Pound slides against dollar, UK car sales suffer and Hammond's war chest 'shrinks' – as it happened

Britain is motoring towards its first drop in annual car sales since 2011, after suffering a 9% drop in registrations last month

• Sterling falls to four week low against the dollar
• It's Official: UK car sales declined by 9.3% last month
• Sales have fallen for six months running
• Sales down 3.9% so far this year
• Diesel sales slump by 21%
• Sofa sales have also dropped this year
• SMMT: Brexit uncertainty is hurting investment

6.15pm BST

With Spanish shares recovering despite the continuing tensions between the government and Catalan separatists, European markets managed to end the day higher. The exception was Germany, which slipped back from its record highs. In the UK, a weakening pound gave some support to the FTSE 100, dominated as it is by overseas earners who benefit from a fall in sterling. The final scores showed:

4.22pm BST

Over in Spain, the stock market has recovered much of Wednesday's slump, as Spain rules that Catalan's parliament should be suspended on Monday, thus ruling out an expected vote on independence. David Madden, market analyst at CMC Markets UK, said:

The IBEX 35 is the best performer in Europe, which make a nice change seeing the Spanish market lost the most ground this week. Madrid and Catalonia are still at loggerheads, and the Spanish government has suspended Catalan's parliamentary session which was due to take place on Monday. Only the Parliament of Catalonia can declare independence, and since Madrid has prevented the meeting from taking place there isn't much the separatists can do. Nonetheless, investors will be fearful of the Spanish stock market while the Catalan question hangs over the country.

4.09pm BST

The pound's weakness against the dollar could be temporary, suggests John Higgins at Capital Economics:

Although sterling has fallen sharply against the dollar over the past fortnight or so, we forecast that the exchange rate will end this year and next at $1.35/, above its level now of $1.31/.

Sterling's drop on Thursday appears to have been prompted by unexpectedly-weak car sales in the UK..and growing doubts over PM Theresa May's future. The economy as a whole seems to be holding up quite well, though. And we don't expect it to be derailed by political uncertainty unless we end up with a new prime minister with a markedly-different view of how Brexit negotiations should proceed.

3.37pm BST

Connor Campbell, financial analyst at Spreadex said:

Sterling's suffering was exacerbated this afternoon by a beefed up showing from the dollar.

Cable plunged as much as 0.9% this Thursday, dragging the pound to a sub-$1.325 4 week nadir against the greenback. Sterling also maintained a half a percent drop against the euro - which itself fell 0.3% against the dollar - sporadically causing the pound to dip below a1.12, a level it hasn't seen since mid-September.

3.09pm BST

Still with the US, and factory goods orders rose by more than expected in August.

New orders increased by 1.2%, following a 3.3% drop recorded in July and better than the forecast 1% rise. On the recent hurricanes the Commerce department said: "We cannot isolate the effects of Hurricanes Harvey and Irma on either the Advance Report or Full Report on Manufacturers' Shipments, Inventories and Orders, because the survey is designed to estimate the month"to"month change in manufacturing activity at the national level and not at specific geographic areas."

2.37pm BST

US markets are continuing their winning streak.

The Dow Jones Industrial Average is up 12 points in early trading while the S&P 500 and Nasday Composite have opened at new record highs.

S&P 500 opens at record high, on track for its longest winning streak since 1997 https://t.co/mic6Gtuxvq pic.twitter.com/Br7NzzlsDG

2.31pm BST

Williams however will not vote on interest rates this year, so if they do rise in December it will not be down to him:

Other voters next year are Mester (hawk), Bostic (unknown/centrist), and the head of the Richmond Fed who don't have a President yet

2.25pm BST

The dollar of course is being supported by the expectation of a US rate rise before the end of the year. And new comments from San Francisco Fed president John Williams in a speech in Missouri do little to dispel that idea:

SF Fed Gov Williams: "As inflation rises and the economic expansion continues, we will be able to move rates up to their new normal level"

2.16pm BST

The pound is on track for its worst week against the dollar since November 2016, according to Reuters.

2.11pm BST

The pound continues to fall, now down a cent or 0.8% against the dollar at $1.3135.

The UK currency is now at its lowest since early September and has lost all the gains (and more) that it made after the Bank of England suggested rates might rise in November.

1.53pm BST

Over in the US, and weekly jobless claims have come in better than expected.

Ahead of the non-farm payrolls numbers tomorrow, the Labor Department said the number of Americans filing for unemployment benefits fell by 12,000 last week to 260,000. Analysts had been expecting a figure of around 265,000. But the impact of the recent hurricanes makes the picture a little difficult to assess. The department said: "Hurricanes Harvey, Irma, and Maria impacted this week's claims."

President Trump will be quick to point towards the strength of the labour market on the back of today's positive jobless claims data. The initial impact of hurricanes Harvey, Irma and Maria have typically increased the number of new applications for unemployment benefits. However, today's dip dampens fears of job growth restraint in the coming months.

Initial jobless claims are unlikely to return to August's record lows for a while yet, though. Weekly claims had previously been operating at their lowest level since the early 1970s, but with many businesses yet to reopen in the wake of the natural disasters, a number of Americans are still faced with little choice but to seek unemployment benefits.

1.45pm BST

Here's a nice chart from the BBC, showing how diesel's share of UK car sales has shrunk, while electric vehicles are carving out a bigger slice of the market.

Why we are ditching diesel and cutting back on car-buying.Six charts that tell the story https://t.co/gigixSzimS pic.twitter.com/ZL6Kd7YBtX

1.12pm BST

Rebecca Long-Bailey MP, Labour's Shadow Secretary of State for Business, Energy and Industrial Strategy, says the drop in UK car sales is part of a wider problem:

"This is an economy being driven into the ditch. Sales of cars last month were down 9.3 per cent compared to a year earlier.

This is worrying not only for the car industry but speaks to a deeper economic malaise with anaemic economic growth figures this year and real wages lower than ten years ago. The country desperately needs a bold, transformative industrial strategy which only a Labour government will deliver."

12.57pm BST

This chart shows one reason why Britain's economy is in a mess - productivity has been persistently weak since the financial crisis, repeatedly defying forecasts of growth.

For 7 years, OBR have said productivity is set to increase.
For 7 years it has defied predictions and flat-linedhttps://t.co/PidZpVCAYT pic.twitter.com/UnTTrmVzVJ

12.31pm BST

The decline in car sales highlights the pressure on chancellor Philip Hammond to deliver an impressive budget next month.

The government desperately needs something to cheer about, following the debacle of Theresa May's speech yesterday. Hammond could improve the mood with some growth-friendly policies, tax cuts or spending pledges.

Philip Hammond is facing what officials describe as "a bloodbath" in the public finances in his Budget next month as weak economic forecasts derail the government's plans.

As much as two-thirds of the 26bn of headroom in the public finances that the chancellor created last year as a buffer for the economy through the Brexit period is likely to be wiped out after the government's fiscal watchdog concludes its forecasts for growth have been too optimistic.

Just when you thought it couldn't get any worse...Eeyore Giles has got more bad news.

11.25am BST

Sales of new vans in the UK also fell in September, by over 4%, indicating that British businesses are cutting back.

Business confidence has taken a hit recently as economic and political uncertainty continues, so fluctuations in purchasing patterns are to be expected.

11.22am BST

The 21% slump in diesel car sales has been welcomed by Friends of the Earth, the environmental campaign group:

Good consumers are turning away from diesels. Reports show diesel vehicles only marginally better on CO2 than petrol + far worse on NOx. https://t.co/uNADQCVoSW

10.57am BST

Labour MP Chuka Umunna says the decline in UK car sales shows that Britain's exit from the EU is causing significant harm to the UK ecnoomy.

"This is yet more evidence that Brexit is having a serious and damaging impact on our economy and on the livelihoods of the British people. Higher inflation, lower growth and greater uncertainty are all taking their toll. These new figures suggest that households are feeling the pinch.

"Car sales tend to be a barometer for the overall health of our economy, which makes this news even more concerning.

10.21am BST

Ian Gilmartin of Barclays Corporate Banking says the 9.3% slump in car sales in September was a poor result, but not unexpected given the drop in consumer confidence.

New plate months are always crucial, and some were pinning their hopes on the usual biannual boost providing a bit of respite ahead of further tough times, but that hasn't materialised.

The result isn't a surprise because across a number of retail sectors consumers are understandably becoming more reluctant to commit to high value purchases. Add to that the ongoing confusion over diesel models, which posted a 22% drop last month, and it's easy to see why the overall figures have dipped so much.

"Consumers walking into the showroom need more clarity on issues such as diesel and air quality. We are working closely with car retailers to assist them in educating their customers."

Very weak car registrations data add to signs that the auto market has slowed sharply #economy #BoE pic.twitter.com/JxkyvWSThR

10.05am BST

Nissan managed to beat Ford to the top of the best-sellers table last month:

9.42am BST

Chris Bosworth, director of strategy at Close Brothers Motor Finance, says anxiety over the UK's exit from the EU has hurt demand for cars.

September traditionally delivers a peak as the new registration plates are introduced, but it appears that the motor industry is struggling to shake off the impact that Brexit uncertainty is having on consumer spending.

We are already seeing the consequences of the weak pound on UK manufacturers' profit margins, and this has made it difficult for dealers to offer customer deals, especially the 0% finance offers which would have been abundant in previous years.

9.42am BST

Here's a handy chart showing how UK car sales have declined this year:

UK new car registrations: change in the last six months, compared to the same six months last year. pic.twitter.com/MqSf1qOpxh

9.31am BST

Diesel car sales slumped by over 20% in September, as British drivers continue to shun them following recent emission scandals.

Around 170,000 new diesel cars were registered last month, down from almost 218,000 in September 2016.

SMMT warns after 21.7% fall in September diesel sales, if negative trend continues UK CO2 levels from new cars could rise this year

Related: Diesel cars emit 10 times more toxic pollution than trucks and buses, data shows

Related: UK diesel car values dive by up to a quarter amid pollution crackdown

9.25am BST

The decline in car sales last month was wide-ranging. Businesses bought 5.2% fewer cars, sales to private buyers fell 8.8%, while 'fleet' sales dropped by 10%.

Sales of luxury saloons slumped by over a third, while supermini sales dropped by 21%.

9.12am BST

The slump in September sales means that new car registrations have fallen by 3.9% since the start of 2017.

Unless the market picks up, we could see the first drop in annual sales since the last recession.

9.11am BST

BREAKING: Car sales across the UK fell by 9.3% in September.

That's the sixth monthly decline in a row, and raises the real risk that British car registrations post their first annual decline since 2011.

September is always a barometer of the health of the UK new car market so this decline will cause considerable concern. Business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big ticket purchases.

The confusion surrounding air quality plans has not helped, but consumers should be reassured that all the new diesel and petrol models on the market will not face any bans or additional charges. Manufacturers' scrappage schemes are proving popular and such schemes are to be encouraged given fleet renewal is the best way to address environmental issues in our towns and cities.

8.49am BST

Sterling has hit a three-week low against the US dollar, shedding half a cent to just $1.318.

Fresh speculation over Theresa May's future, ongoing Brexit worries, and today's weak car sales are all weighing on the pound.

It has taken two speeches, but Theresa May has finally managed to undo Carney's attempt to prop up the Pound#Brexit #SoundAsAPound pic.twitter.com/uR499NTMCi

There were the lingering effects of Standard & Poor's comment yesterday stating that it is 'sceptical' of a Bank of England rate hike.

Keeping with the BoE, deputy governor Sam Woods argued that a transition deal with the EU would need to be in place before Christmas to prevent an exodus of City jobs out of the UK.

8.44am BST

Britons are cutting back on new sofas, as well as new cars, it seems.

The UK furniture market continues to be very challenging and the outlook for the sector remains uncertain.

Big ticket items like sofas tend to be the first things consumers cut back on when they are feeling the pinch, and a slew of poor sales data from the car industry corroborates that trend.

Things don't look like they are getting much easier either, with DFS expecting weak trading conditions to continue into the next financial year.

8.26am BST

The SMMT's communications director, Tamzen Isacsson, blames economic and political uncertainty for the drop in UK car sales:

New car market down over 9% in Sept now at around 426,000 . Confidence falls with ec and pol uncertainty + confusion over air quality plans

8.14am BST

Reuters has a good explanation of why UK car sales have declined for the last six months:

Sales have fallen year-on-year since April due to a combination of factors including increased vehicle excise duty, weaker consumer confidence, partly due to uncertainty around Brexit, and comparisons with record sales in 2015 and 2016.

Diesel car sales have been worst hit as consumers fear new levies and possible restrictions on their use in urban areas as the government continues to consult on ways to reduce pollution.

8.11am BST

SMMT chief Mike Hawes also warns that car manufacturers are putting off new investment until they know what's happening with Brexit.

Hawes says Britain's auto industry enjoyed a "tremendous run" of investment, around 2.5bn per year for the last five years.

"People are waiting to see what the future relationship with our biggest market, Europe, is going to be before making any additional investment."

7.58am BST

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

Sales have been falling for six months and that trend is probably going to be magnified given the size of the September market.

So we're probably going to see something over 9% in September.

The confidence that people have in making big-ticket items" is just declining.

Theresa May's pledge to cap "rip-off" energy prices is about as clear as the average electricity and gas bill.

The prime minister promised to introduce a draft bill next week to give the energy regulator, Ofgem, powers to cap the bills of people being "punished" for their loyalty and their inability to shop around.

Related: May's pledge on 'rip-off' energy prices keeps UK in dark over cap on bills