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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Eurozone inflation drops; UK recession fears linger; Apple hits $3trn valuation – as it happened

United Kingdom Robert Gardner Recession Economy Nationwide Office for National Statistics GDP Capital Economics China Northern Ireland
The former headquarters of the European Central Bank in Frankfurt.
The former headquarters of the European Central Bank in Frankfurt. Photograph: Daniel Roland/AFP/Getty Images

Closing summary

Time to recap…

Apple’s market valuation has jumped over the $3 trillion mark again as shares in the US tech giant hit a fresh record today.

Inflation has cooled in the eurozone, and in the US, fuelling hopes that central bank interest rate increases could end this summer.

Economists fear that the UK economy could slide into recession this year, despite GDP growing slightly over the winter.

UK house prices have fallen at the fastest annual rate since 2009 this month, despite a small rise in June.

John Lewis has defended a plan to build homes to rent as the group files planning applications for projects in west and south-east London.

British Gas has said household energy bills are likely to remain high for the foreseeable future as wholesale market prices remain at more than double the normal level.

Heathrow has appointed Thomas Woldbye as the new chief executive of Europe’s busiest airport, tasking him with repairing relations with airlines and reviving controversial expansion plans.

Updated

FTSE 100 ends weak H1 with gains

Back in the City, the FTSE 100 has ended June on the front foot.

The blue-chip index has jumped by 0.8% today, or 60 points, to close at 7531 points.

This means the FTSE 100 has gained just over 1% so far this year, as it missed out on the global stock market rally.

Since the start of January, Germany’s DAX has gained 16%, France’s CAC is up 14.5%, while the tech-focused Nasdaq has surged by over 30%.

Victoria Scholar, head of investment at Interactive Investor, explains:

Miners have fared worst on the FTSE 100 with Fresnillo, Anglo American and Glencore at the bottom of the leaderboard following China’s bumpier than expected recovery out of Covid.

Bucking the trend and stemming a steeper slide has been Rolls Royce which is this year’s star performer so far, up over 50%. Last month its new CEO Tufan Erginbilgic said its turnaround plan is moving ‘at pace.’

US tech has enjoyed an incredible H1. The Nasdaq 100 is on track for best first half in its 52-year history. Nvidia was the star performer surging more than 180 percent thanks to this year’s buzz around artificial intelligence. Meta and Tesla also sky-rocketed by over 100 percent. And Palo Alto, ADM and Amazon also logged impressive percentage gains, landing them among the top gainers. This marks a turnaround from last year’s ‘tech-wreck’ when the sector was hit hard by rising inflation and interest rates.

Super-rich warned of ‘pitchforks and torches’ unless they tackle inequality

In the ballroom of the five star Savoy hotel on the Strand in central London, the super-rich and their advisers were this week advised that they may soon need to watch out for people with “pitchforks and torches” unless they do more to use their fortunes to help the millions struggling with the cost of living crisis.

At an investment conference organised by Spear’s wealth management magazine, members of the global elite and their financial teams were told by progressive advisers that there was a “real risk of actual insurrection” and “civil disruption” if the yawning inequality gap between rich and poor was allowed to widen as a result of energy and food price hikes hitting squeezed households.

Julia Davies, a founding member of Patriotic Millionaires UK, a group of super-rich people calling for the introduction of a wealth tax, warned that global poverty and the climate emergency were going to get “so much worse” unless the wealthy did more to help poorer citizens….

In the UK water sector, the boss of FTSE 100 water giant Severn Trent is reportedly trying to bring a taskforce of utility bosses together with the Labour party in a bid to head off the threat of nationalisation, amid the crisis at Thames Water.

The Evening Standard reports that Liv Garfield has emailed fellow utility CEOs, inviting them to join an “off-the-record roundtable” with Will Hutton, the Observer journalist, who has written several books analysing economics and politics including The State We’re In.

She writes:

“Whilst it is clear Labour will not include nationalisation in its next manifesto, they are also not keen on entering into the election race championing the status quo.

The leadership thinks there is room for improvement and, politically, there is significant pressure to ‘do something’ about utilities.”

Updated

Shares in Apple have extended their earlier gains, and are now up 1.6% at $192.70, maintaining its $3 trillion valuation.

Other tech stocks are also rallying, with Microsoft up 2.2% and Nvidia gaining 4%, as the markets hail the drop in PCE inflation reported earlier today (see earlier post).

Wall Street is ending the first half of the year in good spirits, with the Dow Jones industrial average up 205 points or 0.6% at 34,328 points.

Shell renewable energy chief quits after shift back to fossil fuel

In the energy sector, Shell’s European renewable power boss Thomas Brostrom has decided to leave the company, just weeks after its new boss abandoned targets to cut oil production.

Brostrom joined Shell from offshore wind giant Orsted in August 2021 to head offshore wind, and then became head of renewables in February 2022.

Now, though, he has decided “to leave Shell to pursue an external opportunity.”

Brostrom’s departure comes two weeks after new CEO Wael Sawan abandoned plans to cut output by about 1-2% each year, and decided production would remain stable until 2030.

Shell claimed that it had hit the target years early, through its sale of a project in the Permian Basin, Texas.

But climate campaigners criticised the move, saying Shell was wrong to target more fossil fuel production.

Bronstrom has declined to comment on where he’s headed next or on his reason for leaving, Bloomberg reports.

Apple enjoys bumper 2023

Apple shares have gained around 48% so far this year, as it recovered from a rough 2022 in which they fell almost 27%.

2023 began badly for Apple, with its market value falling below $2tn in early January, a year after hitting the $3trn mark for the first time in January 2022.

But it has since rallied through this year:

Apple's share price in 2023
Apple's share price in 2023 Photograph: Refinitiv

Shannon Cross, analyst at Credit Suisse, tells the FT that Apple’s longer-term potential is lifting its shares:

“Investors are positive on the margin expansion seen in the past couple of years, which is supported by increased sales of high-end iPhones and strength in services….

“Apple’s $3tn market cap reflects the company’s long-term focus on continuing to develop and control the key elements of their IP — software, silicon, devices and services with a concentration on providing the best customer experience.”

Today’s falling inflation measures in the eurozone, and in the US, could allow their central banks to end their cycle of interest rate increases in July.

Former ECB vice-president Vitor Constâncio predicts they will:

Apple’s investors have had quite the ride over the years:

Apple hits $3 trillion valuation (again)

Newsflash: Tech giant Apple’s market capitalisation has hit the $3 trillion mark, at the start of trading in New York.

Shares in the world’s most valuable listed company, have gained 1.1% in early trading to $191.80, taking its value over the $3trn mark.

Apple first, briefly, hit the $3 trillion valuation in January 2022, before slipping back last year as tech stocks were hit by rising inflation.

But the technology sector has been back in demand with investors, on hopes that central banks could be close to slowing their interest rate increases.

Investors are betting on the iPhone maker’s ability to grow its revenue even as it explores new markets such as virtual reality, says Reuters.

Earlier this month, Apple unveiled its Vision Pro AR headset, priced at $3,500, along with new laptop and desktop computers, and updates to its iPhone, iPad and smartwatch software.

Updated

US PCE inflation rate eases

Over in the US, the Federal Reserve’s preferred inflation measure shows price pressures in America have eased.

The PCE price index rose by just 0.1% during May, and was 3.8% higher on an annual basis, down from 4.3% in the year to April. That fall could encourage Fed policymakers not to raise interest rates further, having left them on hold this month.

Core PCE, which exclude food and energy, rose by 0.3% during the month, but the annual rate dipped to 4.6% from 4.7%. That suggests underlying inflation may be more stubborn.

Andrew Hunter, deputy chief US economist at Capital Economics, says:

The PCE inflation data also provides some support for the doves at the Fed, with the headline PCE deflator rising by only 0.1% m/m, and the core index up by 0.3%, helped by a softer increase in services prices.

The eurozone will benefit from further disinflation this year, predicts Berenberg bank.

Following today’s drop in inflation, they predict CPI will drop below 3% by the end of the year, near to the 2% target.

Berenberg economist Salomon Fiedler says:

Eurozone inflation is now falling about as fast as it surged to its 10.6% peak in October 2022. In June, it dropped to 5.5% yoy, from 6.1% in May. Our Euro Inflation Monitor points to further disinflation over the remainder of 2023, with some month-to-month volatility.

The data indicate that core inflation will likely decelerate towards c4% by the end of 2023, while the headline figure should fall below 3% by that time. Our calls are roughly unchanged since our previous Euro Inflation Monitor one month ago.

A heatmap of eurozone inflation
A heatmap of eurozone inflation Photograph: Berenberg Bank

Tesco has announced price cuts on more than 500 essential items, which could help nudge UK inflation down.

Tesco said it had cut the price of certain packs of own-brand pasta, tinned tuna, milk, grapes, cheese and other goods by an average of 13%, saying that it was working with its suppliers to pass on reductions where it could.

A 5 pence cut on fusilli pasta is the second in recent weeks, Tesco says, meaning shoppers will pay 20 pence less for a 500 gram pack than they would have paid in May.

A four-pint bottle of milk is also 10 pence cheaper, a second price cut in as many months.

This could strengthen hopes that the surge in grocery inflation will moderate this year (although supermarket are less vocal when they raise prices, so we’ll see…)

Tesco chief product officer Ashwin Prasad said:

“We know that more than ever our customers are looking for great value, and this huge round of price cuts on 500 key household essentials will help their budgets go a little further.

“With price cuts on products like grapes, peppers, rice and tuna, customers will find it’s even cheaper to eat healthily with Tesco this summer.

“And we’ll continue to work closely with our suppliers to pass on price cuts to our customers whenever we can.”

Here’s Labour’s shadow chancellor, Rachel Reeves, on this morning’s UK GDP National Accounts confirming growth of just 0.1% in Q4 2022 and Q1 2023.

Updated

Britain’s financial watchdog has updated its rulebook to allow mortgage lenders to help strugging customers.

Following last week’s meeting with chancellor Jeremy Hunt and UK banks, the Financial Conduct Authority has changed its rules to support the commitments made by lenders.

The changes mean that lenders will be able to offer borrowers, without an affordability check:

  • a switch to interest-only payments for 6 months

  • an extension to their mortgage term to reduce their monthly payments, with the option to switch back within 6 months

The FCA says:

The measures are designed to provide relief for people dealing with higher interest rates, but borrowers should be aware that making changes, even temporary ones, will very likely result in higher monthly payments in the future or paying back more overall.

Three eurozone countries have pulled their inflation rates below the ECB’s 2% target:

Updated

Britain’s competition regulator has got another technology deal in its sights.

The Competition and Markets Authority (CMA) has concluded that Adobe’s $20bn deal to acquire cloud-based designer platform Figma could mean less choice for designers of digital apps, websites and other products.

The CMA says its initial investigation into the deal has found Adobe’s purchase of Figma could reduce innovation.

Adobe has five working days to submit proposals to address the CMA’s concerns. Otherwise, the investigation will proceed to an in-depth phase 2 review.

The regulator says:

The CMA found that Figma has established a substantial share of the market for screen design software and that Adobe has been continuously investing in and competing in this segment.

The CMA found that competition between Figma and Adobe has driven investment in updating and developing screen design software, and this important rivalry could be lost if the deal goes ahead.

“This morning’s data suggest that the Eurozone is on the path to bringing inflation down into more sustainable territory, report Sam Miley, senior economist at the CEBR thinktank:

Though the headline rate of price growth remains more than twice the ECB’s target, the fact that inflation has now slowed for two consecutive months and stands well below the recent peak of 10.6% will be welcomed by policymakers.

However, this is not sufficient for the central bank to halt its course of monetary tightening. Cebr expects the ECB to implement a further hike of 25 basis points to its key policy rates at its meeting next month, in an effort to put even further downward pressure on price growth in the medium term.” -

Home sales tumbled by a quarter in May compared with the same month a year earlier, new HM Revenue and Customs (HMRC) figures show today.

It’s another sign that the property market is cooling this year, as high borrowing costs hit demand.

HMRC reports that there were 74,360 residential transactions in May 2023 is 74,360, 25% lower than May 2022. But, that’s 10% higher more than in April 2023

HMRC say the annual fall “is partly due to higher number of bank holidays in May 2023, but also represents the decline in general market conditions in recent months”.

Andy Sommerville, director at property data and insight provider Search Acumen, says:

“Today’s figures show a continuation of the low transaction levels we have become accustomed to in 2023, with the property market facing significant challenges including rising inflation rates and the high cost of borrowing.

The downturn feels especially acute from the market recovery we witnessed after the coronavirus pandemic, remaining 27% down from a year ago in May 2022 for residential, and a 16% decrease in the commercial sector from the same period.

In financially challenging times, debt continues to be a key driver in transaction volumes. The industry needs a sharp end to sticky inflation to provide market stability across the rest of the year.

Euro zone inflation is “on the way out”, declares Moody’s Analytics’ senior economist Kamil Kovar.

Following this morning’s fall in headline inflation to 5.5%, Kovar says:

“Eurozone inflation declined again in June, continuing on its long and gradual disinflationary path. The main good news in the report was hidden in the core inflation segment. While core inflation inched up to 5.4% on a year-ago basis, this was less than expected given the small base effect from last year.

On a sequential month-to-month basis core inflation increased almost in line with the ECB’s inflation target for the second month running.

With a broad-based deceleration in inflation visible in this release, it is clear that euro zone inflation is on the way out.

However, it remains to be seen whether this will be enough to ensure that the ECB’s last hike will be in July, or only in September.”

Here’s ING’s senior eurozone economist, Bert Colijn, on today’s fall in Eurozone inflation:

Headline eurozone inflation continues to drop quickly on energy price effects, but core inflation ticked back up in June.

This is mainly related to base effects from government support and the underlying trend remains disinflationary. Concerns about persistent wage growth remain though as unemployment remained at historic lows in May.

In another boost for Europe, eurozone unemployment rate remained at a record low of 6.5% in May.

That matches April’s reading, and is down from 6.7% a year ago.

There were 11.014m unemployed people in the euro area in May, a drop of 57,000 during the month.

The youth unemployment rate remained at 13.9% in the eurozone, with 2.226m young people out of work.

El Niño could keep food price inflation high

June’s “flash” figures are encouraging, despite the modest increase in core inflation, says Diego Iscaro, head of European economics at S&P Global Market Intelligence.

But, he suspects it won’t stop the European Central Bank raising interest rates again in July (as the ECB has already signalled).

Iscaro warns that the emerging El Niño climate pattern could prolong food inflation, by creating more extreme weather events, saying:

We expect underlying inflation to continue its downward trend in July, supported by the now evident slowdown in service sector activity.

Energy prices will continue to have a negative impact on headline inflation during the second half of the year, although energy markets remain tight. Similarly, the prospect of extreme weather, amplified by El Niño, poses risks of a more moderate decline in food prices.

June’s figures are unlikely to move the dial on the monetary policy front. A new rate increase in July is a done deal, and there is still a lot of data to be published before September’s meeting. We still expect July to be the peak in rates as economic conditions weaken and inflationary pressures soften.

Updated

The contrast between Eurozone and UK inflation is becoming starker, says Neil Shah, director of research at investment research and consultancy firm Edison Group.

Inflation in the UK remained at 8.7% in May – we’ll find out on 19 July how prices changed in June.

But it has been running higher than in Europe this year.

Shah explains:

Britain’s toxic combination of the energy price crisis and deeply embedded labour shortages have resulted in UK inflation being far more stubborn than its fellow G7 economies.

Brexit is partly to blame here, re-shaping the labour market and putting pressure on employers to raise wages to attract talent. Britain’s economy, which is heavily reliant on services rather than manufacturing is another point of difference to the slightly more balanced economies of European countries like Germany.

Progress remains slow, yet the EU’s headline inflation figures are going in the right direction. Will we be able to say the same of UK inflation in July?”

Eurozone inflation drops to 5.5%

Newsflash: inflation across the eurozone has dropped again, and by more than expected, thanks to falling energy prices.

Consumer prices across the euro area rose by 5.5% in the year to June, down from 6.1% in May.

That’s lower than the 5.6% which economists expected, but still some way over the European Central Bank’s target of 2%.

Statistics provider Eurostat says that food, alcohol & tobacco is expected to have the highest annual inflation rate in June – at 11.7%, down from 12.5% in May.

Industrial goods inflation eased to 5.5%, from 5.8%.

But service sector inflation rose to 5.4%, up from 5.0% in May.

Energy prices fell at a faster rate than last month, with energy inflation dropping to -5.6% from -1.8% in May.

Core inflation, which strips out energy, food, alcohol & tobacco, rose to 5.4% from 5.3% (economists had expected a larger increase to 5.5%).

Updated

Full story: UK house prices rise unexpectedly in June

UK house prices have defied expectations by growing slightly in June but annual prices fell at the fastest rate since 2009 as soaring mortgage costs took a toll on the market, according to Nationwide building society.

The surprise monthly rise of 0.1% reversed a 0.1% fall in May and confounded economist forecasts of a 0.3% fall. It pushed the average cost of a house in the UK up slightly to £262,239.

Prices were 3.5% lower in June compared with a year earlier, the sharpest rate of decline since 2009 but a smaller annual drop than the 4% fall predicted by economists.

More here:

German unemployment rose more than expected in June, showing that difficult economic conditions are taking their toll in the jobs market, Reuters reports.

The Federal Labour Office said the number of people out of work increased by 28,000 in seasonally adjusted terms to 2.61 million. Analysts had expected the figure to rise by 13,000.

Labour office head Andrea Nahles said:

“The more difficult economic conditions are now also being felt in the labour market.

“Unemployment is rising and employment growth is losing momentum.”

Updated

The chronic shortage of housing supply in the UK is supporting house prices, points out Victoria Scholar, head of investment at interactive investor, while the strong jobs market is also stopping prices falling faster.

She adds:

The housing market is suffering on the back of the Bank of England’s aggressive rate hiking path which has sharply pushed up mortgage costs.

Two-year and five-year fixed rate mortgages in the UK are at their highest level for seven months.

Coupled with the pressures from inflation which are squeezing household budgets and landing real wage growth in negative territory, consumers are feeling the pinch, prompting many to turn to the rental market instead of trying to get onto the property ladder.

Over in France, inflation has eased in a sign that the cost of living squeeze is easing.

French consumer price inflation fell to an annual rate of 4.5% in June, statistics body INSEE estimates, down from 5.1% in the year to May.

This is due to a drop in energy prices, with fuel cheaper than a year ago, and a slowdown in food prices.

On an EU-harmonised basis, inflation dropped to 5.3% this month from 6.0% in May, INSEE estimates.

An encouraging move, ahead of the eurozone-wide inflation report in 45 minutes.

But, it still means headline inflation in France is running at over twice the European Central Bank’s target of 2%.

Updated

Five-year fixed mortgage rates nearing 6%

Just in: UK mortgage rates are continuing to rise, as the squeeze on borrowers tightens.

The average 2-year fixed residential mortgage rate today is 6.39%, up from 6.37% on Thursday, according to financial information website Moneyfacts.

The average 5-year fixed residential mortgage rate today is 5.96%, up from 5.94% yesterday, as it approaches the 6% mark.

Rates have been climbing higher over the last two months, as the UK’s persistently stubborn inflation has raised expectations of further increases in interest rates.

Bank of England base rate is expected to hit at least 6% by the end of this year, up from 5% today.

Lenders have added two more deals to the market today, Moneyfacts reports, lifting the total residential mortgage products available to 4,432, up from 4,430 on Thursday.

UK (and Germany) still 0.5% smaller than before Covid-19

The big picture is that the UK and Germany are jointly at the back of the pack for G7 growth since the pandemic.

Both economies were still 0.5% smaller than at the end of 2019, today’s National Accounts report shows, while America’s economy is over 5% larger.

A table showing G7 GDP growth rates

Updated

The UK was the second-worst performing major economy in the first quarter of this year but – unlike Germany – it avoided recession.

Here’s how the G7 fared in Q1 2023:

  • Canada: grew by 0.8% quarter-on-quarter in January-March

  • France: grew by 0.2%

  • Germany: contracted by 0.3%, putting Europe’s largest economy into recession

  • Italy: grew by 0.6%

  • Japan: grew by 0.7%

  • United Kingdom: grew by 0.1%

  • United States: grew by 0.5% (revised data yesterday showed)

This morning’s confirmation that the economy grew by 0.1% q/q in Q1 means there won’t be a recession in the first half of this year.

But the sharp rise in interest rates is putting the economy increasingly at risk of falling into one at the end of 2023 or the start of next year, fears Thomas Pugh, economist at audit, tax and consulting firm RSM UK.

Pugh adds:

“We currently think the economy flatlined in Q2 and then will grow by around 0.2% q/q in Q3 and Q4 but further rises in interest rates could easily push that into the negative.

In any case, the big picture is that the economy could be no larger in 2024 than it was pre-pandemic.”

Barret Kupelian, senior economist at PwC, predicts that the UK economy contracted in May, due to the additional bank holiday for King Charles’ coronation.

This chart shows how business investment jumped in the last quarter, as companies tried to take advantage of the super-deduction (which let them cut their tax bill by up to 25 pence for every £1 invested) before it expired on 31st March.

UK business investment

Here are the key points from today’s UK National Accounts report:

This morning’s GDP quarterly national accounts have confirmed there was no growth in real household expenditure in Quarter 1 2023.

That follows 0.2% growth in the previous quarter, as real household incomes were squeezed by high inflation.

The ONS says:

There were increases in expenditure on recreation and culture, clothing and footwear, communications, and housing in the latest quarter (Figure 6). These were offset by falls in transport, and alcohol and tobacco.

Capital Economics: UK recession still to come this year

A UK recession is still coming this year, fears Capital Economics, despite the economy managing some modest growth last autumn and winter.

Ashley Webb, their UK economist, says:

The final Q1 2023 GDP data confirms that the economy steered clear of a recession at the start of 2023. But with around 60% of the drag from higher interest rates yet to be felt, we still think the economy will tip into one in the second half of this year involving a peak-to-trough fall of around 0.5%.

The 0.1% q/q rise in real GDP in Q1 was unchanged from the previous estimate. This follows 0.1% q/q growth in Q4 2022, leaving the economy 0.5% below its Q4 2019 pre-pandemic level (but on the more up-to-date monthly data in April it was 0.2% above its pre-pandemic level). This leaves the UK economy still lagging behind all G7 countries except Germany.

The biggest revision was to business investment growth, which was revised up from +0.7% q/q to +3.3% q/q in Q1, Webb adds:

That may have reflected the bringing forward of investment by businesses in response to the super-deduction allowance, which expired on 31st March.

Only Northern Ireland defies fall in house prices

This chart shows that all regions of the UK, except Northern Ireland, saw annual price falls in the second quarter of this year:

All English regions saw a slowing in the annual rate of change compared with last quarter.

Nationwide says:

London saw a 4.3% year-on-year decline, while the surrounding Outer Metropolitan region saw a 2.9% fall.

“Across northern England overall (which comprises North, North West, Yorkshire & The Humber, East Midlands and West Midlands), prices were down 2.7% compared with Q2 2022. The North West was the weakest performing northern region, with prices down 4.1% year-on-year. Meanwhile southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) saw a 3.8% decline.

House prices falling at fastest annual rate since 2009, but 'soft landing still possible'

On an annual basis, UK house prices are falling at the fastest pace since the aftermath of the financial crisis, today’s Nationwide house price data shows.

Despite that 3.5% year-on-year fall in prices, a relatively soft landing is still possible, chief economist Robert Gardner predicts, “providing the broader economy performs” as expected.

Gardner explains:

“Labour market conditions are expected to remain relatively robust, with the unemployment rate remaining below 5%, while income growth is projected to remain solid. With Bank Rate likely to peak in the quarters ahead, longer term interest rates should also start to fall back.

“As a result, a combination of healthy rates of income growth and modest price declines should improve affordability over time, especially if mortgage rates moderate.

Nationwide: rising borrowing costs will drag on housing market

Robert Gardner, Nationwide’s chief economist, says annual house price growth was “broadly stable” at -3.5% in June, little changed from the 3.4% decline recorded in May.

Prices were also fairly stable over the month, rising by a modest 0.1%, after taking account of seasonal effects, reversing the 0.1% decline seen in May.

Gardner adds that rising interest rates will cool the economy:

“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term.

For example, for a representative first-time buyer earning the average wage and buying the typical property with a 20% deposit, mortgage payments as a share of take-home pay are now well above the long-run average, as illustrated in the chart below.

A chart of UK mortgage affordability

Also, house prices remain high relative to earnings, and as a result, deposit requirements are still a significant barrier for those looking to enter the market, Gardner adds:

A 10% deposit on a typical first-time buyer home is equal to around 55% of gross annual income – this is down from the all-time highs of 59% prevailing in late 2022, but still marginally above the levels prevailing before the financial crisis struck in 2007/8.

Updated

UK house prices rose in June

UK house prices have risen, unexpectedly, in June – but are falling on an anual basis.

Nationwide reports that house price inched up by 0.1% this month, on a seasonally-adjusted basis.

The average price rose to £262,239 from £260,736. Economists predicted a fall of 0.3%.

But on an annual basis, house prices are 3.5% lower than a year ago, a small acceleration on the 3.4% fall in May (which was the fastest drop since 2009).

Nationwide reports that all regions except Northern Ireland recorded annual price falls in Q2.

East Anglia was the weakest performing region with prices down 4.7% year-on-year

Updated

The squeeze on UK households intensified at the start of this year, this morning’s national accounts show.

Real households’ disposable income (RHDI) fell by 0.8% following positive growth of 1.3% in Quarter 4 (Oct to Dec) 2022.

The ONS also reports that households experienced “simultaneous withdrawals from their deposit accounts and negative secured loans for the first time ever”.

UK economy grew 0.1% in Q1, ONS confirms

Newsflash: The UK has avoided recession over the winter, the latest national accounts confirm.

The Office for National Statistics has confirmed that the economy grew by 0.1% in the first three months of this year, and also in the final quarter of 2022.

That matches the initial estimate, and shows that the UK economy avoided contracting through the cost of living crisis last winter.

The major sectors of the economy all grew, the ONS says:

In output terms, the services sector grew by 0.1% on the quarter driven by increases in information and communication, and administrative and support service activities; elsewhere, the construction sector grew by a revised 0.4% (previously 0.7%), while the production sector grew by 0.1%, with a revised 0.6% growth in manufacturing (previously 0.5%).

Updated

We have encouraging news from the UK car sector.

UK car production rose for the fourth consecutive month in May, up 26.9% year on year, according to the latest figures published today by the Society of Motor Manufacturers and Traders (SMMT).

The SMMT reports that:

79,046 units left production lines, 16,762 more than in the same month last year, as manufacturers defied the challenging economic backdrop to fulfil customer demand for the latest British-built models, at home and overseas, although the total was still down -31.9% on May 2019.

Earlier this week, the UK car industry warned that the growth of electric car production in Britain is under threat from a Brexit “cliff edge” in January unless the EU agrees to delay new trade rules until 2027.

Updated

China's factory and service sectors stumble amid economic malaise

China’s factory activity declined for a third straight month in June, and growth in other sectors has slowed.

The official manufacturing purchasing managers’ index (PMI), released earlier today, inched up to 49.0 from 48.8 in May. That left China’s factory PMI below the 50-point mark that separates expansion from contraction.

The non-manufacturing PMI fell to 53.2 from 54.50 in May, indicating a slowdown in service sector activity and construction.

A worrying sign for the global economy….

Introduction: UK national accounts, house price data and eurozone inflation all due

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

Two pieces of data this morning will give us a new insight into the state of the UK economy.

The UK’s GDP quarterly national accounts, for January to March 2023, are due at 7am. They will show how fast (or how slowly) the economy grew in the quarter, how various sectors of the economy performed, and how households fared.

The initial estimate was that the economy grew by 0.1% in Q1, and in the last quarter of 2022, thus avoiding a recession. That could be revised today, though.

We’ll also get a healthheck on the UK property market, from Nationwide’s monthly house price index (also expected at 7am, so we’ll be busy).

A month ago, Nationwide reported that UK house prices fell at their fastest annual pace for nearly 14 years in May, by 3.4%, and economists predict a larger fall in June.

Also coming up

Inflation will also be in focus today, with the latest cost of living data from Europe. Eurozone headline CPI inflation is forecast to have slowed to 5.6%, from 6.1%, but core inflation could nudge higher.

In the US, the Federal Reserve’s preferred measure of price-growth – core PCE -is expected to show that core elements of inflation remain stubborn. That could encourage the Fed to maintain tight monetary policy, to squeeze the US economy.

We’ll also be tracking Thames Water, which has refused to say when it will publish its annual report and accounts, which had been expected by investors next week, as concerns mount over the company’s financial viability.

The agenda

  • 7am BST: UK quarterly national accounts for January-March

  • 7am BST: Nationwide house price index for June

  • 7.45am BST: French inflation report for June

  • 8.55am BST: German unemployment report for June

  • 10am BST: Eurozone inflation report for June

  • 1.30pm BST: US PCE index of inflation for May

  • 3pm BST: University of Michigan survey of US consumer confidence

Updated

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