UK inflation sticks at 2016 low, as London house prices keep falling – business live
Rolling coverage of the latest economic and financial news, including the latest UK and eurozone inflation figures
- Latest: House price growth still weak
- UK inflation weaker than expected at 1.7%
- Weakest CPI since 2016
- Fuel and second-hand cars keep inflation down
- Pound falls as Brexit optimism fades
2.04pm BST
Time for a recap
The end of the Benefit Freeze? Benefits set to rise 1.7% with inflation in first increase in five years https://t.co/mSN4WbtGgg
British Pound forming a "oooh, damn, no wait, feck, oh hang on, no it's nothing, or is it, Tony Connelly tweet, Arlene Foster denial" pattern today pic.twitter.com/GCSkUTCbte
1.50pm BST
Here's some alarming lunchtime reading (or late-breakfast reading, if you're in America):
Low interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (15tn) timebomb in the event of another global recession, the International Monetary Fund has said.
In its half-yearly update on the state of the world's financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries - the US, China, Japan, Germany, Britain, France, Italy and Spain - would be impossible to service if there was a downturn half as serious as that of a decade ago.
Related: Global economy faces $19tn corporate debt timebomb, warns IMF
1.48pm BST
Ouch. Over in America, retail sales have fallen for the first time in seven months, declining by 0.3% in September.
This could be a sign that the trade war with China is causing more damage to the US economy, and that the slump in factory demand is spreading to consumers.
The Commerce Department said on Wednesday retail sales dropped 0.3% last month as households cut back spending on motor vehicles, building materials, hobbies, and online purchases. That was the first and biggest drop since February.
Data for August was revised up to show retail sales gaining 0.6% instead of 0.4% as previously reported. Economists polled by Reuters had forecast retail sales would climb 0.3% in September
US retail sales fell for first time in 7 months in Sept. Could raise fears manufacturing-led weakness spreading to broader #economy. Retail sales down 0.3% last month as households cut spending on motor vehicles, building materials, hobbies + online buys. https://t.co/TPoVcWtnny
1.44pm BST
Newsflash: Sterling has hit its highest level since May, on reports of progress in the Brexit negotiations...before quickly reversing!
The pound jumped over $1.28 after RTE's Tony Connelly reported that the DUP party have accepted the latest proposals regarding consent.
BREAKING: two senior EU sources say the main stumbling block to a deal has been removed with the DUP accepting the latest proposals on consent... Optimism a deal can now be done...
'EU sources' are talking nonsense. Discussions continue. Needs to be a sensible deal which unionists and nationalists can support. https://t.co/CpugVBfyBZ
1.14pm BST
Some good news: The husband and wife team who bought Thomas Cook's network of high street travel agencies out of liquidation have offered jobs to nearly 2,000 of the company's former workforce.
John and Irene Hays are reopening 186 Thomas Cook sites, having beaten two US private equity companies in the race to buy the asset earlier this month.
Related: Hays Travel owners offer jobs to 2,000 ex-Thomas Cook staff
12.50pm BST
Back to house prices.... and Lucy Pendleton of estate agents James Pendleton says that younger, first-time buyers are keeping the market moving:
"Growth may be almost static nationwide but it would be even worse were it not for the UK's army of first-time buyers who are putting a floor under prices with their can-do attitude.
"Despite a nuclear winter's worth of uncertainty, it's the younger generation who are still forging ahead as if nothing was wrong. They have the longest time horizon and we know that they have continued to transact in huge numbers lately.
12.39pm BST
My colleague Richard Partington points out that the government's benefit freeze has cost poorer households nearly 600 a year each, on average:
Households squeezed by the government's benefits freeze are set to receive the first cash increase in payments in five years, despite the austerity policy costing lower-income families 580 each year since 2015.
According to the Resolution Foundation, working-age benefits - including child benefit, universal credit, non-disability tax credits and jobseeker's allowance - are poised to rise with inflation by 1.7% next April.
Related: Benefits to rise 1.7% with inflation in first increase in five years
12.22pm BST
The IFS points out that freezing benefits payments at 2015 levels has cut the welfare bill by several billion pounds a year.
That put struggling families in the front line of the austerity crunch:
The @ONS announced today that inflation is 1.7%, meaning that, on current plans, most working-age benefits will go up by that much in April.
That will be the first increase since 2015, because of a 4-year benefits freeze. This has reduced benefits spending by 4.4bn per year. pic.twitter.com/82dvsIUY0u
Prices up 1.7% in September. Means benefits will rise by that amount in April.
What this means: end of benefits freeze after a long 4yrs as they keep pace with prices
What this doesnt mean: working age benefits actually increasing (they'll increase at 1/2 rate of pensions/wages) https://t.co/mDI27NGUKa
11.50am BST
September's inflation data is traditionally used to set welfare payments.
So this morning's CPI figures should mean that benefits rise by 1.7% next April, assuming the government ends the long austerity freeze.
Inflation is 1.7%. That's the amount benefits should go up next April, if the government finally lifts its four-year freeze on benefit uprating.
This is because benefits uprating is traditionally linked to the inflation figure for the September of the previous year. pic.twitter.com/LbZ74FXH0l
The benefits freeze has meant that vital safety nets, such as job seekers' allowance and child benefit, haven't risen with inflation as they usually would. Instead, they've stayed at the level they were in 2015.
This, in real terms, is a big cut to benefits.
The benefits freeze has meant that those with children, those receiving income support, and those who are out of work and struggling, have lost out on hundreds over this time.
The Joseph Rowntree Foundation estimates that the benefits freeze pushed around 200,000 people into poverty in the first three years of the freeze, around half of them children. If continued as planned, this will increase to 400,000 people.
Poverty isn't inevitable - it's a cruel political choice. That's why government needs to end the benefits freeze now.
11.34am BST
ONS Head of Inflation Mike Hardie sums up this morning's data:
"Inflation remained unchanged into September at its lowest rate since late 2016. Motor fuel and second-hand car prices fell, but were offset by price increases for furniture, household appliances and hotel rooms.
"Annual growth in UK house prices showed a moderate pick-up in August although it remains below the increases seen throughout 2018. Wales saw the strongest growth with prices continuing to fall in London and the South East".
11.28am BST
Despite recent house price falls in London, it's still desperately difficult to get onto the housing ladder, or shimmy up the steps.
That's because real wages have only just started growing faster than house prices, meaning property is very unaffordable.
Despite the slowdown in house price growth - and a welcome pick up in earnings growth - the gap between growth in house prices and earnings since 2011 remains huge. pic.twitter.com/wD2qOCqnm8
But across London, pay growth has only just started outpacing house price growth. The bigger picture is that since early 2011 house prices have increased six times faster than earnings in the capital. Home ownership in London remains far out of reach for many families. pic.twitter.com/Xa6rXF79hr
11.18am BST
Inflation is also looking subdued in the eurozone.
New data today shows that prices are only rising by 0.8% in the last year, the weakest since 2016, down from 1% in August.
#Euro Annual #Inflation Final at 0.8% https://t.co/jMc1LoqXTG pic.twitter.com/4cGMOmFJA4
#Eurozone #CPI falls to +0.8% YoY in September, from previous +1.0% and less than expected +0.9%
it rises +0.2% MoM, as expected
This should incentivise the #ECB to become more dovish and strenghten the #USD against the #EUR@graemewearden
11.08am BST
Howard Archer of EY Item Club predicts house price growth will remain weak, despite bouncing back from a near eight-year low in August.
He writes:
10.59am BST
Uncertainty over Britain's exit from the EU is hurting house prices, says Jamie Durham, economist at PwC:
"Wage growth and relatively low unemployment are continuing to support the housing market. But continued uncertainty in the market, related to Brexit among other factors, is likely to be dampening both supply and demand.
This is particularly the case in the capital and will likely continue to affect price growth over the coming months."
10.26am BST
UK house price inflation has picked up...but not in and around the capital.
Average house prices in the UK increased by 1.3% in the year to August 2019, the ONS reports, up from the seven-year low of 0.8% a month ago.
10.08am BST
TUC General Secretary Frances O'Grady is concerned by this week's economic data:
"Low inflation alongside falling employment is a worrying sign the economy is weakening.
"The government needs an urgent plan to protect growth by speeding up higher public sector investment.
9.59am BST
A handy reminder of which inflation rates matter:
Sept inflation: CPIH (which noone uses) unchanged at 1.7%. CPI (which is used for April benefit rise and many private and public sector pensions) unchanged at 1.7%. RPI (used to raise student loan interest rate, rail fares, and govt gilts etc) down from 2.6% to 2.4%.
9.58am BST
UK inflation has now stuck at its lowest level since December 2016 for two months in a row.
It rose sharply in the months following the EU referendum, as the slump in the pound hit import costs. That impact has now faded, slowing the rise in the cost of living
Commenting on today's inflation figures, our head of inflation Mike Hardie said: https://t.co/gpi0kQSWit pic.twitter.com/vbYt8R11JY
9.47am BST
At 1.7%, Britain's headline inflation rate is below the Bank of England's target of 2% -- meaning less pressure to consider raising interest rates.
But in the current political climate, the BoE is leaning towards cutting borrowing costs - especially if there is another Brexit delay.
"While the below target reading will provide a welcome distraction for participants searching for some Brexit respite, direction will continue to be driven by political developments.
After unemployment data disappointed yesterday, today's inflation miss could bolster the case for a dovish mantra from the BoE as they navigate uncertain waters. Participants with sterling exposure will likely spend the days chained to their desk as headlines continue to fuel volatility."
9.46am BST
September's subdued inflation is good news for workers -- it means real wages are still growing.
Yesterday we learned that average earnings, including bonuses, rose by 3.8% per year in the 12 months to August. That's down from 4.0% the previous month, though, suggesting the labour market is cooling. Unemployment rose, lifting the jobless rate from 3.8% to 3.9%.
9.41am BST
Snap reaction
#uk #CPI +1.7% YoY in September, less than exp.+1.8%
+0.1% MoM, less than exp. +0.2%#inflation
No change in CPI inflation - 1.7%y/y in September. Core inflation (excl.'s food & fuel) did tick up from 1.5%y/y to 1.7%y/y. Main downward push came from motor fuels, main upward push from household goods, hotels & rec. & culture goods. RPI fell from 2.8%y/y to 2.4%y/y. pic.twitter.com/cSSjrdkTsC
9.41am BST
The retail prices index (a broader measure of inflation) was also weaker than expected - dropping from 2.6% in August to 2.4% in September.
9.31am BST
Newsflash: UK inflation remained subdued in September.
The Consumer Prices Index rose by 1.7% year-on-year, matching August, and below the 1.8% expected.
9.22am BST
The US-driven trade conflict is giving the global economy depression.
So warns Kit Juckes of Socii(C)ti(C) Gi(C)ni(C)rale, who says America's move away from free trade is the more important geopolitical issue driving markets (followed by Brexit).
It's worth pointing out, as an aside, that the IMF isn't in the business of scaremongering: As late as July 2008 they weren't forecasting a 2009 recession in any of the world's biggest economies. Indeed, today's forecast of 3% global growth this year, and 3.4% next year, compares to a forecast in July 2008 of 4.1% that year and 3.9% in 2009.
Related: IMF warns there is 'limited ammunition' to fight recession
9.08am BST
Speaking of Brexit.... Whitehall's spending watchdog has warned of chaos at the ports if the UK leaves the EU without a deal.
The National Audit Office says, in a timely warning, that there could be freight delays, more crime and fewer checks on migrants entering the country.
Related: No-deal Brexit could mean freight delays and more fraud, says NAO
9.06am BST
Sterling has taken a bit of a bath this morning, as traders fret that a last-minute Brexit deal isn't going to happen.
The pound has dropped by almost a cent, back below $1.27, having hit a five-month high of $1.2798 on Tuesday
Govt sources are indicating this morning chances of a deal this week are now shrinking - this is of course, partly because room for manouvre limited by DUP and Brexiteers, even tho many of them are reluctantly on board
Related: Brexit talks continue after Boris Johnson makes concessions on Irish border
8.50am BST
Online fashion company ASOS is bucking the trend this morning, with its shares surging 16% in early trading after reporting financial results.
Accordingly we lost focus on several of our core competencies, notably product, presentation and customer engagement.
8.33am BST
European stock markets have made a lacklustre start to trading too, with the Stoxx 600 index down 0.25%.
8.27am BST
There's another problem with the US-China trade 'deal' announced on Friday.
Beijing has, apparently, pledged to buy $50bn of US farm products - a major increase on the $20bn traded in 2017. So to achieve it, China would have to drop tariffs on US agricultural goods.
8.02am BST
China's stock market has lost some ground overnight.
7.57am BST
The row between Beijing and Washington over Hong Kong is threatening to derail the trade war talks, says Ipek Ozkardeskaya, senior market analyst at London Capital Group:
US stock futures headed south in the overnight trading session, as tensions with China started rising again amid the US House passed a bill on Hong Kong, which requires a review of the situation in the city on annual basis to keep its special status in place. Needless to say that Beijing didn't like the US sticking its nose into its internal affairs at all, and threatened to retaliate.
Before that, Chinese officials had said that they would buy massive amounts of US farm products, only if the US removed the tariffs on its exports. Here, we are talking about roughly $40/50 billion US dollar worth of US farm products, versus $20 billion purchased in 2017, before the trade relations between the two countries deteriorated. But that dream of Trump's could turn out to be fiction.
7.53am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
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