There was good news and bad news for the world economy in July – as ever, commentators were divided on whether the glass was half full or half empty…

The price of gold has been steadily falling since its peak of $1,900 an ounce in August 2011. At the beginning of July it stood at less than $1,250 – which surely heralds a worldwide return of confidence. After all, gold is traditionally held as a hedge against economic uncertainty and downright financial Armageddon.

Then again, maybe we are facing trouble in the long term. By the middle of July, the G20 group of countries was warning that more and more global multinationals were paying no tax as they skipped nimbly from one financial jurisdiction to the next. Never mind the price of gold, surely someone, somewhere has to pay some tax…

For now, the major stock markets were fairly relaxed about that prospect and they at least decided that the glass was half full. Nearly all the major markets were up in July, with the UK and France leading the way with gains of 7%.


July was the month when Mark Carney took over as Governor of the Bank of England, and the FTSE-100 index certainly gave him a warm welcome, soaring by 6% in his first week in the job. It appears that the Bank of England under Carney will widen its remit from simply targeting inflation to also targeting ‘financial stability.’

July really was a good month for the UK economy and George Osborne must have wished he wasn’t going on holiday. The IMF raised the UK’s economic growth forecast from 0.7% to 1%: this optimism appeared to be confirmed later in the month as figures for the second quarter showed the economy growing by 0.6% in that period. Not a sensational figure in itself but one that was 1.4% up compared to the same period in 2012.

UK house prices also did well, with the June figures confirming that prices were rising at their fastest rate for three years, with first time buyers at a six year high. Many experts put this down to the Chancellor’s ‘help to buy’ scheme which – it has to be said – has not been entirely welcomed. Albert Edwards, head of global strategy at Societe Generale, said that the scheme is artificially inflating house prices and is “one of the most stupid economic policies for the past 30 years.”

For now, the markets seem prepared to give the Chancellor the benefit of the doubt, but Edwards is certainly not alone in his view.

Back in the ‘real’ economy where people make things; Bentley are investing £800m as they prepare to launch an SUV that will compete with the Range Rover. It is estimated that the project will create 1,000 jobs.

Barclays did rather spoil the party mood at the end of the month. They asked their shareholders if they happened to have £6bn lying around to fix the awkward hole in the balance sheet caused by the Bank mis-selling PPI, but the FTSE was not to be denied. Having started July at 6,215 it closed the month 406 points higher at 6,621.


July was the month of no – as opposed to low – confidence in Europe. The governments in Portugal and Italy both faced votes of no confidence, and in Spain corruption charges against Prime Minster Mariano Rajoy simply refuse to go away.

But, there was some good news in Spain with the unemployment rate falling to 26.3% from the previous high of 27.2% – to put that figure in to some sort of perspective, it would equate to around 8 million people being unemployed in the UK.

Otherwise, it was a relatively quiet month as Europe’s rulers geared up for their traditional escape to the coast. German unemployment remained stable at 5.4% with inflation edging up slightly to 1.9%. The French economy contracted marginally and the trade gap widened, but inflation remained below 1%.

The French and German stock markets followed the general trend, with the French index up a very healthy 7% to 3,993 and the German DAX index up 4% to finish the month at 8,276.


Such is the contrary nature of stock markets that good news can sometimes be bad news. So it was in the US at the start of July when good news on jobs led to the stock market falling. The reason? The markets assumed that strong job figures would lead to inflation and an interest rate rise. However, a few days later the Government promised to keep interest rates low until unemployment was at 2008 levels, and the stock market promptly bounded through the 15,000 barrier.

Sadly, the news was not so good in Detroit, where the city failed to reach an agreement with its bondholders and – bluntly – went bust. Demonstrating a fine mastery of understatement the city’s mayor described it as “a low point.”

The rest of the US fared rather better than Detroit, though, with the economy growing at 1.7% in the second quarter and comfortably exceeding all the forecasts. Everyone’s favourite company also did better than expected in its third quarter. Apple made the small matter of $6.9bn for the three months to June, largely thanks to smart phone sales. Facebook also had a good month, and the shares are now back above the $38 flotation price.

The Dow Jones finished the month at 15,499 – up 4% in June and 18% for the first half of the year.

Far East

As expected, July was the month when North and South Korea held talks on re-opening the Kaesong industrial facility which had been closed by the North earlier in the year. There were no worries about closing buildings in China however, with the largest building in the world opening in Chengdu. The fact that it is 600 miles from the sea doesn’t stop it having a seaside and a replica Mediterranean village.

Chinese growth dropped to 7.5% per annum and factory output was the lowest for 11 months – both of which prompted the Government to consider fresh stimulus measures for the economy, although it may be that slower growth is now the ‘new reality’ for the Chinese economy.

There was good news in Japan with unemployment falling to its lowest level for four years: however, inflation started to creep back up, albeit only at 0.3%. In the circumstances the Bank of Japan – again – kept monetary policy unchanged.

The two main Far Eastern stock markets had a quiet month – China was up 1% at 2,008 whilst Japan ended the month virtually unchanged at 13,668. However it was a good month in Hong Kong, with the market rising 5% to finish July ay 21,884.

Emerging Markets

You can usually rely on the Emerging Markets to provide the pyrotechnics and it’s a poor month when Venezuela or New Zealand doesn’t rise or fall dramatically. Sadly the Emerging Markets behaved like grown-ups in July with Argentina turning in a rise of just under 8% while Turkey fell by just over 7%. In between these extremes all was quiet…

Of the bigger Emerging Markets, Brazil climbed 2% to close at 48,234: India was fractionally down at 19,294 whilst Russia remained more or less unchanged at 1,330.

…And finally

As Bill Clinton might have said, “It’s the baby, stupid.” Yes, George Alexander Louis finally arrived on July 22nd and it was estimated that his birth was worth £243m to the UK economy. This rather exact figure was based on sales of champagne, Union Jack dummies and ‘I love Uncle Harry bibs.’ Clearly no-one’s life is complete without this last item!

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