Closing summary
Time for a recap….
The number of UK mortgages in arrears has jumped as the rise in interest rates since the end of 2021 hits households.
Trade body UK Finance reported that 87,930 homeowner mortgages were in arrears in the third quarter of 2023, 7% more than the previous quarter.
The number of buy-to-let (BTL) mortgages in arrears was 11,540, a 29% increase during the same period – or 100% higher than a year ago.
UK Finance suggested that some landlords may not be able to charge rents which will cover their mortgage, saying:
“The increases in arrears are driven by the combined impact of both cost-of-living pressures and higher interest rates.
“In particular, interest rate pressures are felt more acutely in the BTL sector, where landlords may not be able to raise rents to cover the increases in their payments.”
Separate data from the Ministry of Justice has also shown an increase in mortgage possession claims in the last quarter, and also a rise in landlords repossessing properties from tenants.
But there could be some relief for households looking to remortgage, with Nationwide launching a two-year fixed-rate mortgage priced at below 5%.
The Bank of England’s chief economist has indicated that UK interest rates won’t need to rise any higher to bring inflation down to target.
The UK property sector continued to cool last month, with property surveyors reporting another drop in sales and prices. However, the downturn may be bottoming out, the latest survey from RICS shows.
In other news…
China has fallen back into deflationary territory, after consumer prices dropped by 0.2% in the year to October.
Labour has attacked the Conservatives over the speed of government efforts to upgrade Britain’s draughty housing stock, as analysis showed a leading household energy efficiency initiative was proceeding at what the party called a “glacial pace”.
Shell is suing Greenpeace for $2.1m in damages in one of the biggest ever legal threats against the group after its campaigners occupied a moving oil platform earlier this year.
Insurers operating in the Lloyd’s of London market are the world’s biggest underwriters of fossil fuel projects, research has found.
AstraZeneca is making a big push into the weight-loss drug market, striking an exclusive licence agreement with a Chinese company for an obesity and type 2 diabetes pill that is in early stage development.
Apple has suffered a setback in its battle against an order to pay an alleged €13bn (£11.3bn) tax bill in Ireland, after one of the top advisers to the European court of justice (ECJ) said a ruling in the tech company’s favour should be set side.
National Grid spent a record £3.5bn in the first half of the financial year as it accelerated work to prepare the UK’s power grids for a surge in new clean energy projects.
Updated
Shares in semiconductor designer Arm have dropped back to the levels at which they floated on the New York stock exchange this autumn.
Arm have dropped by 6% in early trading to just over $51, after its revenue forecast for the current quarter missed Wall Street forecasts last night.
Reuters: Siemens Energy secures provisional deal for financial guarantees
Newsflash: The German governmen and Siemens AG have agreed, in principle, to provide billions of euros in project-related guarantees for troubled wind turbine maker Siemens Energy, according to Reuters.
Reuters cites three people familiar with the matter said, adding that some details of the agreement are still being discussed.
It could take some time for a formal agreement to be drawn up and approved by all sides.
It emerged last month that Berlin was in talks to provide a multibillion-euro bailout to the Siemens Energy to shore up its balance sheet amid increasing problems at its wind turbine division.
There’s drama in the precious metals market today, where palladium has fallen to its lowest level in five years.
Spot palladium has dropped below $1,000 to the ounce, for the first time since 2018, extending its recent losses.
SPOT PALLADIUM FALLS BELOW $1,000/OZ FOR FIRST TIME SINCE 2018
— Arturo Robles (@Arturojrobles) November 9, 2023
In spring 2022, palladium spiked over $3,000 per ounce amid concerns of supply shortages from Russia after the invasion of Ukraine.
But the price of the metal, used in catalytic converters for fossil fuel cars, has dropped as the US dollar has strengthened.
Allen & Overy "hit by hackers in ransomware attack"
Allen & Overy, the “magic circle” law firm, has suffered a cyber attack on its systems, which appear to make it the latest big corporate to fall victim to a ransomware hack.
Allen & Overy has said it has experienced a “data incident”, while social media posts have suggested it had been hacked by the Lockbit cybercrime gang.
Reuters has the details:
The attack, first reported by the Financial Times, comes after seven countries, including the U.S. and Britain, in June named Lockbit as the world’s top ransomware threat.
“We have experienced a data incident impacting a small number of storage servers,” an Allen & Overy spokesperson said in a statement.
“Investigations to date have confirmed that data in our core systems, including our email and document management system, has not been affected.
“The firm continues to operate normally with some disruption arising from steps taken to contain the incident.”
Allen & Overy data hit by hackers in ransomware attack https://t.co/mSi8bL4Wt9 via @ft
— Suzi Ring (@journosooz) November 9, 2023
Updated
After a slow start, the UK’s FTSE 100 share index has risen to its highest level since last Friday.
The Footsie is up 40 points or 0.55% at 7441 points, the highest since last Friday.
Autotrader, the car marketplace site, are leading the way – up 8%, after reporting a 10% rise in operating profits in the six months to the end of September.
Autotrader reported that the used car market “continues to be resilient”, adding:
The volume of buyers on Auto Trader is at record levels, supported by stable consumer sentiment towards car buying and the continued availability of finance.
The supply of used cars has gradually improved as new car registrations grow; used car pricing has remained robust; and vehicles continue to sell on Auto Trader quicker than pre-pandemic levels.
Property companies are also rallying today, amid hopes that the slump in the UK housing market may be ending.
House sales portal Rightmove are up 4.2%, with housebuilder Taylor Wimpey gaining 2.6% after it lifted its earnings forecast this morning.
Over on Wall Street, shares in space travel Virgin Galactic have jumped almost 10% in pre-market trading after it beat forecasts last night.
Virgin Galactic reported that revenues rose to $1.7m in the last quarter, up from $800,000 in the third quarter of 2022, driven by commercial spaceflight and membership fees from future astronauts.
Its net loss narrowed to $105m, from $146m a year earlier.
Michael Colglazier, Chief Executive Officer of Virgin Galactic said,
“With six spaceflights successfully completed in under six months, Virgin Galactic has demonstrated the repeatability of our spaceflight system and also showcased the overwhelmingly positive experience of our Astronauts.
With our third quarter cash and marketable securities position of approximately $1.1 billion, we forecast having sufficient capital to bring our first two Delta ships into service and achieve positive cash flow in 2026.”
Back in August, Virgin Galactic’s VSS Unity, the reusable rocket-powered space plane, successfully flew three tourists to the edge of space and back to earth.
US jobless claims data released
Just in: fewer Americans than expected filed new claims for unemployment support last week.
The number of initial claims for jobless support fell by 3,000 last week to 217,000, in the seven days to 4 November.
That’s a low level by historic terms, suggesting that demand for labour remains strong despite higher US interest rates.
The previous week’s data has been revised up to show there were 220,000 initial claims, not the 217,000 first reported.
Initial Jobless Claims in the United States decreased to 217,000 from the previous week's 220,000 📉
— Ben Sparham (@bensparham_) November 9, 2023
The average number of Initial Jobless Claims in the US from 1967 to 2023 was 366,140, with a peak of 6,137,000 in April 2020 and a record low of 162,000 in November 1968… pic.twitter.com/ffMk1t4BXn
However, the number of Americans unemployed for more than a week has risen again,
Seasonally adjusted insured unemployment rose by 22,000 peope in the week ending October 28, to 1,834,000.
Continuing Jobless Claims.
— David. Bidenomics is a hell of a drug. (@David32375134) November 9, 2023
Something snapped in September/October, it just keeps rising. Almost in a straight line pic.twitter.com/XlWYUHK5Xp
Back in the economics world, Goldman Sachs has raised its 2024 growth forecast for China, which has just fallen back into deflation territory (see opening post).
Goldman predict China’s GDP will rise by 4.8% next year, up from 4.5% previously expected.
Its economists expect the Chinese government to “step up easing materially” in the coming months, to support the economy.
English no-fault eviction claims highest since 2016
No-fault eviction claims served on tenants in England have hit their highest number in more than seven years, today’s government data shows.
Between July and September, landlords in England started 8,399 no-fault eviction court proceedings against their tenants – the highest number since the second quarter in 2016, figures from the Justice Ministry showed.
That represented an increase of 38% from the third quarter of 2022.
No-fault evictions allow landlords to end tenancies without reason.
Shelter, a campaign group which seeks to end homelessness, called on the government to deliver on its promise of reform of the rental market.
Shelter chief executive Polly Neate says:
“It beggars belief that this government is prepared to use cynical tactics to delay the banning of no-fault evictions, while record numbers of renters are being removed from their homes without cause,”
“With homelessness at record levels, there’s no excuse for putting the ban on unfair, no-fault evictions on ice.”
Fuel retailers under fire over rising margins at the pump
UK motoring bodies are unhappy that fuel pump prices are not falling in line with wholesale prices.
The Competition and Markets Authority reported this morning that there were “significant increases” in profit margins for petrol and diesel in September and October, at fuel pumps.
This followed an increase in prices in June, July and August, which can be attributed to rising crude oil prices.
The CMA says:
While the retail spread does increase and decrease in response to volatility in wholesale prices, we would expect these spreads to begin returning to normal levels.
If retail spreads were to remain at these levels for much longer, this would cause concern about the intensity of retail competition in the sector.
We’ve published our first quarterly monitoring report on road #fuel which shows that prices at the pump have gone up by over 11p per litre since May this year.
— Competition & Markets Authority (@CMAgovUK) November 9, 2023
Find out more: https://t.co/20gbaBqKpu #FuelMarket #FuelPrices pic.twitter.com/dwseABthVe
RAC fuel spokesperson Simon Williams says the government needs to launch a price monitoring body to keep retailers in check:
“It’s very disappointing that the CMA has found that major fuel retailers are still taking far bigger margins than they have done in the past, something we have been saying for a long time, as this means drivers are still being taken advantage of at the pumps.
While supermarket margins may have fallen in the summer, our latest data shows they have more than made up for this since then and are currently taking very large margins.
Luke Bosdet, the AA’s spokesman on pump prices, says the failure to pass on savings from cheaper wholesale energy costs to motorists is unacceptable.
“The Government needs to speed up the legislation that creates the statutory fuel price transparency scheme. The AA has been testing public responses to the profiling of cheapest pump prices across an area or along a route. The feedback from drivers is that they want more transparency.”
Angela Rayner criticises rise in evictions
The Ministry of Justice has also reported an increase in landlords trying to repossess their properties from tenants.
In July-September, landlord possession claims increased to 24,938 from 21,007 in Q3 2022 (a 19% increase year-on-year). Landlord possession orders rose 17%, from 15,350 to 17,977, while warrants – which permit a bailiff or High Court Enforcement Officer to execute an eviction – rose from 8,573 to 9,753 (14%).
Repossessions increased 11% from 5,464 to 6,080.
Angela Rayner, Labour’s deputy leader and Shadow Secretary of State for Levelling Up, Housing and Communities, is concerned by the data, saying:
“These figures lay bare the devastating impact of the Tories’ abject failure to tackle the housing crisis, with a toxic mix of rising rents and failure to end no-fault evictions hitting vulnerable people.
“The indefinite delay to the promised ban on no fault evictions comes at a heavy price for renters who have been let down by this Government for far too long already, with tens of thousands threatened with homelessness and facing visits from bailiffs.
“The next Labour Government will ban no fault evictions and put an end to the Tories’ housing emergency with our secure homes plan.”
The fall in UK house prices should bottom out in the first quarter of next year, predicts Kallum Pickering, senior economist at Berenberg bank.
He explains that expectations that UK interest rates cuts starting in the second quarter of 2024 should help mortgage costs to ease, saying:
The surge in mortgage rates during the past year has likely ended now that the Bank of England (BoE) has completed its rate hike cycle.
Because c90% of the mortgage market is on fixed-rate contracts, which are priced against prospective money market rates, mortgage conditions can ease on the mere expectation that the BoE will cut rates.
In our view, that should happen in Q1 – ahead of a series of rate cuts from Q2 2024 onwards. For now, the market for overnight index swaps (OIS) is mostly buying the BoE’s “high for longer” mantra. Whereas we expect bank rate to finish 2024 at 4.0% with five 25bp cuts starting in Q2, the OIS market currently prices in just two 25bp cuts to 4.75% (up from just one 25bp cut last week).
Demand should pick up as falling mortgage rates make it less difficult for new buyers to enter the market and for existing homeowners to move up the housing ladder.
The “mortgage charter” agreed by chancellor Jeremy Hunt with lenders this summmer is helping to prevent people losing their homes, says Myron Jobson, senior personal finance analyst at interactive investor.
Following this morning’s data showing an increase in mortgage arrears, Jobson says:
“The figures suggest that the Mortgage Charter is doing its job in preventing repossessions and arrears from rising to dangerous levels that threaten a property crash or financial stability. But the 7% uptick in homeowner mortgage in arrears from Q2 underlines the harsh reality that many are struggling to meet their monthly mortgage repayment obligation.
“Lenders have readied themselves for a tsunami of customers seeking assistance with their home loans amid the uptick in mortgage rates and broader cost of living pressures on household budgets. Most lenders agreed to a set of standards, under the Mortgage Charter, to help struggling borrowers - including lower monthly costs by switching to interest-only payments for six months, or extending a mortgage term.”
Buy-to-let landlords are being hit hard, he adds:
“It is clear that the 14 consecutive interest rate hikes have hit many landlords hard - especially the smaller ones. Those who haven’t been able to pass on the heightened cost burden to their tenants or cover it out of the own pocket have been forced to have a radical rethink of their business model.
“There have been reports of a growing number of landlords selling up because of the double whammy of higher mortgage rates and also the end of mortgage interest relief since 2020, which has curtailed profitability. The sale of rental property could have a telling impact on the balance of supply and demand in the housing market.”
Craig Fish, director at London-based broker, Lodestone Mortgages & Protection, is concerned by the 29% jump in buy-to-let mortgages in arrears in the last quarter.
Fish fears there will be a horrible ending for the buy-to-let sector, with some landlords struggling to get tenants to cover their higher costs, saying:
“The buy-to-let sector has been hit harder than any of late. As if the taxation changes weren’t bad enough, we now have higher interest rates and stress testing causing untold pain.
When it comes to remortgaging, many landlords are finding that they are unable to do so, due to insufficient rental income and are having to stick with their current lender on higher-priced products.
This results in landlords increasing the rent they charge, which in turn has a knock-on effect on the tenants who are unable to pay, resulting in rental voids. Historically, before the tax changes, landlords would have had surplus funds with which to weather this storm, but due to higher taxation, those reserves are now depleted and so mortgages go unpaid.
This Catch-22 situation is seen in these worsening numbers in the buy-to-let sector. Worse is yet to come, and it seems there is no solution. Lenders seem like they don’t want to lend, and the Government just want the tax income. I predict a horrible ending.”
New mortgage deal falls below 5% in ‘watershed moment’ for UK homeowners
In a relief for struggling home owners, a two-year fixed-rate mortgage priced at below 5% has gone on sale for the first time since early summer.
Mortgage brokers called Nationwide’s decision to launch the fixed deal, priced at 4.99%, a “watershed moment” that would give the property market a “shot in the arm”, as well as offering borrowers hope that things were heading in the right direction.
More here.
MoJ: mortgage possession claims increased
New figures from the Ministry of Justice show an increase in mortgage possession claims in the last quarter, as borrowers fail to meet their payments.
They show that compared to the same quarter in 2022, mortgage possession claims increased from 3,681 to 4,185 (14%), orders rose from 2,480 to 2,923 (18%), and warrants increased from 2,473 to 2,289 (7%).
However, repossessions by county court bailiffs decreased from 758 to 622 (18%).
This is a clear signal of the rising financial pressure on homeowners, says Charlotte Nixon, mortgage expert at Quilter:
Navigating through the financial headwinds of the current economic climate, homeowners and renters are confronting stark realities, with increasing legal actions reflecting a surge in housing insecurity.
Mortgage possession actions, indicative of lenders seeking to recover properties from borrowers who have fallen behind on payments, have escalated. Specifically, mortgage possession claims, which are initial filings by lenders to obtain court permission to foreclose on properties, increased by 14% to 4,185.
This uptick is a clear signal of the rising financial pressure on homeowners. Meanwhile, mortgage possession orders, the court’s judgment that lenders may proceed with foreclosure, have risen by 18% to 2,923, underscoring the gravity of the situation for those struggling to pay their mortgages.
However, in a contrasting trend, actual repossessions, have decreased by 18% to 622. This suggests some homeowners are finding ways to avert the final act of losing their homes, possibly through renegotiated payment arrangements or other forms of assistance. Potentially initiatives like the Mortgage Charter have helped to decrease repossessions providing a sliver of hope that there may be a growing cushion against the ultimate displacement from one’s home, despite the uptick in initial legal proceedings.
Updated
UK mortgage arrears jump
Newsflash: The number of mortgages in arrears has risen, partly fuelled by a jump in buy-to-let landlords falling behind on their payments.
Trade association UK Finance has reported that there were 87,930 homeowner mortgages in arrears of at least 2.5% of their outstanding balance, in the third quarter of this year.
That’s a 7% increase compared to April-June 2023, and shows that some households aren’t able to meet their mortgage payments following the steady increase in UK interest rates since the end of 2021.
The number of homeowners in the ‘lighest arrears’ (ie, behind on between 2.5% and 5% of their balance) rose by 10% in the quarter.
UK Finance also reports that the number of buy-to-let mortgages in arrears has jumped by 29% in the last quarter, with 11,540 BTL mortgages in arrears of 2.5% or more in July-September.
That’s twice as many as in the third quarter of 2022, a year ago.
UK Finance also report that 630 homeowner mortgaged properties were taken into possession in the third quarter of 2023, 9% fewer than in the previous quarter.
450 buy-to-let mortgaged properties were taken into possession in the last quarter, unchanged from the previous quarter.
NEW:
— Faisal Islam (@faisalislam) November 9, 2023
Sharp rise in mortgage arrears especially for landlords.. reported by UK Finance, but from low base, still low historically.
“interest rate pressures felt more acutely in BTL sector, where landlords may not be able to raise rents to cover the increases in their payments.” pic.twitter.com/Al4F2t7mzy
Dan Osman, Head of Later Life Lending (for those aged 55 or more) at UK Moneyman, says some banks are failing to show compassion to borrowers.
This data sadly shows how the walls are increasingly closing in on many borrowers.
In cases reminiscent of 2008, we are seeing a lot of older borrowers coming to us because they are under threat of repossession. The lack of compassion shown by some of the major banks is staggering.
When challenged, some will admit to not having offered any support to the vulnerable. This is especially true in the case of widows who may never have had any involvement in the household finances and are now being left to deal with things for the first time.
Updated
BoE's Pill: Inflation will fall without interest rates rising higher
Inflation will fall without the need for further increases in the cost of borrowing, the Bank of England’s chief economist said this morning.
Huw Pill said the current level of interest rates would bring inflation back to the 2% target over the next three years, signalling that interest rates have peaked in the UK, my colleague Phillip Inman reports.
But he warned that wage increases were higher than the Bank would expect now that the economy was slowing towards stagnation. Services firms were also pushing prices higher despite a drop in demand, which meant interest rates would need to stay elevated for longer to achieve the inflation target.
In a presentation to the Institute of Chartered Accountants in England and Wales (ICAEW), Pill said:
“Having established monetary policy in restrictive territory, it’s not the case that we need to raise rates in order to bear down on inflation.
Sustaining rates at their current restrictive level will continue to bear down on inflation.”
BANK OF ENGLAND'S PILL: CRUCIAL THAT RESTRICTIVE STANCE OF MONETARY POLICY, WITH BANK RATE AT 5.25%, SQUEEZES INFLATION FOR AN EXTENDED PERIOD
— Talat Khan (@talatkhan58) November 9, 2023
Last week the BoE held interest rates at a 15-year high of 5.25%. The monetary policy committee, which sets interest rates, said there were no plans to cut the cost of borrowing while it focused on bringing down inflation.
Pill said the UK’s open economy could be buffeted by international events, as it had been over the last three years.
Pill explained:
“We need a persistent level of restriction over the next extended period ... that’s not to say that’s a promise that we will deliver that type of interest rate profile.
“There’s no promise here and we are responsive to events. And every time we meet, we look at all events. Events in the Middle East are a clear focus at the moment for reasons that I think are obvious.
Official figures showed the consumer prices index stood at 6.7% in September, more than three time’s the BoE’s 2% target.
Pill said on Monday that betting by financial markets on a first interest rate cut in August 2024 “doesn’t seem totally unreasonable”. His comments prompted traders to buy UK government bonds, leading to a sharp fall in short-dated government bond yields on Tuesday.
BoE Governor Andrew Bailey said on Wednesday that it was too soon to talk about rate cuts.
BoE chief economist Huw Pill: #Inflation remains much too high
— Global Markets Forum (@ReutersGMF) November 9, 2023
Pill: We do not need to raise #InterestRates to bear down on inflation
Pill: Maintaining restrictive stance of #monetary #policy key to meeting inflation target#bankofengland #UK
Updated
UK online job adverts drop
The number of online job adverts placed by UK companies has dropped again, a sign that demand is weakening.
The Office for National Statistics has reported that the total number of online job adverts fell by 2% in the week to 3 November, compared with the previous week.
Of the 28 online job categories, 25 decreased, 1 category increased, and 2 remained unchanged, the ONS says.
The largest decreases were found in the “catering and hospitality”, “manufacturing” and “legal” categories, all decreasing by 6%. The only increase was in the “creative, design, arts and media” category, which rose by 1%.
On an annual basis, there were 7% fewer online job adverts than in the same week in 2022.
The recovery in the travel sector has boosted sales and profits at retail group WH Smith.
Sales have jumped by more than a quarter over the past year, while profits almost doubled, as WH Smiths benefitted from a higher numbers of travellers at airports and train stations.
Downturn in UK housing market bottoms out in October: RICS
The worst may be over in the UK housing market, according to the latest poll of surveyors across the country.
The RICS Residential Property Monitor, released this morning, shows that demand and sales continued to fall in October. There was another drop in new buyers entering the market, and in sales, although both falls were less severe than in the summer.
Near-term sales expectations point to activity remaining subdued over the coming months, says RICS.
And prices continued to fall, although “the pace of decline appears to be leveling off”, RICS says.
Surveyors polled by RICS expect house prices to have fallen further in three months time, and in a year.
Sentiment on prices for the year ahead is most negative across the East Midlands, West Midlands and Yorkshire & the Humber.
RICS senior economist, Tarrant Parsons, says:
“Plenty of caution remains evident with respect to both buyer and seller activity across the UK housing market, albeit the latest survey feedback points to a slightly less negative picture than that reported over the previous few months.
“Although base interest rates have now been kept on hold at each of the past two MPC meetings, the Bank of England was keen to emphasise that monetary policy is set to stay at a restrictive setting for quite some time yet.
“As such, mortgage affordability will remain stretched over the near-term, leaving little prospect of a strong rebound in residential sales volumes, even if expectations have now moved away from cyclical lows”.
Emma Fildes, property agent at Brickweaver, has posted more details and analysis:
Thurs UK property projections via @RICSnews Oct 23 survey.
— Emma Fildes (@emmafildes) November 9, 2023
After a long summer retreat, the autumn market shows marginal improvement in agreed sales & demand though this is expected to head back down the winter slopes pic.twitter.com/XVtDpT9xHg
New instructions make themselves scarce in the hope the next year will be more lucrative.
— Emma Fildes (@emmafildes) November 9, 2023
Meanwhile prices remain negative with further falls expected, albeit at a slower pace. The exception being Scotland & Northern Ireland were prices are believed to rise pic.twitter.com/mKGFv2BNxM
In the rental sector, peak season over, demand softened slightly whilst supply continued to reduce. The continued imbalance between supply & demand, is projected to raise rents on avg by 4% in2024. Leaving some to weigh up house prices drops versus another year of rent pic.twitter.com/8QmknWy8w9
— Emma Fildes (@emmafildes) November 9, 2023
UK housebuilder Taylor Wimpey has lifted its profit expectations too, despite warning of “significant market uncertainty”.
Taylor Wimpey now expects its operating profit to be at the top end of its guidance range of £440m to £470m.
It says:
The market continues to be impacted by weak consumer confidence influenced by high mortgage rates and cost of living pressures which are negatively affecting affordability for our customers.
Taylor Wimpey reports that in the second half of this year, its net private sales rate per outlet per week has been 0.51, the same as in 2022, with a cancellation rate of 21% (down from 24% a year ago).
Cut-price retailer B&M has lifted its profit forecast, after seeing strong trading in recent weeks.
B&M says it has made a “pleasing” start to the Golden Quarter – the final three months of the year, when Christmas shopping traditionally boosts the retail sector.
B&M says sales have grown by 1.6%, year-on-year, in the first six weeks of the Golden Quarter, and by 4.5% in the last three weeks.
The company has also reported a 10.4% increase in revenues in the 26 weeks to 23 September 2023 (the first half of its financial year), with pre-tax profits up 10.5% to £222m.
B&M says the “uncertain and ever-changing” economic background makes forecasting difficult.
But, given “the strong first half results and positive momentum” it now expects to make adjusted EBITDA profits of £620m to £630m, up from £573m last year.
B&M - "All four of our channels of growth are delivering strong results, underpinned by our relentless focus on low prices, cost control, simplicity in everything we do and disciplined profitable growth". Doing alright but much to talk about. Call at 9.30 am. pic.twitter.com/4NWoVwclZ4
— Chris Bailey (@Financial_Orbit) November 9, 2023
China in deflation; what the experts say
China’s fall into deflation last month is the latest data to confirm anaemic economic conditions in the country, says Kyle Rodda, senior financial market analyst at Capital.com.
The cause of the malaise is a subject of robust debate. Still, most agree it’s some combination of a confidence crisis, a cyclical slowdown, and structural problems related to pockets of leverage in the economy.
While policymakers have avoided the bazooka-style stimulus that drove China’s economy out of the 2008 slump and 2015 asset bubble, recent tweaks to monetary policy and a pledge of more profound deficit spending to achieve growth targets signal intent to boost economic activity. So far, the impacts have only been modest.
The insensitivity to policy support may throw wait behind the “balance sheet recession” argument for why China is stuck in such stagnation, a la the Japanese experience in the late 20th century.
Goldman Sachs have predicted that China’s headline CPI should rise gradually in the coming months, although “persistent pork prices deflation is likely to slow the pace”.
Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, warned that “combating persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” adding:
“An appropriate policy mix and more supportive measure are needed to prevent the economy from a downward drift in inflation expectations that could threaten business confidence and household spending.”
Updated
Energy suppliers pay £10.8m for missing smart meter installation targets
Newsflash: Britain’s energy regulator has fined six suppliers a total of £10.8m for missing their targets for smart meter installation last year.
British Gas, OVO, Bulb, E.ON, Scottish Power and SSE all missed their rollout targets, leading to a shortfall of 1,026,628 smart meters, Ofgem has announced.
The suppliers have all agreed to make payments into Ofgem’s Energy Industry Voluntary Redress Fund (EIVRF) – which is used to provide help to consumers in vulnerable situations who are most at risk from cold homes and high energy bills.
Cathryn Scott, director of Enforcement and Emerging Issues at Ofgem, said:
“The installation of smart meters is a vital step in the modernisation of our energy system and the path to net zero by 2050. Smart meters give customers better information about their energy usage helping them budget and control their costs.”
Some suppliers did cite “mitigating factors” for missing their targets, some of which Ofgem considered when setting their payments into the EIVRF, but didn’t hold a detailed review into what went wrong.
Updated
Introduction: China’s economy falls back into deflation as pork prices tumble
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
China has dropped into deflationary territory for the second time this year, reigniting concerns over its economy.
Consumer prices in the world’s second-largest economy fell by 0.2%, compared with the previous year, in October, a larger decline than the 0.1% expected.
Chinese producers also cut their prices at a faster rate. The producer price index (a measure of prices at the factory gate) fell 2.6% year-on-year, following a 2.5% drop in September. That could push inflationary pressures down globally.
🇨🇳 China's consumer prices back in decline as recovery wobbles
— PiQ (@PiQSuite) November 9, 2023
China's consumer prices swung lower in October, as key gauges of domestic demand pointed to weakness not seen since the pandemic, while factory-gate deflation deepened, casting doubts over the chances of a… pic.twitter.com/ErjLlawYMm
The drop in China’s CPI was partly due to cheaper food prices – pork, for example, cost 30% less than a year ago, with an oversupply of pigs and weak demand making this popular staple cheaper.
But there was also a notable slowdown in core inflation (stripping out food and energy), which fell to 0.6% in October from 0.8% in September.
While cheaper goods and services are welcome news for Chinese consumers, the fall in prices will worry Beijing, as it suggests economic demand remains weak almost a year after pandemic restrictions were ended.
Back in August, China’s inflation rate fell below zero, before returning to positive territory in October.
Deflation is a serious situation – falling price levels lead to a rapid slowdown in economic activity as consumers cut spending and business invest less (on the logical grounds that it will be cheaper next year).
However, is a small drop in prices actually full-blown inflation?
Robert Carnell, ING’s regional head of research for the Asia-Pacific, argues that China is actually grappling with “low underlying inflation”.
Carnell says:
What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today’s data show is that it doesn’t take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.
If you want to use any term, “disinflation” would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.
Carnell adds that the inflation report highlights the “hog cycle” – when pork prices are high, farmers hold back pigs from the market to expand their herds, leading to a glut, causing herd shrinkage, etc etc.
He says:
China is not experiencing “deflation” as most headlines attest. But its pork prices are undoubtedly much lower, good news for all except farmers probably
The agenda
8.10am GMT: European Central Bank chief economist Philip Lane speaks at the ECB Conference on Money Markets 2023 in Frankfurt, Germany
9am GMT: ECB economic bulletin released
11am GMT: Ireland’s consumer price inflation data released
1.30pm GMT: US weekly jobless report
Updated
