Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Consumer prices across China are falling at the fastest pace in 15 years, as its economy struggles with weak demand.
China’s consumer price index fell 0.8% year-on-year in January, data released this morning showed. It’s the fourth straight month of declines, and the biggest contraction since 2009 after the financial crisis.
The inflation rate was dragged down by falling food prices, which dropped by 5.9% year-on-year in January.
Pork prices dropped by 17%, and were a major drag on inflation, while fresh vegetables were 12.7% cheaper than a year ago and fruit cost 9.1% less.
China’s factories continued to cut their prices last month, too. The producer price index (PPI) slid 2.5% from a year earlier in January after a 2.7% fall the previous month.
China’s consumer prices dropped into deflationary territory last summer, and prices have been flattish since.
Its economy has struggled as the bounceback following the lifting of Covid-19 restrictions falters, and as its indebted real estates sector contracts.
The drop in annual inflation puts more pressure on Beijing policymakers to take fresh steps to stimulate the economy.
China’s stock markets have rallied a little today.
Kyle Rodda, senior financial market analyst at capital.com, says the markets have “ostensibly reacted favourably” to disappointing Chinese price data.
While a very concerning sign for China’s economy, which could be becoming entrenched in a debt and deflation cycle, the markets arguably responded in a positive way to the news.
Perhaps markets see the terribly low number as a potential catalyst for more muscular monetary or fiscal stimulus from the central government, which, up until this point, has been moderate in applying countercyclical policy.
9.30am GMT: Latest weekly data on UK economic and business activity
1.30pm GMT: US weekly jobless claims figures
3pm GMT: Bank of England policymaker Catherine Mann to give speech: “Mind the Gap(s): Inflation Data and Prospects”
The boss of the Confederation of British Industry has urged politicians to keep “large-scale” tax cuts off the table, and to focus on funding public services.
Speaking at a conference in Westminster, CBI director general Rain Newton-Smith said that companies do not want to see tax reductions “driven by short-termism”.
Newton-Smith argued that for growth to be truly sustainable, it must prevent persistent high inflation.
Business investment is set to fall five per cent this year, in part because of higher interest rates needed to bring inflation down. As one business leader told me, they don’t want to see tax cuts driven by short-termism which leads to higher interest rates. They want stability so they can invest for the future.
To fund our public services with an ageing population, we must keep large-scale tax cuts off the table.
Last week, the International Monetary Fund issued a strong warning to Jeremy Hunt against cutting taxes in his budget in March, stressing the need to boost key areas of public spending instead.
Hunt had been hinting that the budget would include tax cuts. But following the IMF’s intervention, he played down the prospect, saying there was less room for tax reductions than hoped.
Newton-Smith also called for green investment to be increased from £10bn to £50bn per year by 2030, so the UK can hit its net zero target by 2050.
The majority will need to come from the private sector. But public sector investment in green technologies is essential as a catalyst to crowd that in. Whether that is de-risking Sustainable Aviation Fuels through contracts for difference, or helping our public buildings to move to low carbon heat and our social housing sector to insulate homes, lowering bills.
Just look at the Port of Tyne, a fantastic CBI member I visited two weeks ago. Last year they secured £100m for their Tyne 2050 project – half catalytic public investment; half all-important private sector investment.
But in the UK, overall public sector investment is too low and too volatile. The average OECD country invests nearly fifty per cent more.
That’s a timely intervention, with the Labour party expected to scale back its £28bn green investment programme today….
….a decision that has been criticised by environmentalists, progressive campaigners, and policy experts today:
Newton-Smith was appointed the CBI’s director last spring, after her predecessor Tony Danker was dismissed after the Guardian revealed unrelated complaints about his conduct in March.
The CBI settled with Danker for an undisclosed sum this week and reiterated that his departure was unrelated to other allegations of misconduct at the group.
Profits at motorcycle manufacturer Harley-Davidson have dropped, as demand slows.
Harley-Davidson has reported an operating loss of $21m for the last quarter of 2023, down from a profit of $4m in Q4 2022. Net income shrank 38% to $26m.
Global motorcycle shipments fell by 7% to 179,984.
Just in: US sportswear company Under Armour has raised its profit forecasts, as input costs ease.
Under Armour also lifted its annual profit margin forecasts – it now expects annual gross margin growth of 120 to 130 basis points, compared to previous expectations of a 100 to 125 basis point increase.
However, it also expects revenues to fall by 3% to 4% this financial year, “tightening the previous expectation” of a 2-4% drop.
Revenues fell 6% in the last quarter, Under Armour reports today. But gross margin increased 100 basis points to 45.2 percent, driven primarily by “supply chain benefits related to lower freight expense”.
That indicates that inflationary pressures hitting consumer goods makers are easing.
Shares have risen 6% in pre-market trading.
Santander UK have reportedly taken offence at an advert by rival Nationwide, in which Dominic West played an obnoxious bank chief.
Sky News report that Santandar UK have filed a formal complaint with advertising watchdogs over a Nationwide campaign which “discredits and denigrates” Britain’s high street banking industry.
Sky News has learnt that the Spanish-owned lender has told the Advertising Standards Authority (ASA) that the Nationwide television commercial – featuring the actor Dominic West as an arrogant bank boss – is misleading about its rivals’ approach to closing branches.
The complaint was filed during the autumn, soon after the building society campaign launched, according to insiders, but has not been publicly disclosed.
The ASA has yet to adjudicate on the advert, in which West – the boss of A.N.Y Bank – produces a massive lunch bill before proposing branch closures, declaring:
We’re not Nationwide, are we? We’re nothing like them.
Over in Germany, house prices have dropped at the fastest pace on record.
The German Real Estate Index, published by the Kiel Institute for the World Economy, shows that property prices dropped sharply in Europe’s largest economy last year.
Sale prices of apartments fell by 8.9% during 2023, while single-family home price fell 11.3%. The price of multi-family homes dropped 20.1% during the year.
The report says:
The speed and extent of the current fall in real estate prices in Germany are historically unprecedented. Never since the expert committees started recording prices in the 1960s, have real estate prices fallen so quickly and sharply.
Speculation is swirling over the future of parcel delivery firm Yodel.
Yodel employs 10,000 staff and delivers goods for a number of retailers such as John Lewis, Argos and AO World.
Sky News reported yesterday that the Barclay family, who own Yodel, are scrambling to find a buyer for the company.
In response, Yodel said that it is “currently exploring strategic development options” and that “any decisions taken will be made in the best interest of our clients, colleagues and key stakeholders”.
But if a buyer can’t be found, Yodel could be forced to call in the administrators.
The Daily Telegraph reported last night that Yodel was “preparing to call in administrators”, as pressure for a cash injection mounted.
A source close to negotiations over Yodel’s future said its looming financial obligations mean an urgent cash injection is required within two weeks.
The business had never made a profit until the Government-imposed coronavirus lockdown massively boosted online shopping.
Banks need to be more proactive in helping people who are struggling to pay their mortgages, reckons Alastair Douglas, CEO of TotallyMoney:
“The latest figures show that more and more homeowners and landlords are falling into arrears, and we can expect the trend to continue as 1.7 million cheap fixed-rate deals come to an end this year.
If you’re somebody who’s struggling, contact your lender and ask for support — and remember this won’t impact your credit rating. However, missed payments can — and they could stay on your credit file for up to six years. If these persist, you might end up in mortgage arrears, leading to court action and even repossession.
Banks need to be more proactive in issuing this support, and must reach out to people who they think might be in difficulty. Otherwise we won’t just be looking at a mortgage crisis, but a mental health one too.”
More than 200 companies have joined a new US initiative, created by the Biden administration, to support the safe development and deployment of generative AI.
Commerce Secretary Gina Raimondo has announced the U.S. AI Safety Institute Consortium (AISIC) this morning. Many of the major players in AI have joined, including OpenAI, Google and Microsoft, along with Meta, Apple, Amazon.com, Nvidia, Palantir, and Intel.
Financial groups JPMorgan Chase and Bank of America are also on the list, as are BP, Cisco, IBM, Hewlett Packard, Northop Grumman, Mastercard, Qualcomm and Visa, and major academic institutions and government agencies.
“The U.S. government has a significant role to play in setting the standards and developing the tools we need to mitigate the risks and harness the immense potential of artificial intelligence.”
There’s more takeover action bubbling in the City today.
Shares in packaging firm DS Smith have jumped 10% after it revealed it has received a “highly preliminary expression of interest” from rival, and fellow FTSE 100 member, Mondi.
The Board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage.
There can be no certainty as to whether any proposal will be made or the terms of any such proposal. A further announcement will be made if and when appropriate.
Mondi now has until 5.00pm on 7 March to make an offer, or walk away for six months.
It’s official: NatWest Group has announced the appointment of Wealth Management executive Emma Crystal as the new CEO of its Wealth Businesses, including Coutts, subject to regulatory approval.
Paul Thwaite, NatWest’s interim CEO, says:
“Emma’s extensive Wealth Management experience and deep client focus make her the ideal person to lead our Wealth Businesses at this time.
The UK Wealth Management market is large and growing and Emma’s proven ability to work across organisational boundaries will be invaluable in helping us deliver an outstanding client experience and achieve our growth ambitions.”
As covered earlier (9.38am), the position has been vacant since Peter Flavel was pushed out of Coutts in the row over the “debanking” of Nigel Farage.
Rising cost-of-living pressures and higher interest rates have pushed more mortgage holders into arrears on their loans, new data shows.
UK Finance reports that the number of homeowner mortgages in arrears increased by 7% in the last quarter of 2023, to 93,680.
There was an 18% increase in buy-to-let mortgages in arrears, up to 13,570, as more landlords struggled to cope with higher borrowing costs.
But although arrears are rising, the number of homeowner mortgaged homes being taken into possession dropped by 14% in the last quarter, to 540.
Also, 500 BTL mortgaged properties were taken into possession in Q4, 11% greater than the previous quarter.
That combined total of 1,040 repossessions in Q4 2023 is almost half the nearly 2,000 repossessed in the last three months of 2019, before the pandemic.
Eric Leenders, managing director of Personal Finance at UK Finance, says:
“The number of mortgage holders in arrears, whilst still low, is continuing to rise as the cost-of-living and high interest rates take their toll on households.
Importantly, help is available to anyone worried about their finances – please reach out to your lender as soon as possible to discuss the support options available. Lenders have teams of trained experts ready to help. Contacting your lender to find out what support is available won’t affect your credit score.”
NatWest Group is turning to an executive from UBS to run Coutts, its private bank, to succeed the top Coutts executive who was forced out during last year’s ‘debanking’ row involving Nigel Farage.
Sky News report:
Sky News has learnt that NatWest has lured Emma Crystal, who has also worked for Credit Suisse, to become the next chief executive of its wealth management division, which includes Coutts.
Ms Crystal, who is expected to join later this year, will replace Peter Flavel, who left NatWest last summer.
The Guardian understands Crystal’s appointment could be announced later today.
Employees at almost one in 10 UK companies are having to work extra hours to make up for worker shortages, the latest realtime data from the UK economy shows.
The Office for National Statistics says:
In late January 2024, 19% of businesses with 10 or more employees reported they were experiencing worker shortages, broadly stable with late December 2023; of those businesses, 49% reported that their employees were working increased hours as a consequence.
The ONS also reports that UK spending on debit and credit cards increased by 2% last week, and there was a small rise in footfall on the high street.