Archive for 2015

U.S. dollar strengthens along with emerging market currencies, euro and pound fall, and Wall Street extends gains following better-than-expected U.S. consumer confidence numbers, as markets reopen after the Christmas holiday break…

Powered by Guardian.co.ukThis article titled “Global markets climb on rising US confidence and higher oil prices – live” was written by Katie Allen and Julia Kollewe (now), for theguardian.com on Tuesday 29th December 2015 16.17 UTC

On Monday, the rouble hit its lowest level this year, pressured by sliding oil prices. The Russian economy is heavily reliant on crude and natural gas, which together account for almost half of state revenue.

But today, the Russian currency has recovered, boosted by higher oil prices and a Bloomberg report that former Russian finance minister and investor favourite Alexei Kudrin is in talks with Vladimir Putin about returning to a senior post to help deal with the country’s worsening economic troubles.

Let’s take a look at currency markets. The US dollar is up against the euro and other major currencies, but has slipped against the Russian rouble, which has been been lifted by higher oil prices. Brent crude is nearly 3% higher on the day.

Investors are snapping up riskier assets, including stocks and emerging market currencies, on the back of the rally in oil prices. This has hurt the euro, which is regarded as a safer currency, given its low yield.

Away from the markets, here’s some good news for UK consumers. Companies that plague householders with nuisance phone calls and texts face fines totalling more than £1m this year and next, a government watchdog has warned after tripling the financial punishment for rogue callers in 2015, our consumer affairs correspondent Rebecca Smithers writes.

The information commissioner’s office received about 170,000 complaints in 2015 from people who had received nuisance calls and texts – a slight decline on last year, when the total was 175,330.

You can read our full story here.

Nuisance call firms

Nuisance call firms Photograph: Richard Pohle/The Times/PA

The most recent fine came earlier this month when the ICO fined the Telegraph Media Group £30,000 for sending hundreds of thousands of emails on the day of the general election urging readers to vote Conservative, breaking the rules around direct marketing.

Here is a list of other fines imposed this year:

  • A record £200,000 fine in September to Home Energy & Lifestyle Management Ltd (Helms), a solar panels company that made 6m nuisance calls to householders.
  • A £130,000 fine in October to Pharmacy 2U Ltd, a company that was selling customer details to postal marketing companies. Buyers of the details included a health supplements company cautioned for misleading advertising.
  • A £90,000 fine in November to Nuisance Call Blocker Ltd for making unsolicited marketing calls to sell cold-call-blocking devices. The Poole-based company was telephoning people to sell a call-blocking service and device to stop the same type of calls the company itself was making.
  • A £80,000 fine to UKMS Money Solutions Ltd, a PPI claims firm that sent 1.3m spam text messages to mobile phone numbers it had bought from list brokers.

Updated

Gold has benefited from the rally in oil prices, but gains were limited by a stronger dollar. Spot gold edged up 0.1% to $1,070.05 an ounce in thin trading.

The precious metal is still on course for its third year of losses, pressured by the prospect for more rate hikes in the US. It is likely to end the year nearly 10% lower from the previous year, mainly due to expectations that higher US interest rates will hit demand for gold.

ABN Amro analyst Georgette Boele said:

Gold’s down trend is likely to continue throughout 2016…. there are going to be more US rate hikes than the market is anticipating the next year.”

Brent crude is nearly 3% higher, rising more than a dollar to $37.70, after hitting 11-year lows.

Here is Connor Campbell again, financial analyst at Spreadex:

A slightly better than expected goods trade deficit (at $60.5bn against the $60.9bn anticipated, but still greater than last month’s $58.4bn) and a much better than forecast CB consumer confidence figure helped the Dow Jones open at, and maintain, a 170 point jump this Tuesday. That leaves the US index at a 12 day high, and with a slim chance of edging into the green in terms of year-long growth before the end of trading on Thursday.

This has given a further boost to eurozone stocks, already buoyant on the rising oil price. Germany’s Dax is nearly 180 points, or 1.66%, ahead, while France’s CAC has gained almost 70 points, or 1.45%.

The FTSE 100 index in London is some 33 points ahead, or 0.5%.

Campbell says:

The FTSE likely would have been higher if wasn’t for the gains made by its housing sector being effectively negated by the Scrooge-like commodity stocks and a renewed slide from the supermarket sector. News that the sale of its pharmacy business to Celesio would be undergoing an in-depth investigation, as ordered by the CMA, caused a specific headache for Sainsbury’s [down 1.2%].

More generally, news that Amazon intends to substantially expand its grocery delivery service Pantry in the New Year caused the likes of Tesco and Morrisons to tumble, with the online-only Ocado Group [plunging more than 4%] especially spooked by the announcement.”

Here is our story on Amazon.

Adam Button, currency analyst at Forex Live, says about the rise in US consumer confidence:

It’s strong but still well below where it was in September. The revision to the November reading meant it was the worst since July, not the worst since Sept 2014.”

Stocks on Wall Street are extending gains on the better-than-expected US confidence numbers, with the Nasdaq and the Dow Jones up around 1% and the S&P 500 0.8% ahead.

Lynn Franco, director of economic indicators at the Conference Board, said:

Consumer confidence improved in December, following a moderate decrease in November. As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market.

Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market. Expectations regarding their financial outlook are mixed, but the optimists continue to outweigh the pessimists.”

The monthly survey is conducted for the Conference Board by Nielsen. The cutoff date for the preliminary results was 15 December.

You can read the full consumer confidence report here.

US confidence improves

The latest US consumer confidence numbers are out. The Conference Board consumer confidence index improved to 96.5 in December, from a revised 92.6 in November, beating expectations of a reading of 93.5.

Updated

Barclays Capital agrees $13.75m US settlement over mutual funds

Staying on the other side of the Atlantic for the moment, the US regulator FINRA has settled with Barclays Capital over mutual funds. The Financial Industry Regulatory Authority has ordered Barclays Capital to pay $13.75m for unsuitable mutual fund transactions and related supervisory failures.

The British bank’s investment banking arm will have to pay more than $10m in compensation, including interest, to affected customers, and has been fined a further $3.75m by the regulator. It said in a statement:

FINRA found that from January 2010 through June 2015, Barclays’ supervisory systems were not sufficient to prevent unsuitable switching or to meet certain of the firm’s obligations regarding the sale of mutual funds to retail brokerage customers….

In concluding this settlement, Barclays neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.”

You can read the statement in full here.

Updated

Wall Street opens higher

Shortly after the opening bell on Wall Street, shares are higher, mirroring a rally in oil prices.

The tech-heavy Nasdaq index is up 0.7%, the Dow Jones industrial average is up 0.9% and the S&P 500 has added 0.8%.

In the UK, the FTSE 100 is up 0.6% while Brent crude is up 2% at $37.4, creeping further asway from an 11-year low hit last week.

US house price inflation edges up

Homes for sale

Figures just out in the US suggest home prices there rose at a slightly faster pace in October compared with September and a touch above economists’ forecasts.

The S&P/Case Shiller index of 20 metropolitan areas rose 5.5% on a year earlier in October. That was faster than 5.4% inflation for single-family home prices in September and beat the forecast for 5.4% in a Reuters poll of economists.

The survey authors said San Francisco, Denver and Portland continue to report the highest year-over-year gains among the 20 cities with another month of double-digit price increases of 10.9% for all three.

Commenting on the latest report [PDF], David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices says:

“Generally good economic conditions continue to support gains in home prices.

“Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts.”

He also highlights the impact on sentiment among potential homebuyers from the US central bank’s move to raise interest rates earlier this month – the first increase for almost a decade:

“The recent action by the Federal Reserve raising the Fed funds target rate by 25 basis points and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates … From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve. The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates.”

US mortgage rates and the Fed funds rate

Competition watchdog to probe Sainsbury’s pharmacy sale

Tablets

The Competition and Markets Authority (CMA) in the UK has confirmed it is referring the sale of Sainsbury’s pharmacy business for an in-depth investigation.

In a statement, the CMA says the proposed acquistion of the business by Celesio, the owner of Lloyds Pharmacy, will be probed further after Celesio had failed to address the watchdog’s concerns about competition being affected.

The CMA says:

The CMA’s initial investigation identified 78 local areas where customers may be affected by a loss of competition between Lloyds Pharmacy (a Celesio subsidiary) and Sainsbury’s pharmacies. The CMA also indicated that in other local areas it had been unable to reach a positive conclusion on whether the merger gives rise to a realistic prospect of a substantial lessening of competition.

Celesio has not offered any undertakings in lieu and the CMA will therefore now refer the merger.

A decision on the merger will be made by a group of independent panel members supported by a case team of CMA staff. The deadline for the final report will be 13 June 2016.

Sainsbury’s announced back in July that it had sold its 281-store pharmacy business to Celesio for £125m.

Under the deal, Lloyds will rent out and run Sainsbury’s 277 in-store pharmacies and take over four located in hospitals.

More pressure on Britain’s big supermarkets

Groceries

The focus will be firmly on retailers’ shares in coming days as the trading updates from the crucial Christmas season roll in.

We already know Britain’s supermarkets have been struggling as shopping habits change and as discounters like Lidl and Aldi take market share and intensify a fierce price war. Now Amazon is preparing to crank up the pressure on grocers by dramatically expanding the range of food products it sells.

My colleague Graham Ruddick has been talking to Christopher North, UK boss of the online retailer. North says Amazon plans to expand its Pantry service rapidly in the new year.

Here’s the full story:

Markets edge up, Wall St looks to open higher

On Wall Street the US futures market is pointing to a higher open, helped by a modest rise in oil prices, traders say.

In the UK, the FTSE 100 is up 0.4%, or 24 points, at 6278. Housebuilders are among the biggest risers while the miners again feature among the biggest fallers as aluminium and copper prices head lower.

Connor Campbell, analyst at spread betting company Spreadex highlights that the FTSE is underperforming its European peers:

“Whilst thin(ish) trading volumes appear to be enhancing whatever nascent positive sentiment there is in the eurozone, allowing the DAX and CAC to stretch out their legs to hit fresh 20-day highs, the FTSE hasn’t been so lucky this Tuesday morning.

“Despite a strong set of housing stocks (Persimmon and Berkeley Group leading the charge), lifted by both news of record high UK prices and the potential windfall from the cost of rebuilding and repairing the numerous homes damaged in the northern floods, and a stable oil price, the UK index is struggling to match its Eurozone peers, hampered by a still grumpy mining sector. There are no real signs that the latter issue could turn around this afternoon… As ever those same commodity stocks that have plagued the FTSE throughout 2015 are trying to ensure it ends the year not with a bang but a whimper.”

Saudi stocks hit after oil plunge swells deficit

Aramco Oil Refinery in Saudi Arabia.

Aramco Oil Refinery in Saudi Arabia. Photograph: MyLoupe/UIG via Getty Images

The plunge in oil prices this year has taken its toll on Saudi Arabia’s state coffers and today the fallout is being fell in its stock market.

Late on Monday, Saudi Arabia announced plans to cut government spending and reform its finances after the drop in oil prices resulted in a record annual budget deficit of nearly $98bn (£66bn).

The the world’s top crude exporter ran a deficit of 367bn riyals ($97.9bn) in 2015, or 15% of gross domestic product, officials said.

Today, the Saudi stock index dropped 3% in early trading and is currently down around 1.5% as traders digest the prospect of spending cuts and tax rises in the biggest shake-up to economic policy there for more than a decade. The finance ministry is also changing subsidies for water, electricity and petroleum products over the next five years.

Saudi Arabia’s stock index:

Saudi Arabia's stock market

Brent crude is still just about eking out some gains today after Monday’s sell-off. It is currently up around 0.3% or 0.1 cents to $36.7 per barrel. It is not far off an 11-year low of $35.98 hit last week.

There are signs that the global glut of oil will deepen in 2016 as a market already awash with oil from the two biggest suppliers – Saudi Arabia and Russia – receives additional supply from the lifting of sanctions against Iran and the ending of a 40-year US export ban.

Time for a quiz?

A turkey sandwich with cranberry sauce.

A turkey sandwich with cranberry sauce. Photograph: Graham Turner for the Guardian

Trading volumes are particularly thin on European markets today and it seems many (sensible) people have taken a few days off between Christmas and the New Year. For those who are in the office today, dare we suggest the holiday lull might offer a chance to take an end of year quiz or two while you tuck into your turkey sandwiches.

We’ll keep it strictly business-related:

There is, of course, our own very broad business quiz covering (almost) everything from Cadbury’s Fruit and Nut bars to Libor-rigging and Greece’s brush with Grexit:

If central banks are your thing, this is from Bank Underground, a blog for Bank of England staff:

Deloitte’s chief economist, Ian Stewart, set the quiz for newspaper City AM. The questions are notably offbeat, including one on the world’s “most sleep-friendly airport”:

The BBC’s business team has put together these 10 questions, including some typically flowery Yanis Varoufakis quotes:

New floods threaten the UK with Storm Frank on the way and as we reported earlier, estimates of the costs so far are already in the billions.

For live coverage of the flooding and its fallout, you can follow our blog here:

While accountants have sought to put a figure on the cost of damage so far, economists note that counting up the economic impact overall is a very tricky task.

Howard Archer, economist at the consultancy IHS Global Insight, sends through these comments explaining that damage from extreme weather can dent some spending in the short term but then boost other areas of spending, notably repair work, further out:

https://twitter.com/HowardArcherUK/status/681082677676621824

“In purely economic/GDP costs, the net overall impact of the floods will be limited. There will be some near-term hit to the economy (but even this will be relatively limited given the overall size of the economy) but this will be offset by some gains further out). But this will not tell the whole story by a long way – especially for the poor individual people and businesses that are affected.

“Looking at the extent of the flooding, it could well shave 0.2-0.25 percentage point off GDP growth in the near term. As the flooding is occurring late on in the fourth quarter, some of this negative impact is likely to occur in the first quarter of 2016.

“This is the consequence of businesses not being able to open, loss of agricultural output, people not being able to get to the shops, travel etc. There is also the cost to insurance companies. There is also the loss of work from those people not actually able to get to work.

“However, damage to personal property does not affect GDP growth, although it is obviously a disaster for the poor people involved. And GDP measures do not capture the stress that the people/businesses affected incur.

“Further out there will be some boost to GDP growth through the construction work that will be generated by major repair work to buildings and infrastructure and replacement buildings. There will also be a positive impact to growth coming from the replacement purchases of furnishings, household goods etc lost or damaged during the flooding.

“The boost to growth from the construction work and replacement purchases will be spread out, but some will likely start occurring in the first quarter of 2016 which will at least partly offset the hit to activity at the start of the quarter.”

New record for UK house prices

  • The prospect of stamp duty changes in April has prompted a rush into the UK property market from buy-to-let investors and helped lift the average UK house price above £230,000 mark for first time, according to one estate agent chain today.
  • Haart, the UK’s largest independent estate agent, says the average UK house price was up 3.7% in a month and 13.4% on the year to reach £231,857 in November.
  • London property prices saw the fastest monthly increase for six months, up 3.4% to £525,780.
  • Overall, the number of new buyers rose 7.5% on a year earlier. There were signs, however, that the buy-to-let rush and related price rises were deterring first-time buyers from the housing market. The number of first-time buyers declined 7% on the month, haart said, using figures from some 100 branches around the UK.

Its chief executive Paul Smith comments:

“UK house prices rose 13.4% annually and 3.7% on the month to break records again in November. This is the steepest monthly and annual increase on record and follows a surge in registrations from buy-to-let investors since the Autumn Statement in anticipation of the 3% stamp duty surcharge which is effective from the 1st of April 2016. This could mean the stamp duty payable on a property worth £275,000 could rise from £3,750 to £12,000.

“Although first-time buyer house prices have remained relatively stable, up just 1.1% in the last month, I expect these to shoot up over the coming months as first-time buyers face fierce competition from buy-to-let investors. The pressure is already being felt by many with demand among first-time-buyers already down 7% in the last month alone. While first-time buyers may face a tough couple of months, once the stamp duty changes come into effect in April, demand from buy-to-let investors is likely to recede so we should see a recovery in prices at this level.”

Deutsche Bank shares are up this morning after news it is selling its 20% stake in Beijing’s Hua Xia Bank, making it the latest Western business to pare back its links to China.

As Reuters reports, Deutsche is selling the stake to Chinese insurer PICC Property and Casualty Co in a deal worth up to $4bn (£2.69bn).

It is the latest move in the German bank’s drastic restructuring by new chief executive, John Cryan.

Shares in Deutsche are up 2.4% while the wider German Dax index is up 1.6%.

High street banks.

As Britain’s big banks carry on with long task of patching up their reputations, they have new report cards to pore over from the body set up to improve standards in the wake of the Libor-rigging crisis.

Dame Colette Bowe, chair of the Banking Standards Board (BSB), has likened the assessments of the behaviour and culture inside the major banks to the reports delivered by auditors, which are signed off by the partner at the accountancy firm which has assessed their books and is included in their annual reports. The BSB will publish its own annual report in the spring.

The first such set of report cards have been sent to the founder members: Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander and Standard Chartered and Nationwide Building Society.

There is also talk of making bankers swear an hippocratic oath in the way that doctors do but that seems to be some way off.

My colleagues Jill Treanor and Larry Elliott have the full story:

Fitness trackers

Fitness trackers Photograph: Katherine Anne Rose for the Observer

It looks like it was a very merry Christmas for Fitbit, the US-listed maker of wearable health monitors. Reports that its app topped download charts on 25 December suggest plenty of people were unwrapping new gadgets from the firm on Christmas day and that helped lift its shares on Monday. They closed up 3.3%.

Back in November, Fitbit reported a 168% surge in revenues in its third-quarter earnings report.

In the UK, department store chain John Lewis recently highlighted Fitbits as it reported record Black Friday sales. Overall sales of wearable technology such as fitness monitors up 850%. Sales of Fitbit trackers were up 1,200%.

Puts a whole new spin on new year’s healthy living resolutions when your wristband can tell you when you are cheating…

Markets update: Oil steadies, FTSE bobs around unchanged mark

After its little Christmas break the FTSE 100 has re-opened this morning and struggling to find some direction. The bluechip index of London-listed shares is up around 8 points, that’s just 0.1%, at 6263.

That is down around 5% from where the index started 2015 at 6,566. With a sharp sell-off in global commodities, from copper to oil, providing much of the FTSE’s direction this year, it had climbed to a 2015 high of 7122.7 on 27 April but hit a low for 2015 of 5768.2 on 24 August. The index’s average level for the year is 6,592.6, according to Thomson Reuters.

Here’s how the FTSE looks for the year:

The FTSE 100 in 2015

The FTSE 100 in 2015 Photograph: Thomson Reuters

Oil prices meanwhile look set for further falls after already plunging this year. Brent crude shed another 1.3% on Monday but this morning the price per barrel has edged back up 0.5% to $36.8 with traders citing colder temperatures in Europe as boosting demand prospects.

Brent crude in 2015:

Brent crude in 2015

Brent crude in 2015 Photograph: Thomson Reuters

Elsewhere, Asian stock markets edged up overnight on the steadier oil price, there is a small boost to European stock markets from firmer financial stocks this morning and copper prices are falling again.

Introduction: Floods impact, FTSE re-opens

Good morning and welcome back to our live blog covering financial markets and business and economics news from around the UK and the world.

As the north of England and Scotland brace for the arrival of yet another storm later, towns, households and businesses are counting the cost of the flood damage so far.

The morning newspapers put varying figures on the devastation, citing estimates from insurers, accountants and economists.

Here is our own main story overnight that the cost of the winter floods across the UK will breach £5bn, with about a fifth of the bill falling on those with inadequate or non-existent insurance policies.

That’s according to accountants at KPMG, who warn the insurance policies of many of the worst hit would not cover the full losses. Here’s the full story:

As pressure mounts on the UK government over its spending on flood defences, the Mirror condemns a “£6bn Floods Shambles”:

The i newspaper goes with the £5bn figure and like others, highlights pressure on prime minister David Cameron:

We’ll be following updates on the expected economic impact of the storms throughout the day.

Also on the agenda, the FTSE 100 re-opens after the Christmas break and it is looking like the bluechip index will end the year pretty close to where it started it, after gains in the first half were wiped out by losses for heavyweight commodity-related stocks since the summer. The FTSE 100 has just opened up 0.1%.

After some choppy trading sessions for global oil prices, Brent Crude is fairly flat this morning, at $36.7, and its movements today will again be providing some direction to stock markets. It’s worth keeping in mind that thin holiday trading could make for some volatile moves.

We will also be keeping an eye out for updates from retailers as they tot up takings from the all-important Christmas shopping and sales season.

In the US later there are a handful economic releases: November’s trade balance (at 1.30pm GMT), October home prices from Standard & Poor’s/Case-Shiller (at 2pm GMT) and consumer confidence figures from the Conference Board (at 3pm GMT).

Updated

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USA 

Dec. 22, 2015 (Bureau of Economic Analysis) -The final reading for the third quarter of the year showed today that the U.S. economy expanded at a slower pace that previously estimated. Growth was revised from 2.1% to an annual rate of 2% in Q3, down from 3.9% in the second quarter.

Below is the press release published by the U.S. Bureau of Economic Analysis.

“Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 2.0 percent in the third quarter of 2015, according to the “third” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.9 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.1 percent. With the third estimate for the third quarter, the general picture of economic growth remains the same; private inventory investment decreased more than previously estimated.

The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, state and local government spending, residential fixed investment, and exports that were partly offset by a negative contribution from private inventory investment.

Imports, which are a subtraction in the calculation of GDP, increased. The deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and decelerations in exports, in PCE, in nonresidential fixed investment, and in state and local government spending that were partly offset by a deceleration in imports.

Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, increased 2.7 percent in the third quarter, compared with an increase of 2.2 percent in the second. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.3 percent in the third quarter, compared with an increase of 3.0 percent in the second.

Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Percent changes are calculated from unrounded data and are annualized. “Real” estimates are in chained (2009) dollars. Price indexes are chain-type measures. This news release is available on BEA’s Web site.

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 2.2 percent in the third quarter, compared with an increase of 3.6 percent in the second. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.3 percent in the third quarter, compared with an increase of 1.5 percent in the second. Excluding food and energy prices, the price index for gross domestic purchases increased 1.3 percent, compared with an increase of 1.2 percent. Current-dollar GDP — the market value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production — increased 3.3 percent, or $146.5 billion, in the third quarter to a level of $18,060.2 billion. In the second quarter, current-dollar GDP increased 6.1 percent, or $264.4 billion.

The small downward revision to the percent change in real GDP primarily reflected a downward revision to private inventory investment, based primarily on revised Census inventory data.

 

Dec. 18, 2015 (Allthingsforex.com) – Following a longer than expected meeting, the Bank of Japan announced additional measures to supplement its quantitative and qualitative monetary policy easing program. Policy makers said that the bank will begin purchasing stock market exchange traded funds and Japanese Real Estate Investment Trusts (J-REIT), and will extend the maturity of the bonds that are bought.

The size of the additional easing program would only amount to about 10% of the current ETF buying levels. The central bank did not expand the size of annual asset purchases and kept it at the current level around 80 trillion yen ($650 billion).

The yen rallied in the aftermath of the announcement, as the size of the expansion was perceived by the markets as insufficient.

Below is the Bank of Japan’s press release in its entirety.

“Statement on Monetary Policy
1.At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided,
by an 8-1 majority vote, to set the following guideline for money market operations for the
intermeeting period:
The Bank of Japan will conduct money market operations so that the monetary base will
increase at an annual pace of about 80 trillion yen.
2. With regard to the asset purchases, the Bank decided, by a 6-3 majority vote, to set the
following guidelines:
a) The Bank will purchase Japanese government bonds (JGBs) so that their amount
outstanding will increase at an annual pace of about 80 trillion yen. With a view to
encouraging a decline in interest rates across the entire yield curve, the Bank will conduct
purchases in a flexible manner in accordance with financial market conditions. The
average remaining maturity of the Bank’s JGB purchases will be about 7-10 years until
the end of this year and be extended to about 7-12 years from the beginning of next year.
b) The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment
trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3
trillion yen and about 90 billion yen respectively.
c) As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about
2.2 trillion yen and about 3.2 trillion yen respectively.
3. Japan’s economy has continued to recover moderately, although exports and production have
been affected by the slowdown in emerging economies. Overseas economies, mainly
advanced economies, have continued to grow at a moderate pace, despite the slowdown in
emerging economies. In this situation, exports have been picking up, although sluggishness
remains in some areas. On the domestic demand side, business fixed investment has been
on a moderate increasing trend as corporate profits have continued to improve markedly.
Against the background of steady improvement in the employment and income situation,
private consumption has been resilient and housing investment has been picking up. Public
investment has been on a moderate declining trend, although it remains at a high level.
Industrial production has continued to be more or less flat. Meanwhile, business sentiment
has generally stayed at a favorable level, although somewhat cautious developments have
been observed in some areas.
Financial conditions are accommodative. On the price front,
the year-on-year rate of change in the consumer price index (CPI, all items less fresh food) is
about 0 percent. Inflation expectations appear to be rising on the whole from a somewhat
longer-term perspective, although some indicators have recently shown relatively weak
developments.
4. With regard to the outlook, Japan’s economy is expected to continue recovering moderately.
The year-on-year rate of change in the CPI is likely to be about zero percent for the time being,
due to the effects of the decline in energy prices.
5. Risks to the outlook include developments in the emerging and commodity-exporting
economies, the prospects regarding the debt problem and the momentum of economic activity
and prices in Europe, and the pace of recovery in the U.S. economy.
6. Quantitative and qualitative monetary easing (QQE) has been exerting its intended effects,
and the Bank will continue with QQE, aiming to achieve the price stability target of 2 percent,
as long as it is necessary for maintaining that target in a stable manner. It will examine both
upside and downside risks to economic activity and prices, and make adjustments as
appropriate.
7. In pursuing QQE according to the policy mentioned above, it is appropriate to encourage a
smoother decline in interest rates across the entire yield curve taking into account
developments in the JGB market and the situation in financial institutions’ asset holdings.
Moreover, as conversion of firms’ and households’ deflationary mindset has been progressing
under QQE and many firms have become proactive in making investment in physical and
human capital, it is desirable that these developments will become further widespread.
From this perspective, the Bank decided to adopt supplementary measures for QQE.”

Dec. 16, 2015 (Allthingsforex.com) -  In its first rate hike in nine years, the Federal Open Markets Committee today decided to lift the benchmark interest rate by 25 basis points in a new target band between 0.25 and 0.50%, while maintaining the central bank’s accommodative stance.

Here is the text from the official press release.

“Information received since the Federal Open Market Committee met in October suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; some survey-based measures of longer-term inflation expectations have edged down.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely.

The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.”

If the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission…

Powered by Guardian.co.ukThis article titled “Democratic decisions on benefits of the EU” was written by Letters, for The Guardian on Tuesday 15th December 2015 19.32 UTC

Zoe Williams misses the point about Cameron’s negotiations with EU member states (There is no master plan. On the EU, Cameron is flailing, 14 December). Restricting benefits to EU migrants may or may not be a sensible, legal or logical way to meet the concerns of people, be they “Ukip-minded” or not. But once our PM had to ask permission to do so, the issue was completely transformed. It is no longer one of EU migrants’ access to benefits, but the far more fundamental question of who decides how British taxpayers’ money is spent. It became a question of national sovereignty. That’s why organisations such Trade Unionists Against the EU are not awaiting the outcome of “negotiations” and are campaigning to get the UK out. The issue is as simple as it is clear: if the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission. This will continue to be the case while the UK remains a member of the EU.
Fawzi Ibrahim
Trade Unionists Against the EU

• David Cameron’s negotiations on limiting in-work benefits for EU immigrants appear to have won little support. One simple approach might be to limit levels of benefit to those payable in the country of origin of the European migrant. That would deter those seeking to exploit the system and could disarm politicians in other member states, who would no longer be able to claim that their emigrants were being monetarily disadvantaged. It would leave the fundamental right of freedom of movement untouched.
Ken Daly
Aisholt, Somerset

• Hans Dieter Potsch, the chairman of Volkswagen, glosses over the truth of what his company did to cheat emission tests: it wasn’t a “chain of errors”, it was a chain of liars prepared to sanction a management mindset (VW admits to ‘chain of errors’ at company, 11 December). Or is he not admitting responsibility, even though he is no doubt paid a monstrous salary on the basis of being in charge? This incident just confirms that all companies need active oversight from outside to try and stop such appalling actions. They cannot be trusted any more than managers of banks and other financial groups. This is why we need the EU and strong legislation trying to stop such abuses in companies that think they can do what they like.
David Reed
London

• Join the debate – email guardian.letters@theguardian.com

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Lagarde says she wants Britain to stay in the EU as IMF publishes upbeat assessment of UK economy. Stock markets are down for seventh trading day, with oil prices near seven-year lows. All eyes on the Fed interest rate decision in the week ahead…

 

Powered by Guardian.co.ukThis article titled “Markets tumble as oil falls; IMF chief Lagarde highlights Brexit risk – live” was written by Julia Kollewe (until 2.00) and Nick Fletcher, for theguardian.com on Friday 11th December 2015 16.11 UTC

There is a chance the current market slump could persuade the US Federal Reserve not to raise rates next week, suggests Chris Beauchamp, senior market analyst at IG, but this would undoubtedly damage the central bank’s credibility. He said:

Once again China concerns have spiked just as a Fed rate decision looms. Continued yuan devaluation has been the main driver this time, but it has combined with the ongoing rout in oil and other commodity prices to produce a week of losses for equities.

Just a week ago the situation had seemed relatively calm, but it now appears that many investors have been trying to put a brave face on the situation. Now that mask has slipped.

It goes without saying that the Fed is not meant to take notice of market turmoil in its decisions, but if it feels that the international situation once again calls for it to stay its hand next week, then we could be witnessing a re-run of September. Leaving aside the damage that this will do to the Fed’s credibility (potentially putting Janet Yellen into the ‘unreliable partner’ category currently only occupied by Mark Carney), it will be hard for the central bank to put a positive spin on any decision not to increase rates.

Seasonality suggests the Santa rally will finally start to kick in from next week, but the strength and duration of that depends largely on Janet Yellen. She has a big week ahead of her.

Here’s our economics editor Larry Elliott’s report on the market declines:

A week of turmoil on the world’s financial markets has ended on a downbeat note after a fresh plunge in oil prices triggered sharp stock market falls.

Amid fears that a glut in crude oil will persist for another 12 months, the cost of a barrel of benchmark Brent crude slid by more than 2% on Friday to trade at just under $39 a barrel – its lowest for almost seven years.

In London, the FTSE 100 index crashed through the 6,000 barrier, and was down by more than 100 points in early afternoon trading.

The gloomy mood in the City was echoed on Wall Street, where the Dow Jones industrial average opened more than 250 points lower. Mining shares were among the hardest hit as stock exchanges fell for the seventh day in a row.

Stock markets have been affected by renewed weakness in the price of oil caused by fears that global demand is insufficient to soak up the supply of crude from oil producing countries.

The International Energy Agency, which advises developed states on energy policies, said the glut was likely to continue. “World oil markets will remain oversupplied at least until late 2016 … although the pace of global stock builds should roughly halve next year, ” the IEA said in its monthly report.

Full story here:

Updated

The rout on stock markets could get worse, certainly as far as the FTSE 100 is concerned, says analyst Connor Campbell at Spreadex:

[This is] the first time the UK index has been below 6000 since the end of September and marks the end of one of the worst weeks for the commodity-laden index in an already trouble-filled 2015. What is worrying is that this weekend brings with it the latest Chinese industrial production data, the kind of figure that, if it underperforms expectations, may only help escalate this current commodity collapse.

US consumer confidence has come in slightly lower than expected in the preliminary data for December, but still increased from last month’s figure.

The University of Michigan consumer sentiment index rose from 91.3 in November to 91.8 so far this month. This was below the 92 figure expected by economists.

Wall Street opens sharply lower

US shares have followed other global markets lower in early trading on Wall Street, and the commodity crunch continues to unnerve investors.

With oil tumbling again – Brent crude is currently down nearly 2% to $38.99 a barrel after the International Energy Agency warned of oversupply until at least the end of next shares – shares are following suit.

The Dow Jones Industrial Average is down 223 points or 1.27% while the FTSE 100 has fallen 1.9% to 5972, its lowest since late September. Shares with connections to South Africa are among the fallers in London following the departure of the country’s finance minister earlier in the week, while mining shares continue to be weak amid concerns about falling demand from China.

Investors are also remaining cautious ahead of the probable US interest rate hike next week

VW sales down 4.5% on a year so

The effects of the emissions scandal on Volkswagen sales are shown by new sales figures from the company.

So far this year – from January to November – the company has sold 5.34m passenger cars, down 4.5% on the same period last year.

The fall in November was 2.4% compared to the same month in 2014. Board member Jürgen Stackmann said the current trend was expected to continue for the rest of the year:

Developments in world markets, which are in some cases tense, and their effects on the Volkswagen Passenger Cars brand will continue until the end of the year…

In view of the situation of the brand, which is currently challenging, I do not expect that we will be able to compensate for this fall in the remaining days of the year.

Last VW sold 6.12 million cars across the world.

VW sales
VW sales Photograph: VW

As far as the emissions scandal was concerned, Stackmann said that the main focus was on solutions which were as customer-friendly as possible. The implementation of the measures is to start in January and will probably continue throughout 2016. “For our customers, we want to keep the time needed to implement the technical measures as short as possible. Via our dealers, we will be contacting each of our customers and will do everything in our power to take individual customers’ needs into consideration in the implementation of the technical measures in order to avoid any disadvantages such as possible mobility restrictions.”

On Thursday VW said the scandal was the result of a collection of failures within the company.

Despite the US retail sales making a rate rise from the Federal Reserve next week even more likely, the underlying trend may be weakening, according to Chris Williamson, chief economist at Markit. He said:

Core retail sales, which strip out volatile spending on cars and fuel, as well as building and food services, rose 0.6% to register the largest monthly increase since May. Overall retail sales rose 0.2% in November, missing expectations of a slightly stronger 0.3% rise but nevertheless signalling the best increase since July.

The data will no doubt be seen as further encouragement to policymakers who have already signalled their intent to hike interest rates next week for the first time in nine years. However, the data also suggest that the underlying spending trend could be waning, which adds to the view that spending is not galloping away and the Fed will need to be cautious in timing future hikes, pointing to a gently rate trajectory path.

The 0.7% rise in sales so far on the fourth quarter compares with a 1.1% rise in the third quarter and a 1.2% increase in the second quarter. In fact, barring the weather-torn first quarter, core sales growth is on course to be the weakest for almost two years. Markit’s PMI data also show a deteriorating trend in new orders at factories that produce consumer goods, suggesting retailers are buying few goods from wholesalers, most likely due to weaker than expected sales.

While consumer have benefitted from low inflation and falling fuel prices, the prospect of higher interest rates may be starting to have an impact on people’s propensity to spend.

US retail sales
US retail sales Photograph: Ecowin

ING economist Rob Carnell said the US retail sales numbers were “better than good enough for a December rate hike”.

Markets are already pricing in a very high chance of a hike at next week’s meeting, so we anticipate that impacts on the dollar, and bond yields will be minor, even though the result was on balance a little better than expected.

But it was given an extra nudge in the same direction by slightly stronger November producer price data, perhaps an indicator of what we might expect at next week’s consumer price index release too.”

Producer price figures, also out just now, showed a 0.3% gain in November after a 0.4% decline in October, as the cost of services increased. They were stronger than expected, and the dollar rose on both sets of figures.

Updated

Overall retail sales increased only 0.2%, with automobile sales down and cheaper petrol also having an impact.

Clothing retailers reported 0.8% sales growth, the biggest increase since May, as did sports and hobby stores. Sales at online retailers, and at electronics and appliance chains, were up 0.6%.

US retail sales stronger than expected

The holiday shopping season got off to a good start in the US. Retail sales excluding automobiles, gasoline, building materials and food services rose 0.6% in November from the month before, more than expected. In October, core retail sales rose by 0.2%, according to the Commerce Department.

Consumer spending surprisingly slowed in September and October. The latest figures will bolster expectations of a Fed rate hike next Wednesday.

Shares in the UK and Europe have fallen further.

FTSE 100 index down 1.3% at 6008.18

Dax down 1.9% at 10,398.46

CAC down 1.5% at 4563.56

US retail sales figures are due shortly.

Tesco UK personnel director quits

Tesco has just announced that its UK personnel director Judith Nelson has left the supermarket chain, the second veteran director to resign this week.

Nelson quit after 22 years at the retailer. She will be replaced by Natasha Adams, the business support director. Nelson’s departure comes after the resignation of Jill Easterbrook, the group business transformation director, on Monday.

Tesco’s woes continue to deepen. Its shares hit an 18-year low this week as investors fretted about the strength of its Christmas trading. In October, Britain’s biggest retailer posted a 55% fall in first-half pretax profits.

Here is our full story on the IMF.

Osborne was delighted with the IMF’s latest assessment of the UK, saying it “could hardly be more positive”. Using one of his favourite catchphrases, he said:

I take this as an endorsement of our plan to fix the roof while the sun is shining.”

Updated

My colleagues on the economics desk Larry Elliott and Katie Allen, who are at the Treasury, write:

IMF managing director Christine Lagarde said she wanted Britain to stay in the European Union as the Washington-based organisation highlighted a looming Brexit referendum as a risk to the strongly performing UK economy.

In an upbeat assessment, the Fund said the UK was enjoying strong growth, record employment and had largely repaired damage from the global financial crisis.

Presenting the IMF’s annual healthcheck of the UK economy alongside chancellor George Osborne, Lagarde said there were risks to the outlook, including from the housing market, but she was generally positive.

“The UK authorities have managed to repair the damage of the crisis in a way few other countries have been able to do,” she said.

Lagarde said the IMF will work through various scenarios for the EU referendum outcome in its next assessment of the UK due in May 2016. But she added: “On a personal basis… I am very very much hopeful that the UK stays within the EU.”

The fund called on the Bank of England to keep interest rates at their record low of 0.5% until signs of stronger inflationary pressures emerge.

It suggested property tax reform to the government to ease Britain’s chronic housing shortage.

For example, rebalancing taxation away from transactions and towards property values could boost mobility and facilitate more efficient use of the housing stock. Reducing council tax discounts for single-occupant properties could also increase the utilization of these properties.”

The IMF praised George Osborne’s envisaged path to deficit reduction as “smoother” than at this time last year. The fund says:

The autumn statement appropriately targets steady declines in the deficit and the achievement of a small surplus by 2019/20.

However, it warned the chancellor:

In the event of an extended period of sluggish demand growth, the flexibility in the fiscal framework should be used to modify the pace of structural adjustment.

In addition, the envisaged reductions in some categories of expenditure remain sizable, and the government may need to show flexibility in finding alternative fiscal measures if anticipated efficiency gains fail to materialize.”

IMF: UK’s economic performance strong, but highlights risks

Here is the IMF’s latest assessment on the UK economy. The Washington-based fund concludes that

The UK’s recent economic performance has been strong, and considerable progress has been achieved in addressing underlying vulnerabilities.

Steady growth looks likely to continue over the next few years, and inflation should gradually return to target.”

However, the IMF highlights several risks, namely

  • Housing market: It says that while house price growth has eased somewhat over the past year, it remains high. The share of households borrowing at high loan to income multiples has come down, but after initial declines the household debt to income ratio has stabilised at a high level, “leaving some households vulnerable to income and interest rate shocks”
  • The current account deficit is “strikingly large”. “Confidence shocks could reduce external capital flows into the UK, which could adversely affect growth”
  • The 2014/15 fiscal deficit was nearly 5% of GDP, with government debt at 87% of GDP. “While the UK continues to benefit from record low interest rates, maintaining deficits and debts at these levels would constrain the space to respond proactively to future large negative growth shocks.”
  • Productivity growth: the expected pick-up to nearer its historical average rate “may fail to materialise”.
  • Uncertainty over the planned referendum on EU membership

Here’s our full story on Sports Direct. Sports Direct shares have fallen for a second day after the Guardian’s investigation into its pay and working conditions and poor financial results, my colleague Nick Fletcher writes. This has wiped millions of pounds more off the value of the company and founder Mike Ashley’s stake.

Newcastle United owner Mike Ashley is seen at St James’ Park in Newcastle, Britain in this November 24, 2015.
Newcastle United owner Mike Ashley is seen at St James’ Park in Newcastle, Britain in this November 24, 2015. Photograph: Lee Smith/Reuters

Chris Williamson, chief economist at industry survey compiler Markit, says:

The October upturn goes some way to bringing the recent official data more into line with the Markit/CIPS PMI data, which have shown the construction sector enjoying a good year so far in 2015, albeit with the rate of expansion cooling in recent months, led by a slowing of house building.

The official construction data are notoriously volatile and prone to revision, so we treat the numbers with due caution.”

UK construction output
UK construction output Photograph: ONS/Markit

UK construction output weaker than expected

Meanwhile, the official UK construction figures for October were weaker than expected. Output rose by 0.2% from September, far less than the 1% increase City analysts had predicted.

Britain’s construction industry accounts for 6% of total economic output and was a drag on growth in the third quarter, when the economy was powered entirely by the services sector.

The Office for National Statistics revised up its estimate for construction output in the third quarter to show a drop of 1.9% compared with a 2.2% fall previously, but this will have little impact on the overall GDP numbers.

More worryingly, housebuilding has been revised lower to show a quarterly decline of 5.6% in the third quarter – its biggest drop since early 2009.

UK housebuilder Bellway has seen its shares jump 4.3%, making it the best performer on the FTSE 250 index, after the company said it would build 10% more homes in the year to 31 July. Broker Peel Hunt raised its target price on the shares to £28.90 from £28.20. Numis raised its target price to £28.60.

IEA sees oil glut worsening in coming months

Back to oil prices: the International Energy Agency sees the oil glut worsening in coming months as demand growth slows. It is predicting that global oil markets will remain oversupplied until at least the end of next year.

Additional output from Iran when/if western sanctions on the country are removed will put more oil on the market. Oil prices have fallen to near seven-year lows, below $40 a barrel, this week after the oil cartel OPEC failed to cap its output.

The IEA, which advises developed nations on energy policies, said in its monthly report:

World oil markets will remain oversupplied at least until late 2016… although the pace of global stock builds should roughly halve next year.”

Banks including Goldman Sachs believe oil prices could fall to as low as $20 a barrel, as the world might run out of capacity to store unused oil. But the IEA said:

As extra Iranian oil hits the market, inventories are expected to swell by 300m barrels. Concerns about reaching storage capacity appear to be overblown.

Much of the excess oil will be soaked up by 230m barrels of new storage capacity additions, while US inventories are only 70% full. As inventories continue to swell into 2016, there will still be a lot of oil weighing on the market.”

Joint house brokers Citigroup and Goldman Sachs have both cut their target price on Sports Direct shares.

Citigroup cut its target price to 800p from 900p, while Goldman Sachs went to 725p from 850p, as reported earlier.

Sports Direct shares are now down 3.2% at 573.6p, making it the second-biggest faller on the FTSE 100 index, and wiping more than £100m off the company’s market value. Founder Mike Ashley, who owns a 55% stake in the retailer, took a further £54m hit, following his £237m loss on Thursday.

Updated

The stock market as a whole is down in London, by 0.5%. Elsewhere in Europe, shares have fallen near two-month lows on the pan-European FTSEurofirst 300 index, which has lost 0.7%. Stock markets are falling for the seventh day in a row.

Weak commodity prices, in particular oil, are putting pressure on markets ahead of the US Federal Reserve’s meeting next Wednesday when it is widely expected to hike interest rates.

Updated

Bubb added:

When we got to the presentation room [yesterday] there was no sign of Mike Ashley! Last time the great man was himself late arriving, after a late night session with his property adviser, but he did eventually turn up to delight analysts with his views on online retailing and Europe.

This time he seemed to be keeping a low-profile, for perhaps understandable reasons, given the recent bad press, although he apparently was in London for investor meetings later in the day.

In Ashley’s absence, the managing director Dave Forsey, along with the new finance director Matt Pearson, tried to explain the weak first-half sales performance.

Amazingly, he insisted that even though H1 retail sales were only up by 2.5% on a constant currency basis, UK store LFL sales had been “positive”, despite an increase in UK selling space of over 10%…but that could only be true if new UK store space has been remarkably unproductive and Europe has been remarkably weak, notably Austria, and if there has been much slower Online growth (down from +14% to +7%, in fact).

Asked about the success of rival JD Sports, he envied their ability to get the best new ranges from the branded suppliers…Asked about the lack of more acquisitions in the pipeline, he said that it’s hard to do deals because people know that Sports Direct is a buyer and the asking prices are too high…Asked about the disastrous experience in Austria, he refused to break out the performance, but tried to point people to the much more successful Baltics acquisition.”

Sports Direct Derby
Sports Direct Derby Photograph: Alamy

Updated

Independent City analyst Nick Bubb said this morning:

Well, the poor PR about Sports Direct’s corporate ethics and governance isn’t helping their cause, but the main reason for the slump in the share price yesterday was concern about weak UK sales and the problems with the recent acquisition in Austria…”

Sports Direct shares fall 3.1% after Goldman Sachs target price cut

Shares in Sports Direct, the retail chain controlled by the billionaire Mike Ashley, have fallen another 3.1% this morning, after Goldman Sachs cut its target price on the stock.

The shares tumbled 11% on Thursday, wiping more than £400m off the market value of Britain’s biggest sportswear retailer. City investors and MPs turned on the company following disappointing financial results and revelations over pay and working conditions unearthed by a Guardian investigation.

Updated

UK transport secretary Patrick McLoughlin has been on BBC Radio 4 defending the government’s postponement of its decision on whether to allow a third runway at Heathrow airport until next summer, over environmental concerns.

Pressed why the government wasn’t making a decision by the end of the year as promised, McLoughlin said that a decision had been made – of sorts.

We’ve come to the conclusion that extra airport capacity is needed.”

He said the Airports Commission had looked at 52 different options and three were deemed workable. While the commission’s report recommended a third runway at Heathrow, “it said all three options are viable options,” he noted.

The transport secretary said that with regard to air quality, the changes since the report was published needed to be taken into account.

Gatwick is still on the table. There could be a second runway at Gatwick.”

He added that a decision would be made “hopefully in the summer of next year” and this “would still allow us to get extra capacity by 2030.”

An aircraft flies over residential houses in Hounslow as it prepares to land at London Heathrow airport.
An aircraft flies over residential houses in Hounslow as it prepares to land at London Heathrow airport. Photograph: Leon Neal/AFP/Getty Images

Our political correspondent Rowena Mason wrote:

Although the delay was widely expected, Cameron immediately faced fury from business groups and accusations from Labour that he had ducked a difficult decision on infrastructure to help the chances of Zac Goldsmith, the Tory London mayoral candidate, who is a fierce opponent of Heathrow expansion.

Updated

UK and European stocks have opened lower, as expected:

  • FTSE 100 index down 0.2% to 6073.1
  • Germany’s Dax down 0.2%
  • France’s CAC down 0.5%
  • Italy’s FTSE MiB down 0.3%
  • Spain’s Ibex down 0.2%

Crude oil prices are hovering near levels not seen since early 2009, with Brent crude at $39.65 a barrel (after falling to $39.38 earlier) and US crude at $36.65 a barrel.

Richard Gorry, director of consultancy JBC Energy Asia, told Reuters:

Can you rule out $20 per barrel? No, you can’t.”

An oil pump works at sunset Monday, Dec.7, 2015, in the desert oil fields of Sakhir, Bahrain.
An oil pump works at sunset Monday, Dec.7, 2015, in the desert oil fields of Sakhir, Bahrain. Photograph: Hasan Jamali/AP

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

The head of the International Monetary Fund, Christine Lagarde, is in London and due to meet the UK chancellor, George Osborne, to present the fund’s latest assessment of the British economy (the concluding statement of the regular Article IV consultation). It will be released at 11.30 GMT.

Stock markets in the UK and Europe are set for another weak start to the day, with oil prices still weak and the Chinese yuan at four and a half year lows.

OPEC’s monthly report published on Thursday predicted a fall in oil supply from non-OPEC countries next year coupled with an increase in global demand that should underpin prices. The market however was more focused on the short term fact that oil production from OPEC itself hit the highest level in three years in November.

Jasper Lawler, market analyst at CMC Markets UK, says

The near-term outlook for the stock market looks a lot less rosy while oil prices are tanking. Oil prices fell 40% after OPEC’s meeting in November last year, a similar decline this time would mean Brent crude at $25 per barrel.

An additional cause for concern over the drop in crude this time is that it may cause a policy error by the Federal Reserve. The Fed looks set to raise interest rates at a time when a fall in the oil prices means inflation could be about to take another leg lower. The Bank of England just highlighted exactly this same risk factor in its meeting minutes.”

The main data releases today are UK construction figures at 9.30am GMT and US retail sales at 1.30pm GMT.

Lawler says

The US retail sales report is the penultimate piece of data that could derail a Fed rate hike with CPI [inflation] released next week. Expectations are for a rise of 0.2% in November up from 0.1% in October with sales ex-autos to rise 0.3%, up from 0.2%.

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December 4, 2015 (Allthingsforex.com) – The Bureau of Labor Statistics reported today that total nonfarm payroll employment in the wordl’s largest economy increased by 211,000 in November while the unemployment rate was unchanged at 5.0 percent.

Job gains occurred in construction, professional and technical services, and health care. Mining and information lost jobs. Household Survey Data In November, the unemployment rate held at 5.0 percent, and the number of unemployed persons, at 7.9 million, was essentially unchanged. Over the past 12 months, the unemployment rate and the number of unemployed persons are down by 0.8 percentage point and 1.1 million, respectively.

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $25.25, following a 9-cent gain in October. Over the year, average hourly earnings have risen by 2.3 percent.In November, average hourly earnings of private-sector production and nonsupervisory employees, at $21.19, changed little.

The change in total nonfarm payroll employment for September was revised from +137,000 to +145,000, and the change from October was revised from +271,000 to +298,000. With these revisions, employment gains in September and October combined were 35,000 more than previously reported. Over the past 3 months, job gains have averaged 218,000 per month.

The Employment Situation for December is scheduled to be released on Friday, January 8, 2016, at 8:30 a.m. (EST).

Dec. 3, 2015 (Allthingsforex.com) – The European Central Bank announced today that the interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05% and 0.30% respectively, while the Governing Council decided that the interest rate on the deposit facility will be decreased by 10 basis points to -0.30%.

The central bank’s QE program will be extended until at least March 2017 and will now also include regional and local government debt, but policy makers refrained from expanding the size of asset purchases keeping the pace at 60 billion euro per month, which has disappointed euro bears.

The single currency registered its second largest one-day move for the year, appreciating by almost 2% against the US dollar in today’s trading session.

At the press conference following the announcement, the ECB President said: “Today’s decisions were taken in order to secure a return of inflation rates that are below or close to 2 percent and therefore to anchor medium-term inflation expectations. We are doing more because it works.”

Investors believe Mario Draghi could impose deeper negative interest rates and unleash more QE tomorrow. UK construction growth hits seven-month low. Latest: eurozone inflation just 0.1%. Citi predicts big moves from Draghi tomorrow…

Powered by Guardian.co.ukThis article titled “Euro weakens as eurozone inflation boosts stimulus hopes – business live” was written by Graeme Wearden, for theguardian.com on Wednesday 2nd December 2015 17.01 UTC

After a fairly undramatic day, London’s stock market has closed higher:

In 24 hours we’ll know exactly what Mario Draghi and co have decided.

In the meantime, City analysts continue to speculate — and perhaps prepare the ground for some ‘I told you so’ action.

Capital Economics have nailed their trousers to the mast, forecasting steeper negative interest rates on banks, and a serious QE boost.

Brian Davidson says:

We have long argued that the ECB would need to add more stimulus before long, and the consensus has come round to this view following a series of dovish signals by the ECB. Accordingly, markets are now pricing in a cut of around 10bp to the deposit rate and polls show that most economists expect a €15bn increase in monthly asset purchases. We think the ECB will cut the deposit rate by 20bp, and increase its monthly asset purchases by €20bn.

Updated

Thursday’s ECB meeting could be quite combative, as some central bank governors are reluctant to provide more stimulus.

The German contingent are particularly concerned, as the Wall Street Journal explains:

Several officials have expressed skepticism that more stimulus is needed at this time, led by the ECB’s two German officials, Bundesbank President Jens Weidmann and ECB executive board member Sabine Lautenschläger. Central bankers from Baltic euro members have also signalled resistance, making it unlikely that Thursday’s decision will be a unanimous one.

More here:

Newsflash from Ontario: The Bank of Canada has left interest rates unchanged at today’s policy meeting.

Money is also flowing into eurozone government bonds today, on anticipation that the ECB will boost its QE programme.

This has driven the yield, or interest rate on German two-year bonds deeper into negative territory – which means the price is at a record high.

The pound is tumbling on the FX markets today.

It just hit a new seven and a half-month low against the US dollar at $1.4979.

Sterling is being hit by two events

Back to the eurozone.

Swiss bank UBS have produced a nifty chart showing the main options which the ECB could deploy tomorrow…..and the likely impact on the markets.

ECB policy options

Updated

US private sector job creation hits five-month high

A strong dose of US employment data has just increased the chances that the Federal Reserve raises interest rates in two weeks time.

A total of 217,000 new jobs were created by US companies last month, according to the ADP Research Institute.

That’s the biggest rise in private sector payrolls since June, and beats forecasts for a 190,000 increase. It also beats October’s reading of 196,000, which was revised up from 182,000.

It suggests that the wider Non-Farm Payroll will show a robust labour market. The NFP is due on Friday, and is the last major data point until the Fed’s December meeting.

US ADP Payroll

US ADP Payroll Photograph: ADP / fastFT

As fastFT puts it:

Although the ADP survey has not proved a consistent forecaster of the official monthly government jobs numbers, they may soothe investors nerves ahead of an important period for economic data and central bank decisions.

The euro has fallen back today, in another sign that Draghi is expected to announce new stimulus measures tomorrow.

The single currency dropped back through the $1.06 mark against the US dollar today, which is a near eight-month low.

Euro vs US dollar today

Euro vs US dollar today Photograph: Thomson Reuters

This is a handy chart, showing the three main options in the ECB’s toolbox, and the way they could be deployed:

There’s no realistic chance that eurozone inflation will hit the forecasts drawn up by the ECB’s own economists three months ago.

That’s the view of Timo del Carpio, European Economist, RBC Capital Markets, who told clients:

The most recent staff projections from the ECB (published in September) revealed an expectation for HICP [inflation] to average 0.4% y/y over Q4/15 as a whole.

Taking into account today’s outturn, this would require the headline rate to rise to at least 0.8% y/y in December in order for those forecasts to still be valid. Suffice to say, we think that is too tall an order, even taking into account the expected base effects from last year’s oil price declines (expected to come into force primarily in December and January).

In other words, this outturn should represent further downside news for the ECB.

And that’s why del Carpio predicts a further 20 basis point cut to the deposit rate, and a 6-month extension to the QE asset purchase programme .

It’s all systems go for more ECB stimulus, says Jonathan Loynes, chief European economist at Capital Economics:

“November’s weaker-than-expected eurozone consumer prices figures give a final green light for the ECB to both increase the pace of its asset purchases and cut its deposit rate at tomorrow’s policy meeting.”

Loynes is also concerned the core inflation – which excludes volatile components such as energy prices – dropped from 1.1% in October to 0.9% in November.

(FILES) A picture taken on August 7, 2014 shows the Euro logo in front of the European Central Bank, ECB in Frankfurt am Main, western Germany. Financial markets are looking to the European Central Bank to open the cash floodgates next week after consumer price data showed the 18-country eurozone is flirting with deflation, analysts said. AFP PHOTO / DANIEL ROLANDDANIEL ROLAND/AFP/Getty Images

Ruben Segura-Cayuela, a euro zone economist at Bank of America Merrill Lynch, believes the weak inflation report will have surprised the European Central Bank, in a bad way.

With inflation stuck at just 0.1%, Segura-Cayuela believes the ECB will boost its bond-buying QE programme from the current rate of €60bn per month.

I’ve taken the quotes off Reuters:

“It [the inflation report] is not consistent with the trend that the ECB was expecting.

We are expecting a one year extension on QE purchases and quantities to go up to as much as €70bn a month.”

Segura-Cayuela is also in the ‘deeper negative rates’ camp — he reckons the deposit rate on bank deposits at the ECB could fall from -0.2% to -0.3%.

European stock markets are still rallying after the inflation data reinforced hopes of more eurozone stimulus:

European stock markts

Bloomberg’s Maxime Sbaihi also expects significant action from the European Central Bank tomorrow:

Updated

Economist and ECB watcher Fred Ducrozet has found a chart showing how weak inflation will prompt extra QE from the European Central Bank.

The x-axis shows the forecast for inflation — the ECB’s target is just below 2%.

The y-axis shows how much extra bond-buying would be needed if inflation is falling short — red if the ECB is struggling to push funds into the real economy, and grey if the ‘transmission mechanism’ is working well.

And as Fred tweets, today’s poor inflation data suggests anything between €400bn and one trillion euros of extra QE could be required.

Citi predicts lots more QE.

Citigroup has predicted that Mario Draghi will make two serious announcements tomorrow.

1) They expect him to hit the banks with more severe negative interest rates, by cutting the deposit rate at the ECB to minus 0.4% (compared with minus 0.2% today).

2) In addition, they suspect Draghi will boost the ECB’s bond-buying programme from €60bn per month to €75bn per month….

…and also run the quantitative easing programme for another six months. So rather than ending in September 2016, it would continue to March 2017.

That adds up to around €585bn of extra QE, I reckon.

City traders are predicting that Mario Draghi will announce a significant increase in the ECB’s stimulus measures on Thursday:

This weak inflation report could provoke the ECB into a more dramatic stimulus boost at tomorrow’s governing council meeting, says Jasper Lawler of CMC Markets:

He believes Mario Draghi could announce plans to buy more assets with newly printed money each month, rather than just run the quantitative easing programme for longer.

The euro plunged after data showed Eurozone inflation was stuck at a meagre 0.1% year-over-year in November, missing estimates of a slight rise to 0.2%.

The inflation miss adds to the case for stronger action from the ECB tomorrow. The data could be the difference-maker for the ECB choosing to increase the size of monthly asset purchases over just extending the end-date of the QE program.

Currently the ECB is buying €60bn of assets each month with new money, to expand its balance sheet and push more cash into the economy.

Updated

The euro has fallen sharply, as investors calculate that the ECB is very likely to announce new stimulus measures tomorrow:

Eurozone inflation: the detail

Eurozone’s inflation rate was, once again, pegged back by cheaper oil and petrol.

Here’s the detail, explaining why inflation was just 0.1% last month.

  • Energy prices slumped by 7.3%
  • Food: up 1.5%
  • Service: up 1.1%
  • Other goods: +0.5%
Eurozone inflation

Eurozone inflation, November 2015 Photograph: Eurostat

Another blow – core inflation, which excludes energy, food and tobacco, only rose by 0.9%.

That’s down from 1.1% a month ago, suggesting that inflationary pressure in the eurozone is actually weakening….

Eurozone inflation stuck at 0.1%

Here comes the eagerly-awaited eurozone inflation data!

And it shows that consumer prices only rose by 0.1% year-on-year in November.

That’s a little weaker than the 0.2% which economists had expected.

It raises the chances of significant new stimulus moves from the European Central Bank tomorrow (as explained earlier in this blog)

More to follow….

Updated

The pound has been knocked by the news that UK construction growth has hit a seven-month low:

Pound vs dollar today

Pound vs dollar today Photograph: Thomson Reuters

Updated

Britain’s construction sector is suffering from a lack of skilled builders, warns David Noble, CEO at the Chartered Institute of Procurement & Supply.

He says this is a key factor behind the sharp drop in growth last month:

“Suppliers continued to struggle this month, citing shortages in key materials, supply chain capacity and skilled capability as the causes.

But there is a question mark over the coming months as the housing sector, normally the star performer, may drag back on recovery along with the lack of availability of skilled staff.”

Maybe George Osborne should get back to that building site….

Britain’s Chancellor of the Exchequer George Osborne lays a brick during a visit to a housing development in South Ockendon in Essex, Britain November 26, 2015. REUTERS/Carl Court/Pool

Construction recovery is ‘down but not out’

The slowdown in housebuilding growth last month means that it was overtaken by the commercial building sector, as this chart shows:

Construction PMI by sector

Tim Moore, senior economist at Markit, explains:

“The UK construction recovery is down but not out, according to November’s survey data. Aside from a pre-election growth slowdown in April, the latest expansion of construction activity was the weakest for almost two-and-a-half years amid a sharp loss of housebuilding momentum.

“Residential activity lost its position as the best performing sub-category, but a supportive policy backdrop should help prevent longer-term malaise. Strong growth of commercial construction was maintained in November as positive UK economic conditions acted as a boost to new projects, while civil engineering remained the weakest performer.

UK construction growth hits seven-month low

Breaking — growth across Britain’s construction sector has slowed to a seven month low, as builders suffer an unexpected slowdown.

Data firm Markit reports that house building activity expanded at the lowest rate since June 2013 in November.

Markit’s Construction PMI, which measures activity across the sector, fell to 55.3 last month from 58.8 in October.

That is the weakest reading since the pre-election slowdown in April, and the second-weakest since mid 2013.

The slowdown was particularly sharp in the house-building area – which is particularly worrying, given Britain’s desperate need for more homes.

Markit says:

All three broad areas of construction activity experienced a slowdown in output growth during November. Residential building activity increased at the weakest pace since June 2013, while civil engineering activity rose at the slowest rate for six months and was the worst performing sub- category.

UK construction PMI

More to follow…

Yannis Stournaras governor of Bank of Greece shows the new 20 euro note in Athens, Tuesday, Nov. 24, 2015. The new 20 euro notes will circulate in the 19 Eurozone countries on Wednesday. Greece was formally cleared Monday to get the next batch of bailout loans due from its third financial rescue after the cash-strapped country implemented a series of economic reform measures that European creditors had demanded. (AP Photo/Thanassis Stavrakis)

A new survey of Europe’s businesses has found that, for the first time since 2009, they aren’t struggling to get credit.

That suggests the ECB’s policy measures are having an effect — and also indicates that perhaps more stimulus isn’t needed after all….

The ECB surveyed more than 11,000 companies across the eurozone. And most reported that they have no concerns over their ability to borrow. Instead, the main problem is a lack of customers.

It’s six weeks since the last ECB meeting, when Mario Draghi dropped a loud hint that the central bank was ready to do more stimulus if needed.

Since then, European stock markets have climbed steadily, and are heading for a three-month high today.

Latvia’s central bank governor has apparently told a local newspaper that the ECB’s quantitative easing programme is “better than doing nothing”.

That’s via Bloomberg. The interview took place with the Neatkariga Rita Avize newspaper – but there’s only a teaser online.

There’s a bit of edginess in the markets this morning, as investors wait for November’s eurozone inflation data to arrive in 70 minutes time.

Economists expect a small uptick, from 0.1% to 0.2% — while core inflation (which strips out volatile factors like energy and food) might hover around 1.1%.

A poor reading would surely seal fresh stimulus measure at tomorrow’s ECB meeting. But a stronger inflation report might cause jitters, as Conner Campbell of Spreadex puts it:

Given that the region’s failure to reach its inflation targets is one of the main reasons the Eurozone’s central bank is considering another injection of QE, this Wednesday’s figures perhaps carry slightly more weight than they have of late.

European stock markets

European stock markets in early trading Photograph: Thomson Reuters

This chart shows how investors expect the ECB to impose deeper negative interest rates on commercial banks.

That would discourage them from leaving money in its vaults rather than lending it to consumers and businesses:

Ramin Nakisa of UBS

Ramin Nakisa of UBS Photograph: Bloomberg TV

It’s possible that the European Central Bank disappoints the markets tomorrow.

Ramin Nakisa, global asset allocation manager at UBS, believes the ECB will not boost its quantitative easing programme tomorrow, despite a general belief that more QE is coming.

He also reckons the deposit rate paid by banks who leave cash at the ECB will only be cut by 10 basis points, from minus 0.2% to minus 0.3%.

Nakisa tells Bloomberg TV:

If that happens, there could be some disappointment in the markets.

But in the long-term, Nakisa adds, the eurozone economy is recovering. More stimulus isn’t really needed.

Ding ding – European markets are open for trading, and shares are rising.

The German DAX, French CAC, Italian FTSE MIB and Spanish IBEX are all up around 0.4%, ahead of tomorrow’s ECB meeting.

The FTSE 100 is lagging, though – up just 0.1%. It’s being dragged down by Saga, the travel and insurance group, which has shed 5% after its biggest shareholder sold a 13% stake.

The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes<br />B81HM8 The Bank of England printing works, now De La Rue, in Debden Newly printed sheets of 5 notes are checked for printing mistakes

You’d think that printing banknotes would be a safely lucrative business (losing money? Just make some more!).

But De La Rue, the UK-based printer, has just announced that it’s cutting around 300 staff and halving its production lines from eight to four.

The axe is falling sharply on its Malta plant, which is to close.

De La Rue prints more than 150 national currencies, and has suffered from falling demand for paper notes. There had been chatter that it might pick up the contract to produce new drachma for Greece, but that particular opportunity appears to have gone…..

Updated

VW shareholders to face workers

There could be ructions in Wolfsberg his morning, as the billionaire owners of Volkswagen face workers for the first time since the emissions cheating scandal broke.

The Porsche-Piech have been criticised for keeping a low profile since the VW crisis erupted. But today, several members of the group will make the trip to the carmakers headquarters to show solidarity with workers – who are being forced to down tools over Christmas because sales have weakened.

Bloomberg has a good take:

Wolfgang Porsche, chairman of family-owned majority shareholder Porsche Automobil Holding SE, will address thousands of workers in hall 11 of Volkswagen’s huge factory in Wolfsburg, Germany. He’ll be flanked at the 9:30 a.m. staff meeting by the other three supervisory board members who represent the reclusive clan: Louise Kiesling, Hans-Michel Piech and Ferdinand Oliver Porsche.

The Porsche-Piech family has been asked by labor leaders to signal their commitment to workers, now facing two weeks of forced leave during the Christmas holidays as the crisis begins to affect sales.

Labor chief Bernd Osterloh, who has pushed to shield workers by focusing cutbacks on Volkswagen’s model portfolio, will host the assembly. It comes amid mixed news for Volkswagen: though the company has made progress toward a simpler-than-expected recall of 8.5 million rigged diesel cars in Europe, plummeting U.S. sales show the impact of the crisis on the showroom floor.

Updated

The Agenda: Eurozone inflation could seal stimulus move

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

There’s a ‘calm before the storm’ feeling in the markets today. Investors are bracing for Thursday’s European Central Bank meeting, where it is widely expected to boost its stimulus programme.

European stock markets are tipped to rally at the open, on anticipation that Mario Draghi will step up to the plate again and announce something significant.

It could be a new cut to borrowing costs, hitting banks with harsher negative interest rates to force them to lend money. Or it could be an extension to the ECB’s QE programme – a commitment to pump even more new electronic money into the economy.

Or both.

Or something else entirely. With ‘Super Mario’, you never know for sure.

The ECB is under pressure to act, because inflation in the eurozone is so weak.

At 10am GMT, the latest eurozone prices data is released — it’s expected to show that prices rose by just 0.2% annually in November. That would be an improvement on October’s 0.1%, but still far short of the target (just below 2%).

Also coming up today….

  • Market releases its UK construction PMI report at 9.30am GMT. That will show how the building industry fared last month -
  • The latest measure of US private sector employment is released at 1.30pm GMT. That will give a clue to how many jobs were created across America last month, ahead of Friday’s non-farm payroll report.
  • Federal Reserve chair Janet Yellen is speaking at the Economics Club of Washington on Wednesday at 5:25pm GMT.
  • And Canada’s central bank sets interest rates at 3pm GMT – we’re expecting no change.

We’ll be tracking all the main events through the day….

Updated

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Analysts say 0.6% drop in October shows consumers are taking a breather before festive season. But high street outlook remains healthy as figures for the last three months showed growth for the 23rd consecutive month, increasing by 0.9%…

Powered by Guardian.co.ukThis article titled “UK retail sales fall hints at pre-Christmas lull” was written by Phillip Inman, economics correspondent, for theguardian.com on Thursday 19th November 2015 11.08 UTC

Retail sales slumped in October despite shops slashing prices to entice bargain hunters.

The Office for National Statistics said on Thursday the quantity of goods bought dropped by 0.6% on the previous month, slightly more than analysts had expected.

However, there was a City consensus that consumers were “taking a breather” before the festive shopping season, and the underlying situation was still one of healthy growth.

The ONS emphasised the point with figures for the last three months on the previous quarter that showed growth for the 23rd consecutive month, increasing by 0.9%. Sales volumes were running 3.8% higher than a year ago, it said.

Over the past year, food and fuel have taken the biggest toll on sales after a 3.6% decline in fuel sales and a 1.5% fall in food.

Household goods stores reported a 3.1% rise in sales from October last year, but only after a 2.3% cut in prices. Clothing recorded a 2.3% rise in sales over the same period after prices were kept flat.

Graph showing UK quarterly retail sales

Rolling quarter on quarter of all retailing, seasonally adjusted, January 2010 to October 2015 Photograph: ONS

Chris Williamson, chief economist at the financial data provider Markit, said: “The decline needs to be looked at in light of the 1.7% sales surge seen in September, leaving the three months growth rate – a good indicator of the underlying sales trend – showing a healthy 0.9% rate of increase.

“Further spending growth is likely in the coming months, for the short-term at least. The longer-term outlook is more uncertain, being dependent on trends in inflation, wages and interest rates.”

The prospect of millions of households receiving letters in a month informing them of tax credit cuts may also play a part in dampening consumer demand going into the new year.

Jeremy Cook, chief economist at the currency dealer World First, said: “Retail sales in October are always a strange one – unable to benefit from the ‘back to school’ rush and unlikely to see too many Christmas shoppers and hence can see a slight slip in expenditure.

“This year is no different, given September’s number was boosted by strong spending around the Rugby World Cup and warm weather, and we have seen a natural pause on the nation’s high streets before the manic festive season begins.”

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