UK mortgage approvals hit 13-year high; German inflation falls below zero - as it happened

Graeme Wearden

from on 2020-09-29 15:15 (#58MR6)

New mortgage approvals surged to 84,700 last month, as German harmonised inflation drops to -0.4%

4.14pm BST

So, with the markets becalmed ahead of the first presidential debate , it's time to wrap up.

Here's our news story on the surge in mortgage approvals:

4.07pm BST

Another day.... another comment from the Bank of England about the merits, or otherwise, of negative interest rates.

This times it's governor Andrew Bailey, who has told Queen's University Belfast that he doesn't rule them out... but he also recognises that negative rates are a mixed bag' that would create extra challenges for the banking system.

Andrew Bailey, Governor of @bankofengland stating that the economic performance is approx 7-10% below where we were last year...this is much better than had been forecasted in the midst of Spring #lockdownUK #LoveQUB pic.twitter.com/ULZSuWbWCg

On interest rates, Andrew Bailey stated..."that drawing on experience of other European countries and looking at our own economy...there is no reason for @bankofengland to rule out negative interest rates, however there are other options to explore before we reach that point"

The UK has gone through some major economic crises this year, and a huge positive to take out of that is that, the UK banking system was able to stand up and keep lending throughout #LoveQUB #BankofEngland #AndrewBailey

In response to @QUB_CEC member @Ramseconomics question about dual interest rates, Andrew Bailey stated that this again is an option, however not a current practice of @bankofengland so it would involve a review of their own practices, such as a tiering of negative rates.

Ok the subject of #Brexit, @bankofengland Governor Andrew Bailey stressed that no one in the UK can benefit from closing markets or closing borders #LoveQUB

4.01pm BST

US consumer confidence has rebounded strongly this month, and by more than expected, households' views of the labor market improved.

The Conference Board's monthly consumer confidence index has surged to 101.8 for September, a significant improvement on August's 86.3.

There was an unexpectedly strong rise in the US conference board measure of consumer confidence in September, but that still left confidence far below the pre-virus level pic.twitter.com/6m8KvGnPXu

Feeling better: US Consumer Confidence Index rebounded in September, although sentiment is still far below pre-pandemic levels: https://t.co/WmGytazXbn pic.twitter.com/aaUeth1FMg

3.39pm BST

One of Donald Trump's top economic advisers has claimed that the US economy is still enjoying a V-shaped recovery from the pandemic.

Larry Kudlow, director of the US National Economic Council, pointed to strong figures from the housing sector, the auto sector, and machinery output figures. Retailing also looks very strong, he told CNBC, citing strong credit and debit figures indicating consumer spending is robust.

I can't predict the virus....but we're not going to shut down the economy.

The V-shaped recovery is very much intact.

I think the V-shaped recovery is very much intact," NEC Director Larry Kudlow says. https://t.co/X60S4eJsqi pic.twitter.com/LgRU2v1qNf

2.43pm BST

The New York exchange has opened, but there's not much drama on Wall Street.

Stocks are rather flat, as investors hunker down ahead of the first presidential debate tonight (or overnight, if you're in Europe).

Joe Biden still has a healthy lead and therefore everything to lose, while the debating stage surely benefits President Trump as he looks to close the gap. The New York Times expose on Trump's tax affairs will certainly add extra spice to the evening, with the President going into the debate on the backfoot, meaning he'll probably come out all guns blazing.

We're just over a month away from what is going to be an election for the ages. Covid has turned the election on its head. A year ago, Trump had it in the bag. Now he has a significant deficit to make up and already election day is surrounded in controversy. A tightening of the polls over the next month will only add to the drama.

2.09pm BST

The Guardian's latest analysis of the UK's economy is out, and it shows that growth was already faltering before the latest Covid-19 restrictions were imposed.

In recent weeks, road traffic has cooled after a summer rush, share prices have fallen, redundancies have soared and the national debt has hit a new record high. But... retail sales have picked up, and the Eat Out to Help Out scheme has lifted spending...and pushed down inflation.

1.45pm BST

The slump in German harmonised inflation to -0.4% this month shows that Covid-19 has a disinflationary impact on economies, says Carsten Brzeski of ING.

He writes:

The negative base effect from low energy prices is keeping headline inflation low but there is more: the VAT cut of July is most visible in prices for food, clothing, other consumer goods and increasingly also for other leisure activities and packaged holidays. At the same time, the fact that the increase in hotel and restaurant prices is still very much in line with the trend seen prior to the VAT cut suggests that lower taxes are also used to support businesses and are not necessarily entirely passed on to consumers.

Looking ahead, German headline inflation should first fall further before gradually rebounding next year; at least if the German government sticks to the plan of reversing the VAT reduction in January. In July 2009, headline inflation came in at -0.7% YoY; a record which could be broken in October or November.

Germany: Disinflation for now but deflation risk increases | Snap | ING Think - The September fall in German inflation is mainly the result of low energy prices and the VAT reduction. However, disinflation can easily turn into deflation https://t.co/tIBkvwLYyj

1.44pm BST

Germany's inflation rate has fallen below zero, piling more pressure on the European Central Bank to stimulate the eurozone economy.

Consumer prices across Europe's largest economy were 0.4% lower in September compared with a year ago, when harmonised with the rest of the EU. Prices also fell by 0.4% on a monthly basis, the Federal Statistics Office reports.

And so it begins, with a 30bp downward surprise on German HICP inflation down to -0.4% in September. Core likely to have declined slightly further including on VAT pass-through. It's all temporary of course, until it isn't. pic.twitter.com/jB5Ym9Jhrs

Deflation is back in Germany. This time like always primarily driven by a sharp drop in energy prices. Expect a very weak reading for the entire euro area when data is released on Friday! pic.twitter.com/Md3jmgfXP0

12.41pm BST

Time for a quick recap..

Mortgage approvals in the UK have hit their highest level since the credit crunch nearly 13 years ago.

12.06pm BST

After a rather subdued morning, Europe's stock markets are mostly showing small losses today.

The FTSE 100 is now down 25 points, or 0.3% , at 5902 , with banks and travel companies among the fallers.

Monday's upbeat mood has been replaced with a sense of caution, sending European bourses lower. The optimism surrounding a US fiscal stimulus deal has been faded, with the mood souring amid a slew of disappointing corporate releases....

Greggs warned over an uncertain trading outlook, which is hardly surprising given that work from home looks set to be a way of life at least for the next 6 months if not longer. Job losses and reduced hours are coming. The bottom line with Greggs is that the headwinds are outweighing the positives.

11.42am BST

Back in the City, Greggs has sunk to the bottom of the FTSE 250 index - amid worries about its prospects for the coming months.

Shares are now down 6% at 11.45, closer to last week's two-year low, after the baking chain reported that September sales are only three-quarters of last year's levels.

Greggs has taken the decision to press ahead and try get its operations back to normal. New store opening plans have been revived and some existing stores are now allowing customers to eat in. Cake fans will rejoice at the news that the Belgian bun is being reintroduced alongside other items which have been absent while Greggs survived on a limited menu during the peak of the crisis.

These actions could put Greggs in a stronger position assuming the coronavirus situation doesn't worsen. If it does, the retailer will have to quickly revert to its skeleton operations. The bad news for staff is that Greggs is looking at reducing costs by having reduced working hours in shops.

11.15am BST

Over in Ireland, the jobless rate has fallen back from its recent record peak - but remains painfully high.

Reuters has the details:

Ireland's unemployment rate, including those receiving temporary COVID-19 jobless benefit, fell to 14.7% at the end of September from 15.3% a month earlier, data showed on Tuesday.

The jobless rate, which stood at 4.8% before the crisis, hit a record 28.8% in early May after 600,000 people claimed the special payment.

Ireland's estimated unemployment rate (including PUP) has fallen from a record high of 28.2% in April to 14.7% in September https://t.co/fIHx9Fzowb pic.twitter.com/ui6FO3C4Kb

10.41am BST

Meanwhile in the eurozone, economic confidence has improved for the 5th month running, but remains weak.

The European Commission's monthly gauge of sentiment in the euro area has risen to 91.1 points this month from 87.5 in August.

Eurozone economic confidence improves for a fifth consecutive month to 91.1 vs 89 expected.

Still significantly lower than February levels. pic.twitter.com/ukpcam8vic

Eurozone Consumer Confidence Final SEP

-13.9 pic.twitter.com/71RKVy76TK

#Eurozone sentiment surveys (Sep):

Economic: 91.1 v 89.0 exp. (prev 87.7)

Industrial: -11.1 v -10.0 exp. (prev -12.7)

Services: -11.1 v -15.7 exp. (prev -17.2)

Consumer confidence: -13.9 v -13.9 exp. (flash est -13.9)$EUR

10.25am BST

Despite the surge in mortgage approvals, it's hard to get onto the property ladder.

Some lenders have withdrawn some mortgage offers aimed at those with small deposits, while Nationwide is restricting people from borrowing from their parents.

Mortgage industry stakeholders, from banks and building societies to solicitors and surveyors - still have furloughed staff and are operating under safe working conditions. In other words, while case loads are higher, lenders' capacity to function is currently subdued.

Product choice is still limited, particularly at higher LTVs. There are only a handful of mortgage lenders offering products at 90% LTV, with some singling out First Time Buyers for exclusive eligibility and others only providing guarantor loans.

10.11am BST

The summer is usually a quiet time for estate agents and lenders, as people are more interested in summer holidays than property viewings. But not this year....

The Covid-19 pandemic completely upended" the UK property market in August, says Hina Bhudia, partner at Knight Frank Finance:

Interest rates remain ultra-low and the cheap cost of debt is driving a significant amount of this activity.

Most of the activity we're seeing is at sub 75% loan-to-value and the lenders all want a bigger slice of that market. That means the choice of products for borrowers at that level is growing every day.

10.05am BST

Here's some snap reaction to the UK mortgage figures:

Striking evidence of bounce in #UK #housing market activity since restrictions on activity were removed, reinforced by raising of Stamp Duty threshold as #mortgage approvals for #house purchases at near 13 year-high in August. Doubts remain over outlook
https://t.co/T8h5VdtvZR

UK mortgage approvals climbed to a 13-year high in August, supported by the government's stamp duty holiday https://t.co/yA1TO7VZ41 pic.twitter.com/ZYnHNphg5a

10.00am BST

The Bank of England points out that mortgage approvals are still lower in 2020 than in 2019, despite a sizzling August.

Today's report says:

The mortgage market continued to show more signs of recovery in August. On net, households borrowed an additional 3.1 billion secured on their homes, following borrowing of 2.9 billion in July. Mortgage borrowing troughed at 0.5 billion in April, and is still a little below the average of 4.2 billion in the six months to February 2020. The increase on the month reflected slightly higher gross borrowing of 18.8 billion, although it is still below the pre-Covid February level of 23.7 billion.

The number of mortgage approvals for house purchase continued increasing sharply in August, to 84,700 from 66,300 in July.

9.53am BST

UK mortgage approvals have hit a near-13 year high in August, as the market bounced back from its lockdown blues.

At 84,700, lenders signed off more home loans than at any time since October 2007 (when the credit crunch began, at the start of the financial crisis).

UK Mortgage approvals since 2005 pic.twitter.com/4YAodjkUUl

Long term UK #mortgageapprovals graph highlights the sheer scale of mortgage approvals in Aug 2020. But how many of these approvals will convert into housing transactions? pic.twitter.com/kgQ32FXWux

9.45am BST

The surge in mortgage approvals in August is also due to pend-up demand, as the market froze during the lockdown.

Here are some details:

Instant Info - Bank of England Mortgage Approvalshttps://t.co/ANviYhtRWF pic.twitter.com/idFWkBqYCO

9.39am BST

Just in: the number of mortgages approved in the UK has surged.

New Bank of England figures show that around 84,700 loans to fund a house purchase were approved in August. That's a sharp jump on July, when around 66,000 mortgages were signed up, and much higher than the City expected.

UK Mortgage Approvals (Aug) act: 84.7k, exp: 71.3k, prev: 66.3k

Sharp rise in mortgage approvals for house purchase. But remortgage market remains flat. pic.twitter.com/R18UlazHgq

9.17am BST

High end confectionary chain Hotel Chocolat has also been dragged into the red by the Covid-19 crisis.

Having delivered a strong first-half performance, the second half of the year was materially disrupted by COVID-19 and the related restrictions, which led to the closing of all UK retail locations for 12 weeks, and the shutdown of our factory for eight weeks.

9.05am BST

Here's our news story about Greggs' plan to cut its wage bill:

8.50am BST

Shares in Greggs have dropped by 3% this morning, after it warned that it needs to cut staff hours due to weak demand.

They've lost 38p to 11.83, taking them back towards the two-year low of 11.17 hit last week.

Sales at company managed stores in September were 76.1% of last year. The group re-opened all its stores in early July, sales ticked up in August, and they improved again in September. Greggs cautioned about the uncertainty surrounding the health crisis, but it plans to open net 20 stores this year, so it clearly isn't that worried about the current environment.

The digital service and the click and collect options are now available nationwide so this should help the group in the event of localised lockdowns. The manufacturing sites have re-opened too so new products are available.

8.43am BST

Britain's blue-chip stock index has dropped back in early trading.

The FTSE 100 has shed 27 points, or 0.5%, knocking it back to 5,900.

8.39am BST

Greggs has also reactivated" parts of its expansion plans.

It now expects to open a net 20 shops in 2020, predominantly in locations accessed by car.

8.31am BST

Greggs has also revealed that two of its factories have been hit by two Covid-19 outbreaks in recent weeks.

It says:

In August our supply chain team dealt with a small COVID-19 occurrence at our distribution centre in Leeds and worked closely with Leeds City Council and Public Health England to handle the situation swiftly and professionally. There was some impact to product availability in the region over a five-day period but this was minimised through support from other sites in the network.

In the past week we experienced a further occurrence at one of our manufacturing centres in Newcastle upon Tyne. As a precaution this production operation was temporarily closed, although stock distribution is unaffected.

8.20am BST

Greggs is hoping that Belgian buns can boost sales.

The baking chain has put these sweet, sultana-packed, iced buns (with a cherry on top) back on the menu, to encourage shoppers into its stores again.

With our seated offer closed we were not in a position to participate in the Government's Eat Out to Help Out' scheme and this, along with high temperatures made August a difficult month.

Increased out-of-home activity in September appears to have driven a recovery in customer visits. In response to this we are bringing back more of our product range, including a broader sandwich range and classic favourites such as Belgian buns.

Greggs is in talks with staff on job cuts, doesn't say how many: now at 76% of trade in Sept last year.
Hit by customers going elsewhere in August, Eating Out to Help Out
Widening product options as it recovers: Belgian buns are back, in time for Brexit

7.56am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With business activity levels remaining below normal for the foreseeable future we must change the way we work to be as productive and flexible as we can in order to protect as many jobs as possible for the long term. We have completed a review of our activity and requirements in every part of the business and are now proposing a series of changes which are the subject of a collective consultation with union and employee representatives.

Our aim is to minimise the risk of job losses by negotiating reduced hours in our shops and we will update on the outcome of the consultation when concluded.

Newcastle based Greggs say they plan to cut staff hours to "minimise the risk of job losses''.

This is when the furlough scheme ends next month.

The chain say though, sales have picked up over the past month as it continues its recovery following the coronavirus crisis. pic.twitter.com/CxlEhWA0Je

Recovery in the retail sector remains sensitive to spikes in Covid-19 cases and potential local or national restrictions, creating uncertainty about customer footfall and shopping habits.

It is also too early to determine whether basket mix and average spend patterns, in-store and online, will continue or settle back to pre-Covid-19 levels.

The spread of Covid-19 has precipitated the imposition of an unprecedented level of travel restrictions by governments across the world severely impacting the aviation industry.

These restrictions have affected the Group's revenue from the ground handling and into-plane fuelling services in particular. Volumes across all product categories were down compared with the first half of 2019: ground handling turns down 50%, cargo tonnage down 22% and fuelling events down 41%, as was to be expected with the dramatic reduction in flights.

We currently anticipate market conditions will remain challenging through the winter and the early part of next year, but expect a sustainable recovery in activity levels thereafter, contributing to modest revenue growth in 2021 over 2020.

Whilst cautious on the pace of activity level recovery over the next 18 months, our restructured cost base and the rationalisation of the global portfolio should enable the Group to generate higher returns as volumes improve.

A big upset by Trump could unearth some market volatility as investors re-price a possible Trump second term - or maybe worse - a contested election result and even bigger delays until the next stimulus package gets passed.

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