Time to wrap up…

The UK economy slowed to a near-standstill in the third quarter as uncertainty surrounding Labour’s first budget and high interest rates weighed on business and consumer spending.

In a blow to the chancellor, Rachel Reeves, as she attempts push the UK to the top of the G7 growth league, the economy grew by 0.1% in the third quarter of the year, down from 0.5% in the second quarter, according to figures from the Office for National Statistics (ONS).

The UK ranked sixth in the G7 for growth in the third quarter, above Italy but below France, Germany and the US, which grew by o.4%, 0.2% and 0.7% respectively.

Figures released by the ONS on Friday showed that in the three months to the end of September – the first quarter under the new Labour government – services and manufacturing sector output slowed, indicating that uncertainty surrounding the budget and high interest rates contributed to a loss of momentum since the spring.

City economists had expected quarter-on-quarter growth to be 0.2%. Month-on-month GDP shrank by 0.1% in September, falling short of forecasts for growth of 0.2%.

But despite the slowdown, the money markets indicate there’s only an 18% chance of another cut to UK interst rates next month.

Here’s the full story:

And analysis:

Investors in pharmaceutical companies are selling off stock after Donald Trump nominated the anti-vaccine activist Robert F Kennedy Jr to lead the US Department of Health and Human Services.

RFK Jr has embraced numerous health-related conspiracy theories, and is one of the most persistent and influential vaccine deniers in the US.

Trump’s announcement sent shares in some of the world’s biggest pharmaceutical companies – including Moderna, AstraZeneca and GSK – falling on Friday morning.

The European Commission has forecast that Germany’s economy will shrink by 0.1% this year, casting a shadow over the upcoming general election.

One of Britain’s biggest property developers has reinforced the growing shift to a return to office working, saying that occupancy in its central London offices has grown to an all-time high and the value of its portfolio has returned to growth.

Typhoo Tea is to call in administrators, as Britain’s oldest tea brand struggles with more than £70m in debt amid a sales slump in the highly competitive drinks market.

General Motors laid off roughly 1,000 employees today, according to reports, as the automaker attempts to cut costs and realign priorities amid changing market conditions, according to a person familiar with the decision.

CNBC has the details:

The layoffs, which were announced Friday morning to those impacted, were across the business. Some were due to poor performance, while others were part of a review to reorganize priorities by the automaker, according to the person, who agreed to speak about the decision on the condition of anonymity.

A majority of the employees impacted were in suburban Detroit at the automaker’s global technical center in Warren, Michigan, the person said. A small number of hourly employees were included in the layoffs.

Wall Street has indeed opened in the red.

The Dow Jones industrial average has dipped by 143 points, or 0.33%, to 43,607 points.

The broader S&P 500 share index is down 0.7%, while the tech-focused Nasdaq has dropped by 1.3%.

Vaccine makers are among the fallers, with Pfizer and Moderna both down over 4.5% – adding to yesterday’s losses, following the nomination of Robert F Kennedy Jr as US secretary of health and human services.

As flagged earlier, US central bank chief Jerome Powell has disappointed investors by saying the Federal Reserve doesn’t need to be “in a hurry” to cut interest rates.

There’s drama in the commodities market today.

The aluminium price has jumped over 8% at one point today after China’s finance ministry said it would reduce or cancel export tax rebates for a wide range of commodities and other products.

The move fuelled concerns that shipments abroad from China could be curbed.

From 1 December, the export tax rebate rate for some refined oil products, photovoltaics, batteries, and certain non-metallic mineral products will be cut from 13% to 9%.

China will also cancel the rebate for aluminum and copper products and chemically modified animal, plant, or microbial oils and fats.

Reuters reports that the three-month aluminium contract on the London Metal Exchange soared as much as 8.5% to $2,730 a metric ton, close to a five-month high.

The European Commission has also warned that Germany’s economy will shrink this year.

Its latest economic forecasts, just released, predict that economic activity in Germany will decline by 0.1% in 2024.

In 2025, Germany’s economy is forecast to grow by 0.7% – the weakest in the EU – followed by 1.3% growth in 2026.

On Germany, the EC says:

High uncertainty has been weighing on consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened. Going forward, domestic demand is set to pick up, driven by increases in real wages.

Back in Europe, the European Commission has warned that an increase in trade protectionist measures could “upend global trade” and hurt the EU’s economy.

In a sign that Europe is worried about Donald Trump imposing new tariffs, European Economic Commissioner Paolo Gentiloni told reporters:

“The level of integration between our economies is such that EU-U.S. trade relations are a stabilising economic and political force.

“Despite trade disputes and regulatory divergences, both regions maintain a shared interest in upholding high standards, fair competition and stability in global markets.”

Gentiloni was speaking after the EU released its latest economic forecasts. They predict eurozone growth will pick up, from 0.8% this year to 1.3% in 2025 and 1.6% in 2026.

The EU warns, though, that uncertainty and downside risks to the outlook have increased, saying:

Russia’s protracted war of aggression against Ukraine and the intensified conflict in the Middle East fuel geopolitical risks and risks to energy security. A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU’s highly open economy.

From one RFK to another….

Shares in pharmaceuticals companies across the globe are sliding after Donald Trump nominated Robert F Kennedy Jr. to lead the US Department of Health and Human Services.

RFK Jr is an anti-vaccine activist who has embraced a range of health-related conspiracy theories, including that vaccines are tied to autism in children, that HIV is not the cause of Aids and that certain antidepressants are linked to a rise in school shootings.

Kennedy has also called for bans on hundreds of food additives and chemicals, and wants to cut ultra-processed foods out of school lunches as part of a goal to reduce the incidence of diet-related chronic diseases.

Announcing his choice, Trump posted:

“The Safety and Health of all Americans is the most important role of any Administration, and HHS will play a big role in helping ensure that everybody will be protected from harmful chemicals, pollutants, pesticides, pharmaceutical products, and food additives that have contributed to the overwhelming Health Crisis in this Country.”

But the decision has been quickly criticised.

California’s Democratic representative Robert Garcia called the nomination “fucking insane”, writing on X:

“He’s a vaccine denier and a tin foil hat conspiracy theorist. He will destroy our public health infrastructure and our vaccine distribution systems. This is going to cost lives.”

Shares in pharmaceutical firm Moderna, which produces mRNA vaccines, fell over 5% last night, and are down another 1.8% in premarket trading. BioNTech, the German drugmaker that helped develop a Covid vaccine with Pfizer, fell 7%.

In London, AstraZeneca (-2.8%) and GSK (-2.75%) are among the big fallers on the FTSE 100 this morning.

AJ Bell investment director Russ Mould says:

“Pharmaceutical stocks left the FTSE 100 looking sickly on Friday morning as AstraZeneca and GSK shares came under pressure.

“The announcement of vaccine-sceptic Robert F. Kennedy Junior as health secretary pick for the incoming Trump administration has spooked investors in the sector, with US drug companies also seeing their shares come under significant pressure overnight. The impact on the sector is hard to judge fully at this stage but, at the very least, it will cause a good deal of uncertainty.

Chemicals firm Croda, which makes ingredients for food products, are down 4.1% in London.

Germany’s Roche are down 2%, while Denmark’s Novo Nordisk (the firm behind Wegovy and Ozempic, which also makes vaccines) are down 2.5%.

It was hardly surprising that the chancellor, Rachel Reeves, declared herself “not satisfied” with the news that GDP expanded by a measly 0.1% in the three months to September, our (new) economics editor Heather Stewart writes.

Few could have expected Labour to kickstart an economic renaissance from day one, despite its “mission” to deliver the highest sustained growth in the G7.

But the data will worry the Treasury for two reasons: first, it shows the scale of the challenge ahead; and second, it raises the question of whether the grim mood deliberately created over the summer dented confidence and held back growth.

The figures, released on Friday, show that since Labour swept into government in July, the economy has barely expanded. The 0.1% growth in output over the quarter was weaker than the 0.2% expected by market analysts….

More here:

The shadow chancellor, Mel Stride, has claimed that the slowdown in growth this summer was due to Labour “talking the economy down”.

The shadow chancellor told Times Radio this morning that the government was “reaping, to a degree, what they’ve done”, saying:

“I’m afraid they’re reaping to a degree what they’ve done in terms of talking the economy down. And of course now what they’ve done is follow it up with a budget that has indeed ramped up taxes, particularly taxes that are going to bear down on growth.”

Stride claimed ministers had a ‘mission’ to talk down the economy ahead of the budget, saying:

“Across that quarter, across the summer, what the Labour Government did in order to justify what they planned to do all along, which was to substantially hike taxes… it was their mission to talk down the UK economy.”

As we’ve been covering this morning, several economists have blamed budget uncertainty for the slowdown.

Looking back over summer…. in late July, Rachel Reeves announced a £22bn ‘black hole’ had been discovered in public spending this year, which raised fears of tax rises in the budget, and in August Keir Starmer warned that ‘painful’ decisions were needed.

That was followed by a drop in UK consumer confidence.

Today’s GDP report shows that consumer-facing services grew by 0.5% in Q3, while business-facing services showed no growth in the quarter.

One of Britain’s biggest property developers has reinforced the growing shift to a return to office working saying that occupancy in its central London offices has grown to an all-time high, and as the value of its portfolio has returned to growth.

The improvement in the market saw LandSec, which owns offices and retail locations such as Bluewater and Trinity Leeds, bounce back to a £243m pre-tax profit in the six months to the end of September.

The company, which has reduced its assets in the City of London to 24% of its office portfolio post-Covid, had reported a loss of £193m in the same period last year.

On Friday, LandSec said that its West End offices are “practically full” - with occupancy across its central London portfolio growing to a high of 97.9% - with four-fifths of customer striking lettings deals over the last year either growing space or maintaining existing size.

LandSec says:

“Across our Central London portfolio, office utilisation continues to grow. Rents for highly sustainable, best-in-class offices continue to grow.”

The company said that investment activity in London has picked up and as a result the value of its property portfolio has returned to growth.

“Following two years of softening, property yields stabilised over the last six months,” the company said.

LandSec’s overall central London office portfolio grew by 0.8% in value year-on-year to £6.4bn, and within this its assets in the City of London grew by 1.9% to £1.25bn.

However, the company said that the strongest signs of recovery are being seen in its retail property operation, driven by demand from big brands such as Primark and JD Sports.

LandSec explains:

“Brands continue to focus on fewer, but bigger and better stores in key locations. This means leading brands continue to take more space with us. As supply of both is constrained, rents continue to increase.”

The value of the company’s major shopping centre and retail outlet locations grew by 2.8% year-on-year to just over £2bn at the end of September.

“Given the attractive returns in major retail we will focus our investment for the remainder of this year on this, rather than making any new office commitments,” the company said.

Shares in Landsec have jumped 1.6% at the start of trading in London, the top riser on the FTSE 100 index.

High interest rates also weighed on the UK economy over the summer.

The Bank of England kept interest rates at a 16-year high of 5.25% until August, when it cut them to 5% (followed by a cut to 4.75% last week).

Suren Thiru, ICAEW economics director, suspects the Bank will resist cutting interest rates again next month, even though growth was so weak in July-September.

Thiru says:

“These figures suggest that the economy went off the boil even before the budget, as weaker business and consumer confidence helped weaken output across the third quarter, particularly in September.

“Following a ‘gangbusters’ first half of the year, the third quarter outturn paints a more realistic picture of the UK’s underlying growth trajectory given longstanding challenges over poor productivity and persistent supply side constraints.

“Economic growth in the final quarter of this year is likely to be similarly modest with looming tax rises and growing global uncertainty likely to spark a renewed restraint to spend and invest, despite lower interest rates.

“In spite of these downbeat figures, a December policy loosening looks improbable as rate setters will likely be concerned enough over inflation risks from the budget and growing global headwinds to resist signing off back-to-back interest rate cuts.”

The City agrees. According to the money markets this morning, there’s only a 17.5% chance of a UK interest rate cut in December, and an 82.5% chance the BoE leaves rates on hold.

The Resolution Foundation have calculated that the UK has fallen behind the US for growth so far this year.

They explain that the UK had the fastest growing economy in the G7 in the first half of this year, after growing by 1.2% from January to June.

But Britain’s GDP rebound has now “run out of steam”, with today’s data showing GDP slowing to 0.1% in the third quarter of 2024 (one of the weakest rates across the G7, as explained here).

Resolution say this slowdown puts UK growth over the first three quarters of the year at 1.3%, behind the US (1.9%) but ahead of France and Italy (0.8% and 0.4%), with Canada set to stay just behind the UK based on current forecasts.

Simon Pittaway, senior economist at the Resolution Foundation, says:

“After bouncing back from recession earlier this year, Britain’s recovery is already running out of steam. The UK has fallen below the US at the top of the G7 GDP growth leaderboard, with growth slowing, wage rises shrinking and employment starting to fall.

“The UK has been a GDP rollercoaster over the past 12 months, but its medium-term performance has been staid and stagnant. Over the past five years, the economy has shrunk by 0.7 per cent once you account for population growth.

“This all serves to highlight that the Government’s mission to renew strong economic growth is both extremely hard, and absolutely necessary.”

Chancellor Rachel Reeves says she is “not satisfied” with today’s GDP figures showing the economy slowed over the summer with just 0.1% growth (and a shock contraction in September).

Reeves says:

“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.

“At my Budget, I took the difficult choices to fix the foundations and stabilise our public finances.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal.”

Today’s GDP report shows that the UK is sitting towards the bottom of the G7 for growth over the summer.

Here’s how the lacklustre growth of just 0.1% last quarter compares with other major economies:

• US: +0.7% (or an ‘annualised rate’ of 2.8%) in Q3

• France: +0.4%

• Canada: Not published yet, but expected to be +0.25%

• Germany: +0.2%

• Japan: +0.2%

• UK: +0.1%

• Italy: 0%

Labour have pledged to deliver the “highest sustained growth in the G7”; today’s data shows plenty of progress is needed…..

The CBI are blaming the uncertainty around last month’s budget for the slowdown in growth over the summer.

Ben Jones, CBI Lead Economist says:

“The UK economy stalled over the third quarter. Uncertainty ahead of the Budget probably played a big part, with firms widely reporting a slow-down in decision making. Hopefully this will prove to be a blip. We still expect the economy to return to a path of modest growth in the year ahead. But downside risks to the outlook have increased.

“The Budget has set off warning lights for business. The hike in National Insurance Contributions alongside other increases to employers’ cost base will add to the burden on business. And it is expected to trigger a more cautious approach to pay, hiring and investment as companies work through what it means for their own budgets.

ONS Director of Economic Statistics Liz McKeown says:

“The economy grew a little in the latest quarter overall as the recent slowdown in growth continued. Retail and new construction work both performed well, partially offset by falls in telecommunications and wholesale. Generally, growth was subdued across most industries in the latest quarter.

“In September the economy shrank a little. Services showed no growth with a notable increase in car sales offset by a slow month for IT companies. Production fell overall, driven by manufacturing, though there was an increase in oil and gas extraction.”

The UK economy ended the summer on a weak note, with GDP contracting in September.

Today’s GDP report shows that monthly real GDP is estimated to have fallen by 0.1% in September.

This was largely due to declines in manufacturing output and information and communication services, the ONS says.

While the services sector stagnated in September, production output fell by 0.5% in the month, but construction output grew by 0.1%.

Disappointingly, the economy actually contracted in the last quarter once you adjust for population changes.

Real GDP per head is estimated to have fallen by 0.1% in the third quarter of 2024, and is flat, compared with the same quarter a year ago, the ONS says.

That’s one indicator for a country’s living standard.

Newsflash: the UK economy has suffered a summer slowdown.

GDP rose by just 0.1% in the July-September quarter, data just released by the Office for National Statistics shows.

That’s down from the 0.5% growth in the second quarter of the year, and weaker than the 0.2% expected.

The scorecard for the Labour govenment’s first quarter in office shows that the services sector grew by 0.1%, while construction grew 0.8%.. but production fell by 0.2% in the quarter.

Brexit has also been holding back the UK economy, the Bank of England governor warned last night as he urged ministers to “rebuild relations” with the EU.

Speaking at the Mansion House dinner in the City of London on Thursday evening, Andrew Bailey said he took no position on Brexit “per se”, but added: “I do have to point out consequences.”

He said Brexit had “weighed” on the economy, pointing out in particular the impact of Brexit on the UK’s trade in goods, adding:

“It underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.”

Keir Starmer’s government has pledged to deepen cooperation with the EU, though Brussels has made clear it is unwilling to hold wide-ranging negotiations on the trade and cooperation agreement (TCA).

Labour is opposed to re-entering the EU’s single market or customs union. Instead, the government hopes to win more modest changes such as mutual recognition of professional qualifications and a veterinary agreement that could alleviate the need for checks on food exports.

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

Keir Starmer and Rachel Reeves are about to get their first quarterly growth report since taking office, and it’s not expected to be sparkling.

At 7am GMT the first estimate of UK GDP for the third quarter of 2024 will be released, as well as for September alone.

Economists are expecting the economy grew by 0.2% in July-September, a relatively weak growth rate. That would be a slowdown on the 0.5% growth recorded in April-June, and the 0.7% in January-March.

If that happens, Labour’s gloomy talk since winning the general election in early July is likely to take some other blame. Warnings of a ‘painful’ budget hit confidence among both consumers and businesses, which will have a knock-on impact on spending, and investment decisions.

On the other hand, Reeves could well argue that a slow-moving economy justifies her push for growth – although the extra spending laid out in last month’s budget is only expected to give a short-term lift to economic output…

Previous data have shown that the UK economy stagnated in June and July – as the recovery from last year’s shallow recession faded – before returning to growth in August.

Sanjay Raja, chief UK economist at Deutsche Bank, predicts that the UK economy moved from a “spring sizzle” to a “summer simmer”.

After a solid H1-24, UK growth over summer will likely slow. We expect Q3-24 GDP growth to slow to a more paltry 0.2% quarter-on-quarter.

We see September GDP, which will also be released as part of the GDP data dump, rising by 0.2% month-on-month. Risks are skewed higher on the quarterly print, but lower on the monthly September print, we think.

The agenda

• 7am GMT: First estimate of UK GDP for Q3 2024

• 7am GMT: First estimate of UK GDP for September 2024

• 7am GMT: UK trade balance for Q3 2024

• 8.30am GMT: Hong Kong’s GDP report for Q3 2024

• 9.30am GMT: UK productivity data for Q3 2024

• 10am GMT: EU to release autumn economic forecasts

• 1.30pm GMT: US retail sales for October