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UK inflation hits lowest level since March 2017 as petrol prices fall – business live UK inflation hits lowest level since March 2017 as petrol prices fall – business live
(35 minutes later)
Tom Stevenson, investment director at Fidelity International, reckons Brexit angst is pulling inflation down, as retailers are forced to slash prices.
“Brexit uncertainty and flagging consumer confidence are showing up in increasingly soggy data, with inflation hitting lowered expectations this morning. Retailers are being forced into heavy discounting to persuade shoppers to open their wallets, offsetting the inflationary impact of the weaker pound. Clothing was a notable drag.
“However, it’s not all bad news as last week’s ONS earnings data showed that UK wage growth has risen to a healthy 3.3%. UK households are getting progressively better off.
UK inflation is clearly on a “downward trend,” says Mike Jakeman, senior economist at PwC.
That’s a boost to workers, as earnings are expected to keep rising this year (although a disorderly Brexit could change that!).
Jakeman says:
“Consumer price inflation slowed in November, to 2.3% year on year, from 2.4% in October. This was the slowest pace of increase for 20 months and was driven by the effect of lower global oil prices, which reduced the cost of a tank of fuel for British motorists by an average of 2.6 pence a litre in the past month. But even setting the aside the effects of volatile components such as fuel, it is clear that inflation is on a downward trend.
Both headline and core inflation measures have steadily slowed during 2018, as the effect of a weaker pound has diminished and economic growth has remained tepid.
UK CPI #inflation ticks down slightly to 2.3% in November, in line with consensus forecasts, driven largely by falling fuel prices and recreational goods such as video games pic.twitter.com/vHM2n7C4Gt
Good news for anyone looking to get onto the housing ladder: UK house price inflation has hit its lowest in over five years.Good news for anyone looking to get onto the housing ladder: UK house price inflation has hit its lowest in over five years.
The price of the average UK property rose by 2.7% in the year to October, down from 3% in September.The price of the average UK property rose by 2.7% in the year to October, down from 3% in September.
Once again, London property prices dragged the national average down -- dropping by 1.7% in the last 12 months.Once again, London property prices dragged the national average down -- dropping by 1.7% in the last 12 months.
Average UK house price growth slowed to 2.7%y/y in October according to the latest ONS/Land Registry figures. London & the N. East both saw house price falls, while the N. West & N. Ireland are currently seeing the fastest rates of average house price inflation. pic.twitter.com/MBVyO5RiXkAverage UK house price growth slowed to 2.7%y/y in October according to the latest ONS/Land Registry figures. London & the N. East both saw house price falls, while the N. West & N. Ireland are currently seeing the fastest rates of average house price inflation. pic.twitter.com/MBVyO5RiXk
Jeremy Leaf, north London estate agent, fears that 2019 will be tough for the housing market too:Jeremy Leaf, north London estate agent, fears that 2019 will be tough for the housing market too:
Overall, prospects for the new year are not good as all the recent Brexit and general economic uncertainty are not reflected in these statistics.Overall, prospects for the new year are not good as all the recent Brexit and general economic uncertainty are not reflected in these statistics.
‘On the ground, December is proving to be fairly typical - generally quiet but still, thankfully, a fair number of buyers who need to move checking out what they consider are the best value options.’‘On the ground, December is proving to be fairly typical - generally quiet but still, thankfully, a fair number of buyers who need to move checking out what they consider are the best value options.’
At 2.3%, inflation is moving close to the Bank of England’s target.At 2.3%, inflation is moving close to the Bank of England’s target.
Jeremy Thomson-Cook of foreign exchange firm World First says:Jeremy Thomson-Cook of foreign exchange firm World First says:
“Inflation is moving back towards the Bank of England’s target of 2% and allowing real wages gains to extend into the end of the year.“Inflation is moving back towards the Bank of England’s target of 2% and allowing real wages gains to extend into the end of the year.
The main pressure within the CPI basket is naturally fuel given the precipitous falls we have seen in the cost of a barrel of oil but food prices have also been kept in check ahead of the Christmas period.The main pressure within the CPI basket is naturally fuel given the precipitous falls we have seen in the cost of a barrel of oil but food prices have also been kept in check ahead of the Christmas period.
The BoE might be relieved to see inflation dropping. On the other hand, as Geoff Tily of the TUC points out, it might fear that last summer’s rate hike was a mistake:The BoE might be relieved to see inflation dropping. On the other hand, as Geoff Tily of the TUC points out, it might fear that last summer’s rate hike was a mistake:
Today's inflation figures show CPI at 2.3% and core inflation at 1.8% cent - both at 20 month lows. Increasingly looks like (unanimously agreed) @bankofengland rate rise in August was wrong call. pic.twitter.com/qZDJXUZZmEToday's inflation figures show CPI at 2.3% and core inflation at 1.8% cent - both at 20 month lows. Increasingly looks like (unanimously agreed) @bankofengland rate rise in August was wrong call. pic.twitter.com/qZDJXUZZmE
This chart confirms that cheaper fuel helped to pull UK inflation down last month.This chart confirms that cheaper fuel helped to pull UK inflation down last month.
The ONS says:The ONS says:
Petrol prices fell by 2.6 pence per litre between October and November 2018, compared with a rise of 1.8 pence per litre between October and November 2017. This was partially offset by an upward contribution from sea fares, which rose this year but fell a year ago.Petrol prices fell by 2.6 pence per litre between October and November 2018, compared with a rise of 1.8 pence per litre between October and November 2017. This was partially offset by an upward contribution from sea fares, which rose this year but fell a year ago.
But what about the drop in recreation costs?But what about the drop in recreation costs?
According to the ONS, that’s due to a drop in the price of computer games, and concert tickets (both of which can be volatile, depending on which musical stars are touring the country, and when the latest gaming blockbuster is released).According to the ONS, that’s due to a drop in the price of computer games, and concert tickets (both of which can be volatile, depending on which musical stars are touring the country, and when the latest gaming blockbuster is released).
The drop in inflation means UK wages are outpacing the cost of living.The drop in inflation means UK wages are outpacing the cost of living.
Average earnings are currently rising 3.3%, meaning real wages are growing by around 1%.Average earnings are currently rising 3.3%, meaning real wages are growing by around 1%.
Overall good news for UK inflation and real wages trends as CPI falls to 2.3% and RPI to 3.2% in NovemberOverall good news for UK inflation and real wages trends as CPI falls to 2.3% and RPI to 3.2% in November
Newsflash: Inflation in the UK has fallen to its lowest level since March 2017, giving shoppers a much-needed boost ahead of Christmas.Newsflash: Inflation in the UK has fallen to its lowest level since March 2017, giving shoppers a much-needed boost ahead of Christmas.
The Consumer Prices Index dropped to 2.3% per year in November, the Office for National Statistics says, down from 2.4% in October.The Consumer Prices Index dropped to 2.3% per year in November, the Office for National Statistics says, down from 2.4% in October.
The ONS says that lower petrol prices pulled inflation down; games, toys and hobbies, and cultural services also had a downward impact on the cost of living.,The ONS says that lower petrol prices pulled inflation down; games, toys and hobbies, and cultural services also had a downward impact on the cost of living.,
However, tobacco prices rose at a faster pace (due to higher taxes). Accommodation services and passenger sea transport all had an upward impact on inflation.However, tobacco prices rose at a faster pace (due to higher taxes). Accommodation services and passenger sea transport all had an upward impact on inflation.
More to follow....More to follow....
Newsflash: Banking group Santander has been fined £32.8m by the UK financial watchdog, for a frankly shocking failure to handle the accounts and investments of deceased customers properly.Newsflash: Banking group Santander has been fined £32.8m by the UK financial watchdog, for a frankly shocking failure to handle the accounts and investments of deceased customers properly.
The Financial Conduct Authority has imposed the penalty, after concluding that Santander had often failed to do the right thing when a customer died.The Financial Conduct Authority has imposed the penalty, after concluding that Santander had often failed to do the right thing when a customer died.
Failings in its probate and bereavement processes meant that Santander sometimes didn’t transfer money to beneficiaries for several years.Failings in its probate and bereavement processes meant that Santander sometimes didn’t transfer money to beneficiaries for several years.
According to the FCA, there were weaknesses in Santander’s systems which:According to the FCA, there were weaknesses in Santander’s systems which:
reduced its ability to effectively identify all the funds it held which formed part of a deceased customer’s estate;reduced its ability to effectively identify all the funds it held which formed part of a deceased customer’s estate;
resulted in it failing to effectively follow-up on communications with deceased customer representatives which increased the likelihood of probate and bereavement cases not being closed; andresulted in it failing to effectively follow-up on communications with deceased customer representatives which increased the likelihood of probate and bereavement cases not being closed; and
led to it ineffectively monitoring open probate and bereavement cases to allow it to determine whether cases had progressed to closure.led to it ineffectively monitoring open probate and bereavement cases to allow it to determine whether cases had progressed to closure.
The FCA is also unhappy that Santander didn’t come clean about the problems .The FCA is also unhappy that Santander didn’t come clean about the problems .
In a stern rebuke, it says:In a stern rebuke, it says:
Santander did not notify the FCA of the nature or extent of the issues it faced, including the numbers of potentially affected customers and assets, and was selective in the information it provided.Santander did not notify the FCA of the nature or extent of the issues it faced, including the numbers of potentially affected customers and assets, and was selective in the information it provided.
Accordingly, Santander’s conduct fell below the standards of openness and cooperation expected of an authorised firm.Accordingly, Santander’s conduct fell below the standards of openness and cooperation expected of an authorised firm.
At least Santander is consistent. Treated regulator as shoddily as it did bereaved customers. Tried to hide failings. pic.twitter.com/0aqqorVcnrAt least Santander is consistent. Treated regulator as shoddily as it did bereaved customers. Tried to hide failings. pic.twitter.com/0aqqorVcnr
Italian bonds and stocks are rallying this morning, on relief that Rome has reached a peace deal with Brussels over its budget.Italian bonds and stocks are rallying this morning, on relief that Rome has reached a peace deal with Brussels over its budget.
Last night, the Italian Treasury announced it had reached a “a technical agreement with EU officials” which could avoid an “excessive deficit procedure” being launched against the eurozone’s third-largest member.Last night, the Italian Treasury announced it had reached a “a technical agreement with EU officials” which could avoid an “excessive deficit procedure” being launched against the eurozone’s third-largest member.
Last week, Italy proposed cutting its planned budget deficit for 2019 to 2.04% from 2.4% of gross domestic product. That might keep it within EU rules -- and compares favourably with France’s aims...Last week, Italy proposed cutting its planned budget deficit for 2019 to 2.04% from 2.4% of gross domestic product. That might keep it within EU rules -- and compares favourably with France’s aims...
French Finance Minister Le Maire says French deficit next year will be 3.2% of GDP.#awkwardFrench Finance Minister Le Maire says French deficit next year will be 3.2% of GDP.#awkward
Any deal still needs the approval of European commissioners, who meet later today. Plus, any budget changes would need to be passed by the Italian Senate.Any deal still needs the approval of European commissioners, who meet later today. Plus, any budget changes would need to be passed by the Italian Senate.
But the markets are already excited, sending the Italian FTSE MIB up 1.5% this morning.But the markets are already excited, sending the Italian FTSE MIB up 1.5% this morning.
Italian stocks rise 1.5% and bond yields fall to September levels after press announces budget deal.The European market seems less excited about it. pic.twitter.com/0xyxS4nBSwItalian stocks rise 1.5% and bond yields fall to September levels after press announces budget deal.The European market seems less excited about it. pic.twitter.com/0xyxS4nBSw
World stock markets have a decidedly edgy feel this morning, as investors wait for the Fed’s rate decision.World stock markets have a decidedly edgy feel this morning, as investors wait for the Fed’s rate decision.
China’s Shanghai Composite index has fallen by 1%, amid ongoing anxiety about trade relations with the US. Japan’s Nikkei has dipped by 0.6%.China’s Shanghai Composite index has fallen by 1%, amid ongoing anxiety about trade relations with the US. Japan’s Nikkei has dipped by 0.6%.
European shares are more positive; with the Stoxx 600 up around 0.2%.European shares are more positive; with the Stoxx 600 up around 0.2%.
The FTSE 100 is bouncing back from yesterday’s selloff, up around 0.35%. GSK are leading the way, as investors hail its break-up plan.The FTSE 100 is bouncing back from yesterday’s selloff, up around 0.35%. GSK are leading the way, as investors hail its break-up plan.
Boom! Shares in pharmaceutical giant GlaxoSmithKline have soared by 5% at the start of trading, after it surprised the City with a break-up plan.Boom! Shares in pharmaceutical giant GlaxoSmithKline have soared by 5% at the start of trading, after it surprised the City with a break-up plan.
GSK has agreed to spin off its consumer healthcare business in a £10bn joint venture with rival Pfizer.GSK has agreed to spin off its consumer healthcare business in a £10bn joint venture with rival Pfizer.
GSK, whose consumer brands include Sensodyne and Panadol, will have a controlling stake in the partnership of 68% and Pfizer will own 32%.GSK, whose consumer brands include Sensodyne and Panadol, will have a controlling stake in the partnership of 68% and Pfizer will own 32%.
The FTSE 100 drug maker said that within three years of closing the deal, it will demerge and float the consumer health business, splitting GSK into two distinct businesses – one focused on consumer and the other on pharmaceuticals and vaccines.The FTSE 100 drug maker said that within three years of closing the deal, it will demerge and float the consumer health business, splitting GSK into two distinct businesses – one focused on consumer and the other on pharmaceuticals and vaccines.
Investors around the globe will be watching Fed chair Jerome Powell tonight, when he explains tonight’s interest rate decision.Investors around the globe will be watching Fed chair Jerome Powell tonight, when he explains tonight’s interest rate decision.
Shares could soar, or slide, depending on the guidance that Powell gives for future rate hikes in 2019. Ditto the dollar.Shares could soar, or slide, depending on the guidance that Powell gives for future rate hikes in 2019. Ditto the dollar.
Naeem Islam of Think Markets explains:Naeem Islam of Think Markets explains:
Market participants widely expect the statement to be somewhat dovish and the markets believe that going into 2019, the Fed isn’t going to be this aggressive because of the tighter financial conditions. Mr Powell is likely to indicate two or maximum three rates hikes in 2019. For investors, one to two rate hikes would be considered more dovish to neutral but two to three rate hikes would be aggressive because the economic indicators have started to flash warning light with respect to any aggressive monetary policy.Market participants widely expect the statement to be somewhat dovish and the markets believe that going into 2019, the Fed isn’t going to be this aggressive because of the tighter financial conditions. Mr Powell is likely to indicate two or maximum three rates hikes in 2019. For investors, one to two rate hikes would be considered more dovish to neutral but two to three rate hikes would be aggressive because the economic indicators have started to flash warning light with respect to any aggressive monetary policy.
In terms of trading the event, aggressive tone by the Fed would be negative for the equity market and the sell-off may become intense. The Dow Jones may take a nose dive and the move could in the range of 300-500 points. However, a dovish statement could support the equity markets and it would restore some confidence so investors expect about 150-250 points move for the Dow on the back of this.In terms of trading the event, aggressive tone by the Fed would be negative for the equity market and the sell-off may become intense. The Dow Jones may take a nose dive and the move could in the range of 300-500 points. However, a dovish statement could support the equity markets and it would restore some confidence so investors expect about 150-250 points move for the Dow on the back of this.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
To hike or not to hike, that is the question facing America’s central bankers today.To hike or not to hike, that is the question facing America’s central bankers today.
The Federal Reserve had been certain to raise interest rates at its final meeting of 2018 today, in line with its policy of normalising monetary policy and tackling inflation.The Federal Reserve had been certain to raise interest rates at its final meeting of 2018 today, in line with its policy of normalising monetary policy and tackling inflation.
But Donald Trump has thrown clouds of uncertainty over the Fed, by repeatedly urging the Fed to leave interest rates alone.But Donald Trump has thrown clouds of uncertainty over the Fed, by repeatedly urging the Fed to leave interest rates alone.
After several stinging tweets, the markets now reckon there’s a 25% chance that the Fed won’t hike at tonight’s monetary policy meeting:After several stinging tweets, the markets now reckon there’s a 25% chance that the Fed won’t hike at tonight’s monetary policy meeting:
I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
So great that oil prices are falling (thank you President T). Add that, which is like a big Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)!So great that oil prices are falling (thank you President T). Add that, which is like a big Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)!
But central bank independence is important. So despite Trump’s best efforts, the Fed will probably push US borrowing costs up again tonight (while bracing for another Twitter blast), to 2.5%.But central bank independence is important. So despite Trump’s best efforts, the Fed will probably push US borrowing costs up again tonight (while bracing for another Twitter blast), to 2.5%.
But the Fed will also update the markets on its plans for 2019, and many investors predict it will slash its forecasts for future rate hikes.But the Fed will also update the markets on its plans for 2019, and many investors predict it will slash its forecasts for future rate hikes.
Jasper Lawler of London Capital Group explains:Jasper Lawler of London Capital Group explains:
The market is pricing in a 72.3% probability of the Fed hiking today. This would be the fourth-rate hike for 2018. However, the real concern for the market is what comes next. With growing fears over the health of the global economy, the markets simply don’t think the US economy can handle higher rates.The market is pricing in a 72.3% probability of the Fed hiking today. This would be the fourth-rate hike for 2018. However, the real concern for the market is what comes next. With growing fears over the health of the global economy, the markets simply don’t think the US economy can handle higher rates.
Traders will be watching for dovish signs, such as the dropping of the phrase “further gradual rate rises” from the statement and a softening of the dot plot from three hikes to at most two. In short, if the Fed must hike today, and they will struggle to justify not hiking on current US economic strength; then it will need to be a dovish hike to prevent the US equity markets dumping once more. The dollar has traded lower across the week in anticipation of a dovish hike.Traders will be watching for dovish signs, such as the dropping of the phrase “further gradual rate rises” from the statement and a softening of the dot plot from three hikes to at most two. In short, if the Fed must hike today, and they will struggle to justify not hiking on current US economic strength; then it will need to be a dovish hike to prevent the US equity markets dumping once more. The dollar has traded lower across the week in anticipation of a dovish hike.
Such a dovish hike might calm market nerves, after a turbulent few months.Such a dovish hike might calm market nerves, after a turbulent few months.
The Powell Fed is aiming to reclaim discretion, distancing itself from straitjackets like R-star, the words "gradual increases in the target range," and -- eventually -- the dot plot. This is a stylistic change, but markets hear DOVISH and price less than two hikes through 2019. pic.twitter.com/jE9vrlHy87The Powell Fed is aiming to reclaim discretion, distancing itself from straitjackets like R-star, the words "gradual increases in the target range," and -- eventually -- the dot plot. This is a stylistic change, but markets hear DOVISH and price less than two hikes through 2019. pic.twitter.com/jE9vrlHy87
Earlier this week the US stock market fell to a 14-month low, while Britain’s FTSE 100 closed at a two-year low last night.Earlier this week the US stock market fell to a 14-month low, while Britain’s FTSE 100 closed at a two-year low last night.
Growth fears drive FTSE 100 to two-year closing low - as it happenedGrowth fears drive FTSE 100 to two-year closing low - as it happened
Also coming up....Also coming up....
New UK inflation figures will also show how the cost of living changed last month in Britain. Economists predict that consumer prices rose by 2.3% last year, down from 2.4% in October.New UK inflation figures will also show how the cost of living changed last month in Britain. Economists predict that consumer prices rose by 2.3% last year, down from 2.4% in October.
It could confirm that retailers have been slashing prices in recent months, in an attempt to persuade shoppers to part with some cash.It could confirm that retailers have been slashing prices in recent months, in an attempt to persuade shoppers to part with some cash.
The agendaThe agenda
9.30am GMT: UK inflation data for November9.30am GMT: UK inflation data for November
11am GMT: UK retail sales figures for November11am GMT: UK retail sales figures for November
7pm GMT: US Federal Reserve interest rate decision7pm GMT: US Federal Reserve interest rate decision
7.30pm GMT: Fed chair Jerome Powell’s press conference7.30pm GMT: Fed chair Jerome Powell’s press conference