US annual inflation rises for the first time in 13 months

Over the last 12 months, the US Consumer Price Index for all urban consumers increased 3.2% before seasonal adjustment, the US Bureau of Labor Statistics has reported. Monthly, the all items index rose 0.2% in July on a seasonally adjusted basis, the same increase as in June.

The index for shelter was by far the most significant contributor to the monthly all items increase, accounting for over 90% of the increase, with the index for motor vehicle insurance also contributing. The food index increased 0.2% in July after increasing 0.1% the previous month. The index for food at home increased 0.3% over the month, while the index for food away from home rose 0.2% in July. The energy index rose 0.1% in the month as the major energy component indexes were mixed.

The annual increase of 3.2% was up from June’s 3.0%, the first time annual headline inflation in the US has risen in 13 months. Despite that, it was marginally better than market expectations of 3.3%. Core inflation - the all items list less the food and energy index - rose 4.7% over the past 12 months as expected.

“Overall, inflation is grinding back towards target and the labour market is slowly cooling, but the FOMC [Federal Open Market Committee] will want to see yet more data before deciding in September if progress has been fast enough to warrant a pause, or if the balance of risks calls for another hike to ensure inflation targets are met,” commented Ryan Brandham, Head of Global Capital Markets, North America at Validus Risk Management. “Market pricing currently favours a pause, but the market has underpriced the Fed’s actions before.” 

Tom Hopkins, Portfolio Manager at BRI Wealth Management, said: “Today’s inflation print will likely be taken positively. It will reinforce the majority market view that the Fed will refrain from hiking in September. In a little over a year, the Fed has raised interest rates to a 22-year high. Fed chair Jay Powell said last month that the central bank would decide on further rate increases on a meeting-by-meeting basis. All eyes will focus on next month’s CPI print which is published before the next rate meeting in September."

 

European financial services leaders expect dealmaking to rebound into 2024

Dealmaking is currently a top priority for CEOs across Europe’s financial services sector, according to the latest EY CEO Outlook Pulse Survey, which found that 94% of respondents expect to actively pursue strategic transaction activity over the next 12 months.

The July edition of the pulse survey, which canvassed the views of 96 European financial services CEOs on their strategic plans, headline concerns and investment intentions, found that of the 94% of respondents who foresee strategic transactions in the coming year, 64% are looking to divest, 64% are looking to enter strategic alliances or joint ventures, and 56% are looking at M&A.

Improving tech capabilities is the primary driver of M&A, followed by the need to bring in new skills and expand into new geographies. CEOs are incorporating AI into their M&A strategies, leveraging the technology within target selection and due diligence processes. Nearly three-quarters (71%) of CEOs surveyed use AI as part of the transaction strategy process, either significantly or through pilot programs. Only a small group (5%) claim they have no plans to use AI.

“Market sentiment is picking up across Europe’s financial sector following a turbulent first six months of the year, but the current economic and geopolitical outlook continues to drive caution,” noted Benoit Gérard, EY EMEIA Financial Services Strategy & Transactions Leader. “While this is impacting operating and investment strategies in the short-term, strategic dealmaking continues to provide an answer for many firms looking for growth and economies of scale, or to refocus and simplify.”

 

UK economy returned to growth in June

Monthly real gross domestic product (GDP) in the UK is estimated to have grown by 0.5% in June, according to the Office for National Statistics, following an unrevised fall of 0.1% in May. Monthly GDP is estimated to be 0.8% above its pre-coronavirus levels from February 2020. Many businesses cited the additional bank holiday in May as a reason for increased output in June compared with May. 

Looking more broadly, UK GDP showed 0.2% growth in Q2 2023 compared to Q1. Services showed 0.1% growth in the three months to June, while production grew by 0.7% and construction by 0.3%. Output growth in the services sector was 0.2% in June, while production and construction output grew by 1.8% and 1.6%, respectively. It is the first month since October 2022 that all three sectors contributed positively to GDP.

Reacting to the latest GDP data, David Bharier, Head of Research at the British Chambers of Commerce, said: “Today’s first estimate for Q2, showing GDP grew by 0.2% is better news than expected, but the UK economy remains in a precarious place. Businesses are continuing to face a worrying mix of high inflation, rising interest rates, a tight labour market, and global economic uncertainty. Today’s data is in line with our Quarterly Economic Forecast which expects just 0.3% for the whole of 2023. While the UK remains on course to avoid a technical recession, small movements in one direction or the another won’t mean much for many firms facing the toughest trading conditions in years.”

 

FCA finds fund managers’ value assessments significantly improved, but still work to do

In 2017, the UK’s Financial Conduct Authority (FCA) published its Asset Management Market Study, which found evidence of weak demand-side pressure on fund prices, resulting in uncompetitive outcomes for investors in authorised funds. Since then, the FCA has worked closely with the industry to encourage a greater focus on assessing value to drive improved value for money for investors. 

The latest findings show that many firms have fully integrated considerations on assessing value into their product development and fund governance processes. This greater focus has also driven changes in fees and charges, resulting in savings of costs to consumers amounting to millions of pounds. 

However, there remain outliers where action needs to be taken. This is particularly important with the Consumer Duty, which came into force on 31 July, where firms are expected to deliver fair value for retail consumers. 

The review found examples of good practice include moving investors to clean share classes with no trail commission or cutting funds’ fees. Some firms’ independent non-executive directors did not provide sufficient challenge, with some accepting information provided to Boards at face value without probing further. Significant differences exist between good and poor practices in how authorised fund managers (AFMs) assess their funds’ performance. 

The review also identified firms putting too much emphasis on comparable market rates to justify their fees rather than conducting an assessment using the full range of value assessment considerations. Some firms now have better processes for allocating costs but are reaching conclusions on AFM Costs and Economies of Scale that don’t consider the information made available by that better process. The FCA says it expects firms to consider these findings and to make improvements where required. 

 

Global business travel and events costs expected to remain elevated through 2024

Global business travel and events costs are set to climb higher through the remainder of 2023 and into 2024, albeit at a much more moderate pace than the exceptionally steep increases seen in 2022. This is according to the 2024 Global Business Travel Forecast, published today by business travel firm CWT and the Global Business Travel Association (GBTA). 

Rising fuel prices, labour shortages, and supply chain challenges, coupled with red-hot demand, caused travel prices to skyrocket in 2022 – far surpassing some of the increases outlined in last year’s forecast. Lingering economic uncertainty and a gradual easing of supply-side constraints are expected to result in more subdued price increases over the next 12-18 months, according to the report, which uses anonymised data generated by CWT and GBTA, with publicly available industry information and econometric and statistical modelling developed by the Avrio Institute.

“A potent combination of demand and supply-side pressures propelled travel prices higher than expected last year,” said Patrick Andersen, CWT’s Chief Executive Officer. “Looking forward, prices seem to be levelling off with much milder increases projected over the next 12 to 18 months. We could now be looking at the true new cost of travel. Our focus remains on helping our customers find the right strategies and solutions to get the most out of their travel budgets, meet their ESG commitments, and maximise the ROI on their travel spend.”

 

Conferma Pay to help expand Visa Commercial Pay globally

Visa has announced an extension of its strategic collaboration with Conferma Pay, aimed at further enhancing Visa Commercial Pay, a suite of B2B payment solutions, to help improve business cash flow and eliminate manual processes. A statement released states that extended collaboration enables both organisations to expand further the offering in Asia, Latin America and the Middle East.

Visa Commercial Pay features three B2B payment offerings for financial institutions and their corporate customers, including the Visa Commercial Pay Mobile app, Visa Commercial Pay Travel and Visa Commercial Pay B2B. Since its launch in 2020, Visa Commercial Pay has helped corporates to move away from traditional business payment methods to more automated processes.

So far, the B2B payment suite has been rolled out to select clients, including early adopters such as Commerce Bank, OCBC, and Umpqua Bank. The offering enables financial institutions to deliver on their corporate customers’ virtual payments strategy and continues to drive innovation with connectivity to invoice management platforms through a single connection. 

One innovation within Visa Commercial Pay that could particularly impact digital payments in the travel sector is the ability for virtual corporate cards to be added directly to a digital wallet on an employee’s mobile phone. This enables corporates to centrally manage payments while giving employees the benefits and security of card-in-hand products.

 

Tabit and Jifiti to provide embedded B2B lending to Canadian merchants

Tabit, a B2B BNPL solution provider powered by Merchant Growth, and Jifiti, a multinational embedded lending company, have partnered to serve B2B merchants in the Canadian market.

The solution uses Jifiti's embedded lending platform and is white-labelled for the merchant. Online merchants can download the Tabit plugin from e-commerce platform marketplaces, including Shopify and BigCommerce, customise their user experience based on their needs, and immediately offer business buyers instalment loans and net terms. The financing option is displayed to the customer throughout the buyer journey, from product pages to checkout, increasing sales, AOV and conversion rates. 

Jifiti's platform supports every B2B and B2C point-of-sale financing option, including instalment loans, lines of credit, net terms and split payments. Because the platform is white-labelled, merchants retain full customer ownership and gain data insights.

 

Visa brings Apple Pay to Vietnamese cardholders

Visa has enabled Apple Pay for its cards in Vietnam. Banks such as Asia Commercial Joint Stock Bank (ACB), Military Commercial Joint Stock Bank (MB), Sacombank, Techcombank, Vietcombank and VPBank are among the card issuers who support Apple Pay at launch.

To use, Visa cardholders from the participating banks double-click and hold their iPhone or Apple Watch near a payment terminal to make a contactless payment.  Every Apple Pay purchase is secure because it is authenticated with Face ID, Touch ID, device passcode, and a transaction-specific, one-time unique dynamic security code. Apple Pay is accepted in grocery stores, pharmacies, taxis, restaurants, coffee shops, retail stores, and many more places.

“With the growth of mobile contactless payments in Vietnam, we think consumers will immediately embrace the convenience and security that Apple Pay offers,” said Dung Dang, Visa Country Manager of Vietnam and Laos. “Customers can add their Visa cards to Apple Pay in just a few simple steps before they can start enjoying the added benefits of a contactless payment experience that is both seamless and highly secure.”