Time to wrap up, after another busy week.

Here’s today’s main stories:

Have a lovely weekend. GW

US consumer sentiment has unexpectedly fallen for the first time in three months.

The University of Michigan’s gauge of consumer morale has dropped to 68.9 this month, down from 70.1 in September.

Although consumers are more optimistic about the jobs market, they’re less happy about the high cost of living, the survey shows.

Inflation expectations have risen, while a measure of consumers’ perception of their current financial situation hit its lowest level since the end of 2022.

Bradley Saunders, North America economist at Capital Economics, says:

The trivial fall in the University of Michigan consumer sentiment index in October was likely driven in part by Hurricane Helene, although the fall in the expectations index suggests the mood among households may have soured more generally.

In any case, the poor link between confidence and consumption in recent years means consumption growth may not be as weak as suggested.

Over in the US, price rises by American producers slowed last month, in an encouraging sign in the battle against inflation.

The Producer Price Index for final demand rose by 1.8% for the 12 months to September, down from 1.9% in the year to August.

On a monthly basis, the PPI index – effectively a measure of wholesale inflation – was unchanged in September; services companies lifted their prices by 0.2%, while goods producers cut theirs by 0.2%.

Core PPI (excluding foods, energy, and trade services) rose by 0.1% during September, and by 3.2% over the last year – down from 3.3% in August.

Clients at the world’s biggest custodian bank, BNY, sold British government bonds in September at the fastest pace since the gilts crisis in 2022, Reuters reports.

It’s a potential sign of investor nerves ahead of the new Labour government’s budget later this month.

Geoff Yu, senior EMEA market strategist at BNY, told Reuters:

“UK gilt markets recently faced the most concentrated round of selling by UK and international clients since the mini-budget of 2022.”

Citing BNY’s iFlow data, Yu added that custodian clients sold £3.04bn ($3.97 billion) of gilts last month.

As well as anxiety over the budget, investors could also be rethinking their expectations for UK interest rates moves. Gilt yields (the rate of return on the bonds) have risen in recent sessions, seemingly on expectations that other central banks might cut rates faster than the Bank of England).

Yu explains:

“While there can be many reasons for such sales, including changing Bank of England expectations, investor exposures to UK gilts have been reduced heading into the upcoming budget.”

BNY is a custodian of more than $50 trillion of assets for international clients including pension funds, endowments and other asset managers.

JP Morgan chief Jamie Dimon also tells shareholders that the geopolitical situation is ‘getting worse’, while the US economy faces several critical problems.

Presenting today’s financial results, Dimon says:

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse.

There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history.

Additionally, while inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.”

Just in: Profits at Wall Street giant JP Morgan Chase have dropped, as it puts aside more money to cover bad debts.

JP Morgan has just kicked off the US bank reporting season by reporting net income of $12.9bn for the third quarter of 2024. That’s down from $13.15bn a year earlier, and $18.15bn in April-June.

The bank has set aside $3.1bn to cover credit losses, including $2.1bn of bad debts in the quarter and $1bn of reserves to cover future losses.

Revenues grew 6% in the quarter.

Jamie Dimon, Chairman and CEO, says:

“The Firm reported strong underlying business and financial results in the third quarter, generating net income of $12.9 billion and an ROTCE [Return on tangible common equity] of 19%.

In the CIB [investment bank], investment banking fees grew 31%, while Markets revenue was resilient, rising 8%. Payments fees grew by double-digits as investments are fueling organic growth.

In CCB [Consumer & Community Banking], we ranked #1 in U.S. retail deposits for the fourth consecutive year. Card loans increased 11%, and we saw robust acquisition of 2.5 million accounts.

Finally, in AWM [asset and wealth management], asset management fees rose 15%, and long-term net inflows were a record $72 billion.

Oof! BlackRock, the world’s largest money manager, has grown its assets under management to a new alltime high of $11.5 trillion.

Its latest financial results, just released, show that BlackRock pulled even more money from investors in the last quarter, and the last year, while the value of what it already owns rose.

Assets under management (AUM) rose by $2.4 trillion year-over-year, BlackRock reports, driven by $456 billion of net inflows and “positive market movements”.

Quite astonishing numbers really.

Laurence D. Fink, Chairman and CEO of BlackRock, says:

“Our strategy is ambitious, and our strategy is working. The assets we manage on behalf of our clients reached a new high, ending the third quarter at $11.5 trillion, having grown $2.4 trillion over the last twelve months.

In that time, clients have entrusted BlackRock with $456 billion of net inflows, including a record $221 billion in the third quarter. Third quarter organic base fee growth of 5% and technology services ACV [annual contract value] growth of 15% are each at multi-year highs.

Although the UK economy grew in August, it has lost momentum compared with the first half of this year (when growth was recovering after the small recession in 2023).

Gabriella Dickens, G7 economist at AXA Investment Managers, says:

The latest activity data showed the UK returned to growth in August, which will be somewhat of a relief to the Bank of England after two consecutive months of stagnation.

GDP showed a month-to-month increase of 0.2% in August, in line with ours and markets’ expectations, on the back of strength in the manufacturing and construction sectors.

The overall picture, though, is that momentum is easing. Indeed, on a three-month-on-three-month basis, growth slowed to just 0.2% in August, compared to downwardly revised 0.3% in July. Furthermore, over Q3, it is on track to post 0.2%, compared to 0.5% in Q2.

The UK economy returned to growth in August after flatlining for two months, in a boost for the chancellor, Rachel Reeves, before the autumn budget, my colleague Richard Partington writes.

The Office for National Statistics (ONS) said gross domestic product rose by 0.2% in August, after zero growth in June and July. The reading matched the forecasts of City economists.

Liz McKeown, an ONS director of economic statistics, said:

“All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared with the first half of the year.

“In August, accountancy, retail and many manufacturers had strong months, while construction also recovered from July’s contraction. These were partially offset by falls in wholesaling and oil extraction.”

Growth over the broader three months to the end of August also rose by 0.2%. The rate of expansion is slower than in the first two quarters of 2024, when the economy grew by 0.7% and 0.5% respectively after exiting a shallow recession at the end of 2023.

Reeves has promised to use Labour’s first budget in more than a decade to reboot economic growth, with a plan to prioritise investment, alongside measures to increase household incomes and repair crumbling public services. However, she has also warned that tough decisions will be required to balance the books.

The chancellor said the government would next week host its global investment summit to encourage the world’s biggest businesses to spend in Britain to bring jobs and activity to every part of the country.

The return of the UK economy to growth means a UK interest rate cut as soon as November isn’t certain, argues Suren Thiru, ICAEW economics director.

Following today’s GDP data showing the economy grew by 0.2% in August, Thiru says:

“These figures confirm a reassuring rally in output, as easing inflation and better weather helped return the economy to growth by reviving activity in key sectors, including retail and manufacturing.

“August’s uptick is unlikely to have prevented a slowdown in GDP growth across the third quarter, as lower business and consumer confidence may well have squeezed activity in September.

“The UK economy could blow a bit hot and cold over the near term, as the lift to incomes from muted inflation is hindered by growing consumer and business caution amid global geopolitical uncertainty and probable tax hikes.

“While interest rates are still likely to fall in November, these positive figures mean it’s not quite a done deal by giving the more hawkish rate setters enough encouragement over economic conditions to hold off voting to relax policy.”

The money markets are indicating there’s an 80% chance that the Bank of England cuts rates to 4.75% in November, down from 5% today.

Chancellor Rachel Reeves has welcomed the news that growth has returned to the economy.

“Growing the economy is the number one priority of this Government so we can fix the NHS, rebuild Britain and make working people better-off.

“While change will not happen overnight, we are not wasting any time on delivering on the promise of change.

“Next week, hundreds of the world’s biggest businesses will come to Britain as we deliver on our promise to bring investment, growth and jobs back to every part of the country.”

If you look at the overall picture, the UK economy has had a fairly good run so far this year, particularly when compared to the economic stagnation of 2023.

So says Ellie Henderson, economist at Investec, who told clients:

Providing the 30 October Budget does not include any major curveballs, there are reasons to be optimistic moving forward, too.

The household balance sheet is looking healthy; not only are nominal income gains outstripping inflation, implying real household income growth, the saving ratio is still elevated, at 10% in the last reading, giving room for spending growth to exceed real income growth if households so choose.

Meanwhile on the business side, investment should be supported by lower interest rates, as the Bank of England looks to continue its easing cycle.

On such business investment, PM Starmer and his team aim to push this lever of growth next Monday, with the UK hosting its first International Investment Summit, bringing together up to 300 industry leaders with the aim of boosting investment into the UK.

In the City, shares in supermarket group J Sainsbury have dropped almost 5% after its largest shareholder sold part of their stake.

The Qatar Investment Authority offloaded around $400m of shares in Britain’s second-largest grocer last night, by selling 109m shares to the market.

QIA had owned 335m shares, worth around $1.2bn (or over £900m).

Back in 2007, Qatar launched a £10.6bn takeover approach for Sainsbury’s, worth 600p per share, but abandoned the bid after the increased cost of funding in the credit crunch.

Today, Sainsbury’s shares are down to 275p, a two-month low, valuing the company at £6.5bn.

While there’s relief that the UK economy grew in August, there’s also concern this morning about the country’s trade deficit.

New data shows that the UK’s total goods and services trade deficit widened by £3bn in the June-August quarter, to £10bn.

The increase was due to higher goods imports.

The Office for National Statistics reports that the UK’s goods deficit widened by £2.6bn to £52.4bn in the three months to August. The trade in services surplus is estimated to have narrowed by £400m to £42.4bn.

Yael Selfin, chief economist at KPMG UK, fears that UK exports could suffer in future from protectionism (eg tariffs) and geopolitical tensions overseas.

Selfin says:

“The widening of the trade deficit in the three months to August points at one of the UK’s Achilles’ heels, while rising geopolitical tensions and protectionist measures could accelerate the realignment of supply chains and potentially put further pressure on UK exports in the medium term.”

August’s GDP growth was broad based, with “British brains and British brawn” both contributing to healthy growth, says Nicholas Hyett, investment manager at Wealth Club:

In the crucial Services sector, professional, scientific and technical activities continues to be the key driver of growth - with auditors, lawyers and scientific researchers all reporting a busy month.

In Production manufacturing enjoyed a rebound over the summer, particularly in transport, while infrastructure activity drove a strong result in Construction.

This is all welcome news for the Treasury ahead of the Budget which is expected to see taxes rises, potentially slowing economic activity. It does raise a conundrum for the Bank of England though. The Bank had been eyeing up further interest rate cuts, but the economy doesn’t look like it’s crying out for more monetary support and with inflation expected to accelerate again into Christmas, rate setters might be thinking it makes sense to sit on their hands a little while longer.”

The Labour government needs to build on the 0.2% growth reported in August, says Lindsay James, investment strategist at Quilter Investors:

“After two months of stagnant growth, and downward revisions for previous quarters, UK GDP has finally shown some growth, despite the lack of summer sunshine. GDP increased by 0.2% on the month, helping the economy bounce back after a difficult period. While growth remains sluggish and momentum appears to be stalling, this figure will provide a sigh of relief for the new Labour administration after a difficult start to life in government. However, given the mandate it has to deliver economic growth and wealth creation, it will need to build on this progress.

“Despite the UK experiencing better-than-expected growth this year and upward revisions in economic forecasts, the gloom surrounding the economy has been hard to shake. Much of this is due to Labour’s rhetoric as they attribute difficult tax and spending decisions to their predecessors. Additionally, bond yields have risen recently as debt continues to grow and inflationary threats persist. Until there is clarity from this month’s Budget, consumer and business confidence will likely remain muted, delaying any economic boost from these better GDP numbers.

UK retailers and manufacturers had a good August, the Office for National Statistics reports.

ONS director of economic statistics Liz McKeown says:

“All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared to the first half of the year.

“In August accountancy, retail and many manufacturers had strong months, while construction also recovered from July’s contraction. These were partially offset by falls in wholesaling and oil extraction.”

The services, production and construction sectors all expanded in August, today’s GDP report shows.

The ONS reports:

• Services output grew by 0.1% in August 2024, following an unrevised increase of 0.1% in July 2024, and grew by 0.1% in the three months to August 2024.

• Production output grew by 0.5% in August 2024, following a revised fall of 0.7% in July 2024 (this was a 0.8% fall in our last publication), but showed no growth in the three months to August 2024.

• Construction output grew by 0.4% in August 2024, following an unrevised fall of 0.4% in July 2024, and grew by 1.0% in the three months to August 2024

Newsflash: The UK economy has returned to growth.

UK GDP rose by 0.2% in August, new data released by the Office for National Statistics shows, after no growth in June and July.

That’s in line with City forecasts.

It’s a welcome boost for the government, after growth flatlined earlier in the summer amid wet weather and the cost of living squeeze.

Details to follow….

Poppy Gustafsson, the former CEO of cybersecurity firm Darktrace, has been given a role to boost UK growth in the months ahead.

She was appointed as the UK’s new investment minister last night, just days ahead of the government’s business summit in London.

Gustafsson, who will be made a peer in the House of Lords, is an “accomplished entrepreneur who brings invaluable experience to the role,” Prime Minister Keir Starmer explained.

Gustafsson, 42, was available after stepping down from Darktrace last month following its takeover by private equity firm Thoma Bravo.

The UK economy has already received a growth boost this morning – the leaders of the world’s biggest green energy companies have promised more than £24bn of new private investment across Great Britain.

The single largest investment set out ahead of next Monday’s investment meeting was by the owner of Scottish Power, Spain’s Iberdrola, which has promised to double its planned investments in the UK’s clean energy ambitions to reach £24bn over the next four years.

More here:

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

August was a volatile month in the UK. It began with riots sweeping England, and interest rates being cut for the first time in over four years, and ended with the new Labour government warning that tough decisions would be needed to fix the nation’s finances.

And this morning, we’ll learn how the econony fared during August, in the final GDP report before the budget later this month.

UK GDP has flatlined in June and July, so Chancellor Rachel Reeves will be desperately hoping that we get a number with a plus sign at the front at 7am.

Encouragingly, economics are expecting a return to growth. The City of London is expecting that GDP rose by 0.2% in August.

A weak report could spur the Bank of England towards cutting interest rates, explains Tony Sycamore, market analyst at IG:

The market is looking for GDP to rise by 0.2% in August after flat readings in June and July. A softer-than-expected GDP reading would fuel expectations of a BoE 25bp rate cut at its next meeting on November 7th.

The agenda

• 7am BST: UK GDP report for August

• 7am BST: UK trade balance for August

• 1.30pm BST: US producer prices index for September

• 3pm BST: US University of Michigan’s consumer confidence survey