Chicken and Chips ...

No Chicken in Nando's, No Chips at Nissan, No  shakes at MacDonald's. Empty shelves are increasing. The head of the  Co-Op said food shortages were the worst he has ever known. Evidently  not a war baby, CEO Steve Murrells announced the group was reducing  some ranges. The ability to get food into stores was hit by post Brexit  migration rules and Covid challenges.

This week, once again, the car industry reported  production difficulties. Output fell by 37% last month. It was the worst  July performance since 1956. Manufactures "grappled" with the global  shortage of semi conductors.

Taper Tantrum 

Markets awaited with interest the update from Fed  Chair Jerome Powell this week, at the Jackson Hole virtual symposium.  The central banker hinted the Fed could start scaling back stimulus this  year. The inflation surge is expected to be temporary. There was no  prospect of a rate rise anytime soon but some tapering of asset  purchases could begin before the end of the year.

From hospitality to healthcare,  companies are complaining they can't get staff. Recruitment difficulties  are increasing, pay rates are rising. More perks and promises are on  offer to secure sign ups. The pingdemic isn't helping.

JKA

Central Bankers  came under increased pressure this week as inflation levels continue to  rise. Jerome Powell, Chair of the Federal Reserve admits to being  "uncomfortable" about the level of price increases. 

“This  is a shock going through the system associated with reopening of the  economy, and it has driven inflation well above 2%. We’re not  comfortable with that,” Mr. Powell told the Senate Banking Committee on  Thursday. CPI Inflation hit 5.4% in June.

In the U.K. inflation CPI basis increased to  2.5% in June, the Bank expects levels to rise to 3% before returning  towards the 2% target later this year. Not all members of the MPC are in  agreement.

Recovery on Track Despite Market Wobbles ...

Finals weekend at Wimbledon  and Wembley, a great couple of sporting days ahead. Is it really coming  home on Sunday! Let's hope so. We wish the England team well, as they  put an end to all those years of hurt!

Don't Worry About Rising Debt ...

Phil Aldrick reports of a  mugging in Downing Street this week. The Chancellor received help from  Treasury and the OBR to convince the Prime Minister it was time to dig  up the magic money tree in the rose garden.

Inflation Alarmism Could Kill Off Recovery

The Governor of the Bank of England Andrew Bailey warned this week of "Inflation Alarmism". Prices are on the rise. House prices increased by over 11%. Haribo deliveries are failing, for a lack of lorry drivers. Construction  costs are rising at the "drop of a hat". Quoted prices are good for  just 24 hours. A shortage of materials is compounding pricing dilemmas  in the building industry.

Rising Oil Prices Could Kill Off Recovery 

In our "What next for oil  prices", published in May we expected oil prices Bent Crude basis to  average $66 dollars in the third quarter of the year. Prices  closed last week at $76 dollars. The OPEC delay to any decision on  output increases didn't help. The US administration is voicing concerns  as the market tests the $75 dollar level.  OPEC concerns rise as fears of "Demand Destruction" loom as prices rise.

Borrowing Falls ...

Bank Holds Rates ...

The Dow closed down, the  dollar moved up. Ten year bond yields moved higher by just three basis  points. Not much of a taper tantrum, more of a milk shake than an  earthquake. The Fed announced the policy decision mid week, effectively  to do nothing.

JKA

Official  data from the ONS this week revealed "the economy is hotting up". UK GDP  is estimated to have grown by 2.3% in April, as government restrictions  continued to ease. Compared to prior  year, the economy grew by 28%. Construction activity was up by 80%.  Manufacturing output increased by 40%. Service sector activity increased  by 30%. The increase in the service sector was driven by a surge in  retail expansion with strong growth in education, accommodation and  food. Construction activity slowed  slightly in the month. Developments in the service sector were faster  than expected. The service sector expanded by 3.4%

Great  headlines from the Times this week. "The economy is growing at an eye  popping rate". "Construction growth is going through the roof".  "Manufacturing leads strong performance", "Red hot economy lifts markets, ".  

This week, Joe Biden announced his £6 trillion dollar budget.  The President is committed to an expansion of support for  infrastructure, education and the social safety net.

JKA