Oil breaks US$100, Wall Street retreats and bond yields rise, inflation is becoming the market’s biggest risk again Global markets are starting Thursday in a more defensive position. Brent crude has broken above US$100 a barrel , U.S. Treasury yields are pushing higher, and Wall Street fell for a third straight session as investors reassess whether central banks may need to keep tightening rather than easing. For Malaysian investors, the key chain today is increasingly clear: Oil → inflation → interest rates → bond yields → USD/MYR → Bursa valuations. 30-second market snapshot Market / Asset Latest 🇺🇸 S&P 500 7,636.36, -0.48% 🇺🇸 Dow Jones 52,380.66, -0.77% 🇺🇸 Nasdaq 26,253.34, -0.64% 🇲🇾 FBM KLCI 1,714.34, virtually flat 💵 USD/MYR ~4.06 🇺🇸 U.S. 10Y Treasury ~4.84% 🇺🇸 U.S. 2Y Treasury ~4.42% 🥇 Gold ~US$4,396/oz 🛢️ Brent crude US$101.21/bbl 🛢️ WTI crude US$96.05/bbl ₿ Bitcoin ~US$79,300 🇯🇵 Nikkei ~64,760, -0.6% this morning Brent jumped about 3.4% Wednesda...
British households continue to save at elevated levels four years after the initial Covid-19 pandemic shock, a trend that cannot be fully attributed to higher interest rates or unemployment fears, according to the Office for National Statistics (ONS).
Key Findings:
- Current Savings Rate: In Q1 2024, UK households saved 11.1% of their income, a significant increase from 5.8% in Q4 2019. This is the highest savings rate since 2010, excluding the pandemic spike to 27.4%.
- International Comparison: The UK savings rate contrasts sharply with the US, where the personal savings rate is under 4%, and the eurozone, where the savings rate is 14.7%.
- Accumulated Savings: UK households have built up excess savings ranging from £143 billion to £338 billion (US$185 billion to US$437 billion or RM864.61 billion to RM2.04 trillion) since the pandemic.
Analysis:
The ONS noted that a significant portion of these savings is held in cash rather than long-term investments, indicating that households do not view these funds as permanent.
Implications for the Economy:
- Consumer Behavior: Unlike US households, British households have been hesitant to spend their accumulated savings, which has implications for consumer demand and economic growth.
- Retail and Inflation Impact: Retail volumes remain below pre-pandemic levels. A shift towards spending these savings or a reduction in the savings rate could boost consumer demand and potentially fuel inflation.
- Interest Rates and Saving Behavior: More than 40% of the increased savings rate is attributed to higher interest rates and changed earnings expectations. The Bank of England raised rates from 0.1% to 5.25% between December 2021 and August 2023. Only under 10% of the increase is due to precautionary saving driven by unemployment fears.
Unexplained Factors:
Nearly half of the increase in the savings rate is due to 'other factors,' which may include geopolitical worries or broader economic concerns.
Myron Jobson, a senior personal finance analyst at Interactive Investor, commented, "The harsh reality of income loss and economic instability during the Covid-19 pandemic served as a stark reminder of the perils of lacking adequate savings."
Conclusion:
The persistent high savings rate in the UK highlights a cautious approach by households, influenced by a combination of higher interest rates, economic uncertainty, and the lingering effects of the pandemic. This behavior poses both challenges and opportunities for the UK's economic outlook, particularly in terms of consumer spending and inflation dynamics.
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