Better than expected German confidence figures, along with hopes of further stimulus for the Japanese economy after the country’s government called snap elections, have combined to help support stock markets. ECB president Mario Draghi’s comments on Monday suggesting the bank would do more to support the flagging eurozone if necessary also continued to help the optimistic mood. So by the close, the scores showed:
Greece is officially out of recession, according to last week’s growth figures. But does it feel like the long slump is over?
Still with the US, and housebuilders in the country have become increasingly confident about the outlook.
The National Association of Home Builders said its sentiment index rose to 58 in November from 54 in October, better than an expected reading of 55. The rebound came after the October figure showed its biggest drop since February.
Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery. After a slow start to the year, [the index] has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.
More on the US producer prices, and economists suggest the rise is another sign a rate increase from the Federal Reserve is getting closer. Dr Harm Bandholz, chief US economist at UniCredit Research said:
The rise in the core producer price index [PPI] should alleviate concerns over ongoing declines in US inflation rates.
While the PPI is more volatile than the consumer price index (CPI), the latest move strongly suggests that the downward trend in the CPI that began earlier this year, is about to end.
More from Greek finance minister Gikas Hardouvelis, who has emerged from talks with the country’s president Carolos Papoulias. Helena Smith reports:
Hardouvelis said: “We are at the end of the economic adjustment programme and from 2015 a new period and a new relationship begin. It must be a friendly relationship, that way all of us will come out as winners. The economy will recover faster in a climate of support from our partners. That will help our effort to go out alone to the markets and borrow with low interests.
“As finance minister I am called upon to protect fiscal stability and to resist populism. I will not allow, whatever passes through my hands, to deceive the Greek people. I am working so there can be an overall, realistic agreement with lenders as soon as possible,” he said of the stalled negotiations.
Greece’s finance minister has confirmed that the government and its lenders are struggling to reach an agreement on the outstanding measures that Athens should take.
#Greece MinFin Hardouvelis says tensions are high between the Troika and the Greek gov’t, need to remain calm.
More inflation data just hit the wires, this time from the US.
And producer prices (which measures how much American firms receive for their wares) rose by 0.2% in October. Economists had expected PPI, which feeds through to the headline inflation rate, to drop by 0.1% month-on-month.
*U.S. OCTOBER PRODUCER PRICES RISE 0.2%; CORE RATE RISES 0.4%
Looks like the 2nd biggest core PPI spike in 4 years.
The anti-austerity leftwing Syriza party is currently leading in the polls, so investors fret that elections could once again reopen the can of worms that many hoped had been firmly closed by now.
Over in Greece, the debt-stricken country’s relations with its creditors – though never easy – appear to have deteriorated, prompting government leaders to hold another emergency round of talks this afternoon.
News of the deadlock has hit Greek government bond prices, pushing yields further into the ‘danger zone’ over 8%.
“It is evident that there are difficulties and the negotiations are complex and hard.”
Greece’s government and its international creditors are deadlocked over a final round of measures required to release the last tranche of the country’s bailout, two people familiar with the negotiations said.
Economists are notorious for arguing, but there’s broad agreement today that Britain’s inflation rate will head south in the months ahead.
The Consumer Prices Index rose to 1.3% in October, up from the five-year low of 1.2% set in September (full coverage starts here)
Inflation edged higher last month, pushed up by more expensive computer game releases in the run-up to Christmas, but overall price pressures remained low.
The Office for National Statistics (ONS) said the slight rise in inflation reflected the fact fuel prices fell between September and October as oil prices came down, but the drop was smaller than a year earlier. The other upward effect on inflation came from computer games “where a number of new titles have been released in the run-up to Christmas replacing cheaper titles in the computer games charts.” The rise likely reflects the arrival onto the market of next generation consoles whose games are significantly more expensive than those for older consoles.
The first is the collapse in the oil price, which is feeding through into lower prices on garage forecourts. A litre of unleaded petrol costs just over 120p a litre. Meanwhile, manufacturers are being helped by crashing commodity prices. Input prices for factories are down by more than 8% year-on-year.
The second factor is the intense supermarket price war, where the big retailers are slashing prices to try to retain or win market share. Bad news for profits, good news for consumers.
One for David Cameron: Bounce in ZEW index suggests increased optimism about the German economy: t.co/DM3UjXVUqt
Martin Beck, senior economic advisor to the EY ITEM Club, has joined the ranks of experts predicting that UK inflation will ease back from October’s 1.3%.
And that means interest rates will remain at their current record low for some time.
“October’s uptick in inflation is largely a function of base effects and movements in volatile categories. Otherwise, the inflationary trend is downward and there is a good chance that the CPI measure will drop back again over the next couple of months.
“It looks increasingly likely that inflation will dip below 1% in the early months of 2015, which would lead to a letter of explanation from Mark Carney to the Chancellor. Against this backdrop, and given the increasingly dovish mind-set of the majority of the MPC, it is unlikely that they will even contemplate an increase in interest rates in the near-term. Indeed, the risks are becoming increasingly skewed towards a lengthy period of inaction.
“Oil is currently trading around $10 a barrel below the October average, suggesting that petrol prices still have some way to fall, while today’s producer prices data suggest that the disinflationary pressures coming along the supply chain are intensifying. With core inflation at just 1.5%, underlying pressures remain subdued.
“Although this morning’s data show house price inflation being surprisingly resilient at national level, this has masked some interesting trends in the regional data with the earlier strength of London & the South East now subsiding. This cooling in the southern markets is encouraging, as it is a necessary condition for a slowdown in the wider market. We expect to see the ONS series echo other measures in reporting a cooling in the market over the next few months.”
Union leaders are disappointed that inflation has risen, matching the average basic pay rises over the 12 months to September.
“The first signs of progress on real wages have already been stopped in their tracks. Weak demand remains the big problem facing the British economy.
“With inflation predicted to remain low well into next year, any talk of interest rate rises is dangerously out of kilter with today’s economic situation. It’s higher wages that are needed to boost living standards and sustain growth, not the threat of higher mortgage payments.”
The recent fall in the oil price means the UK consumer prices index will remain low for the next year or so, reckons David Kern, chief economist at the British Chambers of Commerce:
“Although inflation edged up slightly in October, the impact of low oil prices will have a noticeable impact in coming months, causing inflation to drop.
We expect inflation to fluctuate around 1.0% until late 2015, before rising towards 2.0% in 2016.”
Britain is experiencing a major easing of price pressures, despite the small pick-up in inflation last month, says Ian Stewart, chief economist at Deloitte:
Low inflation is likely to ride to the rescue of the UK consumer in 2015, providing vital support for spending and for GDP growth.”
Rising inflation is all those young people’s fault, jokes Société Générale currency expert Kit Juckes.
UK inflation fuelled by transport (half term), tuition fees and computer games. So teenagers, basically.
Ben Brettell, senior economist at Hargreaves Lansdown, explains why fuel costs pushed inflation up last month, even though the oil price has fallen:
Fuel costs and air fares were the main reasons behind the rise. Both have fallen since last month, but this time last year there was an even larger fall between September and October, leading to an upward impact on the year-on-year figures.
The desperate fight for customers between Britain’s supermarkets means Britons can look forward to fuel and food prices continuing to fall.
So reckons James Brown, partner at the London office of pricing experts Simon-Kucher & Partners.
With no clear signal from the OPEC countries of a cut in oil supply, we see no immediate sign of a price increase. The good news for consumers is that these falls in oil price are being rapidly passed on at the pumps, largely thanks to the spill-over effects from the supermarket price war.
This [price war] shows no signs of abating, with Sainsbury’s the latest to indicate heavy investment in price cuts. Whilst consumers can expect to enjoy sustained low prices, this will inevitably put pressure on the margins of these supermarkets and their suppliers.
Returning to the rise in UK inflation… the Labour Party says the increase in the consumer prices index means Britain is still suffering a cost of living crisis.
“While Ministers deny there’s a cost-of-living crisis these figures show an unexpected rise in inflation.
“Working people are £1,600 a year worse off under David Cameron’s government because for four years wages have lagged behind price rises. And working people face a further hit if the Tories win the election. They’ve pledged to cut tax credits again and refuse to rule out another VAT rise.
Encouraging-ish economic news from Germany — economic sentiment in Europe’s largest economy has risen this month, and by more than expected.
The ZEW institute’s monthly measure of morale has jumped to 11.3, from minus 3.6 in October. That indicates some stabilisation in the German economy, according to ZEW.
London’s house price inflation has eased a little, mind, but is still ahead of the rest of the UK.
House price growth (%y/y) slowed in London and S. East in September, but picked up in the rest of the UK. pic.twitter.com/xQtXBXOYn7
UK house price inflation has hit a seven year high, with the buoyant London market leading the way.
House prices continue to increase strongly across the UK, with prices in London again showing the highest growth.
Capital Economics: The slight rise in UK CPI inflation in October seems likely to be just a blip in its downward trend
Britain’s supermarket sector has suffered its first drop in grocery sales in two decades, according to data just released:
Grocery sales falling for first time since 1994 according to Kantar Worldpanel figs out this morning. Whole mkt down 0.2% in 12 wks to 9 Nov
Good news for shoppers as average price of a basket of groceries down 0.4% year on year according to Kantar
Mark Miller, UK analyst at the Economist Intelligence Unit, also reckons UK inflation will fall back in the months ahead:
Going forward, risks remain firmly skewed to the downside amid declining oil prices, emerging signs of another slowdown in global economic activity and subdued wage pressures.
We do not envisage a Bank of England interest rate increase until well into the second half of 2015.
The pick-up in inflation means Bank of England governor Mark Carney is spared the indignity of writing to the chancellor to explain why the consumer prices index isn’t within one percentage point of his 2% target.
“It is almost certain that November’s number is lower than October’s and could easily hit 1%, triggering a letter from BOE Governor Carney to Chancellor George Osborne to explain why.
“Of course, the increase now wipes out last week’s wage improvement and tightens pressure on pockets heading into Christmas. Retailers will continue to cut prices heading into the festive period, until decent wage strength allows their margins some breathing room.”
The government appears keen to portray today’s inflation report as a good thing.
A HM Treasury Spokesperson has said:
“The government’s long term economic plan is working, with inflation falling by three quarters since its peak in September 2011 and pay cheques rising.
But the effects of the great recession are still being felt and so we have taken continued action to help with the cost of living, including cutting income tax, freezing fuel duty and reducing the costs of childcare. The job is not yet done and the biggest risk to the recovery would be abandoning the long-term economic plan that is delivering economic security.
Oct Inflation 1.3%. Combined with record job creation and economic growth shows our @LibDems recovery plan is working #strongereconomy
Rising inflation puts more pressure on households. But we don’t know yet whether real wages are still rising, or not.
Last week’s unemployment report showed that average wages, excluding bonuses, rose by 1.3% in the three months to September. But we don’t get October’s wage data for another three weeks.
Over the last year, food prices are down by 1.6% and prices of motor fuels are down by 4.8%, the ONS says.
So all those XBox and PS4 games helping push inflation higher. #cpi
This chart shows how UK inflation has fallen pretty steadily over the last few years:
Why did UK inflation go up to 1.3% last month?
The Office for National Statistics says that “smaller falls in transport costs than a year ago – notably for motor fuels and air fares, and price rises for computer games were the main contributors to the rise in the rate of inflation.
Here we go! UK inflation rose to 1.3% in October, up from 1.2% the previous month.
Details to follow….
Just under 20 minutes to go until we get the UK inflation data for October, showing how the cost of living changed last month.
A soft outcome is likely to pour cold water on BOE rate hike speculation, weighing on the British pound.
In other corporate news, EasyJet profits have soared by 22% as the no-frills airline continued to bolster its position as Europe’s second largest budget airline. More here.
Japan PM Abe expected to call an election (for Dec.)
The word from Japan is that prime minister Shinzo Abe will hold a press conference at 10.10am GMT, to reveal his response to the country’s slide back into recession.
Abe is widely expected to postpone the increase in the sales tax scheduled for early 2015, in an attempt to stimulate growth by relaxing his fiscal targets.
UK high street retailer John Lewis has reported that Christmas sales are picking up pace, as my colleague Fiona Walsh explains:…
The Christmas rush begins: John Lewis sales broke through the £100m barrier last week, at £108.8m….
…this matches the 2013 record as the earliest week for John Lewis sales to top £100m in the run-up to Christmas
One of the UK’s largest property developershas cited the weak European economy, and next May’s UK general election, as key risks to the sector.
Looking forward, from a macro perspective, the UK recovery looks more established, interest rates globally are likely to stay lower for longer and investment flows into UK property remain broad and deep.
Some risks remain, notably the UK general election next year along with economic conditions in Continental Europe.
Significant upcoming political events, including the UK General Election in May 2015, bring risks both in terms of uncertainty until the outcome is known and the impact of policies introduced, including on the investment case for the UK, and the UK’s relationship with Europe.
Of course #Quindell shares were trading aruond 150p a month ago. Today trading at 59p
In the City, the turmoil at insurance claims processor Quindell had continued with the departure of three top executives.
Quindell told shareholders this morning that chairman Rob Terry and non-executive director Steve Scott will quit with immediate effect.
“I entered into the share transactions announced on 5 November 2014, with the best of intentions for the Company and all shareholders and it would have been my intention to acquire more shares were it not for the restrictions due to the discussions leading to this announcement.
I am clearly disappointed and sorry that events turned out as they did.
French carmaker Renault had a good October, with registrations up 10.5% year-on-year.
Car registrations in Cyprus were almost 35% higher in October than a year ago, AECA reports.
A total of 707 new vehicles were registered, up from 524 in October 2013, suggesting the country is recovering from the trauma of its bailout in March 2013.
The slow but steady recovery in Europe’s car industry continues, with sales rising for the 14th month running.
A total of 1,072,837 new vehicles were registered in the EU in October, 6.5% more than in October 2013, data just released by industry body ACEA shows.
mainly led by the significant growth recorded in Spain (+18.1%) and in the UK (+9.5%). Likewise Italian (+4.2%), German (+3%) and French (+1.4%) markets expanded.
Good morning, and welcome to our rolling coverage of the economy, the financial markets, the eurozone and business.
Quite a lot coming up this morning. The latest UK inflation data, due at 9.30am GMT, will show if the slowdown in rising prices continues in October, with knock-on effects on real wages and interest rate rises.
Japan PM Abe expected to speak at 10:00GMT Speculation over snap elections being announced to reinforce mandate to continue economic reforms
UK companies posting numbers today: EASYJET, ENTERPRISE INNS, BRITISH LAND, PRUDENTIAL, PACE, BALFOUR BEATTY, MAN UTD, UK MAIL, SMITHS GROUP
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