Time to recap.

Economists are hopeful that the US economy is on track for a soft landing, after US employers added 187,000 jobs in July, less than expected.

July’s jobs report is a sign that the labor market is cooling after a series of interest rate hikes by the Federal Reserve have driven rates to their highest level in 22 years.

July’s gains were just 2,000 more than the jobs added in June. The BLS revised June’s job gain down to 185,000, a cut of 24,000 jobs. It also cut May’s jobs number. Together, June and July represent the two weakest monthly gains in two and a half years.

Here’s the full story:

In the UK, there are fears the economy is caught in a ‘low growth trap’, after the Bank of England cut its GDP forecasts yesterday and hiked interest rates to a 15-year high.

UK car sales have risen for 12 months in a row….but rising interest rates have been blamed for another fall in housebuilding.

Shipping giant AP Møller-Maersk has warned of a longer and deeper contraction of global trade than previously expected.

Inflationary pressures in the food sector are on the rise, with the UN reporting that global food commodity prices rose in July.

Revolut is shutting down its crypto trading operations in the US amid a regulatory crackdown.

Revolut is shutting down its crypto trading operations in the US amid a regulatory crackdown.

The fintech firm said it had taken the “difficult decision” as a result of the “evolving regulatory environment and the uncertainties around the crypto market in the US.”

It follows a crackdown on crypto exchanges, by the Securities and Exchange Commission (SEC), which has accused industry giant Binance of a range of securities violations, including mishandling customer funds and misleading investors and regulators, and alleged Coinbase of skirting SEC rules by letting users trade crypto tokens that were actually unregistered securities.

Revolut said users will be blocked from buying cryptocurrencies from 2 September, and that access would be fully disabled by 3 October, meaning customers will no longer be able to buy, sell, or hold any cryptocurrencies after that date.

Revolut said in a statement:

“This decision has not been taken lightly, and we understand the disappointment this may cause. This suspension does not affect Revolut users outside of the US in any way, and impacts less than 1% of Revolut’s crypto customers globally.”

A spokesperson stressed that the decision would not affect customers in any other markets, including the UK, where Revolut has been registered as a crypto asset provider since September 2022.

The company - which has been waiting more than two years for a decision on its UK banking licence - said it would not disclose how much of its revenues rely on crypto services, but said in 2021 that they made up around 15-20% of its revenues.

Some experts are hopeful that today’s jobs report suggests the US could achieve a “soft landing”, rather than tumbling into recession.

Michelle Cluver, portfolio strategist at Global X ETFs, says:

While significantly below the 312K average from the last 12 months, this reading still reflects a robust labor market that is adding almost double the number of jobs required to keep pace with population growth.

From a market perspective, this is encouraging for the Fed’s fight against inflation. This is the second consecutive month that NFP has come in below expectations, and the June reading was even revised downward to 185K.

This reduces the probability of the Fed needing further rate hikes this year. However, wage growth in the NFP report came in at 4.4%, above expectations.

David Henry, investment manager at Quilter Cheviot, is hopeful a recession can be avoided:

“While the labour market is slowly cooling as rate rises have some impact, at the moment there still seems to be enough momentum in the economy to avoid recession.

Whisper it, but the fabled ‘soft landing’ may just be achieved, although a lot can still happen before the Fed declares “job done”.

The economy’s robustness may mean that the Fed feels comfortable continuing to raise rates, but it has repeatedly stated that these decisions will remain dependant on the data and there are a number of data points due before the next meeting - not least next week’s inflation number.

Pay growth in July was faster than expected, in a boost for US workers.

The jobs report shows that average hourly earnings for all employees on private nonfarm payrolls rose by 14 cents, or 0.4%, month-on-month in July to $33.74. Economists had expected a rise of 0.3%.

On an annual basis, average hourly earnings have increased by 4.4%, beating forecasts of a slowdown to 4.2%.

That might cause the Fed some concerns, as its policymakers ponder whether they have raised US interest rates high enough to drive out inflation.

Newsflash: The US economy added fewer new jobs than expected last month.

The US non-farm payroll rose by 187,000 in July, data just released shows, below forecasts of an increase of 200,000.

June’s NFP has been revised down too, from +209,000 to +185,000, while May’s has been cut by 25,000, from +306,000 to +281,000, meaning fewer jobs were created in the spring than we thought.

The U.S. Bureau of Labor Statistics has also reported that the unemployment rate fell to 3.5%, down from 3.6% in June.

They add:

Job gains occurred in health care, social assistance, financial activities, and wholesale trade.

The financial markets are eagerly awaiting the latest US jobs report, due on the half-hour.

July’s Non-Farm Payroll is expected to show that the US economy added around 200,00 new jobs last month, slightly down on the 209,000 new hires recorded in June.

June’s jobs gain was the weakest since December 2020.

Economists will also be watching the latest pay figures, for signs that higher interest rates are cooling the labor market.

Hourly earnings are expected to slow to 4.2% year-on-year from 4.4% previously but continue to rise month-on-month. The unemployment rate is also expected to remain at a long-term low of 3.6%.

Analysts at FxPro point out that eleven out of the last twelve labour market reports have exceeded expectations – with last month’s being a rare miss.

They add:

A second worse-than-expected report in a row could crystallise the market pressure and become the first signal of a trend reversal.

The wage rate is also important for the dollar’s momentum: a better-than-expected reading is a reason for the Fed to tighten policy, which is positive for the dollar. Weak wage growth and strong employment can revive the appeal of risky assets to the detriment of the US dollar.

In a blow to growth hopes, shipping giant AP Møller-Maersk has warned of a longer and deeper contraction of global trade than previously expected.

Maersk predicted this morning that global container volume growth will contract by between 1% and 4% this year. It had previously forecast volumes of between +0.5% and -2.5%.

It blames:

…muted global macro-economic growth given continued pressure from higher interest rates and potential recessionary risk in Europe and the US.

Maersk ships goods around the world, so is a handy barometer of global economic developments.

Chief executive Vincent Clerc said he saw no sign that the destocking which has curbed global trade activity would end this year.

Clerc told a media briefing:

“We had expected customers to draw down inventories around the middle of the year, but so far we see no signs of that happening. It may happen at the beginning of next year.”

“Consequently, the uptick in volumes we had expected in the second half of the year has not occurred.

The price of essential ingredients is rising again around the world as the ongoing conflict in Ukraine, political events, and unpredictable weather are impacting crops and the transport of foodstuffs such as cereals.

The rice price index hit its highest level in almost 12 years in July, after rising 2.8% last month alone, according to the UN’s international food price index. The increase came after India banned exports of non-basmati white rice on 20 July, in a bid to curb domestic food inflation after heavy rains hit crops in the world’s largest exporting nation.

The UN’s Food and Agriculture Organization (FAO) said the move had amplified “upward pressure already exerted on prices by seasonally tighter supplies and Asian purchases.”

Rice prices have continued to climb on global commodity markets in recent days, with exporters reporting that Indian parboiled prices hitting a record high this week, as demand shifted to this grade, which is not subject to export restrictions.

Traders in Thailand and Vietnam, the world’s second and third largest rice exporting countries, have also been looking to re-negotiate prices of August rice shipments, Reuters reported earlier this week, to take advantage of rising prices.

The cost of wheat also made their first monthly climb in nine months in July, the UN FAO found, because of uncertainty about Ukrainian grain exports since Russia decided to terminate the Black Sea grain deal last month, which had guaranteed safe shipment from Ukraine’s sea ports. Russia’s subsequent attacks on Ukrainian port infrastructure on the Black Sea and Danube river pushed international wheat prices up by 1.6% last month according to the UN food price index.

The price of vegetable oils soared by 12% last month compared with June, marking the first increase after seven months of falls, as international prices of sunflower, palm, soy and rapeseed oils all rose. Sunflower oil prices surged by 15% month-on-month over worries about exporting the product out of Ukraine.

Lengthy spells of dry weather in large producers Canada and the US have also added pressure to wheat prices.

Overall, international food prices rose slightly - by just 1.3% - in July, and remain some 12% lower than the FAO’s food price index a year earlier, as the cost of sugar slid, and there were small falls in the prices of dairy and meat, all of which should ease some pressures on consumers amid stubbornly high food price inflation in many countries.

The latest daily mortgage rates are out….

Moneyfacts reports that the average 2-year fixed residential mortgage rate today is 6.85%.

This is unchanged from the previous working day – and indeed unchanged since Tuesday, when it rose from Monday’s 6.81%.

There is a little relief for those seeking longer-term fixed rates, though.

The average 5-year fixed residential mortgage rate today has dropped to 6.35%, down from 6.36% on Thursday.

We’ll find out on Monday if there has been more reaction to yesterday’s interest rate rise.

UK housebuilding continued to fall last month as high interest rates hit demand, a new survey of the sector shows.

Data firm S&P Global has reported that there was another sharp fall in house building last month, as new orders were constrained by rising borrowing costs.

Its construction Purchasing Managers’ Index (PMI) has recovered to 51.7, its highest level since February, and up from June’s five-month low of 48.9.

But a sub-index measuring the house-building sector picked up to 43.0 from June’s 39.6, still well below the 50-point mark showing stagnation.

The report shows that residential construction work have now fallen for eight consecutive months.

Construction companies noted that rising borrowing costs had led to fewer sales enquiries and slower decision-making among clients in July.

Tim Moore, economics director at S&P Global Market Intelligence, explains:

July data indicated that some parts of the UK construction sector gained momentum, notably commercial building and civil engineering activity. This led to a renewed rise in total construction output which, although modest, was the fastest for five months. Survey respondents commented on increased infrastructure work, office refurbishments, and resilient demand for a range of commercial projects.

Meanwhile, another steep reduction in house building acted as a severe constraint on construction growth. Around 35% of the survey panel reported a decline in residential work during July, while only 18% signalled a rise. Lower volumes of housing activity have been recorded in each month since December 2022, with construction companies widely reporting subdued sales due to rising interest rates and worries about the economic outlook.

Despite rising interest rates, and the cost of living crisis, UK car sales have now risen for 12 months in a row.

Trade body the Society of Motor Manufacturers and Traders has just reported that the new car market grew 28.3% in July with 143,921 new vehicles registered.

This means the market has posted non-stop growth for a full year despite “challenging economic conditions”, SMMT says.

Sales of battery-powered electric vehicles are up almost 88% year-on-year, with just over 23,000 new BEVs registered in July.

Mike Hawes, SMMT chief executive, said:

Choice and innovation in the market are growing, so it’s encouraging to see more people switching on to the benefits of driving electric.

With inflation, rising costs of living and a zero emission vehicle mandate that will dictate the market coming next year, however, consumers must be given every possible incentive to buy.

Government must pull every lever, therefore, to make buying, running and, especially, charging an EV affordable and practical for every driver in every part of the country.

The SMMT has raised its forecst for overall new car registrations this year by 0.9%, to 1.847m.

But, the outlook for 2024 has been downgraded by 0.7% to 1.951m, “reflecting wider concerns about the cost of living.”

The 14th increase in UK interest rates in a row, yesterday, makes the front page of many newspapers this morning.

The Guardian highlights the calls from Conservative MPs for tax cuts to help the economy:

Jeremy Hunt’s warning that the UK is stuck in a low-growth trap is on the front of The Times, which also says some analysts think UK interest rates could rise as high as 6%.

The Financial Times flags the Bank’s warning that borrowing costs are likely to remain elevated despite slowing inflation.

The i points out that millions of households face huge rises in their mortgage payments if interest rates remain high over the next few years:

Predictions that Britain’s era of cheap food has come to an end make the front of the Daily Telegraph:

Shadow chancellor Rachel Reeves has labelled yesterday’s rise in interest rates a “hammer blow for working people” which, she argues, did not need to happen.

Writing in the Daily Mirror, the shadow chancellor said the Government is “managing decline rather than getting us moving”.

She wrote:

“This rise – a hammer blow for working people – did not have to happen.

“The Tories crashed the economy with last September’s disastrous mini-Budget and left you paying the price.”

Reeves says Labour has a plan to improve the economy:

First, we’d make sure the banks provide support to mortgage holders who are struggling with repayments.

Second, we would introduce a proper windfall tax on the huge profits the oil and gas giants are making because of Russia ’s invasion of Ukraine and use that money to help families with the cost of living.

And third, we would put in place a long-term plan to secure and grow our economy.

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

Britain is stuck in a ‘low-growth trap’, chancellor Jeremy Hunt has warned, after the Bank of England lifted interest rates to a 15-year high of 5.25% on Thursday.

The BoE also cut its growth forecasts yesterday, and warned that interest rates will remain “sufficiently restrictive for sufficiently long” to squeeze inflation out of the economy.

Hunt told Sky News that other advanced economies were also wedged in this trap saying:

It’s not just the UK, but Europe, the US, Canada, Japan…We’re all in a low-growth trap that we need to get out of.

The chancellor cited IMF forecasts that the UK’s long-term growth rates will be higher than France, Germany or Japan, but conceded “they’re not high enough.

Hunt points to the huge global shocks which have rocked the UK, including a 1970s-style energy crisis and a once in a century pandemic.

He pledges:

What you’ll see from me in the autumn statement, coming up, is a plan that shows how we break out of that low-growth trap and make ourselves into one of the most entrepreneurial economies in the world. That’s what we want.’

The Bank of England’s new growth forecasts are undoubedly poor.

It downgraded the outlook for GDP compared to its previous estimates released in May, particularly during 2024 and at the beginning of 2025.

Dr Linda Yueh, economics fellow at Oxford University, says the BoE’s forecasts are so dire she thought there was a typo in them.

She told Radio 4’s Today programme:

I thought there was a one missing. Growth is normally at least 1%. But the bank has said in 2024-2025, the growth rate is going to average only 0.25%.

It’s a quarter of a percent increase in national output, or national income. I thought it would be at least 1.25%

This is why the chancellor Jeremy Hunt says we’re at risk of being stuck in a low growth equilibrium.

High interest rates will not help the UK economy to grow, of course, as the Bank tries to bring inflation down. It expects consumer inflation to “fall markedly further this year”, but CPI isn’t expected to hit its 2% target until early 2025.

Governor Andrew Bailey cautioned it was too early to say when UK interest rates may start to be cut, saying:

“Inflation is falling and that’s good news. We know that inflation hits the least well-off hardest and we need to make sure that it falls all the way back to the 2% target.,

“That’s why we’ve raised rates to 5.25% today.”

Also coming up today

The US economy will be in focus this afternoon, when July’s jobs figures are released.

Economists predict around 200,000 new jobs were created in America last month, slightly down on June’s 209,000, with the unemployment rate is seen steady at 3.6%.

A strong jobs report could prompt further increases in US interest rates, while a poor report could encourage the Federal Reserve to stop its tightening cycle.

The agenda

• 8.30am BST: Eurozone construction sector PMI index

• 9am BST: UN monthly food price inflation report

• 9am BST: UK new car sales for July

• 9.30am BST: UK construction sector PMI index

• 1.30pm BST: US Non-Farm Payroll jobs report for July