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UK inflation falls to 13-month low, sending pound sliding – business live UK inflation falls to 13-month low, sending pound sliding – business live
(35 minutes later)
POTUS' tweet oft good news pending for US autoworkers is seen as a hint of progress on NAFTA. $CAD and $MXN turn better bid.
It’s time for some more outpourings from President Trump’s twitter account, and this time it appears to be a jobs promise:
There will be big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough!
The pound continues to come under pressure, down 0.9% against the dollar at $1.3316 and losing more than 2% against the Japanese yen, the second biggest daily drop this year.
The unexpected fall in inflation in April has made an interest rate rise in August less likely, according to many commentators. But not everyone agrees:
UK inflation fell in April because data are collected mid-month, so didn't capture the usual rise in transport prices around Easter this yr. April's print matches the MPC f'cast, and inflation looks set to RISE over the summer due to ↑oil prices. An Aug rate hike remains likely. pic.twitter.com/55ijGclqS1
Here’s our economics correspondent Richard Partington on today’s inflation figures:
UK inflation unexpectedly fell further last month to the lowest level in more than a year, as lower airfares provided some relief for cash-strapped Britons.
The consumer price index dropped from 2.5% in March to 2.4%, according to the Office for National Statistics (ONS). Economists had expected the annual rate of growth in prices to remain unchanged.
This decline will be welcomed by consumers under sharp pressure from rising prices since the Brexit vote, when a sudden drop in the value of the pound pushed up the cost of imported goods.
While the impact from sterling’s fall has started to fade, economists reckoned higher fuel prices would force inflation to remain above the Bank of England’s target of 2%.
The latest fall raises fresh questions for Threadneedle Street, after the bank delayed raising interest rates earlier this month as a consequence of weak economic growth and inflation falling further than expected in March. The pound dropped by two-thirds of a cent against the dollar on foreign exchanges, reaching a five-month low of $1.3370.
The ONS said airfares provided the biggest downward contribution, due to the timing of Easter. Airlines typically raise their prices around the holiday, although the ONS said it had found no impact this year because Easter fell between its March and April price collection periods.
Soft drink prices had their biggest increase for this time of year, rising sharply in March and April following the introduction of the sugar tax. However, Mike Hardie of the ONS said many retailers had yet to pass on the impact of the levy to shoppers.
More here:
Back in the UK, new data has confirmed that London’s housing market has come firmly off the boil.Back in the UK, new data has confirmed that London’s housing market has come firmly off the boil.
Property prices in the capital have fallen by 0.7% in the last year - making London the only part of the UK with negative house price inflation.Property prices in the capital have fallen by 0.7% in the last year - making London the only part of the UK with negative house price inflation.
Our personal finance editor Patrick Collinson explains:Our personal finance editor Patrick Collinson explains:
Property experts in London said buyers are “sensing blood in the water” with sellers forced to cut prices steeply to ensure a sale.Property experts in London said buyers are “sensing blood in the water” with sellers forced to cut prices steeply to ensure a sale.
Jonathan Hopper of Garrington Property Finders said: “London is paying a painfully high price for its stellar run of price rises, and a correction is now under way in several parts of the capital.Jonathan Hopper of Garrington Property Finders said: “London is paying a painfully high price for its stellar run of price rises, and a correction is now under way in several parts of the capital.
“Sellers are being forced to trim their expectations, and astute buyers are increasingly sensing blood in the water.”“Sellers are being forced to trim their expectations, and astute buyers are increasingly sensing blood in the water.”
London is the only major region of the UK to see falling house prices over the past year. ONS figures: https://t.co/9yUOpfnG89 pic.twitter.com/RLuIyHefEwLondon is the only major region of the UK to see falling house prices over the past year. ONS figures: https://t.co/9yUOpfnG89 pic.twitter.com/RLuIyHefEw
UK average house price growth was 4.2%y/y according to ONS Land Registry. London still seeing average house price falls (-0.7%). Plenty of regional variation as per usual. Scotland with highest rate of growth (not so usual). Quite a gap between London & rest now. pic.twitter.com/Xs3Cf1h1OcUK average house price growth was 4.2%y/y according to ONS Land Registry. London still seeing average house price falls (-0.7%). Plenty of regional variation as per usual. Scotland with highest rate of growth (not so usual). Quite a gap between London & rest now. pic.twitter.com/Xs3Cf1h1Oc
Newsflash: Breaking away from UK inflation, US media conglomerate Comcast has just announced it is preparing an all-cash offer for most of Twenty-First Century Fox - Rupert Murdoch’s media empire.Newsflash: Breaking away from UK inflation, US media conglomerate Comcast has just announced it is preparing an all-cash offer for most of Twenty-First Century Fox - Rupert Murdoch’s media empire.
That’s a fascinating development, because Murdoch has agreed to sell 21CF to Disney for $52.4bn.That’s a fascinating development, because Murdoch has agreed to sell 21CF to Disney for $52.4bn.
Comcast has already tried to gatecrash the 21CF-Disney deal by bidding for UK broadcaster Sky, challenging Fox’s own bid for Sky (it already owns a 39% stake).Comcast has already tried to gatecrash the 21CF-Disney deal by bidding for UK broadcaster Sky, challenging Fox’s own bid for Sky (it already owns a 39% stake).
It is now upping the stakes and trying to thwart Disney by acquiring 21CF for itself.It is now upping the stakes and trying to thwart Disney by acquiring 21CF for itself.
BREAKING: Comcast says it is in the advanced stages of preparing all-cash bid for Fox assets https://t.co/qzDA61KjmDBREAKING: Comcast says it is in the advanced stages of preparing all-cash bid for Fox assets https://t.co/qzDA61KjmD
Comcast, which owns NBC Universal and Universal Pictures, says it will beat Disney’s offer, telling investors.Comcast, which owns NBC Universal and Universal Pictures, says it will beat Disney’s offer, telling investors.
Any offer for Fox would be all-cash and at a premium to the value of the current all-share offer from Disney.Any offer for Fox would be all-cash and at a premium to the value of the current all-share offer from Disney.
Today’s slide means the pound has now lost 10 whole cents against the US dollar since 16 April, when it was worth $1.43.Today’s slide means the pound has now lost 10 whole cents against the US dollar since 16 April, when it was worth $1.43.
This slide was triggered by Bank of England governor Mark Carney, who warned that weak economic data and Brexit uncertainty might hold back interest rate increases.This slide was triggered by Bank of England governor Mark Carney, who warned that weak economic data and Brexit uncertainty might hold back interest rate increases.
The ongoing cabinet infighting over Britain’s future customs relationships with the EU has also weakened sterling, as it raises the chances of a hard Brexit.The ongoing cabinet infighting over Britain’s future customs relationships with the EU has also weakened sterling, as it raises the chances of a hard Brexit.
A weak pound drives up inflation, by making imports pricier., and several experts are predicting that inflation will rise again later this year.A weak pound drives up inflation, by making imports pricier., and several experts are predicting that inflation will rise again later this year.
Joel Dungate, investment analyst at investment management and stockbroking firm Redmayne Bentley, explains:Joel Dungate, investment analyst at investment management and stockbroking firm Redmayne Bentley, explains:
There are reasons why future inflation may move back up. In recent weeks, the price of oil has risen sharply and the value of the Pound has fallen again, both of which could drive up the costs of goods.There are reasons why future inflation may move back up. In recent weeks, the price of oil has risen sharply and the value of the Pound has fallen again, both of which could drive up the costs of goods.
In addition, recent data showed that wage growth had overtaken inflation, putting more money into the pockets of consumers. In theory this could increase demand and push prices higher.”In addition, recent data showed that wage growth had overtaken inflation, putting more money into the pockets of consumers. In theory this could increase demand and push prices higher.”
Brent crude oil hit its highest levels since 2014 last week, at over $80 per barrel.Brent crude oil hit its highest levels since 2014 last week, at over $80 per barrel.
Rob Scammell, senior portfolio manager at Kempen Capital Management, believes this will hit consumers in the pocket.Rob Scammell, senior portfolio manager at Kempen Capital Management, believes this will hit consumers in the pocket.
“Oil price rises have not yet fed through to the UK – but this could be just a matter of time. With a further 10% rise in oil in sterling terms over the last month, it seems unlikely that this restraint can last for long.“Oil price rises have not yet fed through to the UK – but this could be just a matter of time. With a further 10% rise in oil in sterling terms over the last month, it seems unlikely that this restraint can last for long.
Could someone hand the pound a sponge and a towel?Could someone hand the pound a sponge and a towel?
Sterling has now shed a whole cent against the US dollar to $1.3328 (still a 5-month low).Sterling has now shed a whole cent against the US dollar to $1.3328 (still a 5-month low).
Although the inflation rate dropped last month, it’s important to note that the cost of living is still higher than a year ago.Although the inflation rate dropped last month, it’s important to note that the cost of living is still higher than a year ago.
Each of the main areas - food, transport, housing costs - cost more in April 2018 than April 2017, as this chart shows:Each of the main areas - food, transport, housing costs - cost more in April 2018 than April 2017, as this chart shows:
The report shows that food prices have risen 2.4% in the last year (including a 5.8% jump in fish prices).The report shows that food prices have risen 2.4% in the last year (including a 5.8% jump in fish prices).
Soft drinks cost 6.2% more than in April 2017 (thanks to the sugar tax), while tobacco is 6.1% pricier.Soft drinks cost 6.2% more than in April 2017 (thanks to the sugar tax), while tobacco is 6.1% pricier.
Clothing costs are up by 1.7%, while furniture is up 2.4%.Clothing costs are up by 1.7%, while furniture is up 2.4%.
Although air fares were 7.9% cheaper year-on-year (due to the early Easter), this was balanced out by a 4.2% increase in the cost of new cars.Although air fares were 7.9% cheaper year-on-year (due to the early Easter), this was balanced out by a 4.2% increase in the cost of new cars.
The pound has dropped to fresh five-month lows against the US dollar, as the chances of an early UK interest rate rise drop sharply.The pound has dropped to fresh five-month lows against the US dollar, as the chances of an early UK interest rate rise drop sharply.
Sterling is now down almost a cent at $1.335, following the news that UK inflation dropped to 2.4% last month.Sterling is now down almost a cent at $1.335, following the news that UK inflation dropped to 2.4% last month.
Pound hits its lowest level so far this year after Britain's inflation slows more than expected https://t.co/3A3cVqZgfD pic.twitter.com/oixMkr3ha5Pound hits its lowest level so far this year after Britain's inflation slows more than expected https://t.co/3A3cVqZgfD pic.twitter.com/oixMkr3ha5
However, Yael Selfin, chief economist at KPMG in the UK, predicts that the recent jump in the oil price could drop inflation up in the coming months.However, Yael Selfin, chief economist at KPMG in the UK, predicts that the recent jump in the oil price could drop inflation up in the coming months.
She says:She says:
“Prices of goods, including furnishing, household appliances, clothing and footwear, moderated in April. At the same time, the cost of services, including hotels and communication packages, were on the rise.“Prices of goods, including furnishing, household appliances, clothing and footwear, moderated in April. At the same time, the cost of services, including hotels and communication packages, were on the rise.
This is partially a reflection of the diminishing impact on import prices from the sharp depreciation of the pound following the EU referendum, and increasing domestic inflationary pressures as the labour market tightens further and spare capacity wanes.This is partially a reflection of the diminishing impact on import prices from the sharp depreciation of the pound following the EU referendum, and increasing domestic inflationary pressures as the labour market tightens further and spare capacity wanes.
“With oil prices on the up and domestic price pressures unabated, we may not see further falls in inflation this year.”“With oil prices on the up and domestic price pressures unabated, we may not see further falls in inflation this year.”
Professor Costas Milas of the University of Liverpool agrees that the case for the Bank of England raising interest rates in August is fading.Professor Costas Milas of the University of Liverpool agrees that the case for the Bank of England raising interest rates in August is fading.
He explains:He explains:
The 2.4% CPI inflation reading for April is already (slightly) lower than the most likely outcome (the so called ‘mode’) of 2.43% predicted for the second quarter of 2018 by the MPC’s Inflation Report only a few weeks earlier.The 2.4% CPI inflation reading for April is already (slightly) lower than the most likely outcome (the so called ‘mode’) of 2.43% predicted for the second quarter of 2018 by the MPC’s Inflation Report only a few weeks earlier.
If CPI inflation falls further in May, they will most likely have to revise their inflation forecasts downwards which will obviously make the case for an August interest rate hike even weaker.If CPI inflation falls further in May, they will most likely have to revise their inflation forecasts downwards which will obviously make the case for an August interest rate hike even weaker.
Newsflash: Investors have slashed the chances of a UK interest rate hike in August to just a third:Newsflash: Investors have slashed the chances of a UK interest rate hike in August to just a third:
(Bloomberg) MARKET IMPLIED PROBABILITY OF A BANK OF ENGLAND RATE HIKE BOEWATCH BY AUGUST FALLS TO A THIRD FROM NEARLY HALF EARLIER THIS WEEK(Bloomberg) MARKET IMPLIED PROBABILITY OF A BANK OF ENGLAND RATE HIKE BOEWATCH BY AUGUST FALLS TO A THIRD FROM NEARLY HALF EARLIER THIS WEEK
That underlines why the pound has fallen -- lower interest rates mean there is less incentive to hold sterling.That underlines why the pound has fallen -- lower interest rates mean there is less incentive to hold sterling.
David Lamb, head of dealing at Fexco Corporate Payments, says the City is right:David Lamb, head of dealing at Fexco Corporate Payments, says the City is right:
“Britain’s next interest rate rise hasn’t just been kicked into the long grass, it has been sent sailing right out of the park.“Britain’s next interest rate rise hasn’t just been kicked into the long grass, it has been sent sailing right out of the park.
“With consumer inflation continuing to fall – even in the face of rising fuel prices – the Bank of England is running out of reasons to raise rates.“With consumer inflation continuing to fall – even in the face of rising fuel prices – the Bank of England is running out of reasons to raise rates.
“By contrast it has every reason to keep rates on hold. With CPI now falling to within touching distance of the Bank’s 2% target of its own accord, the last thing Mark Carney and Co will want to do is upset the faltering economy with a rate hike.“By contrast it has every reason to keep rates on hold. With CPI now falling to within touching distance of the Bank’s 2% target of its own accord, the last thing Mark Carney and Co will want to do is upset the faltering economy with a rate hike.
Predictably, the government has welcomed today’s decline in in inflation, while the opposition points out that real wages are still too low.Predictably, the government has welcomed today’s decline in in inflation, while the opposition points out that real wages are still too low.
For the government, financial secretary to the Treasury Mel Stride says:For the government, financial secretary to the Treasury Mel Stride says:
“Inflation falling and real wages on the rise means more money in people’s pockets. We are helping families earn more and keep more of what they earn by cutting taxes for 31 million people and increasing the National Living Wage, worth an extra £2,000.“Inflation falling and real wages on the rise means more money in people’s pockets. We are helping families earn more and keep more of what they earn by cutting taxes for 31 million people and increasing the National Living Wage, worth an extra £2,000.
“We must continue to ensure people’s pay outstrips inflation and build an economy that truly works for everyone.“We must continue to ensure people’s pay outstrips inflation and build an economy that truly works for everyone.
But Peter Dowd MP, Labour’s Shadow Chief Secretary to the Treasury, says workers need more help:But Peter Dowd MP, Labour’s Shadow Chief Secretary to the Treasury, says workers need more help:
“Inflation remains higher than the Bank of England’s target, while working people are struggling with real earnings still lower than in 2010, following eight years of Tory economic failure.“Inflation remains higher than the Bank of England’s target, while working people are struggling with real earnings still lower than in 2010, following eight years of Tory economic failure.
The next Labour government will introduce a £10 per hour Real Living Wage to tackle the squeeze on wages, and build a high wage, high skill economy for the many, not the few.”The next Labour government will introduce a £10 per hour Real Living Wage to tackle the squeeze on wages, and build a high wage, high skill economy for the many, not the few.”
Today’s report also shows the impact of Britain’s new sugar tax.Today’s report also shows the impact of Britain’s new sugar tax.
Prices for mineral waters, soft drinks and juices jumped by 2.8% in April, as some retailers passed on a new levy on beverages packed with sugar.Prices for mineral waters, soft drinks and juices jumped by 2.8% in April, as some retailers passed on a new levy on beverages packed with sugar.
That’s a chunky increase, but not enough to prevent the wider inflation rate falling.That’s a chunky increase, but not enough to prevent the wider inflation rate falling.
Mike Hardie, head of inflation at the Office for National Statistics, explains:Mike Hardie, head of inflation at the Office for National Statistics, explains:
“Inflation continued to slow in April, with air fares making the biggest downward contribution, due to the timing of Easter. This was partially offset by the rise in petrol prices.“Inflation continued to slow in April, with air fares making the biggest downward contribution, due to the timing of Easter. This was partially offset by the rise in petrol prices.
“Soft drink prices saw their biggest ever rise for this time of year, due to the introduction of the sugar tax. However, many retailers still haven’t passed the impact of the tax onto shoppers.“Soft drink prices saw their biggest ever rise for this time of year, due to the introduction of the sugar tax. However, many retailers still haven’t passed the impact of the tax onto shoppers.
Martin Lane, managing editor of money.co.uk, has welcomed the drop in UK inflation to a 13-month low:Martin Lane, managing editor of money.co.uk, has welcomed the drop in UK inflation to a 13-month low:
“The nation can breathe a small sigh of relief. Inflation has fallen, so the pounds in our pockets aren’t being stretched quite as far.“The nation can breathe a small sigh of relief. Inflation has fallen, so the pounds in our pockets aren’t being stretched quite as far.
The pressure on our wages is easing and the gap between inflation and wage growth has disappeared, easing the strain on our wallets.The pressure on our wages is easing and the gap between inflation and wage growth has disappeared, easing the strain on our wallets.
Something else consumers will be grateful for in the run up to holiday season, is the cost of items like food and airfares are slowing.Something else consumers will be grateful for in the run up to holiday season, is the cost of items like food and airfares are slowing.
But consumes should still be cautious, Lane adds:But consumes should still be cautious, Lane adds:
“With inflation at a one year low of 2.4% and no interest rises yet it may seem like a great time to spend spend spend. However, there are still interest rate rises looming on the horizon, so it isn’t the time for you to splash your cash just yet. Use the good times to prepare your finances for when they aren’t so great.“With inflation at a one year low of 2.4% and no interest rises yet it may seem like a great time to spend spend spend. However, there are still interest rate rises looming on the horizon, so it isn’t the time for you to splash your cash just yet. Use the good times to prepare your finances for when they aren’t so great.
Create a budget and spend 30 minutes looking at where you could make savings, from switching where you do your weekly shop to changing your energy supplier. Half an hour of research and admin could save you hundreds, if not thousands a year.”Create a budget and spend 30 minutes looking at where you could make savings, from switching where you do your weekly shop to changing your energy supplier. Half an hour of research and admin could save you hundreds, if not thousands a year.”
Kevin Doran, chief investment officer at stockbroker AJ Bell, warns that the drop in inflation may not last.Kevin Doran, chief investment officer at stockbroker AJ Bell, warns that the drop in inflation may not last.
“UK consumers will be glad to see average wage increases starting to outstrip inflation and for the spending power of the pound in their pocket pick up further.“UK consumers will be glad to see average wage increases starting to outstrip inflation and for the spending power of the pound in their pocket pick up further.
“However, the recent weakness in the pound and the rising oil price are a concern and could quickly reverse the drop in inflation. The jump in the oil price has started to hit petrol pumps, pushing up costs for UK consumers and businesses alike. In addition, the weak pound will be driving up input costs for many UK companies which will ultimately filter through to UK consumers in the coming months.“However, the recent weakness in the pound and the rising oil price are a concern and could quickly reverse the drop in inflation. The jump in the oil price has started to hit petrol pumps, pushing up costs for UK consumers and businesses alike. In addition, the weak pound will be driving up input costs for many UK companies which will ultimately filter through to UK consumers in the coming months.
“If inflation does increase, UK consumers will once again start to feel the pinch. Wage growth is currently only marginally ahead of inflation at 2.6% and interest rates on cash savings remain rock bottom so rising prices will weaken the spending power of both earnings and savings.”“If inflation does increase, UK consumers will once again start to feel the pinch. Wage growth is currently only marginally ahead of inflation at 2.6% and interest rates on cash savings remain rock bottom so rising prices will weaken the spending power of both earnings and savings.”
The drop in inflation in April suggests that real wages in the UK are still growing, at a modest pace.The drop in inflation in April suggests that real wages in the UK are still growing, at a modest pace.
The latest data shows that average basic pay in Britain (excluding bonuses) rose by 2.9% per year in the first quarter of 2018. Total pay (including bonuses) rose by 2.6%, or barely ahead of the cost of living.The latest data shows that average basic pay in Britain (excluding bonuses) rose by 2.9% per year in the first quarter of 2018. Total pay (including bonuses) rose by 2.6%, or barely ahead of the cost of living.
Why did the unusually early Easter helped to pull inflation down last month?Why did the unusually early Easter helped to pull inflation down last month?
Easter Sunday fell on 1 April, two weeks earlier than in 2017. Airlines usually put prices up as people either jet off for holidays, or travel home - but this year, that rush began in March.Easter Sunday fell on 1 April, two weeks earlier than in 2017. Airlines usually put prices up as people either jet off for holidays, or travel home - but this year, that rush began in March.
The ONS explains:The ONS explains:
The timing of Easter in the middle of April 2017 contributed to air fares rising by 18.6% on the month whereas this year, Easter fell at the beginning of April before the price collection period and there was no price rise.The timing of Easter in the middle of April 2017 contributed to air fares rising by 18.6% on the month whereas this year, Easter fell at the beginning of April before the price collection period and there was no price rise.
Instead, fares fell slightly, by 0.2%, between March and April.Instead, fares fell slightly, by 0.2%, between March and April.
Core inflation, which strips out volatile items, has fallen to just 2.1% from 2.3% in March.Core inflation, which strips out volatile items, has fallen to just 2.1% from 2.3% in March.
That’s another sign of cooling inflationary pressures.That’s another sign of cooling inflationary pressures.
*U.K. APRIL CORE INFLATION RATE FALLS TO 2.1%; EST. 2.2%*U.K. APRIL CORE INFLATION RATE FALLS TO 2.1%; EST. 2.2%