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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound highest since 2018 amid Brexit deal hopes; bitcoin hits $20,000 – as it happened

The skyline of the City of London.
The skyline of the City of London. Photograph: Victoria Jones/PA

Summary

Time for a recap

The pound has hit its highest level in 31 months, on hopes that an EU-UK trade deal could be close. Sterling jumped to $1.355 for the first time since May 2018, after Commission president Ursula von der Leyen told the European Parliament that ‘there was a path to an agreement’.

Von der Leyen also warned MEPs that the issue of fishing rights could still scupper the deal:

Stocks also rallied in London, and across Europe, on hopes of a Brexit deal, a US stimulus package and vaccine rollouts to end the pandemic.

However, sterling has now fallen back to $1.347 in late trading after Downing Street said MPs would rise for the Christmas recess as planned tomorrow (although they could be swiftly recalled to vote on a deal if one is reached).

Asked if he still thinks No-Deal is most likely, Prime minister Boris Johnson said that a ‘good deal’ was there to be done, but that the EU knew the UK’s limits.

Cryptocurrency Bitcoin has raced to a record high, smashing $20,000 for the first time ever. It surged by more than 6%, extending a winning streak this year amid growing interest among big investment companies attracted to its potential for quick gains, and fearing they might miss the boat....

Here are several reasons for its rally.

UK factories have reported that disruption at the ports is hurting their supply chains, leading to delays, higher prices, and shortages.

Inflation across the UK has fallen to just 0.3%, dragged down by cheaper clothes as retailers slashed prices during the Black Friday sales.

Economists said weak economic demand, and the November lockdown, had also kept a lid on prices, although a disruptive Brexit could push them higher.

European companies performed better than expect this month, according to the latest eurozone PMI report which showed a much shallower downturn than expected.

Here are today’s other stories:

Updated

The latest word from parliament tonight is that the House of Commons will go into recess for the Christmas break tomorrow, as planned.

However, Downing Street says the House can be recalled very quickly to pass the trade deal legislation if necessary, our Politics Liveblog explains.

Downing Street has also put out a statement saying it expects the trade talks with the EU to continue “over the coming days”.

The pound has now dropped back to $1.347, only a little higher today. That suggests some disappointment in the markets, as MPs’ Christmas break could have been delayed if a deal was extremely close.

But with talks continuing, MPs can be brought back at short notice if there is a deal, as the BBC’s Laura Kuenssberg and the Daily Mirror’s Pippa Crerar both explain:

Brexit trade deal optimism has also helped the London stock market to close higher.

The blue-chip FTSE 100 has closed 57 points higher at 6570 points, a gain of 0.9%. That’s close to last week’s nine-month high.

The smaller FTSE 250 index, which has a greater concentration of UK companies, jumped by 1.2%, close to its highest level since February. It was partly lifted by Dixons Carphone which jumped 12% after reporting strong results today, thanks to online orders.

Back on Brexit... and Boris Johnson said that ‘a good deal’ can be done, but the EU knows the UK’s limits in the negotiations.

Asked during a news conference (to discuss the Christmas rules) whether he still thinks moving to WTO terms is the most likely outcome, Johnson said:

“Where we get to with the EU - well, again, that is very much a matter for our friends. They know what the parameters are.

“We’ve just got to make sure that we control our own laws and control our own waters, and there’s a good deal there to be done but if not, WTO/Australia terms it is, and as I say we will prosper mightily on those terms as well.

The pound is still up on the day, trading just below $1.35, but below that earlier 31-month high.

Ryan Browne of CNBC has written a handy thread about the factors pushing bitcoin up:

Ruffer told its shareholders yesterday afternoon that it had bought its bitcoin stake, as a ‘small but potent’ insurance against currency devaluation.

In a performance update memo published here, it wrote:

The exposure to bitcoin is currently equivalent to around 2.5% of the portfolio. We see this as a small but potent insurance policy against the continuing devaluation of the world’s major currencies.

Bitcoin diversifies the company’s (much larger) investments in gold and inflation-linked bonds, and acts as a hedge to some of the monetary and market risks that we see.

Updated

The surge in bitcoin’s price comes as British fund manager Ruffer Investment Management confirmed it has invested around 2.7% of its portfolio in the cryptocurrency.

Ruffer, which manages around £20bn, has told Reuters that it allocated some of its funds into bitcoin last month, as a ‘hedge’ against the risks in ‘distorted’.

Here’s a flavour:

British fund manager Ruffer Investment Management last month made a bet on bitcoin now worth around £550m ($745m), a spokesman for the company told Reuters, in one of the largest signals of rising institutional interest in the digital currency this year.

The allocation by Ruffer, which managed £20.3bn ($27.3bn) in assets at end-November on behalf of more than 6,500 investors globally, “acts as a hedge to some of the risks that we see in a fragile monetary system and distorted financial markets,” the spokesman said via email.

The allocation was made through a third-party manager, and represents around 2.7% of Ruffer’s total assets, he added.

Ruffer’s move is being seen as confirmation that institutions are taking bitcoin seriously as an asset class -- one of the factors behind this year’s rally.

Yoni Assia, CEO and co-founder of trading platform eToro, says financial institutions have “woken up” to cryptocurrencies this year, with many banks and hedge funds buying bitcoin during 2020.

We expect this to continue into 2021 as fears of inflation continue to creep up globally.

Back in October, JP Morgan analysts suggested that bitcoin could challenge gold as an alternative currency, especially among younger investors, suggesting that it could double or triple (it was $13k at the time). Three years earlier, CEO Jamie Dimon was more sceptical, saying bitcoin was a “fraud” (it was around $4,100 then).

Bitcoin hits record high over $20,000

Sterling isn’t the only asset rallying today.

Cryptocurrency bitcoin has smashed through the $20,000 mark for the first time ever.

It’s currently up over $1,000, or 6%, today at around $20,600, in a sudden surge:

Bitcoin has been rallying sharply since the spring (when it briefly fell below $5,000). Several institutional investors have backed cryptocurrencies this year, while Paypal is also embracing bitcoin.

Nigel Green, founder and CEO of financial advisers deVere, explains

“Unlike previous surges, this time around, a major price driver seems to be fuelled by the flow of institutional investors, who are steadily increasing their exposure to Bitcoin and other cryptocurrencies.

“They’re being attracted by the good returns that the digital asset class is currently offering but, more importantly, by the huge future potential it offers.

“As some of the world’s biggest institutions – amongst them multinational payment companies and Wall Street giants - pile ever more into crypto, bringing with them their enormous expertise and capital, this in turn, swells consumer interest.”

Bitcoin’s supporters also argue that it protects against inflation, triggered by the huge asset-purchase programmes launched by central bankers such as the Federal Reserve.

As Green puts it:

“These emergency measures, like the massive money-printing agenda, reduce the value of traditional currencies like the dollar and raise the inflation threat. Bitcoin, like gold, acts as a shield.”

Today’s surge comes almost exactly three years since bitcoin hit $19,000 for the first time ever, before then falling sharply through 2018.

Bitcoin
The price of bitcoin Photograph: Refinitiv

The pound has now dipped back slightly from its 31-month high of $1.355, after Downing Street told reporters that No-Deal remains the most likely outcome, although “some progress” has been made.

Reuters has the details:

Britain and the European Union have made “some progress” in post-Brexit trade talks but there are still significant gaps and the most likely outcome is for negotiations to end in no deal, Prime Minister Boris Johnson’s spokesman said on Wednesday.

“We have made some progress in some areas but it still remains that there significant gaps,” the spokesman told reporters. “Our position is still that we want to reach an FTA (free trade agreement) but it is still the case ... the most likely outcome is still leaving on Australia terms.”

Australia does not have a free trade agreement with the EU, meaning the bulk of its trade is on World Trade Organization terms.

But the pound’s still clinging on above $1.35, and up around three cents since Johnson and Von der Leyen agreed to keep negotiating on Sunday.

The pound vs the US dollar this week
The pound vs the US dollar this week Photograph: Refinitiv

Here’s our news story on the problems caused by the disruption at UK ports.

Fawad Razaqzada, market analyst at Think Markets, suggests a UK-EU free trade deal could push the pound up to $1.40.

No-deal, though, could send it sliding down to $1.20.

The pound vs the US dollar

He says:

Ursula von der Leyen this morning said that now there is a “narrow” path has opened up for the two sides to strike a deal.

Although the EU Commission President stopped shy of saying whether there will be a deal or not as the issue of fishing rights are “still very difficult”, she added that there was progress on most outstanding issues

At over $1.35 against the dollar, the pound is trading near levels where a Brexit deal is being ‘priced in’ by investors.

That meant it’s all the more vulnerable if negotiations falter, as Paul Dales of Capital Economics explains:

The recent swings in sterling triggered by shifts in sentiment towards the chances of a Brexit deal have left little room for the pound to appreciate if there’s a deal, but plenty of room for it to depreciate if there’s a no deal

As the markets appear to have largely priced in a Brexit deal, such a result by 31st December 2020 would be unlikely to push the pound much above the current levels of $1.35 and €1.13. But as a no deal would come as something of a shock to the markets, there is more scope for it to fall sharply.

Sterling hits highest since 2018

The pound has hit its highest level since May 2018, as optimism over a Brexit deal builds.

Sterling has climbed nearly a cent to trade at $1.355, a 31-month high, after European Commission president Ursula von der Leyen told MEPs this morning that “there is a path to an agreement now”, saying:

“As things stand, I cannot tell you whether there will be a deal or not. But I can tell you that there is a path to an agreement now. The path may be very narrow but it is there.

This has pushed the pound above the highs seen earlier this month.

The pound vs the US dollar
The pound vs the US dollar over the last three years Photograph: Refinitiv

Investor seem more optimistic about a deal being achieved, even though von der Leyen also warned that fishing rights are still an obstacle.

Neil Wilson of Markets.com explains that traders seem to be pricing in a deal....

Sterling jumped on hopes the UK and EU are close to a deal, with Ursula von der Leyen giving a broadly upbeat assessment of talks.

The spot market is inclined to think a deal is coming, while options markets also show traders are scaling back bets on a no-deal collapse.

Time is desperately short, though, and MPs may have to delay their break to get any legislation though, as the Financial Times points out:

Some Conservative Eurosceptic MPs have indicated they could tolerate the deal taking shape. Jacob Rees-Mogg, leader of the House of Commons, is clearing the decks to legislate on the details of a deal at breakneck speed.

Mr Rees-Mogg has not moved a “recess motion”, suggesting that plans for parliament to rise for its Christmas break on Thursday have been scrapped.

“It’s highly likely we’ll be sitting next week,” said one senior government official.

Those supply chain problems are also pushing up costs for manufacturers, points out Duncan Brock, group director at CIPS:

“Though manufacturing was buoyed up by Brexit panic buying and saw the fastest rise in purchasing since August 2013, delivery times increased at the third highest rate since 1992 which meant many essential materials were not getting through.

Manufacturing companies were also paying the price of goods shortages with the highest rise in cost inflation since June 2018 as shipping and commodity prices soared.

[we wrote last week that UK retailers are reporting week-on-week shipping cost increases of 25%, with “congestion charges” also being added to some shipments to offset berthing delays and longer unloading times].

Brock is also concerned that Brexit uncertainty is hitting new orders at services companies, on top of the impact of the pandemic.

“In services the watchword was ‘wait.’ Clients delayed placing orders as potential Brexit disruption loomed large and more lockdowns restricted footfall in consumer-facing businesses resulting in new orders dropping for the third month in a row.

As Covid worries and no-deal uncertainty remains, firms will continue to face the most challenging business conditions in a generation for the next few months.

Port delays hit UK manufacturing supply chains

Freight lorries queueing to enter the port of Dover last week.
Freight lorries queueing to enter the port of Dover last week. Photograph: Justin Tallis/AFP/Getty Images

The disruption at UK ports in recent weeks is putting ‘severe pressure’ on manufacturers’ supply chains.

Data firm Markit’s ‘flash’ PMI survey for December shows that many factories are suffering longer wait times for deliveries, and shortages of key parts, due to freight delays caused by congestion at UK ports.

The poll of UK purchasing managers found that the manufacturing sector did keep growing this month, as factories benefitting from a rush of Brexit stockpiling. But the service sector stagnated, with tiered Covid-19 restrictions continuing to hurt the hospitality sector.

On the port delays, Markit explains:

The latest survey also indicated severe pressure on manufacturing supply chains, which was overwhelmingly linked to freight delays following congestion at UK ports.

Around 45% of the survey panel reported longer wait times from suppliers, while only 2% saw an improvement. The lengthening of lead times in December was the third-steepest since the survey began in 1992, exceeded only by those seen amid COVID-19 shutdowns in April and May.

Shortages of critical inputs, alongside pressure on capacity following forward-purchasing by clients ahead of Brexit, contributed to the sharpest rise in backlogs of work across the manufacturing sector since May 2010.

The survey found that manufacturing output growth slowed, while unfinished work piled up. Markit says:

In some cases, manufacturers noted that supply chain difficulties had restricted their production volumes in December. This contributed to a rise in unfinished work across the manufacturing sector for only the second time in the past three years.

And with new orders rising, factories have also been stocking up on raw materials and parts:

New orders expanded at the fastest pace since August, supported by a temporary boost to purchasing ahead of the Brexit deadline, while stocks of purchases were accumulated to the greatest extent since April 2019.

Here are the details (any reading over 50 shows growth):

  • Flash UK Composite Output Index: 50.7, 2-month high (up from 49.0 in November)
  • Flash UK Services Business Activity Index: 49.9, 2-month high (up from 47.6 in November)
  • Flash UK Manufacturing Output Index: 55.3, 6-month low (down from 56.7 in November)
  • Flash UK Manufacturing PMI: 57.3, 37-month high (up from 55.6 in November)

Here’s our Brussels bureau chief Daniel Boffey on the Brexit trade deal:

A clash over EU access to British fishing waters could still sink hopes of a post-Brexit trade deal, Ursula von der Leyen has said, with agreement said to be “so close but yet … so far away”.

In an address to the European parliament, the European commission president said the issue of domestic subsidies, so long a thorn in the side of the negotiators, had been resolved.

She reported that legal assurances that environmental, social and labour standards would not be undercut had also been secured, with fruitful continuing discussions on “future-proofing” against unfair competition offering a clear path to an agreement.

But Von der Leyen told MEPs that remaining disagreements on the future arrangements for European fishing fleets in UK waters could yet scupper the nine months of negotiations at the 11th hour.

“The discussion is still very difficult,” Von der Leyen said. “We do not question the UK sovereignty on its own waters. But we ask for predictability and stability for our fishermen and our fisherwomen.

“And in all honesty, it sometimes feels that we will not be able to resolve this question. But we must continue to try finding a solution. And it is the only responsible and right course of action.”

Markets lifted by hopes of Brexit deal and US stimulus package

The blue-chip FTSE 100 index has also rallied this morning, jumping 72 points or 1.1% to 6586 points.

UK companies such as housebuilders Barratt Development (+3.6%) and Persimmon (+3.2%) are among the risers, along with investment platform Hargreaves Lansdown (4.9%) and retailers JD Sports (+3.4%).

European stock markets are also higher, as investors pin their hopes on a US stimulus package being agreed soon, as well as tracking the latest Brexit optimism.

Last night, Congressional leaders said they were moving closer to a compromise, with a slimmed-down package worth $748bn on the table.

Mitch McConnell, the Republican Senate majority leader, struck a positive tone last night, saying:

“Everybody wants to finish. Everybody wants to get a final agreement as soon as possible. We all believe the country needs it. And I think we’re getting closer and closer.

European investors are taking note, with the German DAX up 1.6% and the wider Stoxx 600 gaining 0.9%.

European stock markets, December 16 2020

Brexit optimism is also pushing shares higher in London.

The FTSE 250 index, which is domestically focused, has jumped by 1.4% this morning.

Today’s rally is pushing the pound towards to the 30-month high it hit earlier this month.

At $1.351 this morning, sterling is trading close to levels last seen in May 2018.

The pound vs the US dollar since 2015
The pound vs the US dollar since 2015 Photograph: Refinitiv

Sterling reached $1.354 on Friday December 4th, a few hours before negotiators David Frost and Michel Barnier said they had not been able to come to terms on the final issues.

That followed a week of intense negotiations, leading to Boris Johnson and Von der Leyen taking over direct talks.

The pound vs the US dollar in December
The pound vs the US dollar in December Photograph: Refinitiv

Pound jumps as Brexit deal hopes rise

Hopes of a UK-EU trade deal are pushing the pound up this morning, after European Commission president Ursula von der Leyen said that progress is being made.

Sterling has gained half a cent against the US dollar to above $1.35, extending its rally since the two sides agreed to keep talking on Sunday.

The pound strengthened after Von der Leyen told the European Parliament this morning that there is a ‘path to an agreement now’, but two issues remain - fisheries, and the level-playing field.

Von der Leyen told MEPs that there has been progress in the negotiations and the next few days would be ‘decisive’.

She said:

“As things stand, I cannot tell you whether there will be a deal or not. But I can tell you that there is a path to an agreement now. The path may be very narrow but it is there.

We have found a way forward on most issues but two issues still remain outstanding: the level playing field and fisheries. I am glad to report that issues linked to governance now have largely been resolved. The next days are going to be decisive.

This has pushed sterling up to $1.351, its highest level since Friday 4th December, as investors hope that a disorderly Brexit can be avoided.

The pound vs the US dollar this week
The pound has now gained more than two and a half cents against the US dollar since Sunday night Photograph: Refinitiv

Our Politics Liveblog has more details:

Updated

Eurozone economy stronger than expected

On the economic front, the eurozone economy is performing better than expected this month in the face of the second wave of Covid-19.

Although activity fell a little in December, the fall was much less than feared, according to the latest survey of purchasing managers across the region.

European factories posted strong growth this month, data firm Markit reports, lifting its manufacturing PMI index to 56.6 from 55.3 in November (anything over 50 shows growth).

Service sector firms struggled, though, due to the ongoing pandemic. But the rate of contraction has slowed, with the Services PMI rising to 47.3 from 41.7 in November.

This lifted the overall eurozone PMI Composite Output Index to 49.8, from 45.3, indicating the downturn almost bottomed out.

Markit says:

Eurozone business activity came close to stabilising in December as stronger manufacturing output growth helped to counter a further drop in service sector activity.

Encouragingly, future output expectations jumped to a 32-month high, as prospects brightened amid recent news on vaccine developments.

Updated

Full story: UK inflation driven down by discounting from clothing retailers

Steep discounting by clothing retailers pushed down UK inflation in November as the second national coronavirus lockdown in England and tough restrictions across the country kept consumers away from the high street, my colleague Richard Partington writes.

The Office for National Statistics (ONS) said the consumer prices index (CPI) fell to 0.3% in November from 0.7% a month earlier, with retailers slashing the price of clothing and footwear amid the second wave of the coronavirus crisis. City economists had forecast an inflation rate of 0.6%

It comes as retailers across the country are under renewed pressure as the rapid growth in infections discourages consumers from heading to the shops and as lockdown restrictions were imposed in England, alongside tough measures in Scotland, Northern Ireland and Wales.

British electricals retailer Dixons Carphone has reported that the disruption at UK ports is now causing some supply delays.

However, the company also says the delays are manageable.

Reuters has the details:

Britain’s main ports such as Dover and Felixstowe are under huge pressure due to a combination of Brexit stockpiling, Christmas and COVID-19.

“We’ve seen some supply delays, up to about two days worst case, but in our space we can deal with that,” Chief executive Alex Baldock told reporters.

“It’s not ideal but we can handle it. We can do that because we’re number one and therefore we’ve got really strong relationships with the suppliers that allow us to keep the flow of product to customers,” he said.

Baldock was speaking after Dixons reported strong trading for the six months to the end of October. Like-for-like sales jumped 16% in the UK, with online sales surging 145%, which offset sales lost from enforced store closures and in Dixons Travel.

Updated

In other travel news, the UK competition regulator has launched an investigation into airlines for not offering cash refunds to travellers who couldn’t take their flights because of the coronavirus pandemic. More here:

Commuters face an inflation-busting ticket increase next year, when they (hopefully) return to their offices as pandemic restrictions are eased.

Rail fares across England will rise by 2.6% from March 2021, the government has decided.

Although this is the smaller rise in four years, it’s also significantly faster than the cost of living (the RPI measure of inflation in July, which the government uses to set rail fares, was 1.6%).

My colleague Gwyn Topham explains:

The move comes despite widespread calls from transport campaigners to freeze rail fares to entice passengers back on to trains, with usage having plummeted during the Covid-19 pandemic.

However, the government expects to have spent almost £10bn extra on funding trains from last March until next April, since coronavirus restrictions led to fare revenue collapsing and the abolition of rail franchises in favour of emergency contracts for train operators.

The DfT said fares would not increase until 1 March to give the dwindling number of commuters a chance to buy annual season tickets at current prices.

Brexit could push inflation up next year, if delays at the ports lead to supply shortages, or if tariffs are imposed in a No-Deal scenario

Yael Selfin, chief economist at KPMG UK, says ‘border frictions’ could lift prices.

“Early discounting in clothing and footwear lowered inflation, as retailers cut prices to try to boost consumer spend. Working from home has changed people’s needs and households exercised more caution, reining in some non-essential spending in November.

“Despite the weak economic background, inflation could accelerate in coming months, with border frictions as a result of Brexit causing some prices to rise more than usual.

“If a Brexit deal is reached we therefore expect inflation to rise to an average of 1.3% next year from 0.9% in 2020.”

Richard Pearson, director at investment platform, EQi, also says there could be a supply shock.

Brexit looms and with it a potential shock to supplies of imported goods which could stoke inflation for reasons totally unrelated to the coronavirus crisis....

“2021 could see inflation bounce back with a vengeance. A Brexit supply shock and rapidly reheating economy, pumped up by the vaccine, will almost certainly create material price rises as demand reignites.”

The food industry has warned that a no-deal Brexit would quickly push inflation higher, if tariffs were imposed on food imports from the EU.

Ruth Gregory of Capital Economics explains:

The sharp fall in inflation from 0.7% in October to 0.3% in November and in the core rate from 1.5% to 1.1% came as a bit of a surprise. Some of these moves were driven by temporary factors so we still expect inflation to rise temporarily back towards the 2% target next year.

Beyond that, though, the slack in the economy should keep underlying price pressures subdued and allow inflation to drop back to 1.5% in 2022. That is unless a no deal Brexit pushes it up to a peak of 3-4%.

Laith Khalaf, financial analyst at AJ Bell, says retailers slashed prices more sharply than usual in the Black Friday sales this year:

Inflation dropped in November thanks to a Black Friday effect, with increased discounting by retailers pushing down the cost of clothing and footwear.

Of course, Black Friday occurs every year, but this time around discounts were particularly steep in clothing sales, which led to an unseasonal fall in prices. That highlights the continued pressure on the retail sector, and while price cuts on the shelves are good for consumers, they don’t bode well for profits.

The slowdown in inflation also shows that the economy lost steam in November, economists say, with England under lockdown and restrictions in other parts of the UK too.

Ed Monk, associate director for personal investing at Fidelity International comments:

Price rises in most categories fell back and this was more acute for clothing, food and non-alcoholic drinks, demonstrating the pressure on retail. Clothes retailers would normally spend the Autumn increasing prices ahead of Christmas but lockdown has squashed that.

“More widely, the downward pressures of low consumer confidence, increasing coronavirus cases, strict lockdowns, rising unemployment and depressed spending continue to hold back price rises.

Hannah Audino, economist at PwC, also points to the impact of the lockdown:

“The acceleration of consumer price growth over the past two months has been cut short. The 12-month rate for November shows that consumer prices grew by 0.3%, down from 0.7% in October. The figures reflect the second national lockdown in England, which restricted activity and subdued demand for things like fuel and clothing.”

“The deceleration in consumer price growth came as most of the main groups of goods and services experienced a fall in prices between October and November, including transport, health, recreation and culture. The largest drop in prices came from clothing and footwear as retailers discounted products for Black Friday.”

Last month, my colleague Molly Blackall highlighted the scale of discounting on Black Friday – with some online retailers selling clothes and shoes for just pennies each.

She wrote:

Clothing brand Pretty Little Thing offered deals of up to 99% off, with high-heeled shoes on sale for 25p and dresses for 8p. One buyer said on Twitter that they had made 27 orders from the brand for just 57p each, while another said they had bought 56 items for £28.

Boohoo, which owns Pretty Little Thing alongside brands including Nasty Gal and Karen Millen, also offered up to 80% off all of their products, with skirts for as little as £1.60.

However, the reductions caused a backlash on social media and among environmental experts.

“Educate yourself on fast fashion and I promise you those 4p Pretty Little Thing bikini bottoms won’t appeal to you as much,” wrote one Twitter user. Another said that the sale was “making me sick”, adding: “Our fascination with fast fashion and using an outfit once is gross.”

More here:

A Cadbury chocolate bar

Price of food and non-alcoholic beverages fell by 0.2% last month -- compared with a rise of 0.8% a year ago.

The ONS says that many food prices fell in November, some healthier than others....

The effect came from across a wide range of food and drink categories, but particularly sugar confectionery, vegetables and meat, from products such as large bars of chocolate, ice cream, cauliflower, premium potato crisps and cooked ham.

The fall in clothing and footwear prices last month (down 2.6% in November compared with October) was mainly driven by cheaper women’s clothing, the ONS says.

But men’s clothing, and other categories such as footwear, also had a downward effect.

Updated

UK inflation falls to 0.3% amid Black Friday sales

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

Inflation in the UK has slowed sharply last month, dragged down by falling prices for clothing amid the Black Friday sales rush last month.

The consumer prices index rose by just 0.3% in the 12 months to November, down from 0.7% in October, the Office for National Statistics reports.

Food and non-alcoholic drinks also pulled the cost of living down last month, the ONS adds, while accommodation and some games prices rose.

It says:

  • Falling prices for clothing, and food and non-alcoholic beverages resulted in the largest downward contributions (of 0.17 and 0.09 percentage points respectively) to the change in the CPIH 12-month inflation rate between October and November 2020.
  • These were partially offset by upward contributions from games, toys and hobbies, and accommodation services.
UK inflation
UK inflation Photograph: ONS

Clothing prices were a major cause of the drop in inflation last month, the ONS says, with clothing and footwear prices down 2.6% in November compared to October.

It points to the surge of discounting on Black Friday last month as retailers tried to boost sales, particularly online, after a very rough year.

The ONS explains:

Prices overall fell by 2.6% between October and November 2020, compared with a rise of 1.0% between the same two months a year ago. Prices usually rise between these two months but price movements across 2020 have been unusual compared with previous years and appear to have been affected by the coronavirus lockdowns.

The price fall in November this year reflects increased discounting and there have been media reports that some Black Friday sales may have spread further across the month.

UK inflation
UK inflation Photograph: ONS

More details and reaction to follow...

Also coming up today


A flurry of surveys of purchasing managers from the UK, eurozone and the US will indicate how companies are faring this month.

These flash PMIs are likely to show that Britain’s private sector returned to growth this month, after output slumped during England’s November shutdown, with factories growing faster than the service sectors.

The eurozone economy may still be shrinking, though, as tougher restrictions are imposed to fight the second wave of Covid-19.

Michael Hewson of CMC Markets explains:

The latest flash PMIs for the UK are also expected to paint a slightly better picture for the UK economy after the slowdown in November, with an improvement in both manufacturing and services, with manufacturing expected to remain fairly resilient at 56, due to an element of pre-Brexit stock-piling, while services are expected to rebound to 50.7, after the economic reopening as the November restrictions came off.

The announcement of extended lockdowns for the likes of Germany, and the Netherlands earlier this week, along with an extension of some restrictions in France augurs ill for the outlook for northern Europe’s largest economies over the next few weeks. Today’s flash PMI for manufacturing and services is expected to deepen that economic gloom, even as manufacturing continues to help offset the hit the services sector is taking.

The prognosis was already looking bleak after the extended restrictions that were announced at the beginning of November, in both France and Germany, as the optimism of the summer recovery has given way to the pessimism of a long dark winter

Later, the US central bank, the Federal Reserve, will hold its final meeting of the year.

The agenda

  • 9am GMT: eurozone flash PMI index of services and manufacturing for December. Expected to rise to 45.8 from 45.3, showing a contraction.
  • 9.30am GMT: UK flash PMI index of services and manufacturing for December. Expected to rise to 53.1 from 49, showing a return to growth
  • 1.30pm GMT: US retail sales for November. Expected to fall by 0.3% month-on-month
  • 2.45pm GMT: US flash PMI index of services and manufacturing for December. Expected to drop to 55.7 from 56.7, showing slower growth
  • 7pm GMT: Federal Reserve’s FOMC meeting
  • 7.30pm GMT: Federal Reserve press conference

Updated

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California women try to hit on men by sending them hashbrowns at London restaurant. It doesn’t go as planned:‘Yeah you can’t really do that in London’
Sending someone restaurant food is a pretty common flirting tactic in the U.S. However, as one TikToker found out, the same can’t be said for the U.K.
The Mary Sue
The Mary Sue
The Hidden Effects of Screen Time on Children's Health, Sleep, and Development
Discover how excessive screen time affects children's health, sleep, and development, and learn practical tips to manage digital habits for healthier, balanced growth.
Medical Daily
Medical Daily
Barry Keoghan: 'There’s a lot of hate online. It’s a lot of abuse of how I look'
Barry Keoghan has considered quitting acting due to abuse over his looks and says he finds it hard to deal with the comments.
BANG Premier
BANG Premier
Best thing I ever ate? My first In-N-Out burger in LA
Why the Double-Double is ‘the near perfect expression of burger-ness’
The Guardian - UK
The Guardian - UK
How AI English and human English differ – and how to decide when to use artificial language
Suspicion and affection. Apprehension and excitement. Most people have mixed feelings about AI English, whether or not they always recognize it. When reading text generated by AI, people feel it sounds off, or fake. When reading English by a human, people are more likely to feel it has a characteristic…
The Conversation
The Conversation
Delilah and Me
Back in 2002, I heard a great question, from Betchen and Paul Barber: Who cut off Samson's hair? Of course… The post Delilah and Me appeared first on Reason.com.
Reason
Reason
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