The good, the bad and 6.8% inflation
The business news that matters
Hello everyone and welcome to the latest Off to Lunch…
Today is the second part of a big week of economic news. Inflation in the UK has fallen to 6.8 per cent, the lowest since February 2022 and down from 7.9 per cent last month, according to the Office for National Statistics. This is in-line with forecasts by economists. The news has been welcomed by the government…
The graph below is from the ONS and shows how inflation is falling. The light-blue line is the consumer price index, the main measure of inflation. The black line shows owner occupiers' housing costs (which tracks costs associated with owning, maintaining and living in your home) and the dark blue line is a combination of the consumer price index and housing costs…
However, as with other economic data recently, it is not all positive news. Core inflation, which strips out items subject to short-term fluctuations such as energy and food, was stuck at 6.9 per cent in July, the same as June, the ONS said.
Economists have said this makes it even more likely that the Bank of England will increase interest rates again when the Monetary Policy Committee next meets in September, particularly after data out yesterday showed that wages are up 7.8 per cent year-on-year (more on that here)
The headline rate of inflation was dragged down to 6.8 per cent by a 15 per cent fall in the price of gas and electricity. Food price inflation also slowed to 14.9 per cent from 17.3 per cent in June. You can find all the data on inflation from the ONS here
The Institute for Fiscal Studies, the economics think-tank, said the government’s target of halving inflation this year is still in jeopardy. Heidi Karjalainen, research economist at the IFS, said:
“When the target was set, the prime minister may have hoped he could rely on falling in energy prices to do most of the work to hit it. However, the stubbornly high rate of price inflation for goods and services other than food and energy has put the target in jeopardy. With only 4 months to go, it no longer seems at all clear that inflation at the end of the year will have fallen by enough to achieve it."
The graph below shows how the government will struggle to hit its target unless core inflation comes down…
The ONS has also published data today on house prices and rents. This shows that house prices were up 1.7 per cent year-on-year in June, down from 1.8 per cent in May. The ONS data is based on completed transactions so tends to lag reports from Nationwide and Rightmove which are based on mortgage approvals and asking prices.
The data on rents highlights the squeeze on those renting their home. Rents were up 5.3 per cent year-on-year in July, including 5.5 per cent in London, the highest annual rise since records began in 2006. You can find the data on house prices here and the data on rents here
Other stories that matter…
1. The chief executive of Norway’s sovereign wealth fund, the biggest in the world and a key investor in the UK, has said the government’s move against net-zero policies is “bad”. Nicolai Tangen, chief executive of Norges Bank Asset Management, told the Financial Times: “To me, climate is about as political as gravity. It’s just not political. I don’t understand how you can turn this into politics.” As the FT’s story says, Norges owns 2.5 per cent of every listed company in Europe on average, so these are significant comments. Story here
2. Zero-hours contracts should not be banned because they help people who want to work flexibly get back into the labour market, therefore they can ease staff shortages. That is according to the latest column from David Smith, economics editor at The Sunday Times. Piece here
3. Bloomberg has a fascinating column about how businesses need to do a better job at protecting the information they have about failures - whether that be a failed technology, product or venture - because it is vital to understanding how to be successful and what will work. Piece here
4. The Argentinian government has denied reports that it has banned the export of beef and says it is in talks with the agriculture industry about capping the price of the meat to try to stabilise the peso. The value of the peso has fallen sharply after shock results in presidential primary elections at the weekend made anti-establishment figure Javier Milei the front-runner. Reuters story here
5. The Vietnamese electric carmaker VinFast is now worth more than Ford and General Motors after its share price nearly quadrupled in a remarkable first day of trading in New York. VinFast is now valued at $85 billion (£66.6 billion), nearly the same as Ford ($48 billion) and General Motors ($46 billion) combined. However, VinFast’s cars have had mixed reviews and the company is likely to sell fewer vehicles this year than GM does in a week. BBC story here
Podcast…
The latest episode of Business Studies looks at the private equity industry and features an interview with Garry Wilson, the co-founder and managing partner of Endless. Wilson speaks about how he built one of the UK’s largest private equity firms and why his journey from Belfast to Leeds does not fit the stereotype that many have for this industry.
It’s a fascinating episode that looks at how you do deals, how you turn-around a struggling business and why private equity is more friend than foe according to Wilson.
You can listen on Substack here, Apple here and Spotify here
And finally…
Historic England has released thousands of photos of England taken from the air during World War II by US Army Air Forces (USAAF) Photographic Reconnaissance units. The photos show the state of the country during the war, including bomb damage to buildings and the location of anti-tank defences, troops and military vehicles. You can find the archive of photos and a searchable map of the images taken here. You can also find Historic England’s full collection of aerial photos of England over the years here. And there are more details about the new photos in a story from The Guardian here
Thanks for reading. If you enjoy Off to Lunch then please share it with others and spread the word. If this newsletter was shared with you then please sign-up below to become a member, get Off to Lunch sent directly to your inbox, and contribute to the work of Off to Lunch
Best
Graham