Halifax warns of ‘challenging period’ for UK housing market, oil prices drop to nine-month low – business live | Business

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Paul Johnson, director of the Institute of Fiscal Studies, described the support package, expected on Thursday, as “very poorly targeted”. He told BBC’s Today programme on Wednesday morning:

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If this is a straightforward bill freeze then the majority of the money will go to better-off people who use more energy. So this is very poorly targeted. Not only is it poorly targeted, but it also means that we don’t see the full price signal, that across the world people need to see.

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The reason that gas prices are so high is because there’s less gas around and if the world doesn’t use more gas over the next year then we’re going to run out.

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Finding a way of targeting it to the many millions that really need it, without giving it to the many millions who don’t, appears to be something that has stumped the treasury and the government for finding a mechanism of achieving that.

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Johnson also said that the UK government can afford to borrow £100bn to tackle the cost of living crisis, although the amount may well rise to an “awful lot more”.

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We can afford to borrow that amount. We’re still managing to borrow relatively straightforward on the international markets.

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The big question here is: ‘Is it going to be £100bn? What is the exit strategy from supporting bills?’ My guess is it might end up being an awful lot more than that unless we react quite quickly to make it a better system.
Is it the best way of spending the money? I rather suspect it is an inevitable way in the short run if everybody needs help is to get that help.

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But I do think it’s incredibly important that the government thinks through and gets to a better or more targeted way of supporting [people] as we get through to next winter. Otherwise, we’re going to be on the hook, potentially, for an awful lot more money, for an awful lot longer.

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director: expected energy support package ‘very poorly targeted'”,”contributors”:[],”primaryDateLine”:”Wed 7 Sep 2022 03.33 EDT”,”secondaryDateLine”:”First published on Wed 7 Sep 2022 02.28 EDT”},{“id”:”63183b078f08401856417465″,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

High energy prices are leaving their mark on German industry. Data just out shows that industrial production in Europe’s biggest economy fell 0.3% in July from the month before, compared with a 0.8% rise in June.

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According to the statistical office, the relatively small number of school holidays and holiday leave prevented an even larger decline in production compared with July last year. Production in industry excluding energy and construction was down by 1%.

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“Is this the first gust of wind preluding a perfect storm?” asks Carsten Brzeski, global head of macro at ING.

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German industry is clearly suffering from disrupted supply chains on the back of the war in Ukraine, the aftermath of pre-summer lockdowns in China, low water levels in the main rivers and increasingly, higher energy prices. The statistical office released additional data showing that production in the energy-intensive industrial segments declined by more than the broader industry. Production in this area has dropped by 6.9% since February 2022.

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For Germany’s industrial backbone, small and medium-sized enterprises, higher energy prices look like a ticking time bomb. With ongoing pressure on consumers’ disposable incomes, companies’ pricing power is fading. In this regard, it is remarkable that the government’s third relief package presented on Sunday provided only very limited support for this segment of the economy.

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Looking ahead, shrinking order books since the start of the Ukraine war, the well-known supply chain problems (both international and domestic) plus high uncertainty, high energy and commodity prices and potential energy supply disruptions will not make life any easier. Judging from the first macro data for the third quarter, the German economy has not fallen off a cliff at the start of the third quarter but is rather sliding into recession.

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German industrial production in energy intensive sector (red) vs total manufacturing production (blue) pic.twitter.com/QL3rBaRvgj

— Fabien Bossy (@FabienBossy) September 7, 2022

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

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House prices in the UK rose by 0.4% in August, against a 0.1% drop in July, as Britain’s largest mortgage lender Halifax warned of a “more challenging period ahead”.

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The annual rate of growth eased to 11.5% from 11.8%, suggesting the heat is slowly coming out of the market. Figures from Halifax show a typical UK property now costs a record £294,260. Wales is still showing the strongest annual growth in the UK, at 16.1%, while London recorded its highest annual rate in six years, at 8.8%.

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Kim Kinnaird, director of Halifax Mortgages, said:

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While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.

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Firstly, there is the considerable hit to people’s incomes from the cost-of-living squeeze…While government policy intervention may counter some of these impacts, borrowing costs are also likely to continue to rise, as the Bank of England is widely expected to continue raising interest rates into next year.

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With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.

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Meanwhile, crude oil prices have fallen to their lowest level since before Russia invaded Ukraine in late February, as China’s zero Covid policy and expectations of more interest rate hikes around the world fuelled concerns over a global recession (which would reduce demand for oil).

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Brent crude, the global benchmark, is down $1.56 to $91.27 a barrel, while US light crude has lost $1.68 to $85.2 a barrel.

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China’s exports and imports lost momentum in August as surging inflation held back overseas demand and fresh Covid curbs and heatwaves disrupted output. Exports rose 7.1% in August from a year earlier, a big slowdown from July’s 18% gain, official customs data showed. Oil imports fell 9.4%.

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This led to a smaller trade surplus of $79.4bn, compared with $101.3bn in July, which was a record for a single-month goods trade balance for any country.

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Liz Truss became the UK’s new prime minister yesterday, when she met with the Queen at Balmoral. She insisted the UK will “ride out the storm” of the worst cost of living crisis in a generation as she launched her premiership with a brutal cabinet clear-out.

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Kwasi Kwarteng has been appointed chancellor, the second-most powerful job in British politics. During his stint as business secretary, Kwasi Kwarteng clashed with Rishi Sunak over how best to oversee the UK economy. Today, he walks into the office recently held by his former rival, taking charge at the Treasury under his longstanding political and ideological ally Truss.

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The Agenda

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• 9am BST: Italy retail sales for July

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• 10am BST: Eurozone second-quarter GDP, third estimate (forecast: 0.6%)

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• 1.30pm BST: US trade for July

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• 3pm BST: Bank of Canada interest rate decision

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key events

A leading economist has expressed concern that Liz Truss’s plans to freeze energy bills will benefit affluent people more than the less well-off.

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Paul Johnson, director of the Institute of Fiscal Studies, described the support package, expected on Thursday, as “very poorly targeted”. He told BBC’s Today programme on Wednesday morning:

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If this is a straightforward bill freeze then the majority of the money will go to better-off people who use more energy. So this is very poorly targeted. Not only is it poorly targeted, but it also means that we don’t see the full price signal, that across the world people need to see.

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The reason that gas prices are so high is because there’s less gas around and if the world doesn’t use more gas over the next year then we’re going to run out.

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Finding a way of targeting it to the many millions that really need it, without giving it to the many millions who don’t, appears to be something that has stumped the treasury and the government for finding a mechanism of achieving that.

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Johnson also said that the UK government can afford to borrow £100bn to tackle the cost of living crisis, although the amount may well rise to an “awful lot more”.

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We can afford to borrow that amount. We’re still managing to borrow relatively straightforward on the international markets.

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The big question here is: ‘Is it going to be £100bn? What is the exit strategy from supporting bills?’ My guess is it might end up being an awful lot more than that unless we react quite quickly to make it a better system.
Is it the best way of spending the money? I rather suspect it is an inevitable way in the short run if everybody needs help is to get that help.

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But I do think it’s incredibly important that the government thinks through and gets to a better or more targeted way of supporting [people] as we get through to next winter. Otherwise, we’re going to be on the hook, potentially, for an awful lot more money, for an awful lot longer.

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director: expected energy support package ‘very poorly targeted'”,”contributors”:[],”primaryDateLine”:”Wed 7 Sep 2022 03.33 EDT”,”secondaryDateLine”:”First published on Wed 7 Sep 2022 02.28 EDT”},{“id”:”63183b078f08401856417465″,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

High energy prices are leaving their mark on German industry. Data just out shows that industrial production in Europe’s biggest economy fell 0.3% in July from the month before, compared with a 0.8% rise in June.

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According to the statistical office, the relatively small number of school holidays and holiday leave prevented an even larger decline in production compared with July last year. Production in industry excluding energy and construction was down by 1%.

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“Is this the first gust of wind preluding a perfect storm?” asks Carsten Brzeski, global head of macro at ING.

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German industry is clearly suffering from disrupted supply chains on the back of the war in Ukraine, the aftermath of pre-summer lockdowns in China, low water levels in the main rivers and increasingly, higher energy prices. The statistical office released additional data showing that production in the energy-intensive industrial segments declined by more than the broader industry. Production in this area has dropped by 6.9% since February 2022.

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For Germany’s industrial backbone, small and medium-sized enterprises, higher energy prices look like a ticking time bomb. With ongoing pressure on consumers’ disposable incomes, companies’ pricing power is fading. In this regard, it is remarkable that the government’s third relief package presented on Sunday provided only very limited support for this segment of the economy.

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Looking ahead, shrinking order books since the start of the Ukraine war, the well-known supply chain problems (both international and domestic) plus high uncertainty, high energy and commodity prices and potential energy supply disruptions will not make life any easier. Judging from the first macro data for the third quarter, the German economy has not fallen off a cliff at the start of the third quarter but is rather sliding into recession.

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German industrial production in energy intensive sector (red) vs total manufacturing production (blue) pic.twitter.com/QL3rBaRvgj

— Fabien Bossy (@FabienBossy) September 7, 2022

\n”,”url”:”https://twitter.com/FabienBossy/status/1567399788793978881″,”id”:”1567399788793978881″,”hasMedia”:false,”role”:”inline”,”isThirdPartyTracking”:true,”source”:”Twitter”,”elementId”:”ef5de8b8-f5d7-4cb1-b289-a71469c03657″}],”attributes”:{“pinned”:false,”keyEvent”:true,”summary”:false},”blockCreatedOn”:1662532359000,”blockCreatedOnDisplay”:”02.32 EDT”,”blockLastUpdated”:1662532552000,”blockLastUpdatedDisplay”:”02.35 EDT”,”blockFirstPublished”:1662532501000,”blockFirstPublishedDisplay”:”02.35 EDT”,”blockFirstPublishedDisplayNoTimezone”:”02.35″,”title”:”High energy prices leave their mark on German industry”,”contributors”:[],”primaryDateLine”:”Wed 7 Sep 2022 03.33 EDT”,”secondaryDateLine”:”First published on Wed 7 Sep 2022 02.28 EDT”},{“id”:”6317ad748f089d9d4e3f08f1″,”elements”:[{“_type”:”model.dotcomrendering.pageElements.TextBlockElement”,”html”:”

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

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House prices in the UK rose by 0.4% in August, against a 0.1% drop in July, as Britain’s largest mortgage lender Halifax warned of a “more challenging period ahead”.

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The annual rate of growth eased to 11.5% from 11.8%, suggesting the heat is slowly coming out of the market. Figures from Halifax show a typical UK property now costs a record £294,260. Wales is still showing the strongest annual growth in the UK, at 16.1%, while London recorded its highest annual rate in six years, at 8.8%.

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Kim Kinnaird, director of Halifax Mortgages, said:

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While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.

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Firstly, there is the considerable hit to people’s incomes from the cost-of-living squeeze…While government policy intervention may counter some of these impacts, borrowing costs are also likely to continue to rise, as the Bank of England is widely expected to continue raising interest rates into next year.

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With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.

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Meanwhile, crude oil prices have fallen to their lowest level since before Russia invaded Ukraine in late February, as China’s zero Covid policy and expectations of more interest rate hikes around the world fuelled concerns over a global recession (which would reduce demand for oil).

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Brent crude, the global benchmark, is down $1.56 to $91.27 a barrel, while US light crude has lost $1.68 to $85.2 a barrel.

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China’s exports and imports lost momentum in August as surging inflation held back overseas demand and fresh Covid curbs and heatwaves disrupted output. Exports rose 7.1% in August from a year earlier, a big slowdown from July’s 18% gain, official customs data showed. Oil imports fell 9.4%.

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This led to a smaller trade surplus of $79.4bn, compared with $101.3bn in July, which was a record for a single-month goods trade balance for any country.

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Liz Truss became the UK’s new prime minister yesterday, when she met with the Queen at Balmoral. She insisted the UK will “ride out the storm” of the worst cost of living crisis in a generation as she launched her premiership with a brutal cabinet clear-out.

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Kwasi Kwarteng has been appointed chancellor, the second-most powerful job in British politics. During his stint as business secretary, Kwasi Kwarteng clashed with Rishi Sunak over how best to oversee the UK economy. Today, he walks into the office recently held by his former rival, taking charge at the Treasury under his longstanding political and ideological ally Truss.

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The Agenda

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• 9am BST: Italy retail sales for July

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• 10am BST: Eurozone second-quarter GDP, third estimate (forecast: 0.6%)

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• 1.30pm BST: US trade for July

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• 3pm BST: Bank of Canada interest rate decision

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IFS Director: Expected energy support package ‘very poorly targeted’

A leading economist has raised concerns that Liz Truss’s plans to freeze energy bills will benefit wealthy people more than the disadvantaged.

Paul Johnson, director of the Institute for Fiscal Studies, described the support package, expected on Thursday, as “very poorly focused.” He told the BBC’s Today program on Wednesday morning:

If it’s a simple bill freeze, most of the money will go to better-off people who use more energy. So this is very misguided. Not only is it misguided, but it also means we don’t see the full price signal, which people all over the world need to see.

The reason gas prices are so high is because there’s less gas and if the world doesn’t use more gas over the next year, we’re going to run out of gas.

Finding a way to direct it to the many millions who really need it, without giving it to the many millions who don’t, seems to be something that has stumped the treasury and the government to find a mechanism to do it.

Johnson also said the UK government can afford to borrow £100bn to tackle the cost of living crisis, although the amount could well rise to “much more”.

We can afford to borrow that amount. We still manage to obtain relatively easy loans on international markets.

The big question here is: ‘Will it be £100bn? What is the exit strategy for the supporting bills?’ My guess is that it could end up being a lot more than that, unless we react pretty quickly to make it a better system.
Is it the best way to spend the money? Rather I suspect it’s an unavoidable short-term way if everyone needs help is to get that help.

But I do think it’s incredibly important for the government to think carefully and come up with a better or more specific way to support [people] as we move into next winter. Otherwise, we’re going to be hard-pressed, potentially, for a lot more money, for a lot longer.