German inflation falls to lowest since February 2022
Just in: Inflation in Germany has fallen to its lowest level since Russia’s full-scale invasion of Ukraine last year.
The inflation rate in Germany is expected to be 4.5% in September, statistics body Destatis has reported, down from 6.1% in August.
The last time Germany’s inflation rate was lower than this was in February 2022 – the month the war began – when it stood at 4.3%.
Food prices were 7.5% higher than a year ago, but energy prices were only 1% higher.
Core inflation (which strips out food and energy) is expected to have fallen to +4.6%, from 5.5% in August.
Key events
Afternoon summary
Time for a quick recap::
UK house sellers are cutting asking prices to persuade buyers to reach a deal, a report from Zoopla shows.
Mortgage holders are making big changes to their finances to cope with dramatically higher monthly payments, such as cutting pension contributions and downsizing to a smaller property.
But there is some relief, with the average five-year fixed mortgage rate falling below 6% today for the first time since early July.
Inflation in Germany has eased to its lowest since the Ukraine war began, with consumer prices up 4.5% in the last year.
Spanish inflation has risen, though, lifted by higher energy costs.
In the markets, the European Stoxx 600 has hit its lowest level in six months today, while bond prices have also weakened.
Here’s the rest of today’s stories:
Italian government bond prices are also weakening, pushing the gap between Italy and Germany’s bond yields wider:
#Italy #spread klakson: we’re back at 200bps on the 10yr.
Progressive withdrawal of ECB support and worse than expected deficit dynamics start to have an effect on cost of debt.
Move not quick and “brutal” enough to imagine the use of ECB’s TPI anytime soon. pic.twitter.com/ip5SAVpXwi— Gustavo Baratta (@gusbaratta) September 28, 2023
The FT attributes the move to the Italian government raising its fiscal deficit targets and cutting its growth forecast for this year and next, meaning higher budget deficits than expected.
Government bond prices have been sliding today, in a selloff that has gripped the European and US markets.
The drop in prices has pushed up the yield, or interest rates, on these bonds, as investors anticipate that interest rates will stay high for longer than hoped.
UK 30-year bond yields, for example, have risen by 16 basis points to 4.948%, up from 4.779% last night, to the highest level since the market panic after Liz Truss’s mini-budget a year ago.
It’s party conference season in the UK, when the main political parties gather with their supporters for a few days of debate and discussion with their grassroots faithful.
And new data commissioned by Bibby Financial Services shows that small businesses have litttle confidence in UK political parties. Nearly one in four (22%) SMEs are unable to identify the political party that best serves their needs.
The survey also shows “a clear shift to the left” with 33% of SMEs saying that the Labour Party best serves their needs, compared to just 26% choosing the Conservative Party.
They add:
● Ahead of next year’s general election, economic growth and job creation (71%) are the most critical issue for small businesses, followed by tax policies and incentives (68%) and access to affordable financing and loans (46%).
● In terms of specific measures or reforms that the next government could make in 2024, tax incentives is the most popular policy SMEs would like to see (65%), followed by access to low interest loans or grants for business expansion and job creation (57%). Post Brexit, SMEs would also like to see streamlined and simplified regulatory processes put in place, to help navigate compliance requirements (29%).
The John Lewis Partnership is considering raising as much as £150m by selling and leasing back a dozen of its Waitrose supermarkets, Bloomberg is reporting.
The move comes as the strugging retailer seeks more capital, after it warned this month it will take two years longer to achieve its turnaround goals.
Bloomberg says:
The marketing of the stores will begin next week and mostly includes supermarkets in the south of England with 20-year inflation-linked leases, said the people, asking not to be identified as the information isn’t yet public.
CBRE is acting as agent for the partnership, which owns the upmarket grocer and the John Lewis department store chain, they said, adding that there’s no certainty a deal will take place.
The number of Americans filing new claims for unemployment support remains low by historic standards, despite a small last week.
New data from the US Labor Department shows there were 204,000 new initial claims filed last week, an increase of 2,000 from the previous week.
That’s lower than expected, though, as the US jobs market appears to remain robust despite higher interest rates.
New data has confirmed that the US economy expanded at an annual rate of 2.1% in the second quarter of 2023.
Economists had expected a small rise, to 2.2%. However, upward revisions to nonresidential fixed investment, exports, and inventory investment were wiped out by a downward revision to consumer spending.
John Leiper, chief investment oficer at Titan Asset Management, says interest rate increases have hit consumer spending:
No major changes to the headline GDP number, in line with last quarter and slightly below expectations. The key data reading for me is Q2 personal consumption which came in noticeably below expectations and the prior reading. It also marks the lowest rate of increase since Q2 2020.
This data follows the weaker than expected consumer confidence report on Tuesday and contributes to a growing sense that the consumer, responsible for much of the US economy’s recent resilience, is starting to buckle under the weight of prior monetary tightening.
This fall in German inflation may hearten the European Central Bank that its monetary tightening programme is working.
Earlier this month the ECB lifted eurozone interest rates to record highs, pushing up its deposit rate for the 10th consecutive time, to 4%.
German inflation out. Quite a big drop in core & service infl. Looks OK. But then again… Germany is the growth lagard nowadays.
Nonetheless we believe the ECB has no ned to do more. Perhaps it already did too much. #dkøko #dkfinans #ECB pic.twitter.com/Ir6msTeI7I— Frederik Engholm (@FrederikEngholm) September 28, 2023
Germany’s #inflation softened more than estimated: Sep CPI slowed to 4.5% from 6.1% in Aug, slowest since Feb 2022 versus a 4.6% estimate. Core inflation, which excludes volatile food and energy prices, sank to 4.6% in Sep, from 5.5% in Aug, so core > headline inflation. pic.twitter.com/hCln6ZkZJn
— Holger Zschaepitz (@Schuldensuehner) September 28, 2023
