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UK inflation sticks at 2016 low, as London house prices keep falling – business live UK inflation sticks at 2016 low, as London house prices keep falling – business live
(32 minutes later)
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.
Hays Travel owners offer jobs to 2,000 ex-Thomas Cook staff
Back to house prices.... and Lucy Pendleton of estate agents James Pendleton says that younger, first-time buyers are keeping the market moving: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.“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.“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.
Figures released yesterday showed that first-time buyers hit their highest level since the financial crisis in August, as low interest rates keep mortgage repayment costs down .Figures released yesterday showed that first-time buyers hit their highest level since the financial crisis in August, as low interest rates keep mortgage repayment costs down .
My colleague Richard Partington points out that the government’s benefit freeze has cost poorer households nearly £600 a year each, on average: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.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.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.
It would mark the first cash rise since George Osborne launched the benefits freeze in 2015. However, the government has yet to confirm its spending, tax and benefits plans for the year ahead, when the freeze was due to end.It would mark the first cash rise since George Osborne launched the benefits freeze in 2015. However, the government has yet to confirm its spending, tax and benefits plans for the year ahead, when the freeze was due to end.
The assessment comes after the Office for National Statistics (ONS) said inflation remained unchanged in September, with the consumer price index (CPI) holding steady at 1.7%.The assessment comes after the Office for National Statistics (ONS) said inflation remained unchanged in September, with the consumer price index (CPI) holding steady at 1.7%.
The inflation reading for September is used by the government to uprate the value of benefits payments each year, as well as state pensions and business rates.The inflation reading for September is used by the government to uprate the value of benefits payments each year, as well as state pensions and business rates.
According to the latest snapshot from the ONS, inflation stayed at 1.7% as sliding fuel prices were offset by increases in the cost of furniture, household appliances and the cost of booking a hotel room...According to the latest snapshot from the ONS, inflation stayed at 1.7% as sliding fuel prices were offset by increases in the cost of furniture, household appliances and the cost of booking a hotel room...
More here:More here:
Benefits to rise 1.7% with inflation in first increase in five yearsBenefits to rise 1.7% with inflation in first increase in five years
The IFS points out that freezing benefits payments at 2015 levels has cut the welfare bill by several billion pounds a year.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: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/82dvsIUY0uThe @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
And even if working benefits do rise by 1.7%, based on today’s inflation reading, that only matches the rising cost of living.And even if working benefits do rise by 1.7%, based on today’s inflation reading, that only matches the rising cost of living.
In contrast, total wages rose by 4% in the year to July - which would be used for pensions uprating under the triple-lock system.In contrast, total wages rose by 4% in the year to July - which would be used for pensions uprating under the triple-lock system.
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 pricesWhat this doesnt mean: working age benefits actually increasing (they'll increase at 1/2 rate of pensions/wages) https://t.co/mDI27NGUKaPrices 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 pricesWhat this doesnt mean: working age benefits actually increasing (they'll increase at 1/2 rate of pensions/wages) https://t.co/mDI27NGUKa
September’s inflation data is traditionally used to set welfare payments.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.So this morning’s CPI figures should mean that benefits rise by 1.7% next April, assuming the government ends the long austerity freeze.
That freeze has capped payments in cash terms, meaning they’ve actually fallen when inflation is taken into account, hurting the poorest families in the UK.That freeze has capped payments in cash terms, meaning they’ve actually fallen when inflation is taken into account, hurting the poorest families in the UK.
The TUC is urging the government to end the freeze:The TUC is urging the government to end the 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/LbZ74FXH0lInflation 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 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 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.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.Poverty isn’t inevitable – it’s a cruel political choice. That’s why government needs to end the benefits freeze now.
ONS Head of Inflation Mike Hardie sums up this morning’s data: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.“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”.“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”.
Despite recent house price falls in London, it’s still desperately difficult to get onto the housing ladder, or shimmy up the steps.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.That’s because real wages have only just started growing faster than house prices, meaning property is very unaffordable.
The Resolution Foundation have the details, including that London house prices have risen six times faster than earnings in the capital, since 2011.The Resolution Foundation have the details, including that London house prices have risen six times faster than earnings in the capital, since 2011.
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/wD2qOCqnm8Despite 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/Xa6rXF79hrBut 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
Inflation is also looking subdued in the eurozone.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.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.
Good news for households, but a headache for the European Central Bank as it launched another stimulus programme.Good news for households, but a headache for the European Central Bank as it launched another stimulus programme.
#Euro Annual #Inflation Final at 0.8% https://t.co/jMc1LoqXTG pic.twitter.com/4cGMOmFJA4#Euro Annual #Inflation Final at 0.8% https://t.co/jMc1LoqXTG pic.twitter.com/4cGMOmFJA4
This could force the ECB to keep easing monetary policy, despite opposition from more hawkish members of its governing council.This could force the ECB to keep easing monetary policy, despite opposition from more hawkish members of its governing council.
#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 expectedThis should incentivise the #ECB to become more dovish and strenghten the #USD against the #EUR@graemewearden#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 expectedThis should incentivise the #ECB to become more dovish and strenghten the #USD against the #EUR@graemewearden
Howard Archer of EY Item Club predicts house price growth will remain weak, despite bouncing back from a near eight-year low in August.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:He writes:
Despite the August pick-up in house prices reported by the Land Registry, we strongly suspect that house prices will remain soft in the near term with the economy largely struggling and the outlook highly uncertain. Indeed, both the Nationwide and Halifax reported softer house prices in September. Consequently, we expect house prices to only rise around 1.0% over 2019.Despite the August pick-up in house prices reported by the Land Registry, we strongly suspect that house prices will remain soft in the near term with the economy largely struggling and the outlook highly uncertain. Indeed, both the Nationwide and Halifax reported softer house prices in September. Consequently, we expect house prices to only rise around 1.0% over 2019.
Should the UK leave the EU with a “deal” on 31 October - or early next year - we believe reduced uncertainty could see house prices rise by around 2% in 2020. Housing market activity – and possibly to a lesser extent prices – could be given a lift in 2020 if the government cuts Stamp Duty significantly in the Budget later this year However, the economy still looks set for a challenging 2020 even if there is a Brexit deal so that the upside for house prices is likely to be limitedShould the UK leave the EU with a “deal” on 31 October - or early next year - we believe reduced uncertainty could see house prices rise by around 2% in 2020. Housing market activity – and possibly to a lesser extent prices – could be given a lift in 2020 if the government cuts Stamp Duty significantly in the Budget later this year However, the economy still looks set for a challenging 2020 even if there is a Brexit deal so that the upside for house prices is likely to be limited
Uncertainty over Britain’s exit from the EU is hurting house prices, says Jamie Durham, economist at PwC: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.“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.”This is particularly the case in the capital and will likely continue to affect price growth over the coming months.”
UK house price inflation has picked up...but not in and around the capital.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.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.
That’s still relatively weak by recent standards. As this chart shows, there has been a general slowdown in UK house price growth since 2016 (and a certain referendum....).That’s still relatively weak by recent standards. As this chart shows, there has been a general slowdown in UK house price growth since 2016 (and a certain referendum....).
The average UK house price was £235,000 in August 2019, £3,000 higher than August 2018The average UK house price was £235,000 in August 2019, £3,000 higher than August 2018
London has led the slowdown -- with prices dropping for several months. Prices fell by 1.4% over the year to August 2019, followed by the South East where prices fell by 0.6% over the year.London has led the slowdown -- with prices dropping for several months. Prices fell by 1.4% over the year to August 2019, followed by the South East where prices fell by 0.6% over the year.
But there’s solid growth in the North East (3.3%) and the North West (3.1%).But there’s solid growth in the North East (3.3%) and the North West (3.1%).
There’s still a substantial North-South divide, though, with the average London property costing £473,000.There’s still a substantial North-South divide, though, with the average London property costing £473,000.
TUC General Secretary Frances O’Grady is concerned by this week’s economic data: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.“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.“The government needs an urgent plan to protect growth by speeding up higher public sector investment.
“And MPs must stop the prime minister from forcing through the hardest possible Brexit, which would harm jobs, rights and livelihoods.”“And MPs must stop the prime minister from forcing through the hardest possible Brexit, which would harm jobs, rights and livelihoods.”
A handy reminder of which inflation rates matter: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%.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%.
UK inflation has now stuck at its lowest level since December 2016 for two months in a row.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 livingIt 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
The ONS has also found that raw material prices are down year-on-year, by 2.8%.The ONS has also found that raw material prices are down year-on-year, by 2.8%.
This is pulling down ‘factory gate inflation’ too. It hit a three-year low last month, meaning manufacturers aren’t raising their prices as fast.This is pulling down ‘factory gate inflation’ too. It hit a three-year low last month, meaning manufacturers aren’t raising their prices as fast.
Commenting on today’s inflation figures, our head of inflation Mike Hardie said: https://t.co/gpi0kQSWit pic.twitter.com/vbYt8R11JYCommenting on today’s inflation figures, our head of inflation Mike Hardie said: https://t.co/gpi0kQSWit pic.twitter.com/vbYt8R11JY
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.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.But in the current political climate, the BoE is leaning towards cutting borrowing costs - especially if there is another Brexit delay.
Sam Cooper, vice president of Market Risk Solutions at Silicon Valley Bank, explains:Sam Cooper, vice president of Market Risk Solutions at Silicon Valley Bank, explains:
“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.“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.”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.”
September’s subdued inflation is good news for workers -- it means real wages are still growing.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%.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%.
Snap reactionSnap reaction
#uk #CPI +1.7% YoY in September, less than exp.+1.8%+0.1% MoM, less than exp. +0.2%#inflation#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/cSSjrdkTsCNo 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
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.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.