How has Brexit vote affected UK economy? September verdict

Each month we look at key indicators to see what effect the Brexit process has on growth, prosperity and trade
•Growing disconnect between economic and political reality
•Experts debate the data

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UK households face squeeze after surprise inflation jump to 2.7%

Dearer autumn clothing ranges boost CPI to six-month high despite a forecast fall

UK inflation unexpectedly rose to the highest level in six months in August, pushed up by the rising cost of theatre tickets and high street shops launching their new-season autumn clothing ranges.

The Office for National Statistics said the consumer price index (CPI) jumped to 2.7% last month from 2.5% in July, confounding economists’ forecasts for the rate to fall to 2.4%.

Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common.

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British Steel to axe almost 1 in 10 jobs

Steelmaker blames weak pound and euro but pledges not to close plants

British Steel is cutting 400 jobs at its sites in the UK and elsewhere in Europe as it blamed a weak pound and euro for driving up costs.

The firm said it was shedding almost 10% of its 5,000-strong workforce in a bid to “streamline” its operations and secure a long-term future.

Related: British Steel plans 400 job cuts and blames weak pound – business live

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Dollar falls after Trump lashes out at Federal Reserve – business live

US currency slips after comments from president, who also slams China and Europe as currency manipulators

Back with Trump and his comments on the Fed, Michael Hewson, chief market analyst at CMC Markets UK, said:

Two months before he was elected President of the United States in September 2016, Donald Trump said Fed chair Janet Yellen should be “ashamed of herself” for keeping interest rates low and creating a “false stock market” saying that the central bank’s policies were hurting savers and pension plans.

It therefore seems rather strange that he should now be criticising the current incumbent, and his choice as Fed chair for not keeping rates low, and pushing rates higher.

If anything the President’s comments in driving down the US dollar could well make it easier for the Fed to hike rates, as they could mitigate the upside in the US dollar, as a strong currency tends to have a deflationary effect.

In any case, even before yesterday’s comments by the President, there was already a debate going on in the markets, as to the wisdom of the Fed going too quickly where rates are concerned. The crisis in emerging markets, concerns about trade, as well as geopolitics, were causing some to question as to whether the Fed should look at revising its guidance.

The latest UK grocery market share figures are out:

Kantar Grocery Market Share Update 21/08/2018 pic.twitter.com/71uZLqGjxW

The grocery market experienced strong growth buoyed in particular by the recent heatwave. Over July, thirsty Brits spent an additional £67 million on alcoholic drinks, while non-alcoholic beers were cheered on by the sun with sales up 58% compared to this time last year. Soft drinks also increased – up 28%. Meanwhile, Love Island not only tugged on shoppers’ heartstrings but also their purse strings as men’s skincare products jumped by 16%.

As expected, there is a caution tone to early trading in Europe.

The FTSE 100 opened down 0.2%, Germany’s Dax has dipped 0.1%, France’s Cac is 0.2% lower and Spain’s Ibex is off 0.1%.

With the FTSE 100 expected to open lower, Artjom Hatsaturjants at Accendo Markets, said:

Calls for a negative open come in spite of upbeat trading on Wall St and in Asia, where markets were hopeful for an easing in Sino-US trade tensions, and after China’s banking regulator called for local banks to increase infrastructure lending amid a slight pullback of Chinese economy.

Most of the FTSE negativity is generated by dollar losses after President Trump criticised the Fed Chair Powell’s interest-rate hiking policy in an interview with Reuters. The Fed is independent in setting monetary policy and markets were spooked by yet another comment from Donald Trump criticising higher interest rates (his property magnate background seeping through?).

European markets are expected to edge lower when trading begins shortly:

European Opening Calls:#FTSE 7574 -0.22%#DAX 12326 -0.05%#CAC 5377 -0.04%#MIB 20461 -0.05%#IBEX 9462 -0.07%

European equities … are still underperforming their US counterparts. The currency crisis is still hanging over Turkey, as the revelation that S&P and Moody’s downgraded the nation’s debt rating got traders wondering if individual Turkish banks could be in line to be downgraded next. Should that be the case, that could be the catalyst for a move lower in the euro and or eurozone banks. President Trump will keep his tough stance against Turkey, and won’t make any concessions for the release of US pastor Andrew Brunson, and this is likely to keep pressure on Turkey too.

Moody’s will carry out their review of Italy’s debt rating by October. In the grand scheme of things, Italy has the potential to be a much bigger problem for the eurozone than Turkey. The European Central Bank can only buy investment grade bonds for their stimulus package, and should Italian debt be classified as ‘junk’, it could spark a sell-off in Italian government debt, and in turn drive up their borrowing costs.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Kicking out a well respected central banker and replacing them with your own appointee should guarantee an easy ride for the newcomer, you would have thought. But these days we live in Trump world and Jerome Powell, the president’s choice to chair the Federal Reserve as a replacement for Janet Yellen, got it in the neck from the White House on Monday.

I’m not thrilled with his raising of interest rates, no, I’m not thrilled.

We’re negotiating very powerfully and strongly with other nations [on trade]. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated.

Trump could be sowing the seed for market perception problems later down the line. For example, should the stronger dollar result in weaker economic data moving towards December and the Fed decides not to hike. The market could question whether the Fed opted not to hike on the basis of data or to appease Trump? So, whilst Trump will not influence the path of rate hikes, his comments could impact on market’s perception of what is happening, which is an equally dangerous game to be playing.

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UK economy rebounds with 0.4% growth, but manufacturing shrinks – business live

All the day’s economic and financial news, including new growth figures for the UK and the latest on the House of Fraser crisis

Breaking! The UK economy grew by 0.4% in the second quarter of 2018.

That’s up from 0.2% in the first three months of the year, as the economy got back up to speed after the bad wintery weather.

The pound has fallen to a fresh 13-month low against the US dollar this morning.

Sterling shed three quarters of a cent in nervy trading to hit $1.2740, its lowest level since June 2017.

“The markets have lost confidence in the triumvirate of President Erdogan, his son-in-law as finance minister and the [central bank’s] ability to act as it needs to.”

#TRY | *TURKISH LIRA DROPS TO 6/USD (down more than 12%) – BBG pic.twitter.com/UIpe0XfiaX

Related: Business Today: sign up for a morning shot of financial news

Overnight, we’ve learned that Japan’s economy expanded by 0.5%, thanks to a pick- up in consumer spending. Can the UK match it?

Economists said Japan’s recovery was likely to continue on the back of higher wages and consumer spending, unless trade conflicts with the U.S. worsen. https://t.co/LIo1aHV98e pic.twitter.com/X9oNu9DjXE

Michael Hewson of CMC Markets predicts that the UK economy rebounded strongly in the last quarter:

A decent recovery across construction, manufacturing and services is expected to show 0.4% growth, with the timing of Easter, a Royal Wedding and warm weather set to paint a decent picture of economic activity.

Retail expert Nick Bubb thinks some parts of House of Fraser can still be saved, saying:

Hopes of a “pre-pack” deal to salvage parts of the business (with Sports Direct?) still seem high…

The House of Fraser story is moving fast.

EXCLUSIVE: Sports Direct tycoon Mike Ashley is close to striking a deal to buy House of Fraser. I understand that the Newcastle United FC owner could wrap up an agreement with administrators EY as soon as this morning, although deal has yet to be signed. Full story up soon.

Frank Slevin, chairman of House of Fraser, says he’s hopeful that the company’s future will be sorted out soon.

He told investors this morning:

“This has been an extraordinarily challenging six months in which the business has delivered so many critical elements of the turnaround plan.

Despite the very recent termination of the transaction between Cenbest and C.Banner, I am confident House of Fraser is close to securing its future.”

High street chain House of Fraser has confirmed it is appointing administrators after negotiations between investors and creditors failed to reach a “solvent solution.”

The retail chain, which employs over 17,000 people, has been forced to turn to Ernst & Young as administrators after days of negotiations with billionaire tycoons Mike Ashley and Philip Day, and the retail turnaround fund Alteri Investors.

Court hearings are expected to take place at 7:30 am today, at which orders will be sought appointing individuals from Ernst & Young LLP as administrators of each of the Operating Companies with immediate effect.

Significant progress has been made towards completing a sale of the Group’s business and assets. The proposed administrators are expected to continue to progress those discussions with a view to concluding a transaction shortly after their appointment.

The group needs about £50m after C.banner, the Hong Kong-listed owner of Hamleys, pulled out of plans to raise £70m to invest in House of Fraser.

Most industry experts expected any rescue to involve putting House of Fraser into administration to allow a new investor to buy its most attractive stores without taking on loss-making sites. Plum locations include shops in Glasgow as well as Bluewater in Kent, Manchester, Belfast and Meadowhall in Sheffield.

Related: House of Fraser calls in administrators as rescue talks fail

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we discover how Britain’s economy is faring, when growth figures for the second quarter of 2018 are released.

The second quarter was altogether brighter, with good weather, a Royal Wedding and the World Cup all driving consumer behaviour. The latest ONS retail sales data suggests that food and drink sales have been positively impacted by the sunshine and the football, while spending in pubs also increased by 9.5% year on year in June according to Barclaycard’s consumer analysis.

Not all parts of the UK economy have been making hay in the sunshine however, with big ticket items particularly under pressure. Household appliance sales fell 14.8% in the year to June according to Barclaycard, and the football combined with the warm weather led to a June drop in sales for non-food retailers according to the ONS.

Related: House of Fraser days away from collapse without new funding

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Pound edges higher while oil rises as Iran sanctions restart – business live

Sterling still struggling on fears of a no-deal Brexit but recovers some of Monday’s losses

Sterling is set for continued volatility in the run up to Brexit day next March, according to Thanos Vamvakidis, head of G-10 foreign exchange strategy at Bank of America Merrill Lynch. He told CNBC:

If we don’t get a deal, sterling can be weaker by about 10 percent, (or) even lower. If you get a deal, any deal, …. (sterling) can be up by 10 percent. I don’t think any other currency can have this kind of moves in the next few months.

As expected, markets have got off to a slow start in Europe, but a mainly positive one.

The FTSE 100 is up 0.28%, helped by a rise in commodity stocks following the stronger oil price, while France’s Cac has climbed 0.32% and Germany’s Dax is up 0.48%.

Domino’s Pizza reported another firm set of half-year numbers this morning as the investment in digital, especially mobile, pays off in terms of driving top line sales. There’s still plenty of evidence that shifting consumer habits are supportive and while the hot weather took the shine off the second quarter numbers a little, the World Cup offered some compensation. However, investment in its international expansion weighed on profit growth.

Underlying profits rose 2.5% but on a statutory basis profits were down 10% due to a load of exceptional costs that seem to have mounted: £1.9m from its Warrington supply chain centre, a £2.1m hit from Norway as it transforms Dolly Dimples into Domino’s, £1.4m from joint venture store conversion in Germany and a further £4.2m from tax, amortisation and German Market Access Fee increase charges recognised on the income statement as non-underlying items. Nevertheless the underlying picture remains positive.

The June data for Germany so far has been uniformly weak, says Dr Andreas Rees, economist at UniCredit Bank:

Industrial production declined 0.9% mom, while exports treaded water (yesterday’s new orders: -4.0%). However, in all three cases, the decreases (or stagnation) came after strong rises in the previous month.

Going forward, we expect a moderate acceleration in the industrial sector on average, driven by global trade and solid domestic demand. However, it could become a bumpy ride over the summer months. July, August and sometimes September months are notorious for even more volatility, given the start and end of the vacation period. The usual suspect is the car sector. In the last five years, auto production embarked on a wild rollercoaster four times. Auto companies ramp up their production before the summer holidays with a technical setback following suit one month later. This effect then plays havoc with the headline figures in the corresponding two months.

The disappointing industrial figures from Germany do not necessarily mean the country’s economy is heading for trouble, suggests ING Bank economist Carsten Brzeski:

German industrial production took a hit in June, dropping by 0.9% MoM, from 2.4% MoM in May. On the year, industrial production was still up by 2.5%. The drop in industrial activity was broadly-based. After three strong months, activity in the construction sector also weakened, declining by 3.2% MoM. At the same time, exports held up relatively well, despite the delayed impact from last year’s euro strengthening and trade tensions, remaining flat in June after a 1.8% MoM increase in May. As imports increased by 1.2% MoM, the seasonally-adjusted trade surplus narrowed to 19.3bn euro, from 20.4bn euro in May.

After yesterday’s disappointing new orders data, speculations about an imminent downswing of the German economy have gained new momentum. Intuitively, weak June data can be associated with trade tensions. However, in our view, this intuition is not so straight-forward. The analysis of the German economy requires more nuances. Here is our take on the state of the economy.

2. Looking at bilateral trade data, German exports have gone through a slight structural shift since the start of the year. While the share of German exports to the US is currently lower than in 2017, the share of other Eurozone countries like the Netherlands, Italy or Spain has actually increased.

3. At least in the short run, weakening demand for German products as illustrated by yesterday’s disappointing new orders data could actually bring some relief. Particularly the manufacturing sector has been suffering from severe supply-side constraints, with capacity utilisation at its highest level since early 2008, a high lack of qualified workers and equipment as a limiting factor. Orders books are still richly filled and it would take a while before a protracted decline in demand would show in activity data.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With growing concerns about a no-deal Brexit in the past couple of days – as warned by such diverse personalities as Bank of England governor Mark Carney and Sir Liam Fox – the pound hit an 11 month low on Monday.

European Opening Calls:#FTSE 7672 +0.10%#DAX 12617 +0.15%#CAC 5486 +0.15%#MIB 21625 +0.21%#IBEX 9730 +0.07%

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UK inflation tipped to rise as wage squeeze bites – business live

All the day’s economic and financial news, including the latest cost of living figures in the UK

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain may be facing a new cost of living squeeze. Inflation figures due out this morning are expected to show that prices rose at a faster rate in June, hitting consumers in the pocket.

The rise in petrol prices in June should ensure that the transport category continued to make a strong positive contribution to UK inflation.

Added to that, a number of pre-announced utility price increases kicked in last month, including a 5.5% rise from the largest energy provider British Gas which came into effect at the end of May.

Related: UK wage growth slides to lowest rate in six months

If you want a longer view, here’s UK unemployment, wage growth and real earnings over past 15 years (TL;DR – unemployment lower than pre-crisis, wages haven’t caught up, higher inflation after Brexit vote almost as bad as crisis for real pay) pic.twitter.com/Sb8mg9oMur

“The unemployment rate is low and expected to fall further. Americans who want jobs have a good chance of finding them.”

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Markets shrug off trade fears but pound falls on Trump Brexit comments – business live

Traders await developments in US-China dispute, while Trump’s talk of no UK-US trade deal hits sterling

The pound continues to slip against the dollar as investors weigh up Donald Trump’s inflammatory comments about Theresa May’s Brexit proposals meaning no UK-US trade deal. It is currently down 0.64% at $1.3119, after hitting a low for the week of $1.3117.

Fiona Cincotta, senior market analyst at City Index, said:

US President Trump has put his counterpart Teresa May in a difficult position this morning saying that a soft Brexit would mean no trade deal between the UK and US. This comes a day after May released a white paper on the UK-Europe relationship after Brexit, offering a softer stance ahead of next week’s vote on a Brexit trade bill.

The UK can’t afford to alienate either the US or the EU, its two largest foreign trade partners, and will not be able to choose an “either-or” solution. Trump’s comments come at a particularly bad time for May who is facing bigger problems as her government is in a precarious balance after the resignations of David Davis and Boris Johnson earlier this week. The pound dropped 0.6% against the dollar following Trump’s remarks.

Connor Campbell, financial analyst at Spreadex, said:

For the second day in a row the markets ignored Donald Trump’s aggressive posturing to rebound, climbing back towards the levels abandoned at the start of the week. Not that there wasn’t at least one casualty of the President’s big mouth…

The FTSE led the way after the bell, the UK index adding another 60 points to re-cross 7700. That’s put the FTSE back in the ballpark of Monday and Tuesday’s 3 and a half week highs, showing the extent to which investors are trying to ignore the ongoing trade war between the US and China unless they specifically have a new threat to deal with.

Only three fallers in the FTSE 100: Randgold Resources as the gold price dips, credit specialist Experian following a trading update and Sky, as investors take some profits after Thursday’s rise on the back of the bid battle between Rupert Murdoch and Comcast for the satellite broadcaster.

As expected, investors continue to push the markets higher as European trading begins.

The FTSE 100 is up 0.68% at 7704, Germany’s Dax has risen 0.45% , France’s Cac has climbed 0.41% while Italy’s FTSE MIB is 0.43% better.

Michael van Dulken at Accendo Markets said the Chinese trade figures were a double edged sword:

[They are] supportive of global growth but backing up Trump’s trade grievances.

More on China’s trade figures, and more fuel for Donald Trump’s dispute with the country. The latest figures show a record trade surplus with the US as Chinese exporters rushed to sell goods to America ahead of the imposition of Trump’s tariffs. Reuters reports:

China’s trade surplus with the United States swelled to a record in June as its overall exports remained solid, a result that could further inflame a bitter trade dispute with Washington.

The data came after the administration of U.S. President Donald Trump raised the stakes in its trade row with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports, including numerous consumer items.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With Donald Trump focussed on the Nato budget, Brexit and bigging up Boris Johnson, investors have managed to put fears of an escalating trade war behind them for the moment.

The absence of harsh words from the US and China encouraged traders to step into the market and snap up stocks. Investors are getting used to the pattern, whereby equity markets can recover after a big sell-off that was triggered on account of trade tensions. In keeping with recent trends, the US indices held up better than their European counterparts. The S&P 500 hit its highest level since early March and the NASDAQ 100 hit an all-time high. Dealers believe the US is in a stronger position to weather the storm than the rest of the world, and that is why the US equity benchmarks are outperforming.

Steven Mnuchin, the US secretary of the Treasury, revealed that many of the trade talks with China have broken down, however, he confirmed that China is very important in cooperation with North Korea. These remarks suggest the US doesn’t want to be too aggressive with Beijing, which is also giving investors hope.

European Opening Calls:#FTSE 7692 +0.54%#DAX 12549 +0.45%#CAC 5431 +0.46%#MIB 21902 +0.51%#IBEX 9812 +0.46%

It is impressive that exports topped forecasts given that US tariffs on Chinese steel and aluminium kicked in last month. The massive trade surplus that China has with the US is one of the reasons that President Trump instigated the trade spat, and dealers will be keeping an eye on developments.

Trump’s declaration that this softer version of Brexit would mean that a trade deal with the US was “probably” off the table, was a blow to both host Theresa May and the pound, sending sterling tumbling overnight. Let’s not forget that the hope of a quick trade deal with the US was a significant factor in Theresa May’s decision to invite Trump in the first place. Another embarrassment that May could have done without.

Trump’s words of no deal have confirmed the fears of Brexiteers and will have stoked the fire in the hard Brexit camp, making Theresa May’s future in charge look doubtful once more. This fear was reflected in the pound as it dropped sharply in late night trading. With no high impact UK economic data due for release today, pound traders will continue to watch political developments. Trump and May are expected to hold a joint press conference after lunch where they will both be pressed for trade comments. In the absence of any encouraging trade comments, gains in the pound going forward could be limited, and a meaningful move over $1.32 could be doubtful.

Related: Trump trashes May’s Brexit plans and hails Boris Johnson as future PM – live

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