UK markets declined this week, with the FTSE 100 Index falling by 1.07% to trade at 8,220 points at the time of writing. The UK economy grew 0.2% in August following two months of stagnation, helped by broad-based expansions in services, manufacturing and construction. The data from the Office for National Statistics was in line with economists’ forecasts and came after zero growth in June and July, but marked a slowdown from the start of the year.
The expansion in August after the UK economy failed to grow in three of the four previous months lends support to views that a mild slowdown in GDP growth this year is more likely than another recession. The value of UK retail sales increased at an annual rate of 2% in September, up from 1% in August and the fastest pace in six months, according to figures from the British Retail Consortium.
The strong reading was helped by higher clothing purchases as shoppers sought to update their wardrobes with coats, boots and knitwear as we enter autumn and raised hopes for a busy festive season.
The British Retail Consortium data echoes figures from Barclays, which showed consumer spending rising by an annual rate of 1.2% in September, following a 1% increase in August and a contraction in the previous two months.
The Barclays data, which tracks 40% of the UK’s credit card transactions and was published on Tuesday, reported that spending on clothing rose by an annual rate of 4.5%, marking the first uplift this year and its highest growth since July 2022. Non-essential spending, such as entertainment and hospitality, rose by an annual rate of 2.7% in September, the fastest rate this year, according to Barclays.
Elsewhere, the British population reached 68.3 million in the middle of 2023, an increase of 1% on mid-2022 and the fastest annual growth rate recorded since 1971, the Office for National Statistics said on Tuesday. However, overall population growth is now due solely to immigration, with the number of deaths outnumbering births for the first time in 50 years, other than during the pandemic, highlighting the country’s demographic challenges.
Commodity markets
In the commodity markets, Brent crude futures traded around $79 per barrel on Friday and are set for a slight weekly rise, as concerns about potential supply disruptions in the Middle East, with Israel planning to strike oil producer Iran and spikes in fuel demand as the major storm which hit Florida supported prices.
The US, the world’s largest oil producer and consumer, has been hit by a second storm, Hurricane Milton, which ploughed into the Atlantic Ocean on Thursday after cutting a destructive path across Florida, killing at least 10 people and leaving millions without power.
The storm has already driven up demand for petrol in the state, with about a quarter of fuel stations selling out of supplies, helping to support crude prices. Further underpinning prices, investors remained wary of a potential escalation in tensions between Israel and Iran, with Israeli Defence Minister,Yoav Gallant promising that an Israeli strike against Iran would be “lethal, precise and surprising”.
Even with threats to the oil-producing Middle Eastern region top of mind, weak demand continues to underpin the fundamental outlook. The US Energy Information Administration downgraded its demand for 2025 on Tuesday citing weakening activity in China and North America.
Gold prices traded around $2,640 an ounce on Friday and are set for a weekly fall, but remain supported after investors increased bets that the Federal Reserve will deliver another interest rate cut next month, following the release of the latest US economic data.
Equity markets
US equity futures were little changed on Friday as investors look ahead to the latest producer inflation report and corporate earnings from major banks. In Thursday’s regular session, the Dow Jones Industrial Average fell 0.14%, the S&P 500 dropped 0.21%, while the Nasdaq Composite declined by 0.05%. US consumer price inflation fell to 2.4% in September, but still exceeded expectations, strengthening views that the Federal Reserve will cut interest rates by a further 0.25% at its next meeting in November.
The headline figure from the Bureau of Labor Statistics was below August’s 2.5% annual increase but above economists’ expectations of 2.3%. The inflation reading is the last before the November 5th presidential election and comes after the Federal Reserve cut rates by 0.5% last month, amid signs that it was succeeding in its battle to tackle price pressures. Markets are now pricing in an 88% likelihood of a 0.25% rate cut in November following the data, compared with 76% beforehand, according to the CME FedWatch tool.
The inflation figure, released on Thursday marked the sixth consecutive month the annual headline rate has fallen. However, core inflation, which strips out volatile items such as food and energy, rose faster than expected, up 3.3% in the year to September. Economists had expected the core rate to remain at August’s rate of 3.2%.
Jobless claims data released on Thursday also exceeded economists’ expectations, with the number of Americans filling for unemployment benefits jumping to 258,000, almost 30,000 more than the forecast figure, and the highest weekly increase since August 2023. Although the decline in inflation from its 2022 peak of 9.1% has so far not triggered a significant weakening of the labour market, surprising many economists.
Last week’s US jobs report showed that companies added 254,000 positions in September, far outstripping expectations. The unemployment rate fell to 4.1%, after several months of increases.
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