UK inflation at three-year low; Brexit worries weigh - as it happened
Rolling coverage of the latest economic and financial news
- Latest: Consumer price inflation sticks at 1.5%
- Chocolate pushed food prices up, says ONS
- But hotel and tobacco inflation fell
- House price inflation hits seven-year low
Earlier:
- Introduction: Brexit fears are hurting the pound
- Sterling hits two-week low vs euro
- Threat of hard Brexit in December 2020 looms
5.40pm GMT
Time for a quick summary
UK inflation remained at the lowest level in three years in November. The Consumer Prices Index stuck at 1.5%, despite rising prices for a variety of goods including chocolate, concert tickets and package holidays.
Related: UK inflation stays low despite rising cost of chocolate and holidays
4.39pm GMT
The UK stock market has closed for the night, with the FTSE 100 up 15 points.
With the pound still suffering from Brexit angst, international companies led the risers. Pharmaceutical firm Hikma gained 4%, with global equipment rental firm Ashtead 3% higher.
3.28pm GMT
From shipping to craning.... and the world's biggest crane has been in action today, helping to construct the Hinkley Point C nuclear power station.
Big Carl, which stands 250 metres high, successfully moved a 170 tonne (!) piece of the Hinkley reactor's "steel containment liner" at 4.30am this morning.
The world's largest crane, 'Big Carl', completed its first big lift last night: the liner cup for Unit 1 at Hinkley Point C nuclear power station. @edfehinkleyc pic.twitter.com/AY4zG3Jx9q
Big Carl, the world's largest #crane, completed its first big lift at #Hinkley Point C last night. Congratulations to all involved from @Laing_ORourke, @BouyguesUK, @Sarens, TISSOT & everyone on the lifting team on one of the coldest nights of the year. https://t.co/zOcrj7LT3u pic.twitter.com/3fW7Kbr3tr
2.57pm GMT
The Baltic Dry index is one of those esoteric financial benchmarks that may actually give a handy insight into the real economy.
It measures the cost of shipping goods around the world, and thus can gauge how much demand there is for supertankers and smaller ships.
Baltic Dry Index Falls 4.68% to 1,221 in London
"Capesize -5.26% to $15,695
"Panamax -5.74% to $10,730
"Supramax 58k tons -2.05% to $9,031
"Handysize -0.28% to $7,365#DryBulk #Shipping $GOGL $SBLK $GNK $DSX $SB $SALT $EGLE $GBLK pic.twitter.com/zjUA5DKSI4
2.41pm GMT
Wall Street has opened cautiously, as traders await the historic vote on whether to impeach Donald Trump (liveblog here).
2.32pm GMT
A lot of people have been citing December 2020 as the big Brexit deadline. But actually, June could be the real cliff edge date.
That the last date for the UK to request an extension, EU insiders insist. The withdrawal agreement stipulates that the transition can be extended by "one or two years", but that would probably involve the UK committing more money for the EU budget.
The option to extend the Brexit transition disappears on 1 July 2020, no ifs, no buts: this was the message from the EU's most senior lawyer to EU27 diplomats at a private meeting on Tuesday.
1.
EU diplomats believe Boris Johnson when he says he doesn't want to extend the transition period. "It is probably one of the areas where Johnson isn't lying" quipped one person in the room, a view shared by others.
2.
The European commission told EU27 diplomats they would prepare one comprehensive mandate for future relationship talks, covering all subjects. The mandate is expected early February.
EU27 Brexit working group will meet daily in January to feed into this process.
4.
EU officials all stress time is tight and cliff edge real.
But it won't be the same cliff edge as before.
Leaving EU w/o withdrawal agreement under A50 is like kicking the table and smashing the crockery. That is because....
9.
Once out of EU w/o A50 the basic elements of WA would have had to be agreed under new legal basis. That would have been time consuming, legal headache, politically toxic.
No-deal with WA in bank is different: EU and UK negotiators can continue talks on 1 Jan 2021...
10.
2.18pm GMT
Back in the markets, sterling is weakening further as traders keep fretting about Brexit.
The pound has lost more than half a cent against the US dollar today, to $1.3060 - or more than four cents below its post-election spike.
"I'm in no doubt that Boris Johnson wants a deal. A WTO outcome wouldn't be in anybody's interests. The most likely outcome is that a 'core' EU competency agreement will be found with clear timetables for closer relations on security, services, data etc." - Sir @DLidington pic.twitter.com/99NVGfeY3g
1.44pm GMT
Speaking of the Bank of England... the central bank has outlined new climate emergency stress tests.
They will examine whether UK banks and insurance companies are prepared for the impact of climate change. It will consider a range of scenarios, including temperature rises of up to 4 degrees celsius (double the Paris climate agreement). More here:
Related: UK banks and insurers to be tested on climate crisis response plans
1.06pm GMT
Professor Costas Milas of Liverpool University argues that UK interest rates are likely to be cut next year - whether Brexit goes smoothly or not.
He writes:
Under the current interest rate of 0.75%, the Bank expects inflation to be 1.42% in late 2020. Under one interest rate cut, inflation will be 1.51% by the end of 2020. All this, based on the assumption that the sterling effective rate settles at the 79 level in 2020.
Notice that sterling went up to 82 in the aftermath of the election result. Assuming that Brexit-related negotiations run reasonably smoothly in 2020, sterling will rise further therefore pushing inflation further below the Bank's forecast and the 2% target. In this case, the Bank will surely react by cutting the policy rate.
Even if Brexit negotiations involve a lot of ups and downs, the BoE will most likely be forced to cut the policy rate. In this case, uncertainty will spiral out of control. Indeed, we got a taste of this following Boris Johnson's move to legislate against extending the end of 2020 deadline which is, of course, a huge gamble.
So whatever Brexit scenario one is willing to contemplate, an interest rate cut looks as the most likely outcome..
12.05pm GMT
As a knowledgable and well-read lot, I'm sure you'll have NO TROUBLE at all tackling our Christmas quiz.
It's just been published, covering some of the biggest business news stories of the year:
Related: Guardian business Christmas quiz 2019
11.58am GMT
Inflation is rising particularly briskly in the North of England, according to think tank NIESR.
NIESR (the National Institute of Economic and Social Research) has calculated that 'underlying inflation' rose by 1% across the UK (this measure excludes 'extreme price movements').
"Headline CPI inflation remained unchanged at 1.5 per cent in the year to November 2019.
Our analysis of approximately 130,000 goods and services included in the basket, indicates that higher inflation related to food and non-alcoholic beverages and recreation and culture was offset by lower inflation in alcoholic beverages and tobacco, clothing and footwear, and restaurants and hotels.
11.19am GMT
A quick dig into November's inflation report shows that the price of some types of food have risen sharply.
Chocolate, for example, is 4.3% more expensive than a year ago.
10.44am GMT
Economists agree that Britain's low inflation means there's no chance that the Bank of England will raise interest rates soon.
The BoE sets rates tomorrow, at its last meeting of 2019, but Jing Teow, economist at PwC, doesn't expect fireworks:
"The below-target level of inflation means that the Bank of England will be under little pressure to raise its policy rates soon.
However, a recovery next year that follows a further easing of political and economic uncertainties could spur further economic activity and spending, giving rise to inflationary pressures in the medium term. "
Inflation is expected to remain well below the Bank of England's target in 2020, thanks to price caps set on regulated utilities and a stronger pound, giving the Bank of England some room to act if the economy wobbles a little next year.
"The Bank may wish to secure a pre-emptive cut in rates, either in February or May, if recent economic weakness proves more persistent.
10.31am GMT
Chancellor Sajid Javid has welcomed today's inflation figures, saying it will help families handle the cost of Christmas.
However, prices are still rising -- so households will suffer if their income hasn't kept pace with inflation.
Contrary to Chancellor's response , "low inflation " doesn't "help... cash go further" as prices still rising - need falling prices, i.e deflation, to get more bang for your buck pic.twitter.com/FQ6KdBWJ2g
10.31am GMT
Wages are still rising faster than inflation in the UK, but the gap has narrowed.
Yesterday we learned that total pay growth (including bonuses) slowed to 3.2%, from 3.6%, with basic pay growth dipping from 3.6% to 3.5%.
10.19am GMT
Chocolate prices are a classic example of 'shrinkflation', especially at Christmas time.
10.00am GMT
UK house price growth has hit its lowest level in seven years, as prices continue to fall in London.
Across the country, the average house price increased by 0.7% in the 12 months to October to 233,000. That's the lowest growth since September 2012.
9.53am GMT
ONS Head of Inflation Mike Hardie points out that concert tickets, and package holidays, also became pricier last month:
"The headline rate of inflation remained steady with prices rising across a variety of goods and services such as chocolate, concert tickets and package holidays, offset by falling hotel costs and cigarette prices rising substantially slower than this time last year.
9.43am GMT
Food prices rose in November, particularly for chocolate, according to today's inflation report.
Prices rose between October and November 2019 by more than between the same two months a year ago, especially for sugar, jam, syrups, chocolate and confectionery (which rose by 1.8% this year, compared with a rise of 0.1% last year).
Within this group, boxes and cartons of chocolates, and chocolate covered ice cream bars drove the upward movement.
Prices rose between October and November 2019 but by less than a year ago, especially for women's garments (which rose by 1.3% this year, compared with 2.1% last year). Within this group, the largest individual contributions came from women's formal trousers and strappy tops.
9.43am GMT
Britain's inflation rate remains at its lowest since November 2016, as this chart shows:
9.33am GMT
Just in: UK inflation stuck at a three-year low of 1.5% last month.
That's a little higher than expected, but still comfortably below the Bank of England's target of 2%.
9.28am GMT
Big news in the auto sector: Peugeot and Fiat Chrysler have agreed to merge, creating the world's four-biggest carmaker.
My colleague Jasper Jolly has the details:
The two parent companies, PSA Group and Fiat Chrysler Automobiles, confirmed there will be no plant closures as part of a3.7bn in cost savings from the merger, a key concern for more than 1,000 workers at PSA's Vauxhall factory in Ellesmere Port.
PSA's boss Carlos Tavares, who previously oversaw PSA's successful integration and turnaround of the Vauxhall and Opel brands, will stay on as the chief executive of the new group, which will have combined annual sales of about 8.7m vehicles.
Related: Peugeot and Fiat Chrysler agree terms of 38bn merger
9.14am GMT
Newsflash: German business confidence has risen, as Europe's largest economy continues to swerve a recession.
The IFO think tank has reported that Germany's business leaders are more confident about future prospects, and that current economic conditions have brightened a little this month.
#Ifo defying the setback in #PMIs and rising for a third month in Dec. Seems like #Germany is edging further away from #recession territory in Q4, amid brightening prospects for #manufacturing and a stabilizing export situation. pic.twitter.com/xcSfLkAV0r
9.04am GMT
The pound is bobbing nervously this morning, currently below $1.309 at its lowest level since election day.
Rupert Harrison of asset manager BlackRock says Boris Johnson needs to tread more carefully, and help lower economic uncertainty rather than dolloping more onto the markets.
Having said this, the economic benefits of a reduction in uncertainty will require the govt to, you know, actually help to reduce uncertainty...
The fall back in over the last 48 hours shows how fragile sentiment is. No10 need to realise their words have consequences https://t.co/lxeUmDdCxd
9.00am GMT
Back in London, the UK-focused FTSE 250 index has dipped in early trading.
The mid-cap index has lost 54 points or 0.25% at 21,636. Consumer stocks and financials are among the fallers.
8.54am GMT
Experienced City watchers often say that profit warnings come in threes.
8.38am GMT
It's also the season for profit warnings.
UK recruiter Staffline has slashed its profit forecasts for the second time in three, after suffering a slump in demand from customers.
During November, customer demand was down approximately 16% from the prior year which the Board believes reflects high levels of consumer uncertainty across the UK.
8.25am GMT
Breaking: Denise Coates, who runs gambling site Bet365, has secured another MASSIVE payday.
Coates, who was already the world's highest-paid woman, was paid a staggering 276.6m in the last financial year, up from 220m a year ago.
Breaking: Britain's highest paid woman, Bet365 boss Denise Coates, paid 276.6m last year (assuming she remains the highest paid director). pic.twitter.com/yZevxfYCvJ
Bet365 is the personal fiefdom of the Coates family, a business dynasty worth 5.8bn, more than Sir Richard Branson's empire. The story of how they built their empire from a Portakabin in Stoke-on-Trent is the stuff of industry legend.
Coates's father, Peter, the 80-year-old son of a miner, became a successful local businessman and owned a string of betting shops. But it was Coates, an econometrics graduate who, at around the turn of the millennium, became aware of the jackpot opportunity that lay online.
8.13am GMT
Shares in UK-focused companies are coming under fresh pressure this morning.
Housebuilders such as Barratt (-2.7%), Persimmon (-1.8%) and Berkeley Group (-1.7%) are among the top fallers.
8.01am GMT
Brexit jitters have pushed the pound down to a two-week low against the euro.
Sterling dropped as low as a1.1737 this morning, just a few days after hitting a three-year high over a1.20
The markets may have run ahead of the train again, expecting the volatility of the pound to be over. In this case, there are more and more similarities with Trump, whose arrival marked the increased uncertainty for the markets, although it still contributed more to their growth than to their decline for stocks.
7.51am GMT
Today's UK inflation data (9.30am) may show that households are benefitting from a cap on gas and electricity bills.
Elsa Lignos of Royal Bank of Canada explains:
CPI inflation dropped to 1.5% y/y last month from 1.7% y/y previously. Almost all of that fall in CPI inflation was attributable to a cap on domestic energy prices. The effect will continue to drag on inflation again this month.
Our economists expect November CPI inflation to drop to what would be a three-year low of 1.4% y/y.
7.50am GMT
Economist and trade expert Dr Rebecca Harding says Downing Street's Brexit strategy appears to have been taken straight from the White House:
"How should we assess Prime Minister Johnson's proposed hard deadline for a Brexit deal? This is entirely strategic and straight out of the Trump playbook.
Boris said he'd get Brexit done and he will live by that promise. In reality, what we'll probably see is a small deal so everyone wins, leaving many doors open and allowing things that need a little bit longer to get done at a more leisurely pace. The politics are all for show."
7.43am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
'Tiz the season for a festive hangover. But rather than a champagne-induced headache, City traders are feeling groggy about the prospect of a new Brexit deadline crisis next year.
Related: Pound slides to pre-election levels in wake of bid to outlaw Brexit extension
The UK is set to leave the EU on 31 January, and then the transition period will kick in until the end of the year. It would appear that Mr Johnson doesn't want the transition period to run on and on, so he intends to pass legislation that will prevent that possibility. Even if a no-deal Brexit does happen, it won't take place for over a year, so equity traders are not overly worried.
On the other hand, the pound sold-off aggressively yesterday on the back of the no-deal fears. All of the gains the pound made against the US dollar and the euro since the exit poll on election night have been reversed .Keep in mind the pound was broadly pushing higher in the months ahead of the election.
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