 25 years. Prompted by the US investigation Swiss authorities have begun investigating the contentious awarding of the 2018 and 2022 world cups to Russia and Qatar. Fans of the beautiful game have long cried foul and, although prospects are slim, the contentious cups could yet be relocated.
Tom Hays, formerly of Citigroup and UBS, has gone on trial over the LIBOR scandal. Hays is accused of masterminding the scheme to manipulate the benchmark interest rate used to lend money between institutions. Few have been convicted but the scandal and prosecution should help clean up the big banking culture of profits before people.
Aer Lingus to be sold
IAG, which owns British Airways, has taken a large step towards acquiring Ireland’s National Airline, Aer Lingus. The Irish government has given the greenlight but IAG must still win over approval from Ryanair. The budget airline retains a 30% stake in Aer Lingus and has seen its own profits explode by 66% over the last 12 months.
The smartphone market could slow this year to 11.3%, down from 27.6% last year. The major breaking factor lies in the Chinese market which has neared saturation over the last 12 months. Demand in the world’s 2nd largest economy could slow to just 2.5% growth as the growing middle class has already purchased smartphones.
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