Putin to force Russian companies to buy plummeting rouble

Putin to force Russian companies to buy plummeting rouble

See you tomorrow!

I’ll leave you with the thoughts of academic Philip Booth, who explains why the Bank of England is stoking the fires of an entirely new crisis

WeChat owner misses revenue estimates as Chinese economy slumps

China’s largest company Tencent has missed revenue estimates as the country’s economy falters. 

The tech conglomerate, which owns China’s largest messaging app WeChat, posted a worse-than-expected 11pc increase in second-quarter sales to Rmb149.2bn (£16bn).

The Shenzhen-based company suffered a slowdown in key businesses, including gaming and cloud service.

However, Tencent was boosted by a 34pc rise in online advertising revenue, as the group invests heavily in short videos in hopes of rivalling ByteDance-owned TikTok.

Spending cuts also helped Tencent lift net profit by a third to Rmb37.5bn.

Chinese tech leaders are under pressure to kickstart the world’s second largest economy as it struggles to recover from Covid restrictions. 

The tech conglomerate owns China’s largest messaging app WeChat


Jaguar Land Rover creates 300 jobs in electric vehicle push

Jaguar Land Rover (JLR) is creating 300 new jobs in the West Midlands to accelerate its push into electric vehicles.

The British car manufacturer is searching for around 200 technicians and test engineers to help build battery-powered vehicles at its Warwickshire and Coventry sites.

JLR will also recruit about 100 maintenance technicians to ramp-up Range Rover production at its Solihull-based plant.

The group has pledged to spend £15bn over the next five years on retooling its British factories for electric vehicles. 

Last month, JLR owner Tata group announced plans to build one of Europe’s largest gigafactories in Britain after months of negotiations.

The factory will supply Britain with enough electric car batteries to meet half its forecasted demand by 2030.

UK risks falling behind in switch to green energy, study warns

Britain is at risk of falling behind in the global race to transition to green electricity, according to a new study.

“Of the world’s largest eight economies, the UK is forecast to have the slowest growth in low-carbon electricity generation between now and 2030,” said Oxford Economics.

UK production of low-carbon electricity is expected to grow by only 2.9pc, behind France at 3.1pc and Japan at 3.2pc.

This slow-down can be attributed to “low levels of expected investment”, with tax incentives from United States and EU also increasing competition, according to the report. 

 Oxford Economics said:

Given the current incentive schemes around the world, which are often much more generous than the UK, there is a risk that investment in green energy infrastructure will be pulled from the UK to countries with more attractive regimes.

UK virtual-office startup sold as workers return to their desks

A British start-up which provides virtual office spaces to businesses has been sold as workers return to their desks. 

New York-based rival Kumospace has bought Kosy for less than $10m (£7.8m) as the market for remote working software consolidates, Bloomberg reported.

Chief executive Yanis Mellata, who co-founded Kosy during the pandemic, will oversee the transfer of users to Kumospace to “ensure a seamless experience”, the companies announced on Wednesday.

It comes a week after Hopin, a British virtual events start-up, spun off its digital conferences business after workers returned to the office and in-person conferences made a comeback.

Hopin, valued at $7.75bn only two years ago, sold the division to video conferencing company RingCentral for just $50m.

A British start-up which provides virtual office spaces to businesses has been sold as workers return to their desks

Credit: Hollie Adams

Strong pound drags FTSE 100 into the red

The FTSE 100 has closed in the red as the pound strengthens on upbeat inflation data.

The British blue-chip index sank 0.44pc to close at 7,356.88, while the FTSE 250 midcap index ended down 0.42pc at 18,580.78.

The FTSE 100 has been weighed down by a strong sterling, which today has surged more than 0.36pc against the dollar. The pound hit a high of $1.276 at around 11am.

The pound climbed after latest data showed that inflation last month fell to its lowest level since February last year.

It comes after the FTSE 100 on Tuesday sank to its lowest level in a month after strong wage growth sparked concerns that the Bank of England will be required to keep prices higher for longer.

China will prove Western critics wrong, says foreign ministry

China has warned that its economic recovery “will be a bumpy and tortuous process”, but insisted Western critics “will for sure be proven wrong”.

China’s foreign ministry spokesman Wang Wenbin said:  “A number of Western politicians and media have hyped up the periodic problems in China’s post-epidemic economic recovery process,” 

He added: “But eventually, they will for sure be proven wrong.”

China’s foreign ministry spokesman Wang Wenbin

Vietnamese electric car start-up worth more than Ford after US listing

A Vietnamese electric car maker has overtaken the value of Western rivals including Ford in its first day of stock market trading.

Industry editor Howard Mustoe has the story:

Vinfast, the loss-making manufacturer, was valued at $85bn after listing on the New York Stock Exchange, dwarfing the value of each of Detroit’s “big three” carmakers Ford, General Motors, and Stellantis, the owner of Vauxhall.

By comparison, Stellantis has a price tag of $53bn, with Ford and General Motors worth $48bn and $46bn respectively.

Vinfast is controlled by Pham Nhat Vuong, Vietnam’s richest man and the country’s first dollar billionaire, who made his fortune in the 1990s in Ukraine producing and selling instant noodles.

Click here for the full details…

TweetDeck moves behind paywall as Musk pushes for profitability

Users of X, former known as Twitter, may have noticed a big change today: TweetDeck is no longer free.

The popular tool, now renamed X Pro, has now become a paid service available only to paying subscribers. 

The move was announced in July and is the latest effort by owner Elon Musk to encourage users to sign up for X’s premium service.

Efforts to expand and rebrand Twitter come as Mr Musk scrambles to find new revenue streams and stem losses at the company.

On that note, I’ll leave you in the hands of my colleague Adam Mawardi who will keep you updated into the evening. 

PayPal to halt UK crypto sales

PayPal has paused UK cryptocurrency sales for at least three months from October in the face of new rules from the Financial Conduct Authority (FCA). 

The US payments company told customers in a message on Tuesday that it would not restart sales until early 2024, Forbes reported.

Customers will still be able to sell their digital currency holdings, but the company will not restart sales until it meets new regulatory requirements. 

The FCA and the Advertising Standards Authority are planning to implement new rules on cryptocurrency sales in the UK, including mandatory risk warnings and a cooling off period for new customers.

China forces Intel to cancel $5.4bn deal

China has thwarted Intel’s plans to complete a $5.4bn (£4.2bn) takeover as geopolitical tensions mount with the West, Gareth Corfield writes.

Intel, one of America’s biggest computer chip makers, walked away from a planned buyout of Israeli company Tower Semiconductor on Wednesday.

The US company said it had abandoned the takeover because it was unable to obtain “the regulatory approvals required” from China. A contractual deadline expired at midnight on 15 August.

Chinese watchdogs failed to make a decision in time for the deal to close, reflecting the growing strain between the Asian superpower and the US.

American officials recently introduced a ban on US investors backing sensitive hi-tech companies in China, triggering fresh retaliation from Beijing.

Intel chief executive Pat Gelsinger had hoped the Tower deal would help it break into the semiconductor foundry market by acquiring the firm’s manufacturing expertise.

Instead, Intel will now have to pay a termination fee of $353m to Tower, as confirmed on Wednesday.

Jamie Oliver’s businesses pay out £6.8m dividend

Jamie Oliver’s businesses have returned to growth as the celebrity chef opens up new restaurants four years after his eponymous Jamie’s Italian chain collapsed. 

The chef’s companies make money from his cookbooks, television shows, a cookery school and franchised restaurants, with revenues increasing to £29.7m, up 8.1pc, while pre-tax profits rose 17.5pc to £7.7m in the year to December 2022.

The group also paid the “Naked Chef” and his wife Jools Oliver a dividend of £6.8m, The Guardian reported.

The boost in revenues comes four years after Jamie’s Italian went bust, forcing the closure of 22 restaurants and costing 1,000 jobs. 

However, since the failure, Mr Oliver said earlier this year he would open his first UK restaurant in four years.

The new restaurant will be called Jamie Oliver Catherine Street and be located in London’s West End. 

Jamie and Jools Oliver, renewing their wedding vows earlier this year

Credit: Soneva

Private equity bids for stake in EY consulting arm

Private equity firm TPG Capital has expressed its interest in taking a stake in EY’s accounting arm after the big four firm cancelled plans for a break up.

US-listed TPG has made an offer of a debt-and-equity deal that would separate the consulting division from EY’s audit arm, the Financial Times reported.

It came after EY called off a plan in April that would have spun off its consultancy division in a float that partners had hoped would have valued the business at $100bn and led to a massive windfall.

British economy at ‘very real risk’ of recession, economist warns

The UK economy risk slipping into recession, an economist has warned, as Britain braces for further interest rate rises to tackle underlying inflation.

George Dibb, of the IPPR’s Centre for Economic Justice, cautioned against further interest rate increases, which he warned could “kill” any economic recovery.

It’s good news that headline inflation is lower, especially with energy bills coming down, but there is a very real risk that a recession may soon overtake price rises as the main economic concern pic.twitter.com/1oaHot6Pd1

— George Dibb (@GeorgeDibb) August 16, 2023

It’s good news that headline inflation is lower, especially with energy bills coming down, but there is a very real risk that a recession may soon overtake price rises as the main economic concern…

Other countries have brought inflation under control quicker than in the UK, with a more interventionist approach and more support for households and workers, avoiding unnecessary pain.

Particularly positive to see food & drink and energy bills making downwards contributions to CPI this month More worryingly, core inflation has stayed the same, and whilst outweighed by goods inflation coming down, services inflation is up.

The [Bank of England] may see this as a reason to go further with rate rises but this would be the wrong approach Rate hikes take 18 [months] to fully filter through to the economy. [One year] from now pass-the-parcel-inflation might be over but further interest rates might also have killed the recovery.

Pound approaches $1.28 after inflation rise

Sterling neared $1.28 on the back of the latest figures for UK inflation, rising more than 0.36pc from its opening.

The pound hit a high of $1.276 at around 11am on Wednesday, before falling back to around $1.274. Sterling remans well down on its high point this year when it hit $1.31 in July.

Continued increases to core inflation and wage rises make it more likely that the Bank of England will be forced to raise interest rates again in September, which makes the pound more attractive to currency traders.

Rail fare rises to be kept below 9pc

Increases in the price of rail tickets be kept below 9pc next year, the Government has promised. 

Lauren Shirreff has the full story:

Rail fares typically rise in line with the retail price index (RPI) rate of inflation as of March in January each year. On Wednesday, the Office for National Statistics said RPI inflation was at 9pc. 

But increases in ticket costs will be capped below this level and will not come into effect in March next year, the Department for Transport said. However, it is yet to be announced how the increase will be calculated.

It will be the second year in a row the Government has intervened on prices to protect consumers, although commuters have still faced sharp increases.

In March of this year, rail fares went up by 5.9pc, in line with the UK’s average earnings growth in the twelve months up to July 2022.

This was the first time in almost 25 years that fares did not rise in line with inflation.

Read more: Rail fare rises to be capped below 9pc

Britain’s core inflation remains the highest in the G7

Core inflation in the UK is still the highest out of the world’s developed economies, the BBC’s economics editor Ben Chu points out…

Big and welcome fall in UK headline inflation in July – but core inflation (removing volatile elements like food and energy) still looking worryingly sticky on 6.9% (same as June).

UK core inflation also apparently bucking the declining G7 trend 👇 pic.twitter.com/YnLkhTDTRh

— Ben Chu (@BenChu_) August 16, 2023

The Netherlands falls into recession

The Dutch economy has slipped into recession after it shrank by 0.3pc on a quarterly basis, according to data from Statistics Netherlands.

The fifth largest economy in the eurozone sank for its second quarter after falling 0.4pc in the first three months of the year. 

The recession has been driven by falling consumer spending and exports, while surging inflation has driven up food prices and energy prices, Reuters reported. 

Consumer spending fell by 1.6pc.

Dutch GDP contracted in the second quarter of 2023, declining by -0.3% compared to the first quarter. This follows a contraction in the first three months of the year, meaning the Netherlands is in a ‘technical recession’https://t.co/dSaxxQ6bfW

— ING Economics (@ING_Economics) August 16, 2023

London rents rise at fastest pace in 17 years

London rents are soaring at the fastest pace in 17 years as landlords pass on high mortgage rates to tenants.

In the capital, rent growth hit 5.5pc in July, up from 5.3pc in June, when rent growth had matched the record high set in 2012, according to the Office for National Statistics. 

The July growth rate was the steepest growth on record since 2006. Melissa Lawford has more: 

London recorded the steepest pace of growth of any region in England, alongside the West Midlands and Yorkshire and the Humber, which also saw 5.5pc growth.

Demand is wildly out of kilter with supply. Gareth Atkins, Managing Director of Lettings at Foxtons, said: “This July, as the seasonal rush began, there was an average of 21 renters registering per each new instruction in London.”

Nationally, rent growth hit a new record high for the 15th month in a row in July.

UK rents jumped by 5.3pc year-on-year in July, up from 5.2pc growth in June. This was more than double the rate recorded in any month before March 2022 since at least January 2016, when UK-wide ONS records began.

In England, rent growth hit 5.2pc, the highest pace on record since at least January 2006. 

Aneisha Beveridge, head of research at Hamptons estate agents, said: “Higher mortgage rates are disproportionately affecting landlords and they are passing those on as much as they can. And then there is a longer term supply issue, which has been paying out for a couple of years, but this is really the crux point.”

In Wales, rents surged by 6.5pc year-on-year. Until July last year, rent growth here had not exceeded 2pc since records began in 2012.

Tesla falls on wave of China price cuts

Electric car maker Tesla has cut prices in China for the second time in three days, escalating a discounting war in the country that investors fear is sapping profits at Elon Musk’s company.

The company cut the price of its Model S sedan by around $9,600 and its Model X SUV by a similar amount, the company said on its Chinese WeChat account.

The reductions are the latest discounts as Tesla engages in a price war with fast-growing domestic rivals including BYD, which emerged as the world’s largest single electric car company by sales last year.

Shares in Tesla fell by 1.5pc in pre-market trading.

Admiral shares surge on rising insurance premiums

Shares in Admiral jumped 8pc in early trading as the London-listed insurance group promised premium prices would continue to rise to mitigate the impact of inflation.

Milena Mondini, Admiral’s chief executive, told Reuters

Costs are now somewhat stabilizing and we expect we can return to growth soon as the market catches up with price increases.

We’ve seen inflation more stubborn than we thought in the first half of the year, so it’s difficult to make a prediction, but we are more positive about the outlook.

Admiral’s profit increased to £233.9m in the six months to June, up from £224.6m. Shares in the FTSE 100 group are currently up around 5pc.

British quantum start-up raises £13m

A UK start-up developing computer algorithms designed to work on experimental quantum computers has raised £13m from US venture capital investors.

Phasecraft is making algorithms that can be used on the current generation of quantum computers so they can be put to practical use. 

Quantum computers are currently held back by very high error rates, which makes them difficult to use for solving problems. 

The funding comes from US investor Playground Global as well as Episode 1, Parkwalk and University College London.

Ashley Montanaro, the chief executive of Phasecraft, said: “For all the advances that have been made in quantum hardware, and for all quantum computing’s promise, such progress could end up being for nothing if we can’t build the applications needed to make the technology truly useful. 

“With our record-breaking algorithms and groundbreaking techniques, we are pushing the boundaries of what is possible in this space. With support from such a renowned deep-tech visionary as Playground, we think practical quantum advantage is achievable in years, not decades.”

Carlsberg still hopes to sell seized Russian brewer

Carlsberg is holding out hope that it will still be able to sell its Russian arm even after the Kremlin seized the business.

The brewer’s Baltika Breweries subsidiary was taken over by Moscow last month, although Carlsberg said it still retained the shares and legal rights over the business. 

In a trading update, Carlsberg’s chief executive Cees ’t Hart said: “We’re assessing the situation and the legal consequences of this highly unexpected move and will seek to protect our assets and the value of the business.”

The brewer added it “still considers probably that it can achieve a disposal of the business”, but warned the development could hit parts of company operating outside Moscow.

The Russian division was put under Kremlin control a month after Carlsberg said it had found a buyer, while a long-time friend of Russian president Vladimir Putin has been installed as its new boss.

Carlsberg’s Russian arm was taken under state control

Credit: Reuters

House prices fall by £5,000

The average home has lost more than £5,000 in value since house prices peaked in November, official data shows.

In London, the average home in June sold for £527,979 – £11,627 less than in the autumn, according to the Office for National Statistics.

However, a decline in mortgage rates during the spring triggered a small rise in house prices in June, as buyers locked in deals before rates soared. 

Melissa Lawford has more details:

House prices rose by 0.3pc on a monthly basis in June, according to the ONS’ seasonally adjusted estimate.

On an annual basis, house price growth slowed to 1.7pc, down from 1.8pc in May, with the average home selling for £287,546.

But analysts warned that these faint signs of a recovery will be wiped out by the surge in rate rises that hit the market at the end of June.

The ONS data is based on completed sales, meaning buyers who transacted in June had secured mortgage deals several months earlier and benefited from lower mortgage rates at the start of the year.

The average quoted rate on a two-year fix fell to a seven-month low of 5.24pc on April 25, down from a peak of 6.65pc last October in the immediate aftermath of the mini-Budget, according to Moneyfacts. 

Since the April low, higher than expected wages and inflation data have pushed up interest rate expectations, pushing up the cost of a two-year fix to 6.77pc.

Jamie Lennox, director at Dimora Mortgages, said: “With the average purchase transaction taking three to four months, these purchases will have originally been agreed when mortgage pricing was on a downward trend. With the base rate jumping dramatically since then, we are likely to see less favourable figures in the months to come.”

Anna Clare Harper, chief executive of GreenResi, said: “Up to 2 million property owners are facing double or triple their previous housing costs, and some will seek a fast exit at any price, limiting overall house-price growth.”

Inflation data does not justify further rate increases, IEA says

The latest numbers on inflation are pouring cold water on the case for further rate rises by the Bank of England, the Institute for Economic Affairs has said.

Julian Jessop, an economics fellow at the free market think tank, says:

The inflation data shows a welcome fall in the headline rate, but core inflation that excludes food and energy remains stuck at 6.9pc. The headline rate is also likely to tick up in August, reflecting higher fuel and alcohol prices, some unhelpful base effects, and the continued strength of the labour market. 

There are still plenty of reasons to expect inflation to tumble over the rest of the year, notably the sharp slowdown in money and credit growth. Rising unemployment and falling vacancies suggest that wage pressures will soon peak too.

Unfortunately, the Bank of England continues to look backwards at the headline data over the last month or two, rather than pause to assess the impact of the substantial tightening in policy that is already in place. This makes another unnecessary interest rate increase more likely.

Welcome slowdown to 6.8% in July (from 7.9%) keeps UK #inflation on track for sub-5% by the end of the year, but we may have to wait until October’s data for the next big fall (BoE profile below 👇)

Stickiness of ‘core’ rate (6.9%, same as June) will keep the Bank nervous too. pic.twitter.com/5TnzQ7swXJ

— Julian Jessop (@julianHjessop) August 16, 2023

Salaries finally going up faster than prices

Wages are finally starting to rise more quickly than the cost of buying stuff, easing pressure on consumers’ pockets.

Pay packets increased by around 7.8pc in the three months to June before bonuses, or 8.2pc for total pay. This compares to today’s inflation figures, which showed the consumer price index rising by 6.8pc.

Still, mortgage costs will almost certainly continue to rise further, meaning the full pain of the latest price rises is yet to come into effect.

Nicholas Hyett, investment manager at Wealth Club, says: 

Put falling inflation together with strong wage growth, and, for the first time in a long-time, salaries are going up faster than prices. The most recent set of GDP numbers saw economic growth beating expectations too, and you’d be forgiven for thinking the economic crunch is over.

 But unfortunately the fall in headline inflation has been driven by lower energy and food prices – very welcome, but outside the Bank of England’s control. Core inflation, which covers inflation generated within the UK economy remains unchanged month-on-month and at 6.9c is still way above the Bank’s 2pc target. Further interest rate rises shouldn’t be ruled out.

Past interest rate rises haven’t had their full effect on the economy yet either.

The average interest rate people are paying on mortgages is 2.92pc. But the cost of the average 2-year tracker sits at 6.18pc. That means most people haven’t yet felt the interest rate squeeze in full, and it’s only when historic fixed rates roll off that we’ll really know the full extent of the economic pain rate rises have inflicted.

FTSE 100 opens flat

The blue chip index was unmoved and opened at 7,389.

Food price inflation remains high at 14.9pc

Half of British adults say they are buying less food when they go out shopping, according to the latest polling by the ONS, as the cost of food increased by around 14.9pc.

The rate of price rises in food and non-alcoholic drinks dipped slightly from 17.4pc in June 2023 and is down from its peak of 19.2pc in March, which was the highest in over 45 years. 

However, the price of a pint of milk fell between June and July, as did milk, cheese and eggs. Low-fat fell by 3.2pc, whole milk by 5.8pc, however the prices are still up sharply compared to the same time last year.

Shopping list: how your basket compares to last year

  • Semi skimmed milk, 2 pints, £1.25, up 11pc
  • Large white unsliced bread, 750-800g, £1.56, up 11pc
  • Butter 250g, £2.23, up 6pc
  • Olive oil, 500ml-1litre, £6.39, up 42pc 
  • Instant coffee 90-100g, £3.17, flat 0pc
  • Cheddar cheese per kg, £9.49, up 23pc
  • Bananas per kg, £1.15, up 22pc
  • Pork sausages per kg, £6.89, up 19pc
  • Canned tuna 130-200g, £1.08, up 9pc
  • Baked beans 400-425g, £1.06, up 24pc

Smart money: bake a cake and skip the lasagne

The Telegraph economics team’s money saving tip this morning: put on your baking gloves and stop buying pasta.

The cost of food is continuing to rise, up 14.8pc in the year to July, however this is down from 17.3pc in June and comes as a supermarket price war heats up on essential goods, Szu Ping Chan notes:

Dairy prices have been the first to fall, while all of Britain’s major grocery chains announcing price cuts of staples in recent weeks.

Asda will on Friday cut the prices of 226 own label products by an average of 9pc, while Sainsbury’s said it is investing £15m to cut the price of its own brand items such as rice, cornflakes and runny honey.

ONS figures show whole milk prices rose 3.1pc in the year to July, while butter prices rose 2.2pc, compared with rises of 28.1pc and 27.1pc a year ago.

Matthew Corder, the ONS’s deputy director of prices, said: “Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal.”

However, the price of other essentials keeps soaring. Pasta prices rose 23.1pc on a year earlier, while olive oil prices are up by more than 40pc. 

Russia’s recent decision to withdraw from a key Black Sea grain deal could put further upward pressure on food prices, according to economists.

Fears interest rates will rise to 6pc this year

All bets remain on further interest rate increases by the Bank of England after today’s inflation figures did little to dispel calls for Threadneedle Street to get rising prices under control.

Money markets this morning are continuing to bet that the base rate will rise at least 25 basis points in September, before climbing as high as 6pc by the end of the year.

The implied rate, effectively a measure of how likely it is the central bank will raise rates, is now around 5.9pc after yesterday’s wage increase numbers came in.

Responding to today’s CPI numbers, Martin McTague, national chair of the Federation of Small Businesses, said: 

While a drop in inflation provides some comfort, today’s figures show less of a drop in inflation than hoped for, and will renew fears of a wage-price spiral, and of yet more base rate hikes in future.

The worry now is that rising wages ignite a fresh wave of inflation in September, which will threaten the momentum from June’s GDP growth.

The cost of doing business crisis still has a grip on the small business community, as prices for many key inputs, from energy to components and raw materials, remain far above where they were a year ago.

Crucial inflation measure remains high

There are still worrying signs of strong underlying price growth in the British economy, keeping up pressure on the Bank of England to get inflation back down to its 2pc target, The Telegraph’s deputy economics editor Tim Wallace writes.

Core inflation, which strips out energy and food, which are often imported, held steady at 6.9pc, potentially increasing the chance of more interest rate increases.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said another interest rate rise is on the way as a result, though he predicts the Bank of England’s nine monetary policymakers will be split on the decision.

“Although these figures provide reassurance that the inflation tide has turned, this latest drop owes more to lower energy bills, following the reduction in Ofgem’s energy price cap, than to a broader easing of price pressures,” he said.

“Though another interest rate rise in September looks inescapable, this drop in inflation may drive a more notable voting split in the Monetary Policy Committee next month, particularly as worries over the UK economy grow.”

Annual inflation slowed again in July 2023.

▪️ Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 6.4% in the 12 months to July 2023, down from 7.3% in June
▪️ Consumer Prices Index (CPI) rose by 6.8%, down from 7.9% in June

➡️ https://t.co/wLiGaS7wZC pic.twitter.com/XnTmQZwiFq

— Office for National Statistics (ONS) (@ONS) August 16, 2023

‘Working people are worse off’, says Labour

Labour’s shadow chancellor Rachel Reeves responds to this morning’s inflation print: 

Inflation in Britain remains high and higher than many other major economies. After 13 years of economic chaos and incompetence under the Conservatives, working people are worse off – with higher energy bills and prices in the shops.

Labour’s plan to build a strong economy will make working people better off by boosting growth, improving living standards and cutting household bills.

‘Stick to the plan’: says Jeremy Hunt in battle against inflation

Chancellor of the Exchequer Jeremy Hunt said:

The decisive action we’ve taken to tackle inflation is working, and the rate now stands at its lowest level since February last year.

But while price rises are slowing, we’re not at the finish line. We must stick to our plan to halve inflation this year and get it back to the 2 per cent target as soon as possible.

Inflation falls to 6.8pc for July

Price rises decelerated in July as energy bills dropped, easing pressure on consumers as wages finally start to rise faster than prices, our economics editor Szu Ping Chan writes: 

The consumer prices index (CPI), a measure of price increases, rose by 6.8pc in the year to July, according to the Office for National Statistics (ONS). This is a drop from 7.9pc in June and represents the lowest rate since February 2022, when Russia invaded Ukraine. 

Economists had expected a slightly steeper fall in the headline rate to 6.7pc. However, it was in line with the Bank of England’s prediction of 6.8pc, although inflation remains well above its 2pc target. 

However, there were signs that underlying inflation remains stubbornly high. Core inflation, which strips out volatile price movements in food and energy, remained at 6.9pc in July, against expectations for a slight fall to 6.8pc. Services inflation, which is being watched closely by the Bank, also rose 7.4pc, up from 7.2pc in June. 

Both suggest policymakers will be forced to keep raising interest rates from their current level of 5.25pc to try to keep a lid on inflation. Food prices also continued to rise sharply, at 14.8pc. However, this is down from 17.3pc in June and comes as a supermarket price war heats up on essential goods. 

Matthew Corder, the ONS’s deputy director of prices, said: “Although remaining high, food price inflation has also eased again, particularly for milk, bread and cereal.” Changes in the energy price cap from July 1 saw average annual gas and electricity bills fall from £2,500 to £2,074, which was the biggest downward driver of inflation last month. 

The figures were released a day after data showed wages are growing at the fastest pace since records began. Total pay grew by 8.2pc in the three months to June compared with a year earlier, according to the ONS, while regular pay rose 7.8pc. 

Pay growth is on course to stay strong as price rises cool, suggesting workers are seeing real pay growth for the first time in 18 months. However, economists said it will also encourage the Bank of England to raise interest rates above their current 5.25pc level for a fifteenth straight time in September. 

The retail prices index (RPI), which is no longer an official statistic but is used to calculate increases in a range of consumer bills, increased by 9pc in the year to July. Rail fares usually rise in January in line with July’s RPI. However, the Department for Transport has already said regulated fares will not increase as much as the July figure in 2023. However, ministers have not confirmed how much the new cap will rise by.

Good morning

5 things to start your day 

1) Decaying Oxford St risks becoming blueprint for Britain’s high streets, retail chiefs warn | Retailers call for increased cooperation between Government and industry

2) Why the triple lock could blow a fresh hole in Jeremy Hunt’s finely balanced budget | Record wage growth dashes the Chancellor’s hopes of a pre-election tax cut

3) More than 3.5m people lose millionaire status as inflation soars | Soaring inflation and weaker currencies hit super rich

4) ‘Elon Musk of Essex’ moves Royal Mail electric lorry maker to US | Tevva will relocate to Delaware under merger after running into financial difficulties

5) M&S on course to re-enter FTSE 100 as turnaround pays off | Shares hit 19-month high after retail giant forecasts increased profits

What happened overnight 

Wall Street stocks closed lower Tuesday, weighed down by by fresh concerns over the US banking sector, stronger than expected economic data and concerns over the health of the Chinese economy.

The Dow Jones Industrial Average closed 1pc lower at 34,946.39, while the broad-based S&P 500 sank 1.2pc to 4,437.86. The tech-rich Nasdaq Composite Index ended down 1.1pc at 13,631.05.

The yield on benchmark 10-year Treasuries rose two basis points to 4.21pc

Asian stock markets dropped on Wednesday following declines across the board in the US as inflation and growth concerns sapped risk sentiment.

Hong Kong stocks opened lower, with the Hang Seng Index falling 1.07pc, or 199.33 points, to 18,381.78. Meanwhile, the Shanghai Composite Index slipped 0.41pc, or 13.16 points, to 3,163.02 and the Shenzhen Composite Index on China’s second exchange dropped 0.20pc, or 3.93 points, to 1,982.51.

Tokyo shares drifted lower in early trade. The benchmark Nikkei 225 index fell 0.95pc, or 306.16 points, to 31,932.73 shortly after the opening bell, while the broader Topix index dropped 0.98pc, or 22.47 points, to 2,268.73.

The dollar stood at 145.55 yen, nearly flat from 145.57 yen in New York.

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