Closing summary
Our main stories today:
The anticipated post-election bounceback in the UK economy failed to materialise as activity flatlined in July for a second month, according to the latest official data.
The Office for National Statistics (ONS) said the pre-election stalling of activity in June was followed by another month in which gross domestic product remained unchanged.
Although the economy grew by 0.5% in the three months to July, the weak performance of the economy during Labour’s first weeks in power came as a shock to the City, which had been expecting growth of 0.2% on the month.
The economy grew by 0.7% in the first three months of 2024, followed by a 0.6% expansion in the second quarter, but the latest ONS figures suggest the recovery from the mild recession in late 2023 has petered out.
Price growth continued to soften in the US last month, as the Federal Reserve prepares to cut interest rates for the first time since the start of the pandemic at next week’s meeting.
As inflation continues to fade, the consumer price index rose at an annual rate of 2.5% in August – down from 2.9% in July, and below the 2.6% expected by economists. However, the core rate of inflation, which strips out volatile food and energy costs, remained at 3.2%.
The British steel industry has suffered a blow after confirmation that 2,500 jobs will go at the Port Talbot steelworks despite a £500m taxpayer-backed deal for the south Wales plant.
The business secretary, Jonathan Reynolds, has agreed a deal in which the government will provide £500m towards the construction of a new greener electric arc furnace at the site, with the plant’s Indian owners, Tata Steel, paying £750m.
However, while the deal secures the long-term future of steel production at the south Wales site, the government was unable to secure guarantees that would save the 2,500 jobs at Port Talbot that Tata was likely to cut over the coming months.
Thank you for reading. We’ll be back tomorrow. Take care! – JK
Manchester United posts loss for fifth year running
Manchester United’s new chief executive has said that the football club is working towards improving performance on and off the pitch, after posting a financial loss for the fifth year running following a poor 2023-24 season.
United have embarked on a number of changes since British billionaire Jim Ratcliffe acquired a 25% stake in the club and over the summer managed to secure new players, many of whom are under 25 years of age.
Omar Berrada, who was appointed CEO in July after moving from Manchester City’s parent company, City Football Group, said:
We are working towards greater financial sustainability and making changes to our operations to make them more efficient, to ensure we are directing our resources to enhancing on-pitch performance.
Our clear objective is to return the club to the top of European football.
United’s net loss ballooned to £113.2m in the year to 30 June, from £28.7m the previous year. This is only the second time since the New York listing in 2012 that the club’s annual net loss exceeded £100m. Shares were 5% lower in US premarket trading.
United finished eighth in the Premier League last season, their lowest position since the league’s inception. This season hasn’t started any better, with two losses in the first three games.
Earlier this month, Berrada said manager Erik ten Hag had the full backing of the club.
For the coming year, the club expects an adjusted core profit between £145m and £160m, and revenues between £650m and £670m. It reported adjusted core profit of £147.7m on record revenues of £661.8m in the latest year.
It said the estimate reflects the impact of recent restructuring initiatives, including plans for 250 job cuts.
Since Manchester United was acquired in 2005 the Club has made cumulative pre-tax losses of £483m and paid net interest costs on loans of £969 million. pic.twitter.com/XRDfaKarbP
— Kieran Maguire (@KieranMaguire) September 11, 2024
Gerrit Smit, manager of the Stonehage Fleming Global Best Ideas Equity fund, said:
Although largely driven by lower energy costs, the sharp drop in US headline inflation to 2.5% for August removes all uncertainty whether the Fed will start cutting their target rate at their meeting next week.Investor focus has already shifted from inflation to economic growth considerations.
James McCann, deputy chief economist at the investment firm abrdn, noted that the core measure of inflation was up a robust 0.3% month-on-month, the largest gain since March.
Shelter surprised to the upside, with different measures of rents continuing to show quite a lot of heat. Other services inflation was also quite firm, although core goods prices continue to fall, providing some helpful disinflationary tailwinds to the economy.
While the Fed will have wanted a softer print, there is a sense that the inflation story is starting to become yesterday’s news. Indeed, with the pace of private payrolls gains slowing to a 10 year low though this summer, and the unemployment rate trending higher, the deeper concern might be that the economy is losing steam quite rapidly, reigniting the risk of a downturn. Indeed, the Fed looks set to cut rates by 25 basis points at every meeting this year with the bar for larger 50bps moves not particularly high if we were to see further growth scares.
Here’s our full story:
Here is some instant reaction. Naeem Aslam, chief investment officer at Zaye Capital Markets, said:
At first glance, today’s year-over-year inflation data brings a breath of fresh air, hinting that the Fed might have room to cut rates more aggressively. Yet, there’s a twist in the tale – the Core CPI numbers haven’t painted such a rosy picture, throwing a wrench in the works for rate cuts.
The market’s response? The dollar index has found new legs, spelling trouble for gold prices. Meanwhile, equity markets are stuck in limbo as traders chew over the full implications of this mixed bag of data.
US inflation slows more than expected to 2.5%
Consumer price inflation in the United States has slowed more than expected to its lowest since February 2021.
The headline annual rate of inflation fell to 2.5% in August, from 2.9% in July, according to official figures. This was below the 2.6% rate predicted by analysts.
The US Federal Reserve has already signalled that it will cut interest rates at its meeting next week.
However, the core rate of inflation, which excludes volatile food and energy costs, stayed at 3.2%, as expected, complicating the Fed’s job.
JUST IN: More good news on inflation. The US inflation rate cooled to 2.5% (y/y) in August, the lowest since February 2021. This gives the Fed and everyone else more confidence the inflation battle has been won.
— Heather Long (@byHeatherLong) September 11, 2024
Lower gas prices, lower electricity costs and lower used car prices… pic.twitter.com/EoYRfvjRkh
Updated
Some more reaction…
Ava Santina-Evans, political correspondent at PoliticsJOE, said on X:
Conservative MP Greg Smith is at the despatch box lamenting job losses at Port Talbot.
— Ava-Santina (@AvaSantina) September 11, 2024
Made this film last year with @seannhickey, when the Conservatives were overseeing (and funding!) closure and job losses at Port Talbot: https://t.co/wUeDKTjtGg
In her first Welsh Questions as Secretary of State for Wales, @jostevenslabour explained how the new UK Government has taken immediate action to support Welsh steelmaking.
— Wales Office (@WalesOffice) September 11, 2024
Last month an initial £13.5m was released to support workers and businesses in #PortTalbot. pic.twitter.com/GBqpE25p4Q
"This government has made more progress in two months than they made over the last parliament"
— BBC Politics (@BBCPolitics) September 11, 2024
Business Secretary Jonathan Reynolds, criticises the former Conservatiove government as he announces a "better deal" for Tata Steel at its Port Talbot sitehttps://t.co/t3qZCtflRv pic.twitter.com/iNG0vM91y1
Unite: Deal avoids compulsory redundancies, hopes for further investment
The Unite union said it was instrumental in securing the £2.5bn fund for investment in steel, and is in ongoing talks on further investment which should include new lines being installed and generating jobs at both Port Talbot and Llanwern. This should be agreed over the next 12 months.
The Unite regional secretary Peter Hughes said the deal avoided compulsory redundancies.
Unite general secretary Sharon Graham said:
The two stage government commitment to provide serious funding for steel in South Wales is vital for local communities and the long-term future of the steel industry.
The last government was quite frankly asleep at the wheel. The present crisis is a direct result of it failing to invest in the UK steel industry and allowing the companies involved to rundown their operations and let them fall into disrepair. Conservative inaction and disdain have resulted in wholly avoidable job losses.
Unite which secured the additional funding will ensure that the substantial second stage investment in South Wales means new jobs will be available and secure the future of Port Talbot and Llanwern.
It is now imperative on Tata to bring forward the second stage proposals to develop increased steel capacity at its South Wales sites, a jobless transition will not occur on our watch.
Updated
Speaking in parliament, Reynolds defended the deal, though.
This will save more jobs. That’s the point of the new investment. And for those people who are unable to get those new jobs, there will be better terms for them.
The unions have recognised it as a better deal. Our Welsh Labour government has recognised it as a better deal.
Reynolds apologises and says deal 'falls short'
Jonathan Reynolds, the business secretary, has apologised, and said he recognised the deal “falls short of what would be my ideal”.
He told the Commons:
The last government had been promising a plan for the steel industry for years. With what I’m able to announce today, with the signing of a legally-binding deal that enables Tata to order their electric arc furnace as part of a significantly improved package, this government has made more progress in two months than they made over the last parliament.
But even if we had started these negotiations a year ago, never mind many years ago as they had the opportunity to do, I have no doubt we would have secured an even better deal for the community, so I would like to start with an apology to the people of Port Talbot because they were let down by the previous government.
Whilst this deal is much improved, I acknowledge very much it falls short of what would be my ideal.
Reynolds had previously said he believed there was a “better deal available” and that Labour would ensure that job guarantees in return for investment were part of the negotiations, my colleague Jack Simpson reports.
The Guardian understands that Reynolds had initially hoped to persuade Tata to keep the second blast furnace switched on at the site and secure more jobs but this was rejected by Tata because of the costs.
The last blast furnace will now close on 28 September, with most employees leaving before Christmas after working their notice periods. Tata predicts that nearly all of the Port Talbot staff will be gone by March next year.
Despite the job losses, Reynolds said the deal did what the previous government’s deal could not do, and gave “hope for the future of steelmaking in south Wales”.
Here is our full story:
Updated
UK government unveils £500m Port Talbot deal; 2,500 jobs to go
The government has announced a £500m taxpayer-backed deal for the Port Talbot steelworks, securing the long-term future of steel production at the south Wales site, but was unable to secure guarantees that would save the 2,500 jobs that Tata Steel is likely to cut over the coming months.
The business secretary, Jonathan Reynolds, has agreed a deal under which the government will provide £500m towards the construction of a new greener electric arc furnace at the site, with the plant’s Indian owners Tata Steel paying £750m.
Reynolds claimed the deal went much further than the previous government’s agreement – delivering a minimum voluntary redundancy payout of £15,000 for full-time employees plus a £5,000 ‘retention’ payment and offering paid-for training.
The government said 2,000 workers had expressed interest in voluntary redundancy under this deal. Employees who choose redundancy will be paid 2.8 weeks’ earnings for each year of service, up to a maximum of 25 years.
About 500 new jobs are expected to be created to construct the Electric Arc Furnace, but this won’t happen until early 2028 at the earliest.
The government is putting £500m into the steelworks, but said it can claw back investment should Tata Steel not fulfil its commitments. This includes “increased penalty payments should the company not retain 5,000 jobs across its UK business post transformation”.
The government has also pledged £2.5bn of investment to rebuild the industry and help it decarbonise, and said it would lay out a steel strategy next spring.
As part of the deal, Tata Steel will release 385 acres of the site for redevelopment, which is expected to bring in more companies and employers not just from the steel sector but other industries.
It comes after Tata’s decision in January to close both blast furnaces at its Port Talbot site, putting 2,800 jobs at risk.
The business secretary said:
Port Talbot has always been and will always be a steelmaking town. This deal does what previous deals failed to do – give hope for the future of steelmaking in South Wales.
Steel is fundamental to the UK’s economy, sovereignty, and communities, but previous government inaction has blighted the steelmaking industry. That’s why this Government is taking strong action through a new deal and strategy which will reverse the industry’s stagnation and set out a long-term vision for a bright and sustainable future.
We know that a cleaner, greener future for UK steelmaking is vital to the industry’s long-term economic stability. The road ahead is not without its challenges but our steel strategy will set forth a positive vision for the future of the industry, backed by our manifesto commitment to £3 billion of government investment.
Boohoo shuts US site in latest sign of cost cutting
Boohoo is closing is US distribution centre just over a year after it opened in the latest sign of cost cutting at the struggling online fashion seller which owns brands including Debenhams, Warehouse and Karen Millen.
Analysts said the closure of the site in Pennsylvania was likely to mean a £34m profit writedown on the capital investment in the site, which had been distributing the group’s Pretty Little Thing brand and had been intended to handle more brands later this year.
Katie Cousins, an equity analyst at Shore Capital said:
To us, the short life of the US warehouse (previously stated as a key pillar of growth for BOO) is concerning, highlighting a naivety of the American market, along with a waste of time and resources.
Boohoo said it would continue to serve US customers via its UK warehouse and was testing new routes into the market including the recent launch of its Nasty Gal brand in Nordstrom department stores.
These changes will result in a significant reduction in ongoing costs over the medium term. The group remains excited about the opportunity in the US.
The closure of the US site comes as analysts said Boohoo’s sales there were well below 2022 levels and forecasts from that time.
The group racked up net debts of £95m in the year to the end of February – down from almost £6m of net cash a year before – after losses widened 76% to £160m and sales fell to £1.8bn.
Boohoo and fellow online fashion seller Asos have both been struggling amid new competition from cut-price online sellers Shein and Temu as well as the rise in popularity of secondhand clothing among young people spurred on by the likes of Vinted and Depop.
Yesterday, Pretty Little Thing founder Umar Kamani, the son of Boohoo’s founder and chairman Mahmud Kamani, said he was returning to run the brand, which he stepped down from in April last year.
He said one of his first steps would be to reintroduce free returns for premium customers adding “I sincerely apologise for any negative experiences you may have encountered during my absence.”
Bolt drivers seek to be classed as workers at London employment tribuna
Drivers working for Bolt, the ride-hailing app operator, are seeking to be classed as workers rather than self-employed contractors at an employment tribunal.
More than 12,500 drivers, who are represented by the law firm Leigh Day, are bringing the action against Bolt, an Estonia-based ride-hailing app which has been operating in the UK since 2019.
The drivers claim they should be treated as workers because of the significant control Bolt has over how they work, and say they should be given the same rights and protections as typical workers.
The high-profile employment rights case, which begins in central London on Wednesday, comes as the new Labour government prepares to draw up its plans to strengthen workers’ rights in legislation.
UK TV production sector income falls by £400m as programming budgets cut
The TV production sector in the UK suffered a £400m fall in revenues last year as cash-strapped British broadcasters reduced spending to the lowest level since the height of the pandemic.
The latest annual industry survey found that total revenues made by UK production companies fell by £392m to £3.61bn in 2023. However, just as traditional broadcasters struggle, global streaming companies such as Netflix and Amazon continue to become an increasingly important income stream, the study showed.
The latest bellwether census from industry body Pact said UK broadcasters such as ITV, the BBC, Channel 4 and Sky cut programming commissioning budgets due to factors such as a falling advertising market, viewers moving away from traditional TV and rising inflation. The freeze on the BBC’s licence fee also led to severe spending cuts.
The total amount spent on commissioning programmes by all UK-based broadcasters fell by more than 10% last year, from £1.99bn to £1.78bn, to the lowest level since the industry shut down during the pandemic in 2020.
While spending by public service broadcasters – the BBC, ITV, Channel 4 and Channel 5 – remained relatively resilient, budgets across multichannel broadcasters such as Sky plummeted by more than 35%.
The report blamed this on part of the UK market being “particularly exposed to a difficult advertising market placing downward pressures on broadcaster margins”.
Campbell’s to drop soup from company name after 102 years
Bosses at Campbell Soup Company, whose cans feature in one of Andy Warhol’s best-known 1960s pop artworks, have announced plans to drop “soup” from its name after more than 100 years.
Its chief executive, Mark Clouse, said the decision to rename the group the Campbell’s Company was part of a shift in focus to the other snack foods and jarred sauces it sold.
The 155-year-old company started producing canned condensed soup in 1897 – believed to be the first in the US to do so – and has held the Campbell Soup Company name since 1922.
Its place in US popular culture was further cemented when Warhol produced his screen prints depicting 32 cans of Campbell’s soup with different flavours in the early 1960s.
PrettyLittleThing founder is back and promises free returns
The PrettyLittleThing founder Umar Kamani said he was returning to the fast fashion brand, and one of his first changes will be to reintroduce free returns for its royalty customers.
Retail Week described it as a “shock return” after he left the business last year.
A message for my PLT family, thank you 🤍 pic.twitter.com/1MVQYUwoLt
— Umar Kamani (@UmarKamani) September 10, 2024
Updated
GSK ditches experimental herpes vaccine after trial failure
Britain’s second-biggest drugmaker GSK has ditched its experimental vaccine for herpes after it failed in an early to intermediate stage trial – ending efforts to bring the first shot for the condition to market.
The company said the trial for a therapeutic vaccine to treat the herpes simplex virus (HSV) did not meet its efficacy objective, and it won’t be taken into late-stage trials. There were no safety issues.
There are no approved vaccines for the virus, which causes genital herpes, although there is a shot for the herpes virus that causes chickenpox, made by the US drugs giant Merck. The Japanese virologist Michiaki Takahashi invented the first chickenpox vaccine.
GSK said:
Given the unmet medical need and burden associated with genital herpes, innovation in this area is still needed. GSK intends to evaluate the totality of all these data and other studies to progress future research and development of its HSV programme.
GSK shares are down 0.8% on the news, but are still up by about 12% so far this year.
Back to today’s weaker-than-expected UK GDP figures. Philip Shaw, chief economist at Investec, said:
While the relative weakness of the economy in July comes as a surprise, we are not unduly concerned over the outlook for the remainder of the year, not least because survey evidence remains positive. In addition, the positive household income background remains a helpful, if perhaps surprising story – real household disposable incomes grew by 3.3% in the year to Q1 – providing ample ammunition for continued household consumption growth.
It is also worth noting that recent UK economic history is due to be rewritten on 30 September with the publication of the ‘Blue Book’ which will include revisions to GDP since 2023. Changes to the economic profile for the prior period have already been published and these showed that GDP growth in 2022 was revised up to 4.8% from 4.3%. Realistically we cannot guess the scale or even the direction of the forthcoming revisions, but we will be able to make a more definitive judgment after the new figures are released (the monthly GDP series is due on 11 October).
In the context of interest rates, today’s figures do raise modestly the chances that the MPC will ease policy at the next meeting on Thursday week. However the committee is more likely to want to see updated GDP data before rushing to conclusions on the economy and our base case remains that the Bank rate will be held at 5.0%.
WH Smith posts 7% revenue growth, shares jump
Shares in WH Smith jumped by nearly 12% after it said the latest quarter had been strong, in particular its UK stores, and announced a £50m share buyback.
The 230-year-old chain, which sells books and magazines as well as food and drinks, has been closing highstreet stores and is pushing into travel hubs such as railway stations and airports. It said revenues rose by 7% in the year to 31 August, fuelled by 10% growth at its travel division.
Carl Cowling, the chief executive, said:
We have ended the financial year in a strong position, delivering a performance in line with our expectations with good growth across our travel businesses. Our UK division performed particularly well over the peak summer trading period.
We are also today announcing the launch of a £50m share buyback, which reflects strong ongoing cash flow, the receipt of the pension fund buyout cash return, as well as the strength of our balance sheet, with leverage now within our target range.
Updated
European shares rise, oil prices push higher
UK and European stocks have made some modest gains. The FTSE 100 index in London has edged 0.1% higher to 8,212 while the German, French and Italian markets are between 0.3% and 0.4% ahead.
In London, mining and commodities stocks are among the main risers, led by Antofagasta, Fresnillo and Glencore.
Oil prices have risen by 1.3% amid concerns about Hurricane Francine disrupting output in the US. Brent crude is trading 91 cents higher at $70.10 a barrel, while US light crude has climbed to $66.66 a barrel.
Rupert Murdoch-owned firm REA makes £5.6bn offer for Rightmove
REA, the Australian property company majority-owned by Rupert Murdoch’s News Corp, has made a £5.6bn offer for Rightmove, the UK’s biggest online real-estate portal.
The Rightmove board rejected the 705p a share offer, worth 18.6% of the enlarged company post-deal, which comes a week after REA confirmed it was considering a cash and share offer for Rightmove.
Shares in Rightmove closed at 555.6p on 30 August, the last trading day before news of REA’s initial interest was revealed in the press, and closed at 670.8p at the end of trading on the London Stock Exchange yesterday. They rose by 1.2%, or 7.8p, to 678.6p in early trading today.
REA said in a statement released on the Australian Stock Exchange today:
REA confirms that on 5 September 2024 it made a non-binding indicative proposal to the board of directors of Rightmove regarding a possible cash and share offer for the entire issued and to be issued share capital of Rightmove. REA was informed on 10 September 2024 that the Rightmove board rejected the proposal.
Rightmove said:
The board carefully considered the proposal, together with its financial advisers, and concluded that it was wholly opportunistic and fundamentally undervalued Rightmove and its future prospects. Accordingly, the board unanimously rejected the proposal … shareholders should take no action.
Updated
Economists still expect next rate cut in November
Markets see a near-25% chance of an interest rate cut next week.
Some economists (e.g. Capital Economics) say today’s disappointing GDP data make a rate cut then a bit more likely, but overall economists still think November is more likely.
Thomas Pugh, UK economist at RSM UK, said:
The second consecutive month of no growth in July undershot expectations of 0.2% m/m and is clearly disappointing. But it won’t be enough to convince the Monetary Policy Committee (MPC) to cut interest rates next month, especially as output in the services sector, where the MPC is watching price pressures like a hawk, rebounded. The next opportunity will come in November, when services inflation should have cooled enough to allow another cut.
Turning to the budget on 30 October, he said:
Disappointing growth will also add to the chancellor’s misery ahead of a “painful” budget next month. To really make a difference to the fiscal outlook though, she will have to convince the Office for Budget Responsibility (OBR) that their supply side reforms to the planning system and boosting investment are going to kickstart growth. That looks unlikely without more radical reforms.
The weakness in GDP was concentrated in the manufacturing sector, which fell by 1% m/m. Manufacturing is struggling globally, as surging exports from China, combined with weak global demand, especially for goods, weighs on production. Construction also dropped by 0.4% m/m as a wet July hampered construction efforts.
Updated
Liz McKeown, ONS director of economic statistics, summed up the economic picture:
July’s monthly services growth was led by computer programmers and health, which recovered from strike action in June. These gains were partially offset by falls for advertising companies, architects and engineers.
Manufacturing fell, overall, with a particularly poor month for car and machinery firms, while construction also declined.
The 0.1% rise in service sector output in July was driven by retail sales rebounding and fewer strike days, although economists had expected a 0.2% rise. Rob Wood, chief UK economist at Pantheon Macroeconomics, has crunched the numbers.
Wholesale and retail output gained by 0.5%. Health and social work also rose by 0.5%, recovering half of the ground lost in June as junior doctors were on strike for two days in July compared to three in June. With no further doctors strikes planned, healthcare output is expected to jump again in August.
Accommodation and food services did better than expected, rising by 0.9% month-to-month, stronger than the soft industry surveys had signalled.
The downside surprise in services came in the powerhouse professional services sector, where output dropped by 1.3%. Wood said:
That was a correction for unusually strong growth in the first half, when professional services output grew 4.4%. We expect this sector to return to growth in August.
Updated
Isaac Stell, investment manager at the Wealth Club, said:
A reversal in the fortunes for the manufacturing and construction sectors is a blow to the new Labour Government that has growth as a central pillar of its agenda.
The usual bright spot was the bounce back in growth for the services sector with the health sector one of the leading contributors, springing back to life following strike action in June.
A notable slowdown in advertising and architects may be indicative of a wider slowdown. With the canaries beginning to look a bit peaky, the chancellor may need to tread more carefully in October.
A September interest rate cut is not certain despite the downbeat GDP data, said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales. He explained:
These figures confirm that the UK economy struggled for momentum in the aftermath of the general election as falling manufacturing and construction output caused overall activity to flatline in July.
The UK’s growth trajectory should slow further in the coming months with higher energy bills and expected tax rises likely to trigger renewed restraint in spending and investment, despite a boost from subdued inflation.
Despite these downbeat figures, a September rate cut is not certain given that some rate setters are still sufficiently nervous over lingering price pressures to delay loosening policy again, at least until November.
“The July GDP print was disappointing: despite the modest boost from the Euros, the UK saw broad-based weakness across the economy,” said Sanjay Raja, chief UK economist at Deutsche Bank.
Growth is normalising from the rapid pace set in the first half of 2024 – this much should be expected. The pace of the slowdown, however, is a little faster than we anticipated – especially in light of the still stellar survey data we’ve seen over summer.
The economy grew by 0.7% in the first three months of the year, followed by a 0.6% expansion in the second quarter but the latest ONS figures suggest the recovery from the mild recession in late 2023 has lost steam.
Economists say this does not mean that the UK will slip back into recession.
Ruth Gregory, deputy chief UK economist at Capital Economics, said:
The economy stagnated in July, but that doesn’t mean the UK is on the cusp of another recession and we still think the stickiness of inflation will keep the Bank on hold in September.
We still think a mild slowdown in GDP growth to more normal rates of 0.3% quarter-on-quarter later this year is more likely than a sudden drop back into recession.
For now, we are sticking to our view that the Bank of England will keep interest rates unchanged in September before cutting rates again in November. But today’s data has made an interest rate cut next Thursday a bit more likely.
Updated
Luke Bartholomew, deputy chief economist at abrdn, said:
The economy performed a little softer than expected in July, with GDP flatlining. Industrial production and manufacturing were also weak, rounding off a set of weak UK data.
As ever, though, monthly activity numbers are very volatile month to month, often reflecting more noise than signal. The broader trend remains solid, although it is likely that the underlying pace of growth will slow somewhat over the second half of the year.
Certainly, there is no reason yet for the Bank and England to feel it needs to speed up the pace of rate cuts, and we expect the Bank to keep interest rates on hold next week.
Rachel Reeves: 'Change will not happen overnight'
Chancellor Rachel Reeves said:
I am under no illusion about the scale of the challenge we face and I will be honest with the British people that change will not happen overnight.
Two quarters of positive economic growth does not make up for fourteen years of stagnation. That is why we are taking the long-term decisions now to fix the foundations of our economy.
Manufacturing was the main culprit behind the drop in industrial output (which also comprises mining and quarrying, and utilities) in July.
Manufacturing output fell by 1% from June, and declined by 0.3% in the three months to July, compared with the previous three months.
Our story is here:
Bloomberg’s political editor Alex Wickham said on X:
NEW: The UK economy unexpectedly stagnated for a second month in July, suggesting that a rapid recovery from recession is now losing momentum
— Alex Wickham (@alexwickham) September 11, 2024
GDP unchanged after flatlining in June too
Economists had forecast a 0.2% increase
Via @tomelleryrees @PhilAldrick @irinaanghel12
Updated
Services activity picked up by 0.1% in July following a 0.1% dip in June, but did not show the expected strong pick-up while industrial production declined by 0.8%.
Construction output was down by 0.4% in July.
Services grew more strongly, by 0.6%, in the three months to July. There was also a 1.2% increase in construction output, while production dipped by 0.1% over this period.
Professional, scientific and technical activities was the largest positive contributor to the rise in services output over the three month-period, up by 2%. The next largest contribution came from wholesale and retail trade; repair of motor vehicles and motorcycles, where output increased by 0.7%.
Updated
UK economy continues to stagnate in July
The UK economy continued to flatline in July, but grew by 0.5% in the three months to July, according to the latest official figures.
Economists had expected GDP to rise by 0.2% in July. In June, there was also zero growth.
GDP growth was flat in July 2024 but grew 0.5% in the three months to July 2024.
— Office for National Statistics (ONS) (@ONS) September 11, 2024
In July services grew (+0.1%) but production (-0.8%) and construction (-0.4%) both fell.
Read more ➡️ https://t.co/rI5JUOz1LX pic.twitter.com/8KVdtuuBEK
Updated
Dollar falls 1% against yen as Harris puts Trump on defensive
The dollar fell by more than 1% against the yen to its weakest level of the year, after Kamala Harris put Donald Trump on the defensive in the first and only television debate in the presidential race last night.
The yen also got a boost from Bank of Japan board member Junko Nakagawa, who reiterated in a speech that the central bank would continue to raise interest rates if inflation and the wider economy moved in line with its forecasts.
The dollar dropped as much as 1.2% to 140.71 yen, a level not seen since 28 December before recovering slightly.
Updated
Economists at Daiwa Capital Markets said:
After economic output moved sideways in June, we expect a return to expansion in July with growth of 0.3% month on month, which would leave the three-month growth rate unchanged at a solid 0.6%. Growth will in part reflect the pickup in retail sales of 0.5% that month, when a long-awaited improvement in the weather boosted demand.
Surveys also pointed to growth across the services sector as well as construction, while the manufacturing output PMI rose to the highest level in more than two years. So, although factory production grew in June by the most in four months, we expect the expansion in GDP in July to be broad-based.
Introduction: UK economy forecast to have returned to growth in July
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK economy is expected to have returned to growth in July, after flatlining in June.
The latest GDP figures from the Office for National Statistics, out at 7am, are expected to show that the economy expanded by 0.2% in July, after zero growth in June.
Deutsche Bank economist Sanjay Raja, who is predicting a 0.3% rise in GDP in July, said:
What’s driving the increase in output? Mainly, a stronger rebound in services activity, led by a pick up in retail and leisure services. Industrial production output also likely expanded to start the third quarter, lifted in large part by an increase in oil production, and to a slightly lesser extent, manufacturing output. Last but not least, we expect the construction sector to see its third monthly consecutive rise (0.2% month on month).
Where are risks to our nowcast skewed? To the downside, with our modelled estimates having a downward skew relative to our point estimate.
Looking ahead, we continue to see GDP expanding at a steady clip, averaging roughly 0.4% quarter on quarter in the second half. It’s early days, but risks to our quarterly nowcasts are skewed to the upside, raising upside risks to our annual growth projection too.
We are also getting figures for trade and industrial production at the same time.
It’s also US inflation day. The annual headline rate is expected to have fallen to 2.6% from 2.9%, while the core rate, which strips out volatile food and energy costs, is set to have stayed at 3.2%.
Investec economist Ryan Djajasaputra said:
July’s outturn provided further reassurance that inflation remains on a disinflationary path, with the 2.9% print being the first below 3% since March 2021. Early consensus estimates are for a further moderation to 2.6%.
Also today:
The British steel industry is braced for 2,500 job cuts at the Port Talbot steelworks, with thousands more jobs at risk in the UK, as the government prepares a taxpayer-backed deal for the south Wales plant.
The business secretary, Jonathan Reynolds, is expected to outline this morning the details of a rescue deal which will see the government hand the historic Welsh plant’s owners, Tata Steel, £500m to build a new electric furnace – but at the cost of huge redundancies from the closure of its last remaining blast furnace.
Natarajan Chandrasekaran, the chair of Tata Group, told the Financial Times on Tuesday that talks were “going well” and it was “very close” to agreeing a deal.
It is understood the government, which previously promised to “push for job guarantees”, has been unable to protect these jobs, with 2,500 still expected to go in the coming months.
The Agenda
7am BST: UK GDP for July (forecast: 0.2%, previous: 0%)
7am BST: UK trade, industrial production for July
1.30pm BST: US inflation for August (forecast: 2.6%, previous: 2.9%)
Updated
