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The Guardian - UK
The Guardian - UK
Business
Julia Kollewe

UK recession risk mounts as business falters; mortgage lenders cut rates – as it happened

United Kingdom Britain United States Nationwide NatWest TSB Microsoft Activision Blizzard CMA GfK
Young woman writes on blackboard menu with white pen at crepe stall
Young woman writes on blackboard menu with white pen at crepe stall
 Photograph: Radharc Images/Alamy

Closing summary

Britain’s economy is at growing risk of recession, with industry figures showing the sharpest monthly fall in private sector activity, outside of the Covid pandemic, since the financial crisis.

In a sign that higher interest rates and the cost of living crisis are combining to depress consumer demand, the latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply (Cips) showed a steep drop in the UK’s dominant service sector and manufacturing output in September.

Aside from pandemic disruptions to the economy, the latest decrease in the purchasing managers’ index (PMI) was the steepest since March 2009.

On Thursday, the Bank of England halted its most aggressive round of interest rate increases in decades on Thursday amid growing concerns over the economy, holding borrowing costs at 5.25% after 14 previous rises. It said it was given early sight of the S&P Global/Cips data before its decision.

Our other main stories today:

Thank you for reading, and have a great weekend. We’ll be back next week. Take care! – JK

European shares are still drifting lower, with the exception of the UK’s FTSE 100 index which is 25 points, or 0.3%, ahead at 7,703. On Wall Street, the Dow Jones is flat, the tech-heavy Nasdaq has gained 0.4% and the S&P 500 edged 0.2% higher.

With this, we are wrapping up for the day and the week.

Loss of US services momentum holds back economy – PMI

Business activity in the US flatlined in September, the worst performance in seven months, as the services sector lost momentum and manufacturers reported a drop in new sales, according to a survey.

The latest purchasing managers’ index (PMI) flash survey from S&P Global showed a slight drop in the overall output index to 50.1 last month from 50.2 in August, pointing to a slight expansion (any reading above 50 signals expansion; any reading below indicates a contraction).

Manufacturers and service providers reported muted demand. New orders fell at the fastest pace this year so far as demand for services slipped further into negative territory. Manufacturers also saw a drop in new sales, albeit at a slightly softer pace. Cost pressures ticked higher again, as input prices rose at a marked pace. Nonetheless, the rate of cost inflation was much weaker than those seen on average throughout the last three years, S&P Global said.

Key findings:

  • Flash US PMI Composite Output Index at 50.1 (August: 50.2). 7-month low.

  • Flash US Services Business Activity Index at 50.2 (August: 50.5). 8-month low.

  • Flash US Manufacturing Output Index at 49.7 (August: 48.5). 2-month high.

  • Flash US Manufacturing PMI at 48.9 (August: 47.9). 2-month high.

Updated

TikTok has matchmaking service for staff to play cupid for co-workers

TikTok has an internal matchmaking service for employees to introduce their colleagues to friends and family members, it has been revealed.

The channel, called Meet Cute, sits on the workplace tool used by thousands of TikTok employees around the world for document hosting, video conferencing. It also helps people find a potential romantic partner from among their colleagues.

On the platform, which was first reported by Forbes, employees can advertise their family, friends or acquaintances to colleagues, with a feed of posts that show information that typical dating apps would show, such as height and weight. The service also allows employees to comment on the posts and evaluate the people who come up on the feed.

A logo of Tik Tok is seen at the company's headquarters in Singapore.
A logo of Tik Tok is seen at the company's headquarters in Singapore. Photograph: Roslan Rahman/AFP/Getty Images

Labour to strengthen watchdog to avoid repeat of ‘disastrous’ Truss budget

Ministers would have to consult the official watchdog on major tax and spending changes under Labour plans that would prevent a repeat of Liz Truss’s ill-fated mini-budget, the shadow chancellor, Rachel Reeves, has said.

The move would ensure the Office for Budget Responsibility (OBR) was not “gagged” by future prime ministers and chancellors trying to avoid an official financial forecast, she said.

A Labour government would also introduce legislation to ensure that the OBR had the power to independently publish its own impact assessment of any major fiscal event making permanent tax and spending changes, she pledged before a visit on Friday to the London Stock Exchange with the party leader, Keir Starmer.

As UK mortgage interest rates fall, should you choose a two-year or five-year fix? Read this piece by our Money editor Hilary Osborne.

Houses prices in Germany plunged nearly 10% between April and June, the biggest fall on record.

Prices fell by 9.9% in the second quarter on a year earlier, the largest decline since the series began in 2000, according to Germany’s Federal Statistical Office. House prices reached an all-time high in the second quarter of 2022 during a post-pandemic boom, and have fallen every quarter since then.

Updated

CBI: Manufacturing output, orders worsen in September

The latest CBI industrial trends survey paints a gloomy picture for manufacturing.

All the main measures are down, including output; total orders, which fell to a five-month low, a net balance of -18 in September from -15 in August, driven by a further decline in overseas demand; export orders declined to -23 from -18 (the balance deducts the number of manufacturers who said orders rose from those reporting they fell).

This suggests production will continue to contract, said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics.

The further decline in the CBI survey in September chimes with other evidence that the downturn in the manufacturing sector has further to run.

And the true picture probably is gloomier, given that the message from the CBI survey still is stronger than that from the equivalent balance in the S&P Global/CIPS manufacturing PMI. We are inclined to place more weight on the latter; the CBI survey has a smaller sample size and asks respondents to compare orders to “normal” levels, rather than to the previous month, as the PMI does.

On balance, then, we think manufacturing output will continue to tick down over the coming few months, as demand remains weak and firms continue to reduce their excess stock.

The CBI survey, however, adds to our conviction that the rate of increase in the core goods consumer prices index will slow in the second half of this year. While the net balance of manufacturers intending to increase selling prices over the next three months increased to +14, from a 30-month low of +8 in August, it was consistent with core producer output price inflation remaining around 1%.

Amazon to put ads on streaming services

Amazon has become the latest tech company to introduce advertising on its streaming services next year in countries including the US, UK, Germany and Canada.

In a blog post, Amazon said Prime Video content will include “limited” ads from early next year. It added that this will enable it to continue investing in TV content and increase investment “over a long period of time”.

Amazon said it aimed to have “meaningfully fewer ads than linear TV and other streaming TV providers”. Customers will also be able to pay extra for an ad-free option for an additional $2.99 per month in the US. It will share pricing for other countries at a later date.

The US tech giant said:

Ads in Prime Video content will be introduced in the US, UK, Germany, and Canada in early 2024, followed by France, Italy, Spain, Mexico, and Australia later in the year. No action is required for Prime members. We’re not making changes in 2024 to the current price of Prime membership.

We will email Prime members several weeks before ads are introduced into Prime Video with information on how to sign up for the ad-free option if they would like.

Amazon logo.
Amazon logo. Photograph: Pascal Rossignol/Reuters

While the rest of Europe is still a sea of red, the UK index of blue-chip stocks has turned positive, boosted by AstraZeneca, which reported promising clinical results on a breast cancer drug.

The FTSE 100 index is up 40 points, or 0.5%, at 7,718. AstraZeneca shares rose 2.5% while the online grocer Ocado is the main riser, up 5.2%. AstraZeneca reported that an experimental precision drug it is developing with Japanese drugmaker Daiichi Sankyo slowed the progression of breast cancer in a late-stage trial.

Ocado bounced back (a bit) after a 20% slump in the shares yesterday – its worst drop in 11 years after it was downgraded by a City broker. This wiped nearly £1.4bn off the company’s market value, resulting in paper losses of £32m for the co-founder and chief executive Tim Steiner. BNP Paribas Exane analyst Andrew Gwynn downgraded his recommendation on Ocado to ‘underperform’ from ‘neutral’.

Ocado was a big beneficiary of the shift to online shopping during the Covid-19 pandemic but online sales have fallen back since then, as shops reopened.

Updated

‘You could fill a museum with it’: the $963m Roman Abramovich art collection revealed

Away from economic worries, this is a fascinating story about how the Russian oil and gas tycoon Roman Abramovich and his ex-wife Dasha Zhukova amassed one of the most significant collections of modern art in private hands, by my Guardian colleagues Rob Davies and Jonathan Jones:

At first glance, the red-brick facade near a line of railway arches resembles an ordinary south London warehouse.

A more careful observer might notice spiked railings, a steel door, and imposing metal gates through which lorries come and go.

On a cold February day in 2014, a precious cargo left this small fortress: a spectacular and unconventional nude by the painter Lucian Freud. Benefits Supervisor Sleeping, a study of one of his most celebrated models snoozing on a well-worn sofa, the folds of her flesh filling the canvas, is recognised as a modern masterpiece.

Bought at a New York auction in 2008 by Abramovich for $33.6m (£26.5m), it was now emerging from storage, to be displayed in his mansion at Kensington Palace Gardens, a few miles across London.

Most art lovers could only dream of wielding such power. But for Abramovich, the work was a mere fragment of a hoard of paintings and sculptures that the billionaire former owner of Chelsea football club could order up for private enjoyment at homes in England and the south of France or aboard his yacht, the $700m Eclipse.

The Guardian can reveal that during an extraordinary spending spree, spanning nearly a decade, Abramovich and his ex-wife, the US-based collector Zhukova, acquired what experts believe is one of the most significant private collections of modern art ever assembled, a trove of more than 300 pieces whose worth was estimated by the oligarch’s own assessors at almost $1bn.

“You could fill a museum with it; this is a stupendous collection,” said Andrew Renton, the professor of curating at Goldsmiths, University of London.

Updated

Rupert Harrison, a member of the chancellor’s economic advisory council, said:

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, is somewhat sceptical about the UK going into recession. But he added that the gloomy PMI data further increases the chances that interest rates have peaked at 5.25%.

We are skeptical of the composite PMI’s signal that economic activity is declining quickly, given that real wages have picked up and consumers’ confidence has improved materially over recent months.

The PMI has a track record of signalling downturns that have not materialised. For instance, it averaged 48.5 in Q4 2022, when GDP rose by 0.1% q/q. It also signalled quarter-on-quarter contractions in GDP in 1998 and 2001 that never materialised, as well as a dip in activity after the Brexit vote in 2016, which isn’t visible in the official data…

For now, then, we are sticking with our forecast for a marginal 0.1% quarter-on-quarter increase in GDP in Q3. Needless to say, though, today’s report further increases the chances that the BoE’s tightening cycle is over.

Independent economist Julian Jessop also thinks that the UK can dodge a recession:

Updated

Chris Williamson, chief business economist at S&P Global Market Intelligence, which compiled the PMI survey said:

The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK. The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.

Underscoring the severity of the UK’s deteriorating situation, September’s downturn is the steepest since the height of the global financial crisis in early 2009 barring only the pandemic lockdown months.

The survey had warned that a revival of growth in the second quarter looked unsustainable, and the third quarter is indeed seeing a mounting toll on the economy from the reality of the increased cost of living and the recent rapid rise in interest rates.

Despite higher fuel prices during the month, firms’ costs grew at a sharply reduced rate overall which, combined with collapsing pricing power amid weak demand, looks set to take further pressure off inflation in the coming months.

Updated

Rhys Herbert, senior economist at Lloyds Bank, said:

Yesterday’s pause in interest rate rises will be welcomed as a second piece of good news in as many days for businesses following Wednesday’s lower than expected inflation stats. However, today’s data add further weight to Bank of England concerns that economic activity has weakened and reinforces expectations in the market that interest rates are now at a peak.

Nevertheless, manufacturers and services businesses are still feeling the pressures of a tight labour market that has pushed salaries up and squeezed margins in recent months. Businesses will be hoping inflation continues to head in the right direction and that signs that labour market pressures are easing will both aid recruitment and cap wage demands.

The Bank of England referred to the grim business survey yesterday when it announced that it was keeping interest rates unchanged.

The PMI survey said:

Manufacturing production continued to decrease more quickly than service sector output, but the gap narrowed considerably in September. Service providers recorded a fall in business activity for the second month running and the rate of decline was the fastest since January 2021.

The latest survey highlighted an abrupt turnaround in private sector employment numbers, thereby ending a five-month period of growth. Aside from the pandemic lockdown months, the rate of job shedding was the fastest since October 2009.

Cost pressures eased, with input price inflation posting its biggest monthly fall so far this year, despite reports of pressure on costs from higher fuel bills.

UK business activity shrinks most since financial crisis excluding Covid period

The risks of a UK recession have risen as business activity is shrinking at the fastest pace since the financial crisis, when months hit by Covid-19 lockdowns are excluded, according to a closely-watched survey.

A steeper downturn in the dominant service sector is weighing on the UK economy, with overall business activity at a 32-month low in September, the ‘flash’ estimate from S&P Global showed.

Key findings (any reading below 50 signals contraction):

  • Flash UK PMI Composite Output Index at 46.8 (Aug: 48.6). 32-month low.

  • Flash UK Services PMI Business Activity Index at 47.2 (Aug: 49.5). 32-month low. Flash UK Manufacturing Output Index at 44.6 (Aug: 44.1). 2-month high.

  • Flash UK Manufacturing PMI at 44.2 (Aug: 43.0). 2-month high.

Updated

Maximilian Uleer and Carolin Raab, analysts at Deutsche Bank, said:

Contrary to the rest of the eurozone, Germany has merely managed to return to its pre-Covid GDP level and the title “the sick man of Europe” has reemerged in the media. We dislike the title and prefer to see Germany as a “sore athlete”.

Despite the weak GDP growth, the Dax is up 18% since the end of 2019. Germany has been facing multiple challenges, from rising energy costs, its high manufacturing exposure, to weak demand from its export destinations. Some of the challenges are “homemade” and might persist, while others could start to unwind and soon turn into opportunities.

Updated

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:

The numbers for PMI services in the Eurozone paint a grim picture, but it’s not all doom and gloom. Sure, activity has been reduced once again and new incoming business has been shrinking for three months in a row. However, companies are hiring in September at a somewhat faster pace than they did in August. Thus, companies still show some resilience and optimism in the face of lower demand. Having said this, we expect the eurozone to enter a contraction in the third quarter. Our nowcast, which incorporates the PMI indices, points to a drop of 0.4% compared to the second quarter.

The Eurozone’s HCOB PMI figures for services are serving up a bitter pill for the European Central Bank to swallow. Input prices, where wages play an important role, have sped up in September for the second month in a row. Output prices continue to be on the increase as well, but upward pressure has softened a bit again. While the latter may bring some comfort to central bankers, the heat on input prices shows that the risk of a wage-price spiral must remain very much on the radar of the ECB.

The main drag continues to come from manufacturing where the order situation deteriorated further. Companies keep reducing the stock of purchased goods. However, the declines in purchasing activity have lost some momentum. Thus, the destocking process may bottom out over the next few months in line with a worldwide trend. This will be an important precondition for the recovery of the manufacturing sector which we expect for the beginning of next year.

Turning to France and Germany, de la Rubia said:

In terms of the weakness in the manufacturing sector, France is catching up with Germany. Indeed, the French PMI heads further south while Germany’s PMI has marginally increased from a very low level. In the services sector, the French services sector is in a much worse state than the German one. At the same time there are signs of a stabilization in Germany services, but further deterioration in France. This may have to do with the fact the luxury goods business and services play a more important role in France than they do in Germany. When things go south, those are the first to feel it, way more than non-luxury business providers.

Updated

Eurozone companies suffer sharp drop in new orders – PMI

Business activity in the eurozone continued to shrink in September, as companies suffered their sharpest drop in new orders for almost three years.

The worsening in output was once again led by manufacturing but the service sector also declined for the second month running, according to the ‘flash’ PMI from Hamburg Commercial Bank, compiled by S&P Global Market Intelligence. At the same time, costs and inflation picked up although factory gate prices increased at the lowest pace in more than 2 1/2 years.

The eurozone’s two largest economies – Germany and France – were the key drivers of the overall downturn in activity, as we reported earlier. In the rest of the eurozone, business activity was broadly stable.

Key findings (any reading below 50 points to contraction):

  • HCOB Flash Eurozone Composite PMI Output Index at 47.1 (August: 46.7). 2-month high.

  • HCOB Flash Eurozone Services PMI Business Activity Index at 48.4 (August: 47.9). 2-month high.

  • HCOB Flash Eurozone Manufacturing PMI Output Index at 43.4 (August: 43.4). Unchanged rate of decline.

  • HCOB Flash Eurozone Manufacturing PMI at 43.4 (August: 43.5). 2-month low.

Updated

Neil Wilson, chief market analyst at Finalto Trading, has looked at the moves in financial markets this morning.

Stocks are ending the week under pressure as bond yields lurch to fresh cycle highs following the Fed’s hawkishness and a raft of central bank announcements that cement the view that (in most cases) rates are going to stay higher for longer. The benchmark US 10-year Treasury note yield hit 4.5%, the highest in 16 years as investors fretted about inflation and the ability of central banks to ease in a slowing economy, whilst the two-year rose above 5.2%, its highest since 2006.

This morning European stocks are generally lower, taking cue from a very poor performance on Wall Street saw the S&P 500 notch its worst day since March. The FTSE 100 is heading for a weekly decline of around half a percent, whilst the Dax and CAC are looking at 2-3% drops.

The yen fell as the Bank of Japan was unchanged with no major changes to the statement, disappointing some who’d thought the central bank might have a few more crumbs on normalisation.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:

The German services PMI stopped its slump and nudged up near 50 in September. This is a pleasant surprise, to be sure. However, in terms of growth it means that activity remained broadly flat following the decline recorded in August. Therefore, our nowcast for services, which considers the PMI data, continues to signal a drag in the third quarter.

It’s no secret that the German manufacturing sector has been going through the wringer lately. The HCOB PMIs, however, indicate that things aren’t going downhill as fast as before, with the decline in new orders slowing down. In addition, the reduction in purchasing activity is losing momentum. Still, our nowcast for manufacturing production, which includes the PMI figures, is hinting at a drop of more than 2% compared to the second quarter.

The goods sector is still jamming to that deflation tune of recent months, according to PMI numbers. Looking at manufacturing input prices, they keep heading south, just not as quick as before. Most probably this is due to energy prices which have spiked over the last few weeks. Factory output prices, by contrast, have been cut at a marginally faster rate than the month before.

The HCOB Composite PMI confirms our view that Germany has entered once again into contraction during the current quarter, after the downturn at the tail end of 2022 and early 2023. Our nowcast points to a rather deep GDP slump of 1% compared to the quarter before. Having said this, some important sub-indicators like new business and backlogs of work, which appear to be reaching a bottom, offer hope of an end to this slump as we hit the new year.

Updated

The picture is also pretty gloomy in Germany, where business activity fell for a third month in September.

The HCOB ‘flash’ PMI survey compiled by S&P Global said weaker demand meant average factory-gate prices rose at their slowest rate for more than 2 1/2 years, despite growing cost pressures.

Employment fell for the first time since December 2020, albeit only slightly, as businesses reported shrinking backlogs of work and pessimistic expectations for activity in the year ahead.

Key findings:

  • HCOB Flash Germany Composite PMI Output Index at 46.2 (Aug: 44.6). 2-month high.

  • HCOB Flash Germany Services PMI Business Activity Index at 49.8 (Aug: 47.3). 2-month high.

  • HCOB Flash Germany Manufacturing PMI Output Index at 39.2 (Aug: 39.4). 40-month low.

  • HCOB Flash Germany Manufacturing PMI at 39.8 (Aug: 39.1). 3-month high.

The French economy contracted at the fastest rate for almost three years in September, according to a closely-watched survey.

The flash purchasing managers’ index (PMI) survey from Hamburg Commercial Bank and S&P Global Market Intelligence showed declines both manufacturing and services sectors accelerated markedly since August, with firms reporting poor demand.

Key findings (any reading below 50 indicates contraction; any reading above points to expansion):

  • HCOB Flash France Composite PMI Output Index at 43.5 (Aug: 46.0). 34-month low

  • HCOB Flash France Services PMI Business Activity Index at 43.9 (Aug: 46.0). 34-month low.

  • HCOB Flash France Manufacturing PMI Output Indexat 41.8 (Aug: 45.9). 40-month low.

  • HCOB Flash France Manufacturing PMI at 43.6 (Aug: 46.0). 40-month low.

Updated

Microsoft’s Activision Blizzard deal set to be cleared

Microsoft’s $69bn (£54bn) deal to buy Activision Blizzard, the maker of games including Call of Duty and World of Warcraft, looks set to be cleared after the UK competition regulator said a revised deal addresses its concerns.

The Competition and Markets Authority (CMA) moved to block the biggest tech deal in history in April, citing concerns that Microsoft would dominate the nascent cloud gaming market.

While the move angered Microsoft – the company called it the darkest day in its four decades operating in the UK – a revised proposal was submitted that included selling cloud gaming rights outside Europe to the French rival Ubisoft.

On Friday, the CMA said that the sale of the rights “substantially addresses previous concerns and opens the door to the deal being cleared”.

Call of Duty: Modern Warfare III
Call of Duty: Modern Warfare III Photograph: Activision

Updated

UK mortgage rates dip – Moneyfacts

Mortgage rates in the UK have fallen slightly, according to Moneyfacts.

The average two-year fixed residential mortgage is now 6.56%, down from 6.58% yesterday, while the average five-year fix has edged lower to 6.06% from 6.07%. There are 5,295 residential deals available at the moment, slightly up from yesterday.

The average two-year buy-to-let deal dropped to 6.46% from 6.48%, and the average five-year deal for buy-to-let landlords was unchanged at 6.36%.

Experts expect mortgage rates to fall further in the coming weeks and months amid a “rate war”. There are now some five-year residential deals on offer for less than 5%.

European shares have opened lower, and global stocks are on track for their worst week in a month, as investors are now expecting US interest rates to stay high for some time.

MSCI’s index of global equities dropped 1.7%.

The Bank of Japan kept ultra-low interest rates today. The US Federal Reserve also held rates this week, but expectations of swift rate cuts next year receded.

In London, the FTSE 100 index slipped 21 points, or 0.3%, to 7,658 in early trading. The Dax in Frankfurt and the Ibex in Madrid both fell 0.6% at the open, as did the Euro Stoxx 600 index of Europe’s leading shares.

Helen Dickinson, chief executive of the British Retail Consortium, said the coming months will be vital for retailers in the run-up to Christmas.

Returning consumer confidence helped retail sales regain lost ground after a challenging July. Toiletries, cosmetics, and books performed particularly well as consumers purchased holiday essentials for their late summer getaways. Although white goods and other big-ticket items continued to take a hit as households spent more cautiously.

The next few months are vital for retailers as they gear up for the all-important Christmas trading. While cost-of-living challenges continue to loom large, retailers are working hard ensuring customers get the best possible value. Their capacity to do this is limited by the upcoming rise to business rates, which will see retailers paying hundreds of millions more every year and which the chancellor should scrap in his upcoming autumn statement.

Updated

UK consumer confidence rises but remains suppressed

Consumer confidence in the UK is continuing to improve as inflation slows, but many households are still struggling to make ends meet, according to a survey.

GfK’s long-running consumer confidence index increased four points in September, but remains in negative territory, at -21.

Expectations for the UK economy over the next 12 months rose six points to -30, 44 points higher than last September. Confidence in personal finances for the coming year edged up by one point to -2, which is 38 points higher than this time last year.

With fewer than 100 shopping days to Christmas, retailers will be relieved to see a four-point boost to the major purchase index, a measure of confidence in big ticket purchases, taking it to -20, which is 18 points higher than a year ago.

Joe Staton, client strategy director at GfK, said:

Against the backdrop of falling inflation figures, growth in wages and high interest rates, UK consumer confidence rose this month to minus 21, the best recorded showing since January 2022.

While this month’s improved headline score is good news, it’s important to note many households are still struggling with the cost-of-living crisis and that economic conditions are tough. The reality is that consumer confidence remains suppressed, and the financial mood of the nation is still negative.

Updated

Introduction: UK lenders cut mortgage rates; retail sales in Britain rise, led by food

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

A number of UK lenders including NatWest, TSB, Nationwide building society and Virgin Money have now cut their mortgage rates, with some fixed deals going below 5%.

Several lenders began to reduce deals after UK inflation slowed unexpectedly to 6.7% on Wednesday despite higher petrol prices. There were more cuts to mortgage rates after the Bank of England decided to leave its base rate unchanged at 5.25% yesterday, rather than raising it as markets had expected. The move triggered hopes that the peak in rates may have been reached.

NatWest announced 0.31% reductions across fixed residential and buy-to-let deals. Nationwide reduced selected fixed rates by up to 0.31% from today. The UK’s biggest building society said five- and ten-year fixed rate for first-time buyers and home movers will now start at 4.94%.

TSB will reduce some residential deals by up to 0.25% today, which means deals start from 5.09%. Virgin Money said its five-year fixed rates will start from 4.97%. Yorkshire Building Society also launched a sub-5% mortgage this week, lowering its five-year fixed rate to 4.99%.

Lewis Shaw, mortgage expert at Shaw Financial Services, said:

It’s another sign of the growing rate war.

Chances are we’ll see much more of this in the coming few weeks, and not before time, as consumers are worrying, especially with over half a million people set to move onto new rates before Christmas. This could be the present many have been hoping for.

Retail sales in Great Britain staged a modest recovery in August, rising 0.4% after July’s washout when they fell 1.1%.

Economists had expected a 0.5% increase. Over the three months to August, sales were up 0.3%, according to the Office for National Statistics.

Supermarkets and other food stores were the strongest performers, with sales up 1.2% last month following July’s 2.6% drop when supermarkets reported that the wet weather reduced clothing sales and their food sales also fell back.

It was the wettest July since 2009 and the sixth-wettest July on record since 1836, according to the Met Office. While weather in August improved on July, it was still a mixed and unsettled month, the ONS noted.

Sales at non-food stores (department stores, clothing retailers and others) were up 0.6% last month, following a 1.2% decline in July. However, online sales suffered, falling 1.3% after July’s 1.9% rise when heavy rain and a range of promotions boosted sales. Petrol and diesel sales fell by 1.2% as prices rose sharply.

The Agenda

  • 8am BST: Spain GDP final for second quarter

  • 8.15am BST: France HCOB PMIs flash for September

  • 8.30am BST: Germany HCOB PMIs flash for September

  • 9am BST: Eurozone HCOB PMIs flash for September

  • 9.30am BST: UK S&P Global/CIPS PMIs flash for September

  • 11am BST: :UK CBI Industrial trends for September

  • 2.45pm BST: US S&P Global PMIs flash for September

Updated

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