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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Britain’s energy price cap heading for £3,300; US jobs report eases recession worries – as it happened

United Kingdom United States REC (Organization) KPMG Boris Johnson Inflation
UK household bills set to soar again in October, and in January, warns Cornwall Insight
UK household bills set to soar again in October, and in January, warns Cornwall Insight Photograph: Andy Rain/EPA

Closing post

European markets are ending the week calmly, with the FTSE 100 index up 11 points or 0.1% in late trading, the pound now calm at $1.20, and the euro moving away from parity with the US dollar.

So here’s today’s main stories so far:

Hope you have a nice weekend, see you on Monday... GW

Today’s US jobs report is good for growth but bad for inflation, says Janet Mui, Head of Market Analysis at wealth manager Brewin Dolphin:

The US labour market remains a bright spot with better-than-expected job gains, plentiful job openings and decent wage growth, which should help dampen near-term recessionary concerns.

We think today’s report in any state will not change the Federal Reserve’s mind to deliver another 75 basis point hike in July, followed by 50 basis point hikes in September, as the Fed is focused on fighting inflation. These aggressive rate hikes are being well priced in by financial markets.

While the probability of a recession in the US over the next 12 months has risen due to rampant inflation and tighter monetary policy, the resilience in jobs will prevent the economy from falling off a cliff as some fear.”

The prospect of another large increase in US interest rates this month has seen Wall Street open lower.

The S&P 500 index of US stocks has dropped 28 points, or 0.7%, to 3,874 points, after today’s better-than-expected jobs report.

Mining companies, technology firms and industrial companies are among the fallers, pushed down by the prospect of further tightening, with a 75-basis point hike heavily priced in.

But, as Michael Antonelli, market strategist at Baird points out, solid job creation is good news and should be welcomed by investors.

Back in the UK, peace has broken out in the baked bean battle between Tesco and Heinz.

Britain’s largest supermarket has reached agreement with the US food giant, which means a full range of products will be back on Tesco shelves and online soon.

Shoppers had been facing shortages of Heinz ketchup and salad cream, as well as baked beans, after Tesco baulked at price rises.

In a joint statement, the two firms say:

“Lorries full of Heinz products including Heinz Tomato Ketchup and Heinz Beanz will hit the road shortly, and Tesco colleagues will be working hard to ensure shelves are filled again over the coming days.

“With British summertime finally here, Tesco shoppers will be able to get all the essentials they need for their perfect summer salad or barbecue, including the Heinz varieties they know and love. It’s great to be back together.”

Seema Shah, chief strategist at Principal Global Investors, also sees another hefty increase in US interest rates this month... which could push the economy close to recession.

“Today’s job number should soothe fears of an imminent recession, but it does nothing to relieve fears of considerable further Fed tightening. The job market remains severely tight, suggesting still-intense wage pressures. How can the Fed do anything other than persisting with rapid policy tightening? A 0.75% increase is still on the cards for July.

“In recent weeks, markets have become increasingly fearful that recession is around the corner. But with payrolls above 350,000, this is an economy that is still well-supported by a strong labour market.

Yet, cracks are undoubtedly forming and, with the Fed determined to contain inflation pressures, monetary tightening will only prompt economic activity to decelerate further over the coming months.

Recession is not upon us, but it’s not too far away.”

Jobs report could solidify another 75bp rise from the Fed

The strong 372,000 gain in non-farm payrolls in June appears to “make a mockery” of claims the US economy is heading into, let alone already in, a recession, says Andrew Hunter, Senior US Economist at Capital Economics.

That’s clearly good news. Except it may spur the US Federal Reserve into a massive 75bp increase in interest rates this month, for the second month running, putting more pressure on borrowers.

Hunter explains:

That may be enough to solidify the case for another 75bp rate hike at the Fed’s meeting later this month, although signs that wage growth is cooling and the recent plunge in commodity prices both suggest the inflation outlook could improve more quickly than officials had feared.

Today’s strong US jobs report contrasts with other recent economic announcements, points out Richard Flynn, managing director at Charles Schwab UK:

The US economy and the stock market have both struggled in the first half of 2022, in the face of risks that include a multi-decade high in inflation, aggressive monetary policy tightening, and the effects of Russia’s invasion of Ukraine. For now, the jobs market appears unimpacted by these risks. However, jobs reports are lagging economic indicators that are often strong entering a downturn.

Despite today’s good news, stocks are likely to continue to feel the weight of monetary tightening, shrinking liquidity, and slower economic growth.”

Average earnings paid to US workers are still lagging behind inflation, today’s jobs report shows, despite rising last month.

In June, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3%, to $32.08.

Over the past 12 months, average hourly earnings have increased by 5.1%, which is down from 5.3% a month ago (but a little higher than forecast).

That doesn’t keep pace with rising prices, as consumer price inflation jumped by 8.6% in the year to May.

June’s jobs gains means the US economy is closing in on its pre-pandemic employment levels.

Total nonfarm employment is down by 524,000, or 0.3 percent, from its pre-pandemic level in February 2020, the BLS says.

Private-sector employment has recovered the net job losses due to the pandemic and is 140,000 higher than in February 2020, while government employment is 664,000 lower.

You might remember that in April 2020, more than 20m Americans lost their jobs in the first pandemic lockdowns.

The US Bureau of Labor Statistics says there were notable job gains in professional and business services, leisure and hospitality, and health care last month.

That includes:

  • Professional and business services employment growing by 74,000 in June.

  • Leisure and hospitality added 67,000 jobs, as growth continued in food services and drinking places (+41,000). However, employment in leisure and hospitality is down by 1.3 million, or 7.8 percent, since February 2020.

  • Employment in health care rose by 57,000 in June

  • In June, transportation and warehousing added 36,000 jobs

  • Employment in manufacturing increased by 29,000 in June and has returned to its February 2020 level.

  • Information added 25,000 jobs in June,

  • Employment in social assistance rose by 21,000, but is down by 87,000, or 2.0 percent, since February 2020

  • Wholesale trade added 16,000 jobs in June, including 8,000 in nondurable goods.

  • Mining employment rose by 5,000 in June,

US economy added 372,000 jobs in June

America’s economy has added more new jobs than expected last month.

Non-farm payrolls rose by 372,000 in June, beating forecasts of a 268,000 increase in jobs, which may show the labor market is holding up better than economists feared.

That’s only slightly lower than May’s 384,000 new hires.

The unemployment rate held steady at 3.6%, which also indicates the US economy could be defying recession worries even with inflation at 40-year highs.

As Matilda Long of Yahoo News points out, energy bills will hit alarming levels this winter -- meaning some people simply won’t be able to keep warm.

UK households are also facing sharp rises in car insurance, on top of record fuel prices when they fill up.

Over the first five months of 2022, the average motor insurance premium increased by 7.8%, according to Consumer Intelligence today, with the typical policy now costing £786.

The report also found that:

  • Older drivers continue to be stung by higher car insurance premiums – with increases of 9.4% over the past year for drivers aged over 50, bringing their average annual premium to £414.

  • For motorists aged 25-49, prices have risen by 6.4% over the same 12-month period – with the annual cost of car insurance now £592.

  • Younger drivers aged under 25 – who are statistically more likely to have an accident – typically now pay £1,669 for their car insurance, a fall of 3.2% in the last 12 months.

Here’s some early reaction to Cornwall Insight warning that the energy price cap is heading over £3,300 in January, from Graham Hiscott of the Daily Mirror:

Here’s Gary Caffell of Money Saving Expert:

Here are those new forecasts:

Cornwall Insight’s latest energy price cap forecasts
Cornwall Insight’s latest energy price cap forecasts Photograph: Cornwall Insight

Updated

British energy bills could hit £3,363/year in January

The British household energy bill price cap could surge to above £3,300 per year next January, analysts at Cornwall Insight have warned.

New, higher forecasts from Cornwall Insight show that the price cap is on track to rise to £3,244 a year in October, when it is next adjusted.

That’s up from £1,971 per year at present, and would be an extremely tough blow for struggling households.

And under regulator Ofgem’s new quarterly cap changes, Cornwall estimates the Default Tariff Cap would rise again, to £3,363 per year, for January-March 2023.

Just last month, Cornwall had calculated the cap would rise to £3,003 for the January to March period, but the latest energy price moves suggest it will be higher.

Ongoing uncertainty regarding Russian gas flows into continental Europe, as well as more recent concerns such as the halted strike by Norwegian gas workers, have led to an increasingly volatile energy market, Cornwall says.

That leads to a rise in wholesale energy prices - which ultimately trickles down to consumers.

These predictions do not include the impact of the government’s Energy Bills Support Scheme, which will give a £400 grant to households in October.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:

“As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer Default Tariff Cap rise to what are even more unaffordable levels.

“There is always some hope that the market will stabilise and retreat in time for the setting of the January cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.

“Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.”

Updated

Inflation in Greece has hit a 30-year high, adding to the cost of living squeeze facing Greek citizens.

Consumer prices jumped by 12.1% per year in June, up from 11.3% in May, as the costs of energy, transport and foods surged.

Statistics service ELSTAT reported that food and non-alcoholic beverages jumped 12.6% over the year, clothing and footwear rose 4.6%, transport costs jumped 25% and housin costs (including gas, electricity and heating oil) surged 31.5%.

This will also push up the cost of holidaying in Greece -- at 12.1%, inflation is higher than the eurozone average (8.6%), or the UK’s CPI at 9.1%.

Updated

The financial markets are ending the week with a fresh bout of recession worries.

The FTSE 100 index of blue-chip shares has dipped 0.15%, or 11 points, to 7178, with mining companies, banks and UK housebuilders among the fallers.

Russ Mould, investment director at AJ Bell, says:

“The FTSE 100 is trying its very best to hold on to this week’s winning streak, but it looks touch and go as to whether the index will have the stamina to stay higher for the whole of Friday.

“Investors continue to lock on to oil stocks, with BP, Shell and Harbour Energy among the top risers. JD Sports also got a lift as it found a new chairman.

“Housebuilders didn’t fare as well, with Taylor Wimpey and Persimmon taking a knock amid mixed messages about the sector which is battling materials, energy and labour cost inflation. There is also a growing sense that the property market can’t sustain its positive momentum if we get a recession.

Germany’s DAX has dropped 0.3%, while France’s CAC is 0.5% lower.

The pound has also lost some of yesterday’s gains, down 0.8 of a cent to $1.195.

The euro’s weaker against the dollar too, sliding nearer to parity at $1.011 (down 0.5% today).

Stagecoach Merseyside bus workers to take all-out strike action, Unite says

Bus drivers and engineers from Stagecoach Merseyside striking outside the company’s Gilmoss depot in Liverpool, England, on Monday July 04
Bus drivers and engineers from Stagecoach Merseyside striking outside the company’s Gilmoss depot in Liverpool, England, on Monday. Photograph: Christopher Furlong/Getty Images

Hundreds of bus workers are to stage an all-out strike in a dispute over pay.

Members of Unite employed by Stagecoach Merseyside held an initial day of strike action on Monday.

The union said Stagecoach had failed to make an improved pay offer so its members will take all-out, continuous strike action from Wednesday July 20.

Prior to this, there will be one-day strikes on Friday July 15 and Monday July 18.

Unite general secretary Sharon Graham said:

“Stagecoach is a wealthy company, it can easily afford to pay fairly and Unite is determined to ensure that it does.

“Our members simply want the rate for the job and are not going to accept being underpaid a moment longer.

“Stagecoach’s refusal to make an offer that would resolve this dispute has, however, resulted in an escalation in industrial action.

“Unite will be giving our members the union’s complete support until they receive an acceptable pay increase.”

Updated

Petrol prices: UK watchdog raises concerns over refinery margins

This chart from the CMA’s report shows the growing gap between the crude oil price and the wholesale price of petrol and diesel, which pushed prices sky-high at the pumps.

UK refinery spreads
The “refining spread”, Photograph: CMA

The refining spread had tripled in the last year, growing from 10p to almost 35p a litre, the watchdog says.

It says it has “found cause for concern in the growing gap between the price of crude oil when it enters refineries, and the wholesale price when it leaves refineries as petrol or diesel”.

Here’s the full story on the CMA’s concerns over the margins made by refineries. by our energy correspondent Alex Lawson:

It’s important that the CMA’s market review is conducted quickly, to provide help in the cost of living squeeze, says RAC fuel spokesman Simon Williams.

As each day goes by and the cost-of-living crisis is felt ever more keenly, the need for retailers – especially the largest ones – to reflect wholesale prices fairly becomes ever more urgent.

We urge the Government to ensure it’s in a position to scrutinise the relationship between wholesale and retail prices. And where issues are found, it must be able to take action that quickly leads to fairer prices.”

AA: Pump-price competition in the UK is broken.

The AA has welcomed the CMA’s decision to launch a market study of the UK fuel sector.

Jack Cousens, the AA’s head of roads policy, argues that pump-price competition in the UK is “broken”:

A month of major wholesale price falls without a penny coming off the average pump price of petrol is testament to that.

“It is very welcome and timely that the Competition and Markets Authority probe into road fuel pricing has agreed with the AA that there is a need for further investigation.

“However, the AA argues that the problem is not the gap between the oil price and wholesale price feeding through to the forecourts but the length of time it takes for that wholesale price to be reflected at the pump. The fuel trade has no trouble in passing on rising costs to the customer but lags badly in passing on savings. It has been labelled ‘rocket and feather’ pricing, and it exists.

Cousens adds that supermarkets have lost their competitive edge on fuel:

“Pre-pandemic, UK fuel pricing had settled into a rhythm where significant wholesale price reductions would start to be passed on in a matter of days by ‘cost-cutter’ supermarkets. That would then trigger other supermarkets and fuel retailers to start bringing down theirs, or find themselves at a competitive disadvantage.

“That didn’t mean that oil company forecourts couldn’t cut their prices sooner. However, most of them just sat back waiting for the supermarkets to make the first move.

“That trigger appears to have gone, and now there is a need to find another way to re-invigorate pump-price competition. The AA therefore welcomes the CMA’s suggestion of more pump price transparency immediately, something the UK’s biggest motoring organisation has been calling for years.”

Updated

Greater transparency about fuel prices at the pumps could help competition, but wouldn’t have a large impact, the CMA says:

In particular, an open data scheme for pump prices could strengthen retail competition and create new commercial opportunities for developers.

However, given that retailer profits represent a relatively small share of the pump price, such measures are likely to have only a modest effect on prices.

CMA: Fuel retailer profit margins have not pumped up prices

The CMA’s review of the petrol and diesel market has not found evidence that profiteering by petrol stations has been a major factor driving up pump prices.

It says:

Although there are concerns about fuel retailers profiting from the current situation, our review finds the gap between wholesale prices and retail prices (the “retailer spread”) has not been a significant contributor to the overall rise in pump prices.

In particular, the share of the overall price accounted for by the retailer spread was lower in the three months after the 23 March duty cut than in the last six months of 2021; and in absolute terms, the spread fell from 11.2p to 9.9p.

The retailer spread also includes covering costs they incur:

Retailers told us that they have also seen increases in a range of costs, including transportation, wages and utilities.

Fuel retailer spreads

BUT.... the CMA has spotted that the spread has widened recently, as wholesale prices fell back but prices didn’t.

That will be part of its new market review:

In relation to the most recent spike in retailer spreads, the CMA will be looking closely, as part of its market study, into how far and how fast these fall back to reflect recent declines in wholesale prices.

Updated

CMA to launch formal market study into road fuel markets

Britain’s competition watchdog is to hold a formal market study into the UK’s road fuel sector, following concerns that motorists may be being charged too much.

The move comes as the Competition and Markets Authority says it hasn’t found evidence of retailers profiting by not passing on fuel cuty cuts.

Instead, it says, petrol and diesel prices have been pushed up by higher crude oil prices, and a widening gap between the price of crude oil entering refineries and the wholesale price of petrol and diesel leaving them.

The review will consider three key areas -- including those large profit margins being enjoyed by refiners, and whether competition between supermarkets has softened.

The Competition and Markets Authority says this study will cover:

  • refining, including why refining spreads are so high and what, if anything, ought to be done to bring them back down;

  • wholesaling, including the impact of long-term exclusive supply agreements between independent retailers and wholesalers; and

  • retailing, including how far local price variation is being driven by weak competition, and whether there has been a softening of competition from supermarkets.

The CMA has also published a review of the sector, requested by the government last month amid claims that retailers were not passing on the 5p/litre fuel duty cut announced in March’s Spring Statement.

The CMA says:

We have seen no evidence – nor is it clear from our analysis – that retailers in aggregate have profited from failing to pass on the fuel duty cut.

It explains that supermarkets cut prices by just over 5p per litre immediately following the duty cut, and probably incurred a cost as they’d paid the old rate when they bought their fuel from refiners.

Prices charged by other types of retailer also fell in the days following the duty cut -- around 3.5p in the case of oil company-operated sites, and 2.1p in the case of independently operated sites.

But, the CMA says, wholesale prices were rising at the time:

These price reductions occurred in a period where – absent the duty cut – retail prices might otherwise have been expected to rise.

Updated

The CMA’s initial report into the fuel market, just released, highlights how prices have soared:

The price of a litre of both petrol and diesel has gone up by over 60p in the last year. Households now pay on average more than £500 per year extra to run a medium-sized petrol car, and for those living in rural areas, the impact will generally be greater.

More than half of motorists have changed their behaviour in response to this increased cost.

Updated

UK financial assets could suffer from the political upheaval following Boris Johnson announcing his resignation yesterday, warns Mark Dowding, CIO of BlueBay Asset Management.

In his latest weekly analysis, Dowding writes:

Even with his resignation, he remains emboldened to continue as a caretaker PM until the autumn while a new leader is selected, eager to push through his economic agenda and make one final stand.

Needless to say, at a time when the UK economy is already on its knees, these developments may continue to add to the negative sentiment and weigh on the outlook for UK financial assets.

Dowding also tells clients:

  • Euro recession: Recession fears look much more justified in Europe. With the Eurozone likely to experience a contraction, BlueBay thinks that it will be hard for the ECB to hike rates as much as is discounted, even as inflation continues to overshoot.

  • Bond yields: Fixed income is bearing much of the brunt, with implied volatility in rates markets and credit spreads both close to their covid crisis peaks a few years back.

  • Energy costs: Further moves upwards in natural gas prices continue to feed recession fears, yet there may be little that policy makers can do about this, save for caving in to Putin.

  • US economy: BlueBay believes that US growth fears may have been exaggerated as this week’s ISM services gauge pointed towards a steady business conditions.

Key event

A JD Sports store in London, Britain.
A JD Sports store in London, Britain. Photograph: May James/Reuters

Retail news: JD Sports has hired former Morrisons chair Andrew Higginson as its new chairperson, succeeding Peter Cowgill who was ousted in May.

Cowgill suddenly stepped down six weeks ago, after 18 years at the helm. That came after several missteps, including:

1) JD Sports being fined more than £4m for breaching the competition regulator’s rules with clandestine meetings with a takeover target.

2) a shareholder revolt over pay after Cowgill was paid almost £6m in bonuses despite the company accepting more than £100m in pandemic government support.

Cowgill had also objected to the board’s plan to split the roles of chair and chief executive, which he has jointly held since 2014, my colleague Sarah Butler reported here.

Higginson is an experience hire for the FTSE 100-listed retailer, as Victoria Scholar, head of investment at Interactive Investor, explains:

Higginson is the previous chair of the supermarket Morrisons when it was taken over by private equity last year and he’s worked at Tesco in top positions for many so he has plenty of experience working at a high level in FTSE 100 companies.

The company is still on the hunt for a CEO though, so uncertainty lingers in the C-suite for Morrisons after the chairman and chief executive roles were split up last year.

Shares in JD Sports initially spiked to the the top of the FTSE 100 but have since pared gains. The market is receiving the appointment of Higginson positively, but shares are down almost 50% since the highs in November.

Updated

Ashley Alder appointed to run City watchdog

The Financial Conduct Authority head offices in London.
The Financial Conduct Authority head offices in London. Photograph: Toby Melville/Reuters

The Financial Conduct Authority (FCA) has appointed Ashley Alder, the head of Hong Kong’s securities watchdog, as its new chairman.

Alder, who has run the Securities and Futures Commission (SFC) since 2011, joins as the UK’s financial watchdog remains mired in internal strife amidst strikes by staff over pay and conditions.

Alder, who two years ago was in the running to become chief executive of the FCA, will join as chairman in January for a five year term.

He replaces interim chair Richard Lloyd, who ran consumer watchdog Which? for five years until 2016, who was appointed after Charles Randell stepped down as FCA chair in May – a year before the official end of his five year term.

The appointment of Alder, who also chairs the Board of the International Organisation of Securities Commissions (IOSCO), follows a turbulent few years for the FCA.

The City watchdog, which is responsible for supervising thousands of companies, was criticised for its handling of two major consumer scandals in 2019: The £236m collapse of London Capital & Finance, which sold unregulated minibonds on investors, and failure of Neil Woodford’s equity fund.

The FCA has also found itself battling with staff since the appointment of Nikhil Rathi as chief executive in 2020, replacing Andrew Bailey who became governor of the Bank of England. This led to a walkout this summer, in a row over pay.

Updated

The jobs market isn’t the only part of the economy slowing. Consumers are cutting spending in the shops as high inflation and the cost of living squeeze hits their budgets.

The BDO High Street Sales Tracker shows that retail sales have grown at their lowest rate since February 2021, with like-for-like sales in June increased by 8.4% compared with a year ago.

An 8.8% drop in homeware sales suggests that consumers are postponing large purchases.

Lifestyle sales through online channels fell for the eighth consecutive month, as consumers cut their discretionary spending in the sector (which has seen its lockdown boost fade).

Sophie Michael, head of retail and wholesale at BDO, says retailers face a concerning outlook:

With consumer confidence at historically low levels, real wages falling to a 20-year low and interest rates set to rise further, there are few signs of encouragement for retailers.

All four English regions monitored by KPMG and REC saw a slowdown in permanent job placements, with the North of England only seeing a fractional upturn.

London saw the sharpest increase in temporary jobs in June, while the softest expansion was registered in the Midlands.

UK wage growth
Starting salary inflation eased to the softest since
August 2021, while temp wage growth edged down to a 12-month low. Photograph: Graeme Wearden/KPMG/REC

Starting salaries continued to climb last month, KPMG and the REC’s UK jobs report shows.

The shortages of skilled candidates forced firms to lift their starting pay -- good news for workers looking for help in the cost of living squeeze.

Pay pressures did moderate slightly, though, with starting salary inflation edging down to a ten-month low. That could ease the Bank of England’s worries of a wage-price spiral breaking out.

The report says:

The ongoing imbalance between the supply and demand for workers drove further steep increases in rates of starting pay during June.

Though sharp and well above the series average, the rate of starting salary inflation eased to the softest since August 2021, while temp wage growth edged down to a 12-month low.

Updated

Introduction: UK jobs market loses steam

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

The UK’s employment market is losing steam, in a sign of the challenge that will face the next government to strengthen the struggling economy.

British employers slowed their hiring through recruitment agencies again in June, with vacancies rising at the weakest rate in over a year.

The slowdown is due to rising economic uncertainty, spiralling costs, and a shortages of candidates, according to UK Report on Jobs, from KPMG and the REC (Recruitment & Employment Confederation).

The survey shows that permanent staff appointments and temporary positions both expanded at the softest rates for 16 months in June, as the labour market lost some strength.

UK jobs report
UK jobs report Photograph: KPMG and REC

Recruiters also reported another steep fall in overall candidate availability.

That’s partly due to a drop in foreign candidates.... and a reluctance to switch jobs in the current climate, as the so-called Great Resignation fizzles.

Recruitment consultancies often attributed lower candidate numbers to a generally low unemployment rate, fewer foreign workers, robust demand for staff and hesitancy to switch roles in the increasingly uncertain economic climate.

The report follows a slowdown in May....

....and shows we are past the peak of the “post-pandemic hiring spree”, as Neil Carberry, chief executive of the REC, explains:

That pace of growth was always going to be temporary – the big question now is the effect that inflation has on pay and consumer demand over the course of the rest of the year. Whether we will see the market settle at close to normal levels, or see a slowdown, is unpredictable at this point.

“Part of the reason for unpredictability in the market is a slower economy accompanied by severe labour and skills shortages. These are already proving a constraint on growth in many firms. The government should be thinking about how to ensure all its departments enable greater labour market participation and encourage business investment funds to help address this.

Also coming up today

After recovering on Thursday, the pound is hovering around $1.20 as the City waits to see who will emerge to succeed Boris Johnson as Prime Minister (a process which could take a few months).

There could be paralysis in the aftermath of yesterday’s dramatic resignation announcement, with Johnson promising no major policies, tax decisions or other changes of direction during his caretakership.

Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, says:

A Conservative leadership election is likely to begin within days. While his resignation could add to near-term uncertainty, so far the market response has been fairly muted.

Looking further out (past the current loss of growth momentum), the UK economy and its financial markets could perhaps benefit from more certainty.

Eleswhere, Britain’s competition watchdog, the Competition and Markets Authority, should be releasing its report into the fuel retail market today, following a request by Business Secretary Kwasi Kwarteng.

The latest US jobs report, June’s non-farm payroll, is expected to show that job creation slowed last month.

Economists predict the NFP will rise by 268k, down on the 390k US jobs created in May. A weak reading could lead to more worries about a possible US recession.

European stock markets rallied yesterday, but are on track for a subdued open today.

The agenda

  • Morning: CMA expected to release report on UK motor fuel market
  • 9am BST: Italian industrial production for June
  • 12.55pm: ECB president Christine Lagarde takes part in a session at the Les Rencontres Economiques event in Aix-en-Provence, Franc
  • 1.30pm BST: US non-farm payroll jobs report for June

Updated

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