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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

China’s credit outlook cut to negative; Rupert Soames named CBI president; trading outages in London – as it happened

Rupert Soames CBI China United Kingdom Moody United States LSE Inflation the London Stock Exchange Brian McBride
China’s national flag flutters at the headquarters of a commercial bank in Beijing
China’s national flag flutters at the headquarters of a commercial bank in Beijing Photograph: Kim Kyung Hoon/Reuters

Closing post

Time for a recap….

The outlook on China’s sovereign credit rating has been cut to negative today by rating agency Moody’s Investors Service.

Moody’s warned that Beijing would need to bail out local and regional governments and state-owned enterprises that were struggling with rising debts, hampering efforts to boost investment and growth.

China’s finance ministry said it was “disappointed” with Moody’s decision when the economy was on the mend. It said the agency’s concerns were “unnecessary” when the recovery “has been advancing steadily”.

Rupert Soames, the former chief executive of the outsourcing company Serco, has been named as the next president of the Confederation of British Industry, as the scandal-hit lobby group aims to rehabilitate its image following allegations of sexual misconduct.

Soames, the chair of Smith & Nephew, a London-listed medical tech group, will take up the role in the new year before being formally elected by CBI members at its next annual general meeting in June.

Trading in London today has been disrupted by technical problems that temporarily prevnted the buying and selling of small company shares.

Only stocks on the FTSE 100 and 250 indices, plus some overseas companies, were tradable during two different outages today, as the LSE battled to fix its latest technical problems.

In the energy industry, a Guardian investigation has shown that Sellafield, Europe’s most hazardous nuclear site, has a worsening leak from a huge silo of radioactive waste.

Ministers are facing calls for answers, after the Guardian revealed Sellafield had been hacked by groups linked to Russia and China.

In retail, UK households are expecting to spend an extra £105 this Christmas, as shrinkflation hits the size of festive chocolates, mince pies and cheese.

UK retailers are on course for a budget Christmas after shoppers cut back on the purchase of non-essential items in November to cope with rising food prices.

But in better news for households, grocery inflation has slowed:

UK car sales have risen again, with a 9.5% increase in registrations last month.

But sales of electric cars fell 17%, which analysts are attributing to a fall in Tesla sales.

Troubled Thames Water is likely to be called back to be questioned by MPs over concerns raised by its auditors that its parent company could run out of money by April.

In the US, job vacancies have fallen to the lowest since 2021, with 8.7m openings recorded.

Inflation across the OECD has hit a two-year low….just as bond prices rally as investors bet that interest rates have peaked….

Reports: Brussels proposes three-year delay to EV sales tariffs

The Financial Times are reporting that Brussels has proposed delaying the introduction of tariffs on electric vehicle sales between the UK and EU by three years.

They say:

The European Commission will on Wednesday approve the plan, officials familiar with its thinking told the Financial Times. The 27 member states must then agree, with the vast majority in favour.

This should please the automotive industry in the UK, and across Europe, which had been pushing for the tariffs to be delayed.

Under the Brexit trade agreement, from 1 January any electric vehicle exported from the EU to the UK or vice versa must be at least 45% made in either the EU or the UK or it will be subjected to a tariff.

Several manufacturers have called for the tariff to be suspended for three years to allow time for new battery factories and their associated supply chains to get up and running.

Bloomberg is also reporting that the European Commission is set to recommend delaying tariffs on electric vehicles traded with the UK by three years.

They explain:

France has long resisted a straightforward extension, preferring instead alternatives to mitigate the impact of the tariffs on the industry. Paris had signaled in recent weeks that it was open to finding a flexible solution.

Updated

In another worrying sign from the US economy, the the RealClearMarkets/TIPP Economic Optimism Index has dropped.

The index, which measures consumer sentiment, fell 10.1% in December to 40.0, and has now remained in negative territory for 28 consecutive months.

US job openings lowest since 2021

Newsflash: Job openings across the US economy have fallen, a sign that America’s labor market could be weakening.

The number of job openings decreased to 8.7 million on the last business day of October, the U.S. Bureau of Labor Statistics reported today.

That’s a drop of over 600,000 compared with the previous month, when there were around 9.3 million vacancies, and looks to be the lowest since 2021.

The BLS expains:

The job openings rate, at 5.3 percent, decreased by 0.3 percentage point over the month and 1.1 points over the year.

Over the month, job openings decreased in health care and social assistance (-236,000), finance and insurance (-168,000), and real estate and rental and leasing (-49,000). Job openings increased in information (+39,000).

There was little change in the number of workers quitting their jobs, or being laid off, the JOLTS report shows.

Updated

Saxo Bank's Outrageous Predictions for 2024

It’s that time of the year again when Saxo Bank makes eight strange predictions for the year ahead.

Saxo’s aim is to highlight the risk of unlikely but underappreciated events which would send shockwaves across the financial markets if they happened.

And they are…

  1. With oil at $150, Saudis buy Champions League franchise

  2. World hit by major health crisis as obesity drugs make people stop exercising

  3. US heralds the end of capitalism with tax-free government bonds

  4. Generative AI deepfake triggers a national security crisis

  5. Deficit countries form ‘Rome Club’ to negotiate trade terms

  6. Robert F. Kennedy Jr wins the 2024 US presidential election

  7. Japan’s ‘lucky 7%’ GDP growth rate forces BoJ to abandon yield curve control

  8. Luxury plunges as EU goes Robin Hood, introducing wealth tax

Saxo argues that the world has reached an inflection point, with “the familiar road of the last decade coming to an end”.

Saxo’s chief investment officer, Steen Jakobsen, says:

“The smooth road the world has travelled on since the Great Financial Crisis, with stable geopolitics, low inflation, and low interest rates, was disrupted during the pandemic years.”

Updated

Bonds rally as investors bet on rate cuts

Government bond prices are surging today, as investors bet that central banks will start to cut interest rates in 2024.

The yield, or interest rate, on UK two-year government bonds has touched its lowest since 21 November today, dropping below 4.5%.

Yields fall when price rise, which can be a sign that investors are anticipating lower interest rates in future.

The money markets are currently indicating that the Bank of England will make its first rate cut by May or June next year, from 5.25% to 5%, followed by at least two more quarter-point cuts by the end of 2024.

Eurozone government bonds are rallying today too, after European Central Bank board member Isabel Schnabel told Reuters that the “remarkable” fall in inflation means the ECB needn’t raise interst rates any more.

Inflation in the euro area is estimated to have dropped to just 2.4%% in November, nearer to the ECB’s 2% target.

CMA hears concerns over cloud computing sector

Britain’s competition watchdog has heard evidence that the UK’s cloud computing sector needs reform, as it investigates the £7.5bn market.

The Competition and Markets Authority has today published 17 responses to its inquiry, announced in October, into whether industry leaders Amazon and Microsoft, known as ‘hyperscale’ providers, are distorting competition.

Two former employees of UKCloud Ltd, a British cloud computing company, have told the CMA that their business went into compulsory liquidation last year, with the loss of 180 jobs, costing taxpayers £20m.

They say:

Several factors contributed to UKCloud’s demise, including government’s lack of support for UK cloud providers and inherent market bias toward hyperscale cloud providers. Each of these factors made inward investment progressively harder to secure.

They agree with the four “Theories of Harm” identfied by the CMA, but also add extra concerns, including Free Courses and Educational Programs provided by hyperscale operators, Free Usage Credits which lock customers in, and ‘obscure pricing regimes’.

Microsoft and Amazon together control up to 80% of the £7.5bn UK cloud computing market, with Google the next closest with up to 10%.

But Amazon’s web services arm also has concerns over Microsoft’s business practices. In its evidence, AWS accuses Microsoft of using licensing practices that restrict customer choice and make switching more difficult.

For its part, Microsoft has argued there are no features that materially “prevents, restricts or distorts competition” in connection with the supply of cloud services in the UK.

Updated

How Tesla caused sales of UK electric cars to fall last month

The number of electric cars sold in the UK has dropped sharply in November (as flagged at 9.19am).

There is one big reason for that: Tesla, my colleague Jasper Jolly explains.

The drop in sales comes a few weeks after Rishi Sunak delayed the ban on new petrol and diesel cars by five years, leading to concerns it could slow the electric car transition.

However, New AutoMotive, a thinktank, cautioned against over-interpreting volatile monthly sales data because of the large impact of production shutdowns at Tesla, the US electric car pioneer.

Electric car sales dropped by 5,000, or 17%, year-on-year to 24,300 in November, according to the Society of Motor Manufacturers and Traders, the industry lobby group, who also reported a 9.5% rise in all car registrations.

New AutoMotive’s analysis of the same data shows that Tesla sales fell by 4,300 cars during the month, accounting for the vast majority of the drop.

Tesla “suffered a series of setbacks in production in the second half of 2023”, said New AutoMotive. Analysts had predicted a slowdown in Tesla sales because of temporary shutdowns at its factories in Germany and China to upgrade equipment and prepare for the production of the updated Model 3 saloon and the new Cybertruck.

Ben Nelmes, New AutoMotive’s chief executive, said:

“Monthly car sales are highly volatile. This well-anticipated slowdown in sales of electric cars demonstrates the need for the government to make it cheaper and easier for people to access the benefits of going electric.”

A table showing UK EV sales
A table showing UK EV sales Photograph: New AutoMotive

Brazil has shrugged off fears that it could be on the brink of recession.

New GDP data today shows that Brazil’s economy grew by 0.1% in the third quarter of this year, beating forecasts for a contraction of 0.2% or 0.3%.

Year on year, the economy was 2% larger – better than the 1.8% expected.

This followed better than expected growth of 0.9% in Q2, and is another boost to president Luiz Inácio Lula da Silva as he tries to lift living standards in Latin America’s largest economy.

Today’s technical problems on the London stock exchange don’t “bode well for the LSE as it isn’t the first time,” according to John Moore, head of trading at Berkeley Capital Wealth Management.

Moore told Bloomberg:

“Investors and traders may lose confidence when they cannot transact, as well as attract attention from the regulator as the issues persists. In this day and age we expect 100% uptime as per major stock indexes globally.”

Here’s our news story on Rupert Soames’s appointment as the CBI’s next president:

Updated

Revealed: Sellafield nuclear site has leak that could pose risk to public

Sellafield, Europe’s most hazardous nuclear site, has a worsening leak from a huge silo of radioactive waste that could pose a risk to the public, the Guardian can reveal.

Concerns over safety at the crumbling building, as well as cracks in a reservoir of toxic sludge known as B30, have caused diplomatic tensions with countries including the US, Norway and Ireland, which fear Sellafield has failed to get a grip of the problems.

The leak of radioactive liquid from one of the “highest nuclear hazards in the UK” – a decaying building at the vast Cumbrian site known as the Magnox swarf storage Silo (MSSS) – is likely to continue to 2050.

That could have “potentially significant consequences” if it gathers pace, risking contaminating groundwater, according to an official document.

More here, by Anna Isaac and Alex Lawson:

As flagged this morning (see 11.53am), Energy Security Secretary Claire Coutinho MP has written to the Nuclear Decommissioning Authority about the “serious and concerning” allegation.

On the MSSS, Coutinho has asked the NDA what efforts are being taken to speed up the work to stop the leak.

For the second time today, the London Stock Exchange says that the securities caught up in the technical problems “are now in regular trading”.

Back in the City of London, the stock market authorities are making a new attempt to resume trading.

The London Stock Exchange say that impacted instruments are being resumed, after trading in hundreds of small stocks was hit by a second technical glitch.

The LSE started a re-opening auction at 12:20pm.

It adds:

During this period, instrument status will be shown as Halted but customers will be able to manage their orders in the system.

Hopefully this will resolve the second outage of the day, and not be followed by a third….

At least trading in FTSE 100 and FTSE 250 stocks, and overseas stocks, has kept working today.

Updated

Coutinho demands answers over Sellafield cybersecurity

Claire Coutinho, the UK’s Secretary of State for Energy Security and Net Zero, has asked Britain’s Nuclear Decommissioning Authority for a full explanation about cybersecurity at Sellafield.

Following the Guardian’s revelation that the nuclear waste and decommissioning site had been hacked by groups linked to Russia and China, Coutinho has asked NDA chief executive David Peattie for a delivery plan and a timeline for how Sellafield will emerge from ‘enhanced regulatory scrutiny’.

Coutinho is also seeking assurances from the NDA that cyber security threats are bring treated with the highest priority, and that threats are recorded and acted upon.

Here’s the letter:

My colleagues Anna Isaac and Alex Lawson reported yesterday that the Office for Nuclear Regulation (ONR) had found cybersecurity “shortfalls” during its inspections of Sellafield, and noted that it had taken “enforcement action” as a result.

They wrote:

The latest annual report from the ONR stated that “improvements are required” from Sellafield and other sites in order to address cybersecurity risks. It also confirmed that the site was in “significantly enhanced attention” for this activity.

Coutinho also told Peattie she has “zero tolerance for bullying or harassment in the workplace”, after our investigation uncovered a toxic workplace culture at Sellafield.

Updated

LSE 'still investigating an issue'

The problems hitting small companies traded on the London Stock Exchange this morning appear to have resurfaced!

The LSE says:

We are still investigating an issue. Currently only FTSE 100, FTSE 250 and IOB securities are available for trading.

Several of the stocks which were frozen earlier seem to be having problems again.

Fevertree has been frozen for 12 minutes, while YouGov, for example, just traded after a half an hour pause.

Deliveroo just traded, too.

Updated

Inflation across OECD countries hits two-year low

Back in the global economy, inflation across the world’s richest countries has slowed to a two-year low.

Year-on-year inflation in the OECD, as measured by the Consumer Price Index (CPI), has fallen to 5.6% in October, down from 6.2% in September.

That’s the lowest level since October 2021, before the spike in energy and food prices in 2022 after Russia’s invasion of Ukraine.

The OECD reports that inflation fell in 28 of its members, but rose by at least one percentage point or more in Greece, Czechia, and Costa Rica.

It adds:

Inflation rates were close to zero in Denmark, turning negative in the Netherlands and remained negative in Costa Rica despite its increase.

The OECD also reports that food inflation continued to slow rapidly, dropping to 7.4% in October down from 8.1% in September.

It declined in 32 OECD countries but still exceeded 10% in Turkey, Iceland, Colombia, and the United Kingdom (where it was 10.1% in October).

Rupert Soames isn’t a stranger to taking on a challenge.

Serco was vying for the label of Britain’s most-reviled company when Soames heard it had sacked its CEO, and decided he’d like to do the job.

As my colleague John Collingridge wrote last year:

Soames got the job and joined in early 2014, when Serco was vying for the label of Britain’s most-reviled company. It was in the dock for having overcharged the Ministry of Justice (MoJ) tens of millions of pounds for electronically tagging offenders, some of whom were dead or still in prison; its shares were in freefall; and it was barred from winning new government work.

“I have a horrible habit of walking towards gunfire,” says Soames with a grin, sitting in the central London office of his public relations adviser, wearing his trademark blue shirt embroidered with the words “Serco and proud of it”. (He ordered a batch when he was appointed.)

The new chief executive’s approach combined gusto with a heavy dose of gallows humour. His initial appeal to staff was: “Bring out your dead.” In response, he says, “rather a lot of bodies came flying out”

Updated

Rupert Soames to be next CBI president

Newsflash: The CBI has turned to Winston Churchill’s grandson, Rupert Soames, to be its next president.

The CBI has announced that its governance bodies, including the CBI Board, have today approved the nomination of Rupert Soames OBE, to succeed Brian McBride as their president.

The CBI says “a smooth transition” will take place early in the new year, with Soames due to be formally elected by members at the next AGM in June 2024.

Soames has around four decades experience in business. He’s currently the chair of FTSE medical technology manufacturer Smith & Nephew, and is the former CEO of UK government contractor Serco.

When he retired from Serco last year, Soames joked that “it is now time for me to outsource myself”.

The CBI announced in May that McBride would step down early, next January. It accelerated its search for a new president as it also put forward proposals to overhaul its culture after the Guardian revealed a series of sexual misconduct allegations at the business lobby group.

McBride says today:

“I’m pleased to announce that after a robust search process, Rupert Soames will be taking on the role as the next President of the CBI.

“With the CBI back influencing at the highest levels across the UK again, there is no better person to pass the baton to. Rupert’s track record as one of the UK’s longest serving and most successful CEO’s makes him the ideal choice.”

Soames says he is “pleased and honoured” to have been nominated to be the next President of the CBI, adding:

After a decade of disruption and distraction due to Brexit, Covid, inflation and labour shortages, business and government need to work closely together to deliver a prosperous future where economic growth will lift living standards and sustainably fund the UK’s vital public services.

“The CBI is needed more now than at almost any time in its history, and it will be a privilege to lead the organisation in the coming years.”

Here’s a profile of Soames from last year:

As we reported yesterday, the CBI has warned that there is a “material uncertainty” that it can continue operating in the long term after sexual misconduct allegations.

The scandal-hit business lobby group said it was “emerging from an unprecedented situation” that had led to “exceptional costs”, warning there was also “material uncertainty arising from the CBI’s financial performance since the year end”.

The CBI released the warning in its annual accounts published on Monday ahead of its annual general meeting on Wednesday.

Updated

The FT points out that trading in drinks maker Fevertree and polling company YouGov was also disrupted by this morning’s technical glitch on the London Stock Exchange.

Both are trading again now, though.

Indeed, the LSE has issued a new status update saying:

“Impacted securities are now in regular trading”

Updated

UK services sector returns to growth

Britain’s services sector has returned to growth, according to the latest poll of purchasing managers across the economy.

UK services firms have reported rising demand in November, with a pick-up in export orders from the US and Europe – despite Brexit trade frictions.

But, companies also flagged that elevated borrowing costs were hitting new orders.

Firms also raised their prices at the fastest rate since July, as they passed on risng staff wages and elevated inflationary pressures.

This pushed the UK services PMI up to 50.9, showing growth, up from 49.5 in October (which indicated a contraction).

This helped to lift private sector output for the first time in four months.

Tim Moore, economics director at S&P Global Market Intelligence, says:

“UK service providers moved back into expansion mode during November as stabilising demand conditions helped to lift business activity from its recent malaise. Although only marginal, the upturn in service sector output was the fastest since July and slightly stronger than the earlier ‘flash’ estimate for November.

Staffing numbers also returned to growth, supported by a modest improvement in business activity expectations for the year ahead. “Despite tentative signs of a turnaround in new orders, survey respondents once again commented on a lack of willingness to spend among clients. Many firms noted that low levels of business and consumer confidence, alongside elevated borrowing costs, had constrained sales opportunities in November.

Overseas markets continued to show resilience, with strengthening US demand often cited as a driver of increased new export orders.

The FTSE small cap index was subject to a trading halt during this morning’s outage, Reuters reports.

That affected some 222 stocks, including Tullow Oil, CMC Markets and Marston’s – companies whose market value (or capitalisation) is too low to qualify for the FTSE 100 or 250.

Those three stocks are now trading normally again, after the LSE resumed trading in the affected securities (see 9.59am).

It is the second time LSEG has flagged a disruption to trading in smaller stocks on the London market in less than two months, Reuters adds.

Updated

Trading appears to be underway again normally in London.

Shares in Deliveroo and Asos, two of the companies caught up in this morning’s system outage, have both just traded.

Bloomberg reports that this morning’s outage at the London Stock Exchange halted trading in about 2,000 smaller shares on the market.

It’s the third outage in a few months, Bloomberg adds.

But, as flagged at 9.59am, the problem is being resolved, with trading expected to have resumed at 10.15am.

And it didn’t affect shares in blue-chip companies on the FTSE 100, or the smaller members of the FTSE 250.

Updated

LSE: Trading is resuming now

Update: The London Stock Exchange says trading will resume this morning, on the stocks affected by today’s outage.

In a status update a few minutes ago, the LSE says:

We are now resuming trading on impacted instruments. Instruments will go into auction at 09:55 with uncrossing beginning at 10:15. All live orders remain on the system.

Updated

London Stock Exchange investigating 'issue' with trading and information system

The London Stock Exchange is currently investigating an issue impacting its trading/information system.

Currently only FTSE 100, FTSE 250 and IOB (international order book) securities are available for trading, it admits.

The outage appears to be affecting stocks listed in London, but not part of the blue-chip FTSE 100 or smaller FTSE 250 index.

Deliveroo, for example, hasn’t traded since 9.14am, while a trade on ASOS hasn’t gone through since 9,24am.

Back on 19th October, a similar-sounding system incident halted trading in hundreds of shares on the London Stock Exchange for the final 80 minutes of the day’s session, but (as today) stocks on the FTSE 100 Index, FTSE 250 and international orderbook weren’t affected.

Moody's: Tech restrictions will hurt China's manufacturing

In its China rating decision today, Moody’s warns that the trade war over technology being fought with the US will hurt Chinese manufacturing.

Moody’s says:

Restrictions on trade in technology driven by geopolitical tensions will curb the kind of information sharing that is crucial to the rapid development of high-tech manufacturing sectors.

In August, US president Joe Biden banned a range of US high tech investments in China, including in companies developing software to design chips and tools to manufacture them, citing national security risks.

Then in October, the US banned Nvidia from exporting some of its high-end artificial intelligence chips to China as regulators advanced the deadline.

China hit back, restricting exports of gallium and germanium – crucial for chipmaking, and for manufacturing communications equipment and electric vehicles.

Updated

China credit default swaps rise after Moody’s cuts rating outlook

The cost of insuring China’s sovereign debt against a default has risen to its highest since mid-November after Moody’s put the country’s credit rating on a “negative outlook” today.

Data from S&P Global Market Intelligence showed 5-year credit default swaps had risen to 63 basis points, which was up 4 bps from Monday’s closing level, Reuters reports.

That’s still a low level, implying little risk of China defaulting, despite Moody’s concerns that Beijing may need to provide support to financially-stressed regional and local governments and state-owned enterprises, and its worries about slow growth and the property sector.

Updated

Best November for UK car sales in four years

Back in the UK, car sales have risen again… but registrations of battery-powered vehicles were lower than a year ago.

There were 156,525 new car registrations last month, which is 9.5% more than in November 2022. It’s the strongest November for car sales in four years, and just 0.1% lower than in 2019, before the pandemic.

Growth was driven entirely by fleet sales, as companies invested in the latest vehicles, reports the Society of Motor Manufacturers and Traders.

Fleet registrations rose over 25% year-on-year, while sales to private sellers fell by 5.9%.

But sales of battery electric vehicles (BEVs) fell by 17% compared with November 2022, to 24,359, with three-quarters of these vehicles snapped up by fleet and business buyers.

Mike Hawes, SMMT chief executive, says:

Britain’s new car market continues to recover, fuelled by fleets investing in the latest and greenest new vehicles. With car makers gearing up to meet their responsibilities under new market legislation, and COP28 currently underway, now is the time to take sensible steps that will multiply that economic growth and minimise carbon emissions.

Private EV buyers need incentives in line with those that have so successfully driven business uptake – and workable trade rules that promote rather than penalise the transition.

China’s stock market has hit its lowest level in over four years today, as concerns grow over its economy.

The CSI 300 index, which tracks the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, fell 1.9% today.

It ended at 3,394 points, the lowest since February 2019, closing shortly before Moody’s announcement that it was cutting China’s credit outlook.

Shares fell even though new economic data showed China’s services sector expanded last month, with the Caixin Services PMI rising to 51.5 in November from 50.8 in October (showing faster growth).

Victoria Scholar, head of investment at interactive investor, tells us:

China has struggled with a bumpier than expected post covid recovery. It has been grappling with weak demand, an embattled property sector, declining imports and exports, and heavy debts from long-term infrastructure spending.

The government has stopped publishing youth unemployment figures, after they hit a record high in the summer. While the authorities have been attempting to bolster demand through stimulus measures, more needs to be done to support the world’s second largest economy particularly amid the backdrop of sluggish global demand.”

A spokesperson for Beijing’s finance ministry also said that China’s economy was recovering this year: saying (via AFP):

“Since the beginning of this year, facing a complex and severe international situation and against the backdrop of unstable global economic recovery and weakening momentum, China’s macro economy has continued to recover.”

Beijing: Moody's concerns are 'unnecessary'

China’s finance ministry says it is “disappointed” by Moody’s downgrade of the country’s ratings outlook today.

The ministry says:

“Moody’s concerns about China’s economic growth prospects, fiscal sustainability and other aspects are unnecessary.”

Moody’s cuts China's credit outlook to negative

Newsflash: Credit rating agency Moody’s has cut its outlook for China’s government bonds to negative, from stable, due to concerns over its rising debts and slowing economy.

Moody’s slashed its outlook due to concerns that Beijing’s government will need to provide fiancial support to “financially-stressed regional and local governments and State-Owned Enterprises”.

This would pose broad downside risks to China’s fiscal, economic and institutional strength, Moody’s says.

Moody’s also warns that China faces “structurally and persistently lower medium-term economic growth”, saying:

Moody’s expects that China’s annual GDP growth will be 4.0% in 2024 and 2025, and average 3.8% from 2026 to 2030, with structural factors including weaker demographics driving a decline in potential growth to around 3.5% by 2030

The agency also points to the “downsizing” taking place in China’s property sector, where many developers such as Evergrande are trying to restructure debts.

The changes in the property sector is “a major structural shift in China’s growth drivers”, and could be a more significant drag to China’s overall economic growth rate than expected, they say.

Moody’s move underscores deepening global concerns about the level of debt in the world’s second-largest economy.

It has maintained China’s credit rating at A1, which is its fifth-highest rating (the top ‘upper medium grade’) and comfortably in ‘investment grade’. But lowering the outlook is a sign that the credit rating could be cut in future.

Updated

Grocery inflation slows again

A Tesco store at christmas
A Tesco store at christmas Photograph: Kevin Britland/Alamy

Good news for consumers: British grocery inflation has slowed again.

Market researcher Kantar has reported that annual grocery inflation dropped to 9.1% in the four weeks to November 26, down from 9.7% a month earlier.

And the cost of a traditional Christmas dinner is rising by less than the headline rate of food inflation, Kantar adds.

The average cost of a frozen turkey Christmas dinner for four with all the trimmings, Christmas pudding and sparkling wine was up 1.3% at £31.71 – with the prices held down by cheaper Brussels sprouts and Christmas pudding than a year ago.

Kantar also predicts that take-home supermarket sales will surpass £13bn for the first time ever this December, with Friday December 22 set to be the busiest day for festive grocery shopping.

Fraser McKevitt, head of retail and consumer insight at Kantar, said:

“The scene is set for record-breaking spend through the supermarket tills this Christmas.

“The festive period is always a bumper one for the grocers, with consumers buying on average 10% more items than in a typical month. Some of the increase, of course, will also be driven by the ongoing price inflation we’ve seen this year.”

Clothing retailer Quiz reports disappointing sales

UK clothing retailer Quiz has issued a sales warning to the stock markets, after a disappointing Black Friday.

Quiz told shareholders that sales in October and November had been below management expectations, which it blamed on the cost of living and inflationary pressures for hitting customer demand during the financial year.

Quiz warns:

As a result, the near-term outlook is difficult to predict for many UK retailers including QUIZ.

Quiz now estimates that revenues for the current financial year (to the end of March) will be between 6 and 8% below market expections.

Quiz has also reported a £1.5m loss for the six months to 30 September, down from a £1.8m profit the year before.

Given its recent poor trading performance, Quiz’s board is now going to conduct “a thorough review of the strategic options” available to maximise shareholder value.

Cautious consumers delay Christmas spending

UK retailers have warned that many households are holding back on Christmas spending, as the festive period threatens to be a damp squib for shops.

Like-for-like retail sales spending was just 2.6% higher in November than a year ago, the British Retail Consortium reported this morning, despite attempt to lure consumers to spend in the Black Friday sales.

A chart showing UK retail sales

With inflation running at 4.6% in October, that implies a chunky fall in the amount of goods being bought.

Total food sales spending slowed to a 7.6% increase in the September-November quarter, down from 8.2% in June-August.

Spending on non-food items fell by 1.6% as households cut back.

Helen Dickinson OBE, chief executive of the British Retail Consortium, said:

“Black Friday began earlier this year as many retailers tried to give sales a much-needed boost in November. While this had the desired effect initially, the momentum failed to hold throughout the month, as many households held back on Christmas spending. Health and beauty products showed stronger growth, but non-food sales were down overall year on year.

November had the highest proportion of non-food goods purchased online for 2023, though this remains below the previous years’ level.

Introduction: Shoppers face spending £105 more amid Christmas shrinkflation

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

With Christmas approaching, the scourge of shrinkflation and rising prices means UK shoppers will be spending over £100 more this year to keep their cupboards and larders filled with festive favourites.

Three in five customers have noticed “shrinkflation” on classic Christmas goods, according to a report by Barclays, with boxes of chocolates, tins of biscuits, cheese, mince pies and Christmas cake all singled out for getting smaller, but not cheaper.

Barclays reports that shoppers expect to spend an average of £105 more on Christmas this year than in 2022. But some of that spending will be driven by shrinkflation.

Festive food and drink is expected to be the largest contributor, up £25.87, followed by gifts (+£18.62) and activities (+£11.86).

Shrinkflation – where a product gets smaller but stays the same price – has been a growing threat to shoppers as food producers have tried to absorb rising costs. In September, for example, Mars trimmed 10g off its Galaxy chocolate bar.

But the problem predates the current cost of living crisis. According to the Office for National Statistics, 2,529 items shrank between January 2012 and June 2017.

Barclays reports consumer card spending rose slightly in November, growing by 2.9% following a 2.6% increase in October. However, that’s still below the headline inflation figure of 4.6% in November.

Spending at clothing retailers picked up, as shoppers took advantage of Black Friday discounts to update their winter wardrobes to ward off the wet and cold weather.

But while high street spending picked up, restaurants were hit by falling spending – as cold weather and dark evenings encouraged people to stay in.

Jack Meaning, chief UK economist at Barclays, said:

“This data suggests consumers are continuing to spend more but get less for their money, as spending growth remains below inflation. However, the gap is narrowing as the rate of price increases slows, and we expect it to narrow further in the coming months.

“It’s reassuring to see that some of the previous weakness in spending was due to unseasonal weather, as shoppers go out and finally buy that new winter coat and get in the Christmas spirit. But the key question for the UK is what happens after the holiday period – it will take more than a festive bounce to keep consumers spending in 2024.”

Also coming up today

UK car sales rose again in November, by around 9%, according to preliminary data from the Society of Motor Manufacturers and Traders. We get the full details at 9am.

There’s also a healthcheck on eurozone and UK services companies, which will show whether recessionary fears are building.

In Australia, the central bank has left interest rates on hold, sparing borrowers a pre-Christmas increase in borrowing costs as it assesses cooling inflation and a softening jobs market.

The agenda

  • 7.45am BST: French industrial production report for October

  • 9am BST: UK car registrations data for November

  • 9am BST: Eurozone service sector PMI report for November

  • 9.30am BST: UK service sector PMI report for November

  • Noon BST: Brazil’s Q3 GDP report

  • 3pm BST: US service sector PMI report for November

  • 3pm BST: TIPP survey of US economic confidence

  • 3pm BST: JOLTS survey of US job openings

Updated

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