Finimize - 🥵 Inflation wouldn't budge

What’s going on here?

UK inflation was out of tune with expectations for the fourth month in a row.

What does this mean?

Economists predicted inflation to drop to 8.4% in May, but it seems price increases ignored the memo last month, holding steady at 8.7% instead. That overshoot marks the fourth month on the trot that inflation has outpaced the pundits. And the main culprits? Used car prices, airline tickets, and the swelling cost of recreation and culture. That’s left Britain as an outlier among major economies, with consumer prices rising at a pace that’s more than four times the central bank’s 2% target. And it gets worse: core inflation, which excludes volatile food and energy prices, decided to join the fray, accelerating to a 30-year high of 7.1% – up from 6.8% the previous month. That left economists, who’d expected core inflation to sit pretty, with some serious egg on their faces.

Why should I care?

The bigger picture: Ticket to hike.

This spicy inflation data has got traders betting that the Bank of England will push interest rates to a peak of around 6% by early next year. But that strategy could be a double-edged sword, potentially causing the economy to stumble too. After all, a recent Bloomberg analysis suggests that pushing rates that high could cause the British economy to shrink by about 0.3% this year – and by a whole 1.4% in 2024.

Zooming out: The taxman.

A separate report dropped another bombshell on Wednesday: the UK’s government debt has climbed above the size of its economy for the first time since 1961, after public borrowing doubled in May. And with the economy potentially shrinking, that debt ratio could run further into the red. All that borrowing doesn’t just weigh on public finances: it’ll also tie the government’s hands, making it harder to cut taxes or rev up the economy with stimulus.

What’s going on here?

May was smoother than a limousine for the European auto industry, with car sales speeding ahead.

What does this mean?

Nothing beats debuting a new ride in May, with the volume up, the windows down, and hayfever sneezes racking your body. That might be why car sales in Europe continued their upswing last month, rising for the tenth time in a row. Or maybe it had more to do with easing supply snags, which allowed carmakers to churn out even more vehicles. Either way, fears that the cost-of-living squeeze might make consumers cut back on big-ticket purchases seem to have been misplaced, with new car sales in Europe increasing by 18% in May from the same time last year. EVs led the charge with a 71% jump, boosted by government subsidies and juicy orders for corporate fleets.

Why should I care?

Zooming in: Full throttle, empty pockets.

Tesla’s been making waves in the EV market, with European sales doubling in the first five months of the year. That’s mainly down to some aggressive price cuts – but there is a catch. See, while slashing prices boosted revenue by 24% last quarter, it also nibbled away at profit margins, dragging some profitability measures down to multi-year lows. And that’s got investors wondering if Elon Musk’s long-term game plan – prioritizing market share over short-term profit – will eventually pay dividends.

The bigger picture: Supercharger synergy.

There’s a silver lining for Tesla investors: EV newcomer Rivian plans to build Tesla’s EV charging ports into its future cars and tap into Tesla’s supercharger network of 12,000 fast-charging stations. That move follows Ford’s recent sharing-is-caring deal with Tesla, sparking a trend among North American EV makers and the companies that make charging tech. Those kinds of real-world, nuts-and-bolts charging considerations are key to broader EV adoption – and industry-wide standardization could make plug-in purchases a whole lot more tempting.