Time to wrap up...

UK inflation has dipped, but the respite could be temporary. Consumer prices rose by 3.1% in the year to September, down from a nine-year high of 3.2% in August.

But the drop was due to last summer’s discount meal offer, Eat Out to Help Out, dropping out of the calculations. Economists predict inflation will keep rising, and could be over 4% by early next year.

Transport costs pushed up the cost of living, with petrol and second-hand car prices having risen sharply since pandemic restrictions eased.

The inflation data will be used to set UK pensions next year. They should rise by 3.1%, but would have jumped by 8%, in line with wages, if the government hadn’t suspended the triple-lock.

Age UK said it is “imperative” to revert back to the triple-lock to tackle pensioner poverty.

House prices inflation also accelerated, with prices up over 10% in the last year.

Petrol retailers warned that prices at the pump will hit new record highs by the end of October - blaming the surge in oil prices.

But motoring organisations accused forecourts of pumping up prices.

Rising petrochemical prices are also pushing up the cost of paint.

Dutch paints and coatings maker AkzoNobel warned this morning that “significant raw material cost inflation and supply constraints” are expected to continue until the middle of next year.

Bitcoin has hit a new record high, scaling April’s peak to climb over $65,000 for the first time. The move followed the launch of the first Bitcoin ETF, which makes it easier to invest in the crypto currency.

But the UK’s financial watchdog warned that young investors were being lured into high-risk products such as cryptocurrencies and foreign exchange trading by social media hype and the gambling-like thrill of competing to get rich quick.

In another intriguing development, short-seller Hindenburg Research launched a $1m “bounty” programme for information on Tether, the company at the centre of the global cryptocurrency market.

Shares in Pinterest have surged, after Bloomberg reported the PayPal was exploring acquiring the popular digital pinboard site.

Elon Musk, the world’s richest person, with an estimated $241bn fortune, could become the first trillionaire, Morgan Stanley predicted.

Facebook has been fined £50.5m for breaching an order imposed by the UK competition regulator during its investigation into the purchase of the gif creation website Giphy.

Rishi Sunak is preparing to announce a tax cut for Britain’s biggest banks at next week’s budget to maintain the competitiveness of the City of London after Brexit, according to reports, despite plans to raise taxes on workers.

MPs have warned that UK public sector pension schemes could deepen divisions in society unless they use their billions of pounds of investment to cushion communities pivoting away from carbon-intensive industries such as steel and carmaking.

Five of the UK’s leading manufacturing industries have called for more government financial support to boost capital investment in research and development as well as new factories and equipment with lower carbon emissions.

Burberry has appointed Jonathan Akeroyd as its next chief executive in a deal including a £6m “golden hello” to cover the loss of bonus and share awards for leaving his position as boss of rival Versace.

Deliveroo enjoyed a 59% increase in orders in the UK and Ireland between July and September despite the return of dine-in restaurant eating, as a partnership with Amazon more than doubled members of its premium subscription service.

The scourge of scam texts and calls has been laid bare by UK telecoms regulator research showing almost 45 million people received at least one in the last three months, while mobile network EE had to block 18,000 sim cards used for the fraud over that period.

Goodnight. GW

Shares in Pinterest, the image sharing and social media service, have surged by over 10% after Bloomberg reported that PayPal was exploring a possible takeover bid.

They say:

PayPal Holdings Inc. is exploring an acquisition of social media company Pinterest Inc., people with knowledge of the matter said, Bloomberg News reports.

San Jose, California-based PayPal has recently approached Pinterest about a potential deal, the people said, asking not to be identified because the talks are private.

Short-seller Hindenburg Research has launched a $1m “bounty” programme for information on Tether, the company at the centre of the global cryptocurrency market.

Hindenburg is seeking more detail on the reserves which back Tether, which has issued around $70bn of stablecoins which underpin the crypto market.

“We feel strongly that Tether should fully and thoroughly disclose its holdings to the public,” said Hindenburg’s founder Nathan Anderson.

“In the absence of that disclosure, we are offering a $1m bounty to anyone who can provide us exclusive detail on Tether’s supposed reserves.

Stablecoins are a bridge between cryptocurrencies and traditional financial assets, making it easier for traders to buy and sell crypto.

One tether is equivalent to $1, with Tether insisting for years that it held equivalent fiat assets to back the billions of tethers it was creating.

But in May, it revealed that much of its reserves were actually in commercial paper - short-term debt issued by companies.

Last Friday, Tether agreed to pay a $41m penalty to resolve a US regulator’s claims that it had falsely said its digital tokens were fully backed by dollars.

The Commodity Futures Trading Commission said Tether had made untrue or misleading statements and omissions of material fact, and that its Tether was not “fully-backed” by dollars for the majority of the time between June 1, 2016 and February 25, 2019.

Today, Tether has hit back at Hindenburg’s move, calling it a “pathetic bid for attention” (but not releasing any more details on their reserves):

This is not the first time Hindenburg Research has orchestrated an apparent scheme in pursuit of profit. Nor will it be the last. Tether abhors and denounces their actions and transparent motives.

Though the state pension is set to rise in line with inflation, some pensioners may be disappointed – as they could be missing out on a wage increase of 8% because of the temporary suspension of the triple-lock.

With many elderly people heavily reliant on their state pension, and disproportionately affected by high heating costs, this confirmed figure is a worry for many. Age UK has said it is “imperative” to revert back to the triple-lock to tackle pensioner poverty.

Caroline Abrahams, charity director at Age UK, said:

Even taking into account the expected 3.1% increase following today’s inflation figures, the state pension is hardly a fortune, paying less than £9,000 a year on average and leaving about a quarter of pensioners reliant on means-tested benefits to top it up.

With surging household bills on the cards, many older people – including the two million currently living in poverty – will be feeling extremely anxious about how they’ll be able to afford to stay warm and well this winter. More than a million older households are already living in fuel poverty and rocketing energy prices are likely to push thousands more into trouble over the next few months.

The one year suspension of the triple lock, plus the ending of the universal credit uplift, means that areas with significant numbers of people of all ages living on low incomes will take a financial hit in the next few months. In these places it certainly won’t feel like there is much ‘levelling up’ going on.

There may have been good reason to suspend the triple lock for a year, given how exceptional its impact would have been as a result of the pandemic, but for the sake of millions of older people, as well as the local economies where pensioner poverty is concentrated, it is imperative that it reverts back to normal once the year is up.

Bitcoin has hit a fresh record high.

The cryptocurrency just hit $66,000 for the first time ever, bursting over the previous record high of almost $65,000 back in April.

Bitcoin has rallied sharply in recent weeks, since tumbling to $30,000 back in July.

The rally comes after the first US bitcoin exchange traded fund began trading on Wall Street -- a move which could pull new money into the digital asset market.

The ProShares Bitcoin Strategy ETF launched on the New York Stock Exchange on Tuesday. It gives investors exposure to bitcoin without having to buy the crypto asset itself, and will test whether Wall Street will treat cryptocurrencies as a serious asset alongside shares and bonds.

Bullish comments from billionaire investor Paul Tudor Jones, who told CNBC that bitcoin offered better protection against inflation than gold, also provided a lift.

Jones told CNBC’s “Squawk Box” on Wednesday:

“Bitcoin would be a great hedge. Crypto would be a great hedge,”

“There’s a plan in place for crypto and clearly it’s winning the race against gold at the moment ... I would think that would also be in very good inflation hedge. It would be my preferred one over gold at the moment.”

Mind you, the FT’s Robert Armstrong has criticised bitcoin ETFs, arguing they are an expensive way of getting exposure to crypto compared to simply buying it.

Bitcoin is not at all like standard financial products. It is supported by highly complex technology, the source of its value is fundamentally open for debate, and by far its most common current use is as a vehicle for the purest speculation.

If you can’t be bothered to learn the unique subtleties involved in owning this stuff, you can’t possibly understand the risks, and so you should not own it at all. Bitcoin ETFs should not exist.

Five of the UK’s leading manufacturing industries have issued a plea for more government financial support to boost capital investment in research and development as well as new factories and equipment with lower carbon emissions.

Carmakers, aerospace, chemicals, pharmaceuticals and food and drinks manufacturers banded together on Wednesday to call for a long-term strategy for industry as the chancellor, Rishi Sunak, prepares for the budget next week.

Cutting industrial carbon output will be crucial to meeting the government’s legally mandated target of net zero emissions by 2050, and the manufacturers argue that they need government incentives to spend on decarbonisation.

The lobby groups said UK manufacturers needed help with energy costs, which can be as much as 80% higher than in some European countries. The UK is in the midst of an energy supply crisis, with high prices hitting manufacturers’ ability to make up for earnings lost during the pandemic.

Kevin Craven, the chief executive of ADS, the aerospace and defence group, said:

“Manufacturing is essential to achieving net zero, ensuring our national economic resilience and providing rewarding careers.”

Here’s the full story:

Elon Musk, the world’s richest person, with an estimated $241bn fortune, could become the first trillionaire, an investment bank has predicted.

Analysts at Morgan Stanley forecast that Musk, who has made most of his wealth from the electric car company Tesla, could make much more money from his fledgling space exploration business SpaceX.

The analyst Adam Jones said the company, founded in 2002, was “challenging any preconceived notion of what was possible and the timeframe possible, in terms of rockets, launch vehicles and supporting infrastructure”.

He added:

“More than one client has told us if Elon Musk were to become the first trillionaire ... it won’t be because of Tesla. Others have said SpaceX may eventually be the most highly valued company in the world – in any industry.”

The dip in UK inflation to 3.1% in September is unlikely to last, my colleague Phillip Inman writes:

Anyone concerned about rising prices could be forgiven for thinking that the momentum building in recent months had slipped a gear and forecasts of inflation running away to 4% or even 5% next spring could joyfully be put in the bin.

Not so fast. The coronavirus pandemic has wreaked havoc on most official data and the inflation figures are among the worst affected.

Lockdowns that closed most shops and government subsidies that propped up household spending power are among the many distorting effects of Covid-19 affecting prices.

The chancellor’s £850m eat out to help out scheme that offered 50% off meals up to £10 in August last year to lure consumers back to the high street is the latest to send the figures in an unexpected direction.

Rishi Sunak’s handout for bars and restaurants, which many health experts believe was a super-spreader event that contributed to the surge in the virus last autumn, was not only financially costly, it also allowed for a reduction in prices in August.

Subsequent price increases in September 2020 meant the cost of eating out increased at a slower rate relative to the same month this year....

More here:

Rising petrochemical prices are also pushing up the cost of paint.

Dutch paints and coatings maker AkzoNobel warned this morning that “significant raw material cost inflation and supply constraints” are expected to continue until the middle of next year.

The Dulux-maker said raw material inflation continued to intensify in the third quarter of the year. Its raw material and other variable costs increased by €278m compared with Q3 2020.

In response, the decorative and industrial paint maker, which took over ICI back in 2007, hiked its prices by 9% in July-September compared with the previous year.

But operating income dropped (to €226m from €326m in in 2020), as higher prices were “more than offset” by the impact of higher costs and lower sales volumes.

Thierry Vanlancker, chief executive of AkzoNobel, said that the cost pressures and supply shortages were widespread across many inputs including petrochemicals, additives and metal packaging.

He told the Financial Times:

“It’s probably easier to say where we don’t feel the pressure. It’s very much across the board.

We do believe this situation is going to be with us for most of the first half of 2022.”

UK petrol retailers have warned that prices at the pumps could hit record levels by the end of the month, adding to the cost of living squeeze.

Brian Madderson, chairman of the Petrol Retailers Association, says that the previous records are “almost certain to be eclipsed before the end of October”.

Back in April 2012, petrol hit a record high of 142p per litre while diesel reached 148p per litre.

Prices are nearing that level, the PRA warns, with Experian Catalist UK averages hitting 141.35p per litre for petrol yesterday, and 144.84p per litre for diesel.

Madderson says this increase is being driven by higher oil prices. Brent crude hit a three-year high over $85 per barrel last week, up from around $51 at the start of the year.

The primary reason is the rise and rise of crude oil costs which recently hit $85 per barrel for Brent Crude.

This involves more than a 50% increase since January 2021 and has been caused by a cutback in production from OPEC countries and Russia at the same time as the global economies are staging a rapid economic turnround from the global pandemic. There is no immediate sign of a change to this position and some analysts have talked about further oil price rises to $100/barrel by Christmas.

The Opec+ group slashed production last year, and is sticking to its policy of gradually increasing production by 400,000 barrels per month - despite the White House urging them to pump faster.

Madderson adds that motorists haven’t seen the full impact of rising oil prices:

Current average pump prices across the UK are being softened by some of the largest retailers who typically benefit from a 3 or even 4-week lag to their delivered fuel prices.

Last week, AA data showed that petrol had hit 140p for the highest since the record levels in 2012 (on a nominal basis, not adjusted for inflation).

The PRA also flags that the petrochemical industry is buying up more distillates that would otherwise be used for petrol. Heating oil - which is in higher demand following the surge in gas prices - comes from the same part of the barrel as diesel.

The PRA, which represents independent fuel retailers, says:

S&P Global Platts advised PRA, “Physical spot market activity has seen Gasoline and diesel rise in tandem with the wider energy complex, and this has a knock-on effect, boosting retail prices for road and heating fuels.

Lower stock levels in Northwest Europe are tightening supply and this is accompanied by stronger demand for gasoline in the US, which is an export outlet for the European gasoline market. There’s also stronger demand in the petrochemical sector, which is attracting certain components that would be otherwise destined to gasoline blending.

The picture for diesel is not dissimilar, with limited refinery output coupled with stronger demand across Europe and a boost of demand from the heating fuels lifting values across the entire gasoil complex”.

Central bank news: Bundesbank President Jens Weidmann -- one of the sternest critics of the European Central Bank’s ultra-loose monetary policy -- is stepping down.

Weidmann will leave Germany’s central bank at the end of the year for personal reasons, which will remove one of the hawkish voices at the ECB.

During his time on the ECB’s Governing Council, Weidmann often clashed with more dovish policymakers over the stimulus measures, and record low interest rates, introduced during the eurozone crisis.

Weidmann issued a new warning about inflation risks in his farewell message, telling Bundesbank staff that:

It will be crucial not to look one-sidedly at deflationary risks, but not to lose sight of prospective inflationary dangers either.”

Carsten Brzeski, ING’s Global Head of Macro, says Weidmann’s departure comes at a crucial time for the ECB.

The camp of the hawks is losing an important voice, at a time that increasing inflationary pressure seems to have fueled a more balanced inflation assessment than in the summer.

Even if board member Philip Lane yesterday reiterated that the ECB’s forward guidance currently did not really justify financial markets’ speculation about future rate hikes, higher inflation (prospects), herd immunity and an economy returning to pre-crisis levels before the end of the year are creating a strong argument to withdraw the ECB’s emergency stimulus and start reducing asset purchases.

Maybe the decision to do the latter will be Weidmann’s last success as Bundesbank president at the ECB’s December meeting.”

House price inflation has picked up again, as prices continued to rise despite the tapering of the stamp duty holiday this summer.

The average UK house prices jumped by 10.6% in the year to August, the ONS reports, up from 8.5% in July.

That lifted the average house price to £264,000 in August 2021, £25,000 higher than a year earlier.

Average house prices increased over the year in England to £281,000 (9.8%), in Wales to £195,000 (12.5%), in Scotland to £181,000 (16.9%) and in Northern Ireland to £153,000 (9.0%).

The stamp duty holiday ended in Wales at the end of June, and finished in Scotland back in March. It was halved in England in Wales at the start of July, and ended last month.

Within England, the North East saw the highest annual house price growth -- up 13.3% -- while London lagged with just 7.5% growth, as the ‘race-for-space’ continues to drive people towards larger properties in more rural areas.

Jamie Durham, economist at PwC, says the housing market has “clearly remained strong”.

“Looking ahead, we expect that house price growth will remain relatively buoyant, but likely at a slightly lower rate than we have seen over the last few months as a result of conditions normalising post-COVID-19 and weakening consumer confidence driven by inflation and ongoing stock issues.

It is unlikely that there will be a significant decline in the rate of growth, however, as the underlying factors driving up the market should continue.

Just in: Britain’s competition watchdog has fined Facebook £50m for breaching an enforcement order over its investigation into the takeover of gif creation website Giphy.

In a stinging rebuke, the Competition and Markets Authority says the social media giant failed to comply with the ‘initial enforcement order (IEO) imposed in June 2020 when it began its investigation into its Giphy purchase.

The IEO is meant to ensure companies continue to run as separate businesses while a takeover is investigated, preventing them from integrating.

Facebook was required to provide regular updates showing it was complying with this IEO. But, the CMA says, Facebook “significantly limited the scope of those updates”, despite repeated warnings.

The CMA says this is the first time a company has breached an IEO by consciously refusing to report all the required information.

And given the multiple warnings it gave Facebook, the CMA considers that this failure to comply was deliberate.

As a result, the CMA has issued a fine of £50 million for this “major breach”, which the regulator says “fundamentally undermined its ability to prevent, monitor and put right any issues”.

The CMA has also fined Facebook £500,000 for changing its Chief Compliance Officer on two separate occasions without seeking consent first.

Joel Bamford, senior director of mergers at the CMA, said the fine is “a warning to any company that thinks it is above the law.”

“Initial enforcement orders are a key part of the UK’s voluntary merger control regime. Companies are not required to seek CMA approval before they complete an acquisition but, if they decide to go ahead with a merger, we can stop the companies from integrating further if we think consumers might be affected and an investigation is needed.

“We warned Facebook that its refusal to provide us with important information was a breach of the order but, even after losing its appeal in two separate courts, Facebook continued to disregard its legal obligations.

“This should serve as a warning to any company that thinks it is above the law.”

Giphy supplies animated gifs to social networks such as Snapchat, TikTok and Twitter.

In August, the CMA said Facebook could be forced to sell Giphy after an investigation found its takeover could harm competition among social media companies and the digital advertising market.

Facebook, which owns Instagram and WhatsApp, has denied that owning Giphy will hurt competition.

UK state pensions are set to rise by 3.1% next April, in line with September’s rise in inflation.

With the pensions triple-lock temporarily downgraded to a double-lock, pensioners are on track to see an increase in line with rising prices.

That would lift the new state pension from £179.60 per week to £185.16, while those on the basic state pension would see an increase from £137.60 per week to 141.86.

The triple lock aimed to increase the state pension in line with the highest of 2.5%, CPI inflation and earnings. However, the earnings component was suspended this year, after wage growth surged over 8% as workers came off furlough earlier this year.

Work and pensions secretary Thérèse Coffey told the House of Commons last month the state pension would increase either by 2.5% or inflation, whichever is higher, in April.

James Jones-Tinsley, self-invested pensions technical specialist at Barnett Waddingham, explains:

“In September, the Government changed the ‘triple lock’ to a ‘double lock’ for one year only, meaning pensioners wouldn’t benefit from an anomalous wage increase of 8% - a result which would have been unpopular amongst both the under 55s and the Treasury. Instead, their pensions would increase by the higher of either 2.5% or this month’s inflation figure.

In good news for many pensioners, at 3.1% this will still be the second highest increase in a decade.

Those on a full new state pension will see their payments rise from £179.60 a week (£9,339 a year) to £185.17 (£9,629 a year).

But will that protect pensions from the impact of soaring energy costs, with fears that supply chain shortages will push up food prices in the shops?

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, says a 3.1% increase will be “cold comfort to pensioners bracing themselves for soaring energy bills this winter”.

While many pensioners have other sources of income to fall back on the state pension still forms the backbone of many peoples’ retirements and too many are wholly reliant upon it.

In addition, not everyone receives the full amount with recent Hargreaves Lansdown analysis showing more than 2m pensioners get less than £100 per week in state pension. While working households will also need to prepare for rising bills pensioners will be particularly vulnerable to these increases.”

This chart shows how the triple lock has lifted pensions each year since it was introduced.

Economists are warning that September’s dip in inflation will be temporary.

As well as supply chain disruption driving up costs, households have just been hit by the rise in the energy price cap this month.

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, says:

“Inflation stabilised in September, as policy-related distortions such as last year’s ‘Eat Out to Help Out’ scheme dropped out of the calculation.

Nevertheless, energy price effects and ongoing supply-chain disruptions could see inflation peak comfortably above 4% early next year.

Melanie Baker, senior economist at Royal London Asset Management agrees there is more inflation heading our way:

“UK inflation remains elevated and although we may not have seen another big jump in the CPI measure of inflation in September, there is more to come. Energy bills are among factors set to help push consumer price inflation further above the Bank of England’s target in the near term.

“Though some consumers will have benefited from higher pay growth, higher inflation is set to reduce real income growth for many and will add to some of the challenges facing the economy into 2022.”

Paul Dales of Capital Economics predicts inflation could hit 5% next April, when Ofgem is likely to hike the energy price cap again.

However, this feels a bit like the lull before the storm as the 12% rise in utility prices on 1^st October will probably lift CPI inflation to around 3.8% in October. And we think inflation could then climb to around 5.0% in April next year due to a further rise in utility prices and the upward influence from global/domestic product shortages. With underlying wage growth and inflation expectations rising, the BoE is concerned that higher inflation will become embedded in the system. That’s why it become much keener to raise interest rates.

But higher inflation will also weaken the outlook for activity by reducing real incomes. And as base effects drop out of the annual rate next year and supply shortages ease, we think inflation will fall close to 2% by the end of next year. That why we don’t share the markets’ view that interest rates will be raised as far as 1.00% by the end of next year.

The cost of goods and services producer by UK companies continued to rise last month, as the supply chain crisis hit industry.

Output price inflation jumped to 6.7% per year in September, from 6% in August, as producers hiked their prices in response to surging costs.

That’s a signal that inflationary pressures are building in the economy, as companies pass on costs to consumers.

Companies reported that input prices jumped by 11.4% year-on-year in September. Manufacturers were hit by the jump in commodity costs, while transport costs surged due to the lack of lorry drivers and shipping problems.

Mike Hardie, head of prices at the ONS, explains:

“The costs of goods produced by factories rose again, with metals and machinery showing a notable price rise.

Road freight costs for UK businesses also continued to rise across the summer.”

Suren Thiru, head of economics at the British Chambers of Commerce, tweets:

Petrol prices hit an eight-year high last month, the inflation report shows:

Average petrol prices hit 134.9p per litre in September 2021, compared with 113.3p per litre a year earlier, when parts of the UK were in local lockdowns.

That’s the highest price since September 2013.

The ONS explains:

In comparison, for most of September 2020, some areas of the UK were in a period of relaxed movement restrictions, and petrol prices were therefore recovering after a period of reduced demand.

There may be more pain ahead for motorists -- as petrol hit 140p per litre earlier this month.

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

UK inflation has dipped slightly, but remains well over the Bank of England’s target.

The consumer prices index rose by 3.1% in the year to September, new figures from the Office for National Statistics this morning show.

Thats’s down from 3.2% in August, when inflation hit the highest rate in nine years.

But, that dip is mainly due to the impact of last summer’s Eat Out to Help Out scheme -- as prices rose in September 2020 as the scheme wrapped up. So it’s probably only a temporary respite.

Many other prices have risen over the last year, as the cost of living squeeze has hit households.

As this chart shows, transport, food, and household goods and services all pushed up inflation over the last year.

Mike Hardie, head of prices at the ONS, explains:

“Annual inflation fell back a little in September due to the unwinding effect of last year’s ‘Eat Out to Help Out,’ which was a factor in pushing up the rate in August.

“However, this was partially offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year.

In September alone, prices rose by 0.3%, driven by price rises in clothing and footwear, housing and household services, recreation and culture, and furniture and household goods.

That follows August’s record jump in inflation from 2% to 3.2%, as the cost of living accelerated ahead of the Bank of England’s 2% target.

The Bank expects inflation to rise over 4% by early next year. And yesterday, MPs were warned that prices are rising at “terrifying” speed in the hospitality sector, with inflation running as high as 18%.

Ian Wright, chief executive of industry body the Food and Drink Federation, told MPs on the business, energy and industrial strategy committee:

“Inflation is a bigger scourge than almost anything else because it discriminates against the poor.”

More details and reaction to follow...

The agenda

• 7am BST: UK consumer price inflation for September
• 7am BST: UK producer prices report for September
• 9.30am BST: UK house price index for August
• 10am BST: Eurozone inflation report for August (final estimate)
• 3.30pm BST: EIA weekly US oil inventory figures