UK petrol prices near record; inflation dips; bitcoin hits new high – as it happened

Last modified: 04: 47 PM GMT+0

Closing summary

Time to wrap up...

UK inflation has dipped, but the respite could be temporary. Consumer prices rose by 3.1% in the year to September, down from a nine-year high of 3.2% in August.

But the drop was due to last summer’s discount meal offer, Eat Out to Help Out, dropping out of the calculations. Economists predict inflation will keep rising, and could be over 4% by early next year.

Transport costs pushed up the cost of living, with petrol and second-hand car prices having risen sharply since pandemic restrictions eased.

Second-hand cars
Second-hand car prices Photograph: ONS

The inflation data will be used to set UK pensions next year. They should rise by 3.1%, but would have jumped by 8%, in line with wages, if the government hadn’t suspended the triple-lock.

Age UK said it is “imperative” to revert back to the triple-lock to tackle pensioner poverty.

House prices inflation also accelerated, with prices up over 10% in the last year.

Petrol retailers warned that prices at the pump will hit new record highs by the end of October - blaming the surge in oil prices.

But motoring organisations accused forecourts of pumping up prices.

Rising petrochemical prices are also pushing up the cost of paint.

Dutch paints and coatings maker AkzoNobel warned this morning that “significant raw material cost inflation and supply constraints” are expected to continue until the middle of next year.

Bitcoin has hit a new record high, scaling April’s peak to climb over $65,000 for the first time. The move followed the launch of the first Bitcoin ETF, which makes it easier to invest in the crypto currency.

But the UK’s financial watchdog warned that young investors were being lured into high-risk products such as cryptocurrencies and foreign exchange trading by social media hype and the gambling-like thrill of competing to get rich quick.

In another intriguing development, short-seller Hindenburg Research launched a $1m “bounty” programme for information on Tether, the company at the centre of the global cryptocurrency market.

Shares in Pinterest have surged, after Bloomberg reported the PayPal was exploring acquiring the popular digital pinboard site.

Elon Musk, the world’s richest person, with an estimated $241bn fortune, could become the first trillionaire, Morgan Stanley predicted.

Facebook has been fined £50.5m for breaching an order imposed by the UK competition regulator during its investigation into the purchase of the gif creation website Giphy.

Rishi Sunak is preparing to announce a tax cut for Britain’s biggest banks at next week’s budget to maintain the competitiveness of the City of London after Brexit, according to reports, despite plans to raise taxes on workers.

MPs have warned that UK public sector pension schemes could deepen divisions in society unless they use their billions of pounds of investment to cushion communities pivoting away from carbon-intensive industries such as steel and carmaking.

Five of the UK’s leading manufacturing industries have called for more government financial support to boost capital investment in research and development as well as new factories and equipment with lower carbon emissions.

Burberry has appointed Jonathan Akeroyd as its next chief executive in a deal including a £6m “golden hello” to cover the loss of bonus and share awards for leaving his position as boss of rival Versace.

Deliveroo enjoyed a 59% increase in orders in the UK and Ireland between July and September despite the return of dine-in restaurant eating, as a partnership with Amazon more than doubled members of its premium subscription service.

The scourge of scam texts and calls has been laid bare by UK telecoms regulator research showing almost 45 million people received at least one in the last three months, while mobile network EE had to block 18,000 sim cards used for the fraud over that period.

Goodnight. GW

Updated

In London, the FTSE 100 index of blue-chip shares closed up just 5 points or 0.08%, with travel, hospitality, property developers and miners dropping.

The more UK-focused FTSE 250 index of medium-sized firms dipped by 0.4%.

British Airways owner IAG fell almost 5% and holiday operator TUI shed 6.6%, while easyJet dipped by 3.5%.

Hotel operator Whitbread lost almost 3%, while cinema operator Cineworld is down 3.6%.

The latest government figures show that Covid-19 cases and deaths have risen over the last week:

  • There have been 49,139 new cases – and the total number of new cases over the past week is up 17.2% on the total for the previous week.
  • There have been 179 more Covid deaths – and the total number of deaths over the past week is up 21.1% on the total for the previous week.
  • And hospital admissions are up 11.2% week on week – although this data only covers the period up to Saturday, when there were 869 hospital admissions.

Earlier today Morocco said it was banning flights to and from the UK due to rising coronavirus case rates.

Updated

European shares have closed at six-week highs tonight, lifted by strong results from Swiss food giant Nestle.

The Europe-wide Stoxx 600 index gained over 0.3%, with Nestlé up 2.66% after reporting strong sales figures of products including coffee and pet food this morning, and passing on higher costs to consumers.

🔔 European Closing Bell 🔔

🇬🇧 FTSE 100 up 0.1%

🇪🇺 STOXX 50 up 0.2%

🇪🇺 STOXX 600 up 0.4%

🇩🇪 DAX up 0.1%

🇫🇷 CAC up 0.6%

🇪🇸 IBEX up 0.2% pic.twitter.com/ucIxKQCofC

— PiQ (@PriapusIQ) October 20, 2021

Pinterest shares jump on reports of PayPal interest.

Shares in Pinterest, the image sharing and social media service, have surged by over 10% after Bloomberg reported that PayPal was exploring a possible takeover bid.

They say:

PayPal Holdings Inc. is exploring an acquisition of social media company Pinterest Inc., people with knowledge of the matter said, Bloomberg News reports.

San Jose, California-based PayPal has recently approached Pinterest about a potential deal, the people said, asking not to be identified because the talks are private.

BREAKING: PayPal is exploring an acquisition of Pinterest, sources say https://t.co/hMF3a4a9r7 pic.twitter.com/9G6KEGE3bL

— Bloomberg (@business) October 20, 2021

Pinterest shares jumped on the news, triggering a circuit breaker https://t.co/CyxeYMcP7D pic.twitter.com/4eMgmydH30

— Bloomberg (@business) October 20, 2021

Pinterest shares soar after report says PayPal is exploring a takeover of the company with a price of about $70 per share discussed between the two firms https://t.co/AZLXh8kOUl pic.twitter.com/TA3ua6qYDM

— CNBC Now (@CNBCnow) October 20, 2021

Hindenburg launches $1m bounty for Tether info

Short-seller Hindenburg Research has launched a $1m “bounty” programme for information on Tether, the company at the centre of the global cryptocurrency market.

Hindenburg is seeking more detail on the reserves which back Tether, which has issued around $70bn of stablecoins which underpin the crypto market.

“We feel strongly that Tether should fully and thoroughly disclose its holdings to the public,” said Hindenburg’s founder Nathan Anderson.

“In the absence of that disclosure, we are offering a $1m bounty to anyone who can provide us exclusive detail on Tether’s supposed reserves.

Stablecoins are a bridge between cryptocurrencies and traditional financial assets, making it easier for traders to buy and sell crypto.

One tether is equivalent to $1, with Tether insisting for years that it held equivalent fiat assets to back the billions of tethers it was creating.

But in May, it revealed that much of its reserves were actually in commercial paper - short-term debt issued by companies.

Since the claims that garnered it “stablecoin” status were made, Tether subsequently revealed that its coin was backed only by a small percentage of traditional currency, and that much of its backing consists of holdings in commercial paper issued by unnamed counterparties.

— Hindenburg Research (@HindenburgRes) October 19, 2021

Despite multiple regulatory sanctions over its alleged lack of truthful disclosure about its reserves, and despite Tether now having a $70 billion market cap, Tether still refuses to provide transparency to the public on its holdings.

— Hindenburg Research (@HindenburgRes) October 19, 2021

Last Friday, Tether agreed to pay a $41m penalty to resolve a US regulator’s claims that it had falsely said its digital tokens were fully backed by dollars.

The Commodity Futures Trading Commission said Tether had made untrue or misleading statements and omissions of material fact, and that its Tether was not “fully-backed” by dollars for the majority of the time between June 1, 2016 and February 25, 2019.

Today, Tether has hit back at Hindenburg’s move, calling it a “pathetic bid for attention” (but not releasing any more details on their reserves):

This is not the first time Hindenburg Research has orchestrated an apparent scheme in pursuit of profit. Nor will it be the last. Tether abhors and denounces their actions and transparent motives.

Tether responds to cynical bounty -- Hindenburg Research’s announcement is a pathetic bid for attention ⬇️ https://t.co/PolZFCXK9J

— Tether (@Tether_to) October 20, 2021

The International Monetary Fund doesn’t believe Europe will be dragged into an inflation spiral, despite prices rising at the fastest rate in 13 years last month.

IMF European Department Director Alfred Kammer told a news briefing that the surge in energy costs should fade in 2022, Reuters reports.

“We don’t at this stage, expect any inflation spiral in Europe.

The high inflation which we are seeing right now is really driven by ... an increase in energy prices, and we expect that to fade out during 2022.”

Krammer added that labour market slack means inflation is unlikely to push up wages:

“Generally, the underlying inflationary momentum in the euro area is just not there,” he added.

Reuters: Europe won’t see inflation spiral as energy price spikes fade-IMF Europe chief

Samuel Indyk, senior analyst at uk.Investing.com, agrees that the launch of the first Bitcoin ETF this week has driven its price higher... but that doesn’t mean it will keep rising.....

”Bitcoin hit an all-time high on Wednesday, a day after the launch of the first ETF based on the world’s largest cryptocurrency. The ProShares Bitcoin Strategy ETF launched with a lot of fanfare and the recent run-up in price can be mostly attributed to expectations that a new method of investing in cryptocurrencies would give more investors exposure to Bitcoin and other digital assets.

A close above the all-time high could lead to further gains with the big round number of $70,000 the next port of call. With Bitcoin now trading at an all-time high and with no previous resistance levels above here, the path of least resistance is likely to be upwards for the time being and $100,000 should not be ruled out by year-end.

“On the other hand, as has been the case previously when major events occur in the cryptocurrency space, a correction could also be on the cards. For example, when the Bitcoin Futures contract launched on the CME in 2017, a bear market occurred shortly after, and it took almost three years for the price to recover. Similar price action was observed this year with the Coinbase IPO marking the previous Bitcoin peak.

“Those who expect higher prices in the coming months will be hoping that the launch of the first Bitcoin Futures ETF won’t see history repeating itself.

Bitcoin’s surge to a fresh record high comes despite warnings from UK regulators about the dangers of crypto.

The UK’s financial watchdog is worried that social media hype and the gambling-like thrill of competing to get rich quick are driving younger investors to turn to cryptocurrencies, foreign exchange trading and other high-risk products.

The Financial Conduct Authority said it was seeing more people chasing high returns and was concerned that many new investors were increasingly putting money into high-risk investments which may not be right for them.

It has launched an £11m campaign targeting inexperienced investors to help them understand the risks they are running.

And last week, Bank of England deputy governor Sir Jon Cunliffe warned that digital currencies such as bitcoin could trigger a financial meltdown unless governments step forward with tough regulations.

Likening the growth of cryptocurrencies to the spiralling value of US sub-prime mortgages before the 2008 financial crash, Cunliffe said there was danger that speculation could lead to a new crisis.

Charity Age UK warns more pensioners will face fuel poverty as energy prices soar

Though the state pension is set to rise in line with inflation, some pensioners may be disappointed – as they could be missing out on a wage increase of 8% because of the temporary suspension of the triple-lock.

Pensioner in Iceland
A pensioner shopping in Blackheath, west midlands. Photograph: PetaPix/Alamy

With many elderly people heavily reliant on their state pension, and disproportionately affected by high heating costs, this confirmed figure is a worry for many. Age UK has said it is “imperative” to revert back to the triple-lock to tackle pensioner poverty.

Caroline Abrahams, charity director at Age UK, said:

Even taking into account the expected 3.1% increase following today’s inflation figures, the state pension is hardly a fortune, paying less than £9,000 a year on average and leaving about a quarter of pensioners reliant on means-tested benefits to top it up.

With surging household bills on the cards, many older people – including the two million currently living in poverty – will be feeling extremely anxious about how they’ll be able to afford to stay warm and well this winter. More than a million older households are already living in fuel poverty and rocketing energy prices are likely to push thousands more into trouble over the next few months.

The one year suspension of the triple lock, plus the ending of the universal credit uplift, means that areas with significant numbers of people of all ages living on low incomes will take a financial hit in the next few months. In these places it certainly won’t feel like there is much ‘levelling up’ going on.

There may have been good reason to suspend the triple lock for a year, given how exceptional its impact would have been as a result of the pandemic, but for the sake of millions of older people, as well as the local economies where pensioner poverty is concentrated, it is imperative that it reverts back to normal once the year is up.

Updated

Bitcoin hits new all-time high

Bitcoin has hit a fresh record high.

The cryptocurrency just hit $66,000 for the first time ever, bursting over the previous record high of almost $65,000 back in April.

🎉 #Bitcoin rises to a record high of $65,124 pic.twitter.com/9ZcNd9tZtt

— PiQ (@PriapusIQ) October 20, 2021

Bitcoin has rallied sharply in recent weeks, since tumbling to $30,000 back in July.

The rally comes after the first US bitcoin exchange traded fund began trading on Wall Street -- a move which could pull new money into the digital asset market.

The price of bitcoin
The price of bitcoin Photograph: Refinitiv

The ProShares Bitcoin Strategy ETF launched on the New York Stock Exchange on Tuesday. It gives investors exposure to bitcoin without having to buy the crypto asset itself, and will test whether Wall Street will treat cryptocurrencies as a serious asset alongside shares and bonds.

Bullish comments from billionaire investor Paul Tudor Jones, who told CNBC that bitcoin offered better protection against inflation than gold, also provided a lift.

Jones told CNBC’s “Squawk Box” on Wednesday:

“Bitcoin would be a great hedge. Crypto would be a great hedge,”

“There’s a plan in place for crypto and clearly it’s winning the race against gold at the moment ... I would think that would also be in very good inflation hedge. It would be my preferred one over gold at the moment.”

Bitcoin jumps to new record high above $65,000 after landmark U.S. ETF launch https://t.co/Sy3w1A3f3l

— CNBC (@CNBC) October 20, 2021

Mind you, the FT’s Robert Armstrong has criticised bitcoin ETFs, arguing they are an expensive way of getting exposure to crypto compared to simply buying it.

Bitcoin is not at all like standard financial products. It is supported by highly complex technology, the source of its value is fundamentally open for debate, and by far its most common current use is as a vehicle for the purest speculation.

If you can’t be bothered to learn the unique subtleties involved in owning this stuff, you can’t possibly understand the risks, and so you should not own it at all. Bitcoin ETFs should not exist.

Stocks have opened cautiously on Wall Street, with the Dow Jones industrial average rising 35 points or 0.1% to 35,492 points.

But Netflix shares dipped by 2.5%, despite the huge success of Squid Game. The streaming giant reported last night that 142m households have watched its dystopian thriller (for at least two minutes), its biggest hit ever.

Netflix also added 4.4 million subscribers in the last three months, comfortably beating Wall Street expectations, and that it expected the next quarter to be even better as more content comes online after a pandemic-related lull.

Fiona Cincotta, senior financial markets Analyst at City Index, says:

Netflix opened lower despite beating subscriber numbers and on earnings.

Thanks to the draw of “Squid Games” subscribers topped 4.4 million and earnings per share (EPS) came in at $3.19 ahead of $2.56 forecast.

However, EPS for the current quarter was $0.80 below forecasts and 32% lower YoY.

What Netflix wants you to think everyone is watching on Netflix versus what everyone is really watching on Netflix and how Netflix can control the narrative by selectively releasing data. https://t.co/AgMGXNaOpY

— Jim Waterson (@jimwaterson) October 20, 2021

Updated

UK manufacturers plead for more state funds to boost sector

Five of the UK’s leading manufacturing industries have issued a plea for more government financial support to boost capital investment in research and development as well as new factories and equipment with lower carbon emissions.

Carmakers, aerospace, chemicals, pharmaceuticals and food and drinks manufacturers banded together on Wednesday to call for a long-term strategy for industry as the chancellor, Rishi Sunak, prepares for the budget next week.

Cutting industrial carbon output will be crucial to meeting the government’s legally mandated target of net zero emissions by 2050, and the manufacturers argue that they need government incentives to spend on decarbonisation.

The lobby groups said UK manufacturers needed help with energy costs, which can be as much as 80% higher than in some European countries. The UK is in the midst of an energy supply crisis, with high prices hitting manufacturers’ ability to make up for earnings lost during the pandemic.

Kevin Craven, the chief executive of ADS, the aerospace and defence group, said:

“Manufacturing is essential to achieving net zero, ensuring our national economic resilience and providing rewarding careers.”

Here’s the full story:

SpaceX could make Elon Musk world’s first trillionaire, says Morgan Stanley

SpaceX’s SN15 and SN16 starships in Boca Chica, Texas, this month.
SpaceX’s SN15 and SN16 starships in Boca Chica, Texas, this month. Photograph: Reginald Mathalone/NurPhoto/REX/Shutterstock

Elon Musk, the world’s richest person, with an estimated $241bn fortune, could become the first trillionaire, an investment bank has predicted.

Analysts at Morgan Stanley forecast that Musk, who has made most of his wealth from the electric car company Tesla, could make much more money from his fledgling space exploration business SpaceX.

The analyst Adam Jones said the company, founded in 2002, was “challenging any preconceived notion of what was possible and the timeframe possible, in terms of rockets, launch vehicles and supporting infrastructure”.

He added:

“More than one client has told us if Elon Musk were to become the first trillionaire ... it won’t be because of Tesla. Others have said SpaceX may eventually be the most highly valued company in the world – in any industry.”

Motoring groups have weighed in, warning petrol retailers not to sting motorists with higher fuel prices.

Following the PRA’s warning that petrol and diesel are approaching record levels, RAC fuel spokesman Simon Williams said retailers are taking a ‘bigger cut’ on petrol (via Sky News):

“The bioethanol component of unleaded has increased from 5% to 10% with the introduction of E10 in September and unfortunately that costs even more than petrol on the wholesale market.

“Retailers are also taking a bigger cut on petrol than they normally do at around 8p a litre which is a further blow to drivers, particularly as VAT is charged at 20% on top of this and the other increases.”

“We strongly urge retailers not to contribute further to the pump price rise”.

An AA fuel spokesman echoed the sentiment, adding:

“Someone in the fuel trade, whether retailer or supplier, is pumping up the cost of petrol and talking up the price to hide the extra profit.”

Petrol retailers have been accused of "taking a bigger cut" by a motoring group after warning that record pump prices are expected within days https://t.co/ZmiY3UR6kx

— Sky News Business (@SkyNewsBiz) October 20, 2021

The surge in petrol and diesel prices could spur drivers towards electric cars.

The government’s net zero strategy, released on Tuesday, showed that car manufacturers in the UK will be mandated to produce a growing proportion of zero-emission vehicles each year, to push the transition from fossil fuels to electric cars.

Targets will be introduced from 2024 for zero-emission vehicle sales, before the 2030 deadline when the sale of new petrol and diesel cars and vans will be banned.

Environmental campaigners welcomed the move, while manufacturers gave a guarded response ahead of the detail of the scheme being announced. The exact targets and mechanisms will be set out for consultation in spring next year.

But as we covered yesterday, the Treasury says the UK will need new taxes or reduced public spending to cover the move to net zero.

The move to electric cars will erode revenues from fuel duty and vehicle excise duty, so new levies - such as road tax, potentially - could be needed to fill the gap.

Why September’s dip in UK inflation may be a false dawn

Diners in Gerrard Street, Chinatown, during the Eat Out to Help Out scheme in August 2020
Diners in Gerrard Street, Chinatown, during the Eat Out to Help Out scheme in August 2020 Photograph: James Veysey/Shutterstock

The dip in UK inflation to 3.1% in September is unlikely to last, my colleague Phillip Inman writes:

Anyone concerned about rising prices could be forgiven for thinking that the momentum building in recent months had slipped a gear and forecasts of inflation running away to 4% or even 5% next spring could joyfully be put in the bin.

Not so fast. The coronavirus pandemic has wreaked havoc on most official data and the inflation figures are among the worst affected.

Lockdowns that closed most shops and government subsidies that propped up household spending power are among the many distorting effects of Covid-19 affecting prices.

The chancellor’s £850m eat out to help out scheme that offered 50% off meals up to £10 in August last year to lure consumers back to the high street is the latest to send the figures in an unexpected direction.

Rishi Sunak’s handout for bars and restaurants, which many health experts believe was a super-spreader event that contributed to the surge in the virus last autumn, was not only financially costly, it also allowed for a reduction in prices in August.

Subsequent price increases in September 2020 meant the cost of eating out increased at a slower rate relative to the same month this year....

More here:

Raw material squeeze drive up cost of paint

Cans of Dulux paint, an Akzo Nobel brand, are seen on the shelves of a hardware store near Manchester, Britain.

Rising petrochemical prices are also pushing up the cost of paint.

Dutch paints and coatings maker AkzoNobel warned this morning that “significant raw material cost inflation and supply constraints” are expected to continue until the middle of next year.

The Dulux-maker said raw material inflation continued to intensify in the third quarter of the year. Its raw material and other variable costs increased by €278m compared with Q3 2020.

In response, the decorative and industrial paint maker, which took over ICI back in 2007, hiked its prices by 9% in July-September compared with the previous year.

But operating income dropped (to €226m from €326m in in 2020), as higher prices were “more than offset” by the impact of higher costs and lower sales volumes.

Thierry Vanlancker, chief executive of AkzoNobel, said that the cost pressures and supply shortages were widespread across many inputs including petrochemicals, additives and metal packaging.

He told the Financial Times:

“It’s probably easier to say where we don’t feel the pressure. It’s very much across the board.

We do believe this situation is going to be with us for most of the first half of 2022.”

Updated

Petrol retailers warn of record prices at the pumps within days

A petrol station in East London, on Saturday.

UK petrol retailers have warned that prices at the pumps could hit record levels by the end of the month, adding to the cost of living squeeze.

Brian Madderson, chairman of the Petrol Retailers Association, says that the previous records are “almost certain to be eclipsed before the end of October”.

Back in April 2012, petrol hit a record high of 142p per litre while diesel reached 148p per litre.

Prices are nearing that level, the PRA warns, with Experian Catalist UK averages hitting 141.35p per litre for petrol yesterday, and 144.84p per litre for diesel.

Madderson says this increase is being driven by higher oil prices. Brent crude hit a three-year high over $85 per barrel last week, up from around $51 at the start of the year.

The primary reason is the rise and rise of crude oil costs which recently hit $85 per barrel for Brent Crude.

This involves more than a 50% increase since January 2021 and has been caused by a cutback in production from OPEC countries and Russia at the same time as the global economies are staging a rapid economic turnround from the global pandemic. There is no immediate sign of a change to this position and some analysts have talked about further oil price rises to $100/barrel by Christmas.

The Opec+ group slashed production last year, and is sticking to its policy of gradually increasing production by 400,000 barrels per month - despite the White House urging them to pump faster.

Madderson adds that motorists haven’t seen the full impact of rising oil prices:

Current average pump prices across the UK are being softened by some of the largest retailers who typically benefit from a 3 or even 4-week lag to their delivered fuel prices.

Last week, AA data showed that petrol had hit 140p for the highest since the record levels in 2012 (on a nominal basis, not adjusted for inflation).

The PRA also flags that the petrochemical industry is buying up more distillates that would otherwise be used for petrol. Heating oil - which is in higher demand following the surge in gas prices - comes from the same part of the barrel as diesel.

The PRA, which represents independent fuel retailers, says:

S&P Global Platts advised PRA, “Physical spot market activity has seen Gasoline and diesel rise in tandem with the wider energy complex, and this has a knock-on effect, boosting retail prices for road and heating fuels.

Lower stock levels in Northwest Europe are tightening supply and this is accompanied by stronger demand for gasoline in the US, which is an export outlet for the European gasoline market. There’s also stronger demand in the petrochemical sector, which is attracting certain components that would be otherwise destined to gasoline blending.

The picture for diesel is not dissimilar, with limited refinery output coupled with stronger demand across Europe and a boost of demand from the heating fuels lifting values across the entire gasoil complex”.

Updated

Weidmann to leave Bundesbank, with one last inflation warning

Central bank news: Bundesbank President Jens Weidmann -- one of the sternest critics of the European Central Bank’s ultra-loose monetary policy -- is stepping down.

Weidmann will leave Germany’s central bank at the end of the year for personal reasons, which will remove one of the hawkish voices at the ECB.

During his time on the ECB’s Governing Council, Weidmann often clashed with more dovish policymakers over the stimulus measures, and record low interest rates, introduced during the eurozone crisis.

Weidmann issued a new warning about inflation risks in his farewell message, telling Bundesbank staff that:

It will be crucial not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either.”

#Bundesbankpräsident Jens #Weidmann legt sein Amt zum Jahresende aus persönlichen Gründen nieder. Näheres in unserer Pressenotiz: https://t.co/PxHhhc4vPZ#Bundesbank pic.twitter.com/yrvweXYmYZ

— Deutsche Bundesbank (@bundesbank) October 20, 2021

Carsten Brzeski, ING’s Global Head of Macro, says Weidmann’s departure comes at a crucial time for the ECB.

The camp of the hawks is losing an important voice, at a time that increasing inflationary pressure seems to have fueled a more balanced inflation assessment than in the summer.

Even if board member Philip Lane yesterday reiterated that the ECB’s forward guidance currently did not really justify financial markets’ speculation about future rate hikes, higher inflation (prospects), herd immunity and an economy returning to pre-crisis levels before the end of the year are creating a strong argument to withdraw the ECB’s emergency stimulus and start reducing asset purchases.

Maybe the decision to do the latter will be Weidmann’s last success as Bundesbank president at the ECB’s December meeting.”

UK house prices jump 10.6%

House price inflation has picked up again, as prices continued to rise despite the tapering of the stamp duty holiday this summer.

The average UK house prices jumped by 10.6% in the year to August, the ONS reports, up from 8.5% in July.

That lifted the average house price to £264,000 in August 2021, £25,000 higher than a year earlier.

UK house price inflation
UK house price inflation Photograph: ONS

Average house prices increased over the year in England to £281,000 (9.8%), in Wales to £195,000 (12.5%), in Scotland to £181,000 (16.9%) and in Northern Ireland to £153,000 (9.0%).

The stamp duty holiday ended in Wales at the end of June, and finished in Scotland back in March. It was halved in England in Wales at the start of July, and ended last month.

Within England, the North East saw the highest annual house price growth -- up 13.3% -- while London lagged with just 7.5% growth, as the ‘race-for-space’ continues to drive people towards larger properties in more rural areas.

UK house price inflation
UK house price inflation Photograph: ONS

Jamie Durham, economist at PwC, says the housing market has “clearly remained strong”.

“Looking ahead, we expect that house price growth will remain relatively buoyant, but likely at a slightly lower rate than we have seen over the last few months as a result of conditions normalising post-COVID-19 and weakening consumer confidence driven by inflation and ongoing stock issues.

It is unlikely that there will be a significant decline in the rate of growth, however, as the underlying factors driving up the market should continue.

A store of luxury brand Burberry at a shopping mall in Beijing.
A store of luxury brand Burberry at a shopping mall in Beijing. Photograph: Tingshu Wang/Reuters

In the world of luxury, Burberry has appointed Jonathan Akeroyd as its next chief executive in a deal including a £6m “golden hello” to cover the loss of bonus and share awards for leaving his position as boss of rival Versace.

The 54-year-old has been the boss of Versace since 2016, overseeing the $2.1bn sale of the business to Michael Kors three years ago. Burberry’s outgoing chief executive, Marco Gobbetti, is due to leave Britain’s biggest high fashion brand to take the top job at luxury Italian group Salvatore Ferragamo at the end of the year.

Akeroyd, who previously spent 12 years at Alexander McQueen leading the brand through the aftermath of the death of its eponymous founder, will join Burberry on 1 April next year. The British national previously also held a number of senior fashion roles at London’s luxury department store Harrods.

Akeroyd saud:

“I have long admired Burberry’s position as the most iconic British luxury brand and I have a deep affection for its storied heritage. I am looking forward to returning to London where I first built my career with ambitious plans for the future.”

Inflation is rising even faster in the eurozone than in the UK.

Consumer prices in the single currency bloc rose by 3.4% in September, up from 3% in August, statistics body Eurostat reports.

That’s the highest reading since 2008, and further above the European Central Bank’s 2% target.

Energy prices pushed up the cost of living, rising by over 17% year-on-year, while industrial goods prices jumped 2.1%, and food, alcohol and tobacco were up 2%.

Euro area annual #inflation up to 3.4% in September https://t.co/2zJMYr7ajA pic.twitter.com/73qLBr1Nqb

— EU_Eurostat (@EU_Eurostat) October 20, 2021

The lowest annual rates were registered in Malta (0.7%), Portugal (1.3%) and Greece (1.9%). The highest annual rates were recorded in Estonia, Lithuania (both 6.4%) and Poland (5.6%).

Eurozone's CPI rises by +3.4% YoY in September, from previous +3.0%. An increase which could force ECB to tighten monetary policy stance sooner than expected, despite Lagarde's attempt to convince markets that inflation is 'transitory'@graemewearden

— BP PRIME UK (@bpprimeuk) October 20, 2021

Updated

In other news, Deliveroo has continued to grow its sales, even though lockdown restrictions were eased earlier this year.

Deliveroo posted a 59% increase in orders in the UK and Ireland between July and September despite the return of dine-in restaurant eating, as a partnership with Amazon more than doubled members of its premium subscription service.

The food delivery platform, which has performed strongly during the coronavirus pandemic, with customers often under lockdown restrictions, reported 35.8m orders in the third quarter compared with 22.6m in the same period last year. More here.

Sarah Pennells, consumer finance specialist at insurance company Royal London, fears pensions won’t keep pace with inflation in 2022, given the jump in energy costs.

“The dip in the inflation rate could be bad news for pensioners, who will see their state pension uprated by 3.1% in April, now that the triple lock has been suspended.

There’s seems to be a divide at the Bank of England about where inflation is headed next, with warnings of inflation hitting – or nearing - 4% by the end of the year. Rising energy costs will add to the concern that price rises will outstrip the increase pensioners see next year.”

The NIESR thinktank has predicted that inflation will peak over 4% next year (ahead of next April’s pensions increase).

NIESR says that short-term inflationary pressures, such as rising energy bills, supply chain disruption and labour shortages, will lift consumer prices higher in the coming months.

Janine Boshoff, Economist for Macroeconomic Modelling and Forecasting, says:

Our analysis suggests annual consumer price inflation will remain elevated in 2021 before peaking above 4 per cent in the first half of 2022, well above the Bank of England’s 2 per cent target in the short-term.”

🚨 OUT NOW: Our latest #NIESRCPI Tracker suggests that headline #inflation will peak above 4% in the first half of 2022 and that the Bank of England will consider a rate increase to prevent a wage & prices spiral from de-anchoring inflation expectations⚡️https://t.co/YJXQGPH0Ny

— National Institute of Economic and Social Research (@NIESRorg) October 20, 2021

CMA fines Facebook £50m for breaching order over Giphy investigation

Just in: Britain’s competition watchdog has fined Facebook £50m for breaching an enforcement order over its investigation into the takeover of gif creation website Giphy.

In a stinging rebuke, the Competition and Markets Authority says the social media giant failed to comply with the ‘initial enforcement order (IEO) imposed in June 2020 when it began its investigation into its Giphy purchase.

The IEO is meant to ensure companies continue to run as separate businesses while a takeover is investigated, preventing them from integrating.

Facebook was required to provide regular updates showing it was complying with this IEO. But, the CMA says, Facebook “significantly limited the scope of those updates”, despite repeated warnings.

The CMA says this is the first time a company has breached an IEO by consciously refusing to report all the required information.

And given the multiple warnings it gave Facebook, the CMA considers that this failure to comply was deliberate.

As a result, the CMA has issued a fine of £50 million for this “major breach”, which the regulator says “fundamentally undermined its ability to prevent, monitor and put right any issues”.

The CMA has also fined Facebook £500,000 for changing its Chief Compliance Officer on two separate occasions without seeking consent first.

Facebook fined £50.5m by the CMA for failing to provide sufficient information during the watchdog's investigation into the takeover of Giphy. First fine of its kind due to Facebook "consciously refusing to report all the required information" after "multiple warnings".

— Simon Neville (@SimonNeville) October 20, 2021

Joel Bamford, senior director of mergers at the CMA, said the fine is “a warning to any company that thinks it is above the law.”

“Initial enforcement orders are a key part of the UK’s voluntary merger control regime. Companies are not required to seek CMA approval before they complete an acquisition but, if they decide to go ahead with a merger, we can stop the companies from integrating further if we think consumers might be affected and an investigation is needed.

“We warned Facebook that its refusal to provide us with important information was a breach of the order but, even after losing its appeal in two separate courts, Facebook continued to disregard its legal obligations.

“This should serve as a warning to any company that thinks it is above the law.”

We’ve fined Facebook £50.5m for breaching an order we imposed during our investigation into their purchase of Giphy.

This is the first time a company has breached an IEO by refusing to report information required after multiple warnings.

Read more: https://t.co/64SVu0zXsA pic.twitter.com/LOfbtUs6fS

— Competition & Markets Authority (@CMAgovUK) October 20, 2021

Giphy supplies animated gifs to social networks such as Snapchat, TikTok and Twitter.

In August, the CMA said Facebook could be forced to sell Giphy after an investigation found its takeover could harm competition among social media companies and the digital advertising market.

Facebook, which owns Instagram and WhatsApp, has denied that owning Giphy will hurt competition.

Updated

Tom Selby, head of retirement policy at AJ Bell, says that suspending the pensions triple lock will save the government around £4.5bn.

But the decision not to lift pensions in line with earnings will cost pensioners up to £9.35 per week, he points out -- a loss of £486.20 per year for those on the new state pension.

Today's CPI inflation figure should confirm next year's state pension increases. Basic state pension set to rise by £4.25 per week to £141.85 per week; flat-rate to increase by £5.55 per week to £185.15 (assuming rounded to nearest 5p). BUT...

— Tom Selby (@thomasselby) October 20, 2021

...had Government used average earnings increase for 3 months to July (8.3%) the flat-rate state pension could have risen to £194.50 per week. So ditching triple-lock could 'cost' someone in receipt of full flat-rate £9.35 a week, or £486.20 over the course of the year...

— Tom Selby (@thomasselby) October 20, 2021

...OBR reckons each 1 percentage point increase in the value of the state pension costs the Exchequer roughly £900 million, meaning the Treasury should save around £4.5 billion as a result.

— Tom Selby (@thomasselby) October 20, 2021

Financial journalist Paul Lewis points out that other welfare payments will also rise in line with September’s inflation reading:

Good news for Chancellor as CPI inflation 12 months to September has fallen a fraction to 3.1% from 3.2% in August. So benefit and state pension increases from April 2022 not quite as bad as 3.3% DWP feared.

— Paul Lewis (@paullewismoney) October 20, 2021

On that CPI rise of 3.1% to September old state pension will rise £4.25 a week to £141.85. New state pension up £5.55 to £181.15. Child Benefit up 65p for first child to £21.80 a week and 45p up to £14.45 a week for each other child.

— Paul Lewis (@paullewismoney) October 20, 2021

On that CPI rise of 3.1% to September Carer's Allowance up £2.10 to £69.70 a week; DLA/PIP highest up £2.80 to £92.40. Universal credit £10.07 a month (after losing £86.67 from this month) 25+ and up £7.98 a mnth <25.

— Paul Lewis (@paullewismoney) October 20, 2021

All these amounts are unofficial estimates of mine using the existing rules and 3.1% CPI for September announced this morning. Chancellor may confirm some in Budget on 27th, full official list will follow after that from DWP.

— Paul Lewis (@paullewismoney) October 20, 2021

Although the 3.1% CPI for September is used for next April's benefits uprating, Bank of England predicts inflation will exceed 4% by end of this year.

— Paul Lewis (@paullewismoney) October 20, 2021

Small dip in UK #CPI from 3.2% to 3.1% in September is good news and probably a relief to the BoE (and the Chancellor, as this is the month that counts for uprating the state pension). But doesn't change the big picture: inflation still likely to be well above 4% by year end.

— Julian Jessop (@julianHjessop) October 20, 2021

Pensions set to rise 3.1% after inflation dips in September

UK state pensions are set to rise by 3.1% next April, in line with September’s rise in inflation.

With the pensions triple-lock temporarily downgraded to a double-lock, pensioners are on track to see an increase in line with rising prices.

That would lift the new state pension from £179.60 per week to £185.16, while those on the basic state pension would see an increase from £137.60 per week to 141.86.

The triple lock aimed to increase the state pension in line with the highest of 2.5%, CPI inflation and earnings. However, the earnings component was suspended this year, after wage growth surged over 8% as workers came off furlough earlier this year.

Work and pensions secretary Thérèse Coffey told the House of Commons last month the state pension would increase either by 2.5% or inflation, whichever is higher, in April.

James Jones-Tinsley, self-invested pensions technical specialist at Barnett Waddingham, explains:

“In September, the Government changed the ‘triple lock’ to a ‘double lock’ for one year only, meaning pensioners wouldn’t benefit from an anomalous wage increase of 8% - a result which would have been unpopular amongst both the under 55s and the Treasury. Instead, their pensions would increase by the higher of either 2.5% or this month’s inflation figure.

In good news for many pensioners, at 3.1% this will still be the second highest increase in a decade.

Those on a full new state pension will see their payments rise from £179.60 a week (£9,339 a year) to £185.17 (£9,629 a year).

But will that protect pensions from the impact of soaring energy costs, with fears that supply chain shortages will push up food prices in the shops?

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, says a 3.1% increase will be “cold comfort to pensioners bracing themselves for soaring energy bills this winter”.

While many pensioners have other sources of income to fall back on the state pension still forms the backbone of many peoples’ retirements and too many are wholly reliant upon it.

In addition, not everyone receives the full amount with recent Hargreaves Lansdown analysis showing more than 2m pensioners get less than £100 per week in state pension. While working households will also need to prepare for rising bills pensioners will be particularly vulnerable to these increases.”

Difficult inflation figures for pensioners. Today's 3.1% will guide the 2022 rise in state pension, but it doesn't reflect recent rises in energy prices, and underplays recent rises in food prices. Both will hit pensioners hard. Tough times ahead for pensioners.

— Alistair McQueen (@HelloMcQueen) October 20, 2021

This chart shows how the triple lock has lifted pensions each year since it was introduced.

Triple-lock changes since it was introduced
Triple-lock changes since it was introduced Photograph: Hargreaves Lansdown

Updated

Business secretary Kwasi Kwarteng said he is confident that inflation will be contained.

Kwarteng has urged calm on inflation fears, saying he is confident the Bank of England will be able to curb the rising cost of living.

“I think it’s a real cause of some concern because, clearly, we want inflation rates to be lower,” he told BBC TV in an interview this morning.

It was put to Kwarteng on BBC Breakfast that the Bank of England was talking about inflation reaching 4%.

The business secretary said:

I read all sorts of things ... those are private conversations. I read lots of analysis from city economists and there’s a debate at the moment as to how long this inflation will last. I’m confident that it’ll be contained, but we’ll have to wait and see.

Andrew Bailey said on Sunday the Bank of England “will have to act” over the soaring inflation, suggesting an increase in UK interest rates could come soon.

The Bank’s rate-setting Monetary Policy Committee (MPC) is due to meet on 4 November.

Bailey said in a speech last month the price pressures are likely to be “transient” and global supply chains will eventually repair themselves, but a lot of this remains in the balance. With the UK recovery weakening, “these are truly hard yards”, he added.

Kwarteng earlier told Times Radio that a Covid lockdown would be completely wrong right now as Britain is learning to live with the virus.

Updated

Economists: inflation dip just a temporary respite

Economists are warning that September’s dip in inflation will be temporary.

As well as supply chain disruption driving up costs, households have just been hit by the rise in the energy price cap this month.

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, says:

“Inflation stabilised in September, as policy-related distortions such as last year’s ‘Eat Out to Help Out’ scheme dropped out of the calculation.

Nevertheless, energy price effects and ongoing supply-chain disruptions could see inflation peak comfortably above 4% early next year.

Melanie Baker, senior economist at Royal London Asset Management agrees there is more inflation heading our way:

“UK inflation remains elevated and although we may not have seen another big jump in the CPI measure of inflation in September, there is more to come. Energy bills are among factors set to help push consumer price inflation further above the Bank of England’s target in the near term.

“Though some consumers will have benefited from higher pay growth, higher inflation is set to reduce real income growth for many and will add to some of the challenges facing the economy into 2022.”

Paul Dales of Capital Economics predicts inflation could hit 5% next April, when Ofgem is likely to hike the energy price cap again.

However, this feels a bit like the lull before the storm as the 12% rise in utility prices on 1st October will probably lift CPI inflation to around 3.8% in October. And we think inflation could then climb to around 5.0% in April next year due to a further rise in utility prices and the upward influence from global/domestic product shortages. With underlying wage growth and inflation expectations rising, the BoE is concerned that higher inflation will become embedded in the system. That’s why it become much keener to raise interest rates.

But higher inflation will also weaken the outlook for activity by reducing real incomes. And as base effects drop out of the annual rate next year and supply shortages ease, we think inflation will fall close to 2% by the end of next year. That why we don’t share the markets’ view that interest rates will be raised as far as 1.00% by the end of next year.

UK Economics Outlook Q4: The UK economy is experiencing a taste of stagflation. This won’t be anywhere near as severe or as persistent as in the 1970s. https://t.co/wlePQD7trF pic.twitter.com/Am0jFU11tu

— Capital Economics UK (@CapEconUK) October 19, 2021

Updated

Inflationary pressures rise at UK companies

The cost of goods and services producer by UK companies continued to rise last month, as the supply chain crisis hit industry.

Output price inflation jumped to 6.7% per year in September, from 6% in August, as producers hiked their prices in response to surging costs.

That’s a signal that inflationary pressures are building in the economy, as companies pass on costs to consumers.

Companies reported that input prices jumped by 11.4% year-on-year in September. Manufacturers were hit by the jump in commodity costs, while transport costs surged due to the lack of lorry drivers and shipping problems.

UK producer price inflatiom

Mike Hardie, head of prices at the ONS, explains:

“The costs of goods produced by factories rose again, with metals and machinery showing a notable price rise.

Road freight costs for UK businesses also continued to rise across the summer.”

Suren Thiru, head of economics at the British Chambers of Commerce, tweets:

Inflationary pressures in supply chains continue to rise:

➡️Input prices growth stood at 11.4% on the year to September, up from 11.2% in August.

➡️Rate of output inflation for goods leaving the factory gate at 6.7% on the year to September (up from 6.0% in August). pic.twitter.com/P22BSnOhHE

— Suren Thiru (@Suren_Thiru) October 20, 2021

@ONS data shows UK CPI #inflation eased slightly to 3.1% in September, from 3.2% in August.

Slowdown mostly due to strong base effects caused by dining out costing less last month in comparison with Sept-20, when prices rose following the end of the Eat Out to Help Out scheme. pic.twitter.com/wcbKwlSIER

— Suren Thiru (@Suren_Thiru) October 20, 2021

Updated

UK inflation data

Second-hand car prices have continued to surge.

They rose by 2.9% in September, which means they’ve jumped by 21.8% since April, when pandemic restrictions were eased.

Second-hand cars
Second-hand cars Photograph: ONS

The global semiconductor shortages has hit production of new cars, meaning some drivers have bought used models instead. Some people have also been avoiding public transport due to Covid-19.

The ONS says supplies of second-hand cars coming onto the market have also hit roadblocks:

These include fewer one-year-old cars coming to the market because of a fall in new car registrations last year, and the extensions of lease contracts and fewer part exchanges caused again by delays in new-car supply.

Petrol prices at eight-year high

Petrol prices hit an eight-year high last month, the inflation report shows:

Average petrol prices hit 134.9p per litre in September 2021, compared with 113.3p per litre a year earlier, when parts of the UK were in local lockdowns.

That’s the highest price since September 2013.

The ONS explains:

In comparison, for most of September 2020, some areas of the UK were in a period of relaxed movement restrictions, and petrol prices were therefore recovering after a period of reduced demand.

There may be more pain ahead for motorists -- as petrol hit 140p per litre earlier this month.

Introduction: UK inflation dips, but transport costs rise

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

UK inflation has dipped slightly, but remains well over the Bank of England’s target.

The consumer prices index rose by 3.1% in the year to September, new figures from the Office for National Statistics this morning show.

Thats’s down from 3.2% in August, when inflation hit the highest rate in nine years.

UK inflation data

But, that dip is mainly due to the impact of last summer’s Eat Out to Help Out scheme -- as prices rose in September 2020 as the scheme wrapped up. So it’s probably only a temporary respite.

Many other prices have risen over the last year, as the cost of living squeeze has hit households.

As this chart shows, transport, food, and household goods and services all pushed up inflation over the last year.

UK inflation report September 2021

Mike Hardie, head of prices at the ONS, explains:

“Annual inflation fell back a little in September due to the unwinding effect of last year’s ‘Eat Out to Help Out,’ which was a factor in pushing up the rate in August.

“However, this was partially offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year.

Commenting on today’s inflation figures for September, ONS Head of Prices, Mike Hardie said: (1/3) ⬇️ pic.twitter.com/R2oKTeapOL

— Office for National Statistics (ONS) (@ONS) October 20, 2021

In September alone, prices rose by 0.3%, driven by price rises in clothing and footwear, housing and household services, recreation and culture, and furniture and household goods.

That follows August’s record jump in inflation from 2% to 3.2%, as the cost of living accelerated ahead of the Bank of England’s 2% target.

The Bank expects inflation to rise over 4% by early next year. And yesterday, MPs were warned that prices are rising at “terrifying” speed in the hospitality sector, with inflation running as high as 18%.

Ian Wright, chief executive of industry body the Food and Drink Federation, told MPs on the business, energy and industrial strategy committee:

“Inflation is a bigger scourge than almost anything else because it discriminates against the poor.”

More details and reaction to follow...

The agenda

  • 7am BST: UK consumer price inflation for September
  • 7am BST: UK producer prices report for September
  • 9.30am BST: UK house price index for August
  • 10am BST: Eurozone inflation report for August (final estimate)
  • 3.30pm BST: EIA weekly US oil inventory figures

Updated

Contributors

Graeme Wearden

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