Vehicle Sales Finish a 7-Year Upswing, With Increased Challenges Ahead

Advertisement

The car industry’s lengthy-running sales party originates for an finish.

After seven straight many years of development in domestic new-vehicle sales, manufacturers on Wednesday reported a decline of approximately 1.8 percent in 2017, to 17.two million cars and lightweight trucks.

Further dampening the atmosphere may be the consensus that 2018 brings a level bigger drop. Edmunds.com, a car-information website, predicts that simply 16.8 million light vehicles is going to be offered this season.

“Over all, you need to be careful within this atmosphere,” stated Adam Silverleib, v . p . of Silko Honda, an agreement in Raynham, Mass. “The industry cycle has peaked.”

Some factors that propelled the upward swing are actually fading or altering course. Extremely low interest are turning greater. And quality has improved, customer-satisfaction surveys have proven, a lot of Americans are keeping their cars longer.

Throughout the recession, consumers and companies delay buying new vehicles. Once the economy improved, many rushed to switch the clunkers they’d been driving, driving sales up every year.

“The marketplace is pretty saturated at this time,” stated Jessica Caldwell, an analyst with Edmunds.com. She noted there were now 1.26 vehicles on the highway for each licensed driver, more than ever before.

The downward sales trend may be the latest challenge for that industry. Tariffs might be enforced on cars produced in Mexico and Canada when the Trump administration negotiates major changes towards the United States Free Trade Agreement. Manufacturers will also be attempting to push ahead with self-driving and electric vehicles even while it remains unclear the number of they can sell, so when.

The result of rising fuel prices is another question mark. Though still low through the standards of latest years, prices in the pump were $2.49 a gallon for normal gas on Wednesday in contrast to $2.35 last year, based on AAA.

The seven-year stretch of growth from 2010 to 2016 may be the longest because the infancy from the automobile nearly a hundred years ago, based on the automotive writer WardsAuto. It had been born from among the industry’s darkest periods: the deep recession that motivated federally backed personal bankruptcy reorganizations of Vehicle and Chrysler. In the low point, 2009, new-vehicle sales stepped to less than 11 million annually.

As sales rose in the last seven years, carmakers needed to worry little about keeping their plants humming. Description of how the have to face the possibilities of trimming production and finding methods to lure people to purchase the vehicles which are moving from the set up line.

“It’s challenging for each company,” stated Ray Mikiciuk, assistant v . p . for sales at American Honda. “It’s a great deal simpler to function inside a rising market.”

Last year’s stop by sales was mitigated by elevated discounts along with other incentives, which now equal 11.five percent of sticker prices, up from about 7 % a couple of years back, stated Mark Wakefield, global co-mind of automotive and industrial at AlixPartners, a talking to firm. Sooner or later, further increases in sales incentives could hurt manufacturers’ profits, he stated.

“We are deep right into a push market,” by which consumers need to be lured with deals instead of driven with a strong need or desire to have a brand new vehicle, Mr. Wakefield stated.

Despite last year’s decline, domestic auto sales stay at a in the past healthy level. And worldwide sales continue to be increasing: The study firm IHS Markit believed that global light vehicle sales rose 1.five percent in 2017, to 93.5 million vehicles.

Americans have a tendency to favor cars when gas costs are high, and trucks when costs are low, however this time the shift to trucks continues to be compounded by an growing preference for taller, roomier vehicles. Which has forced carmakers recently to shift the development mix quickly to highlight sport-utility vehicles, minivans and lightweight trucks.

In December, passenger cars composed only one-third from the market. “In 2012, cars were 50 plus percent,” stated Ms. Caldwell, the Edmunds analyst. “That’s a large transfer of a short time.’’

Sales at Vehicle recently reflected that shift. The organization were built with a strong December in trucks, selling greater than 94,000 full-size pickups between its Chevrolet and GMC brands, almost one-third of their total sales. Nevertheless its overall sales still fell 3.3 % in the previous December, as cars such as the Chevrolet Malibu and Impala languished on dealer lots.

For that twelve month, G.M.’s sales declined 1.3 %, to three million vehicles. In the Detroit auto show, which begins later this month, G.M. will unveil redesigns of their full-size pickups.

Fiat Chrysler Automobiles also were built with a tough month, with sales declining 10.7 %. Fiat Chrysler has stopped making small , mid-sized cars, and trucks take into account 85 % of their sales total. However a push to scale back on incentives and purchasers to rental fleets have slowed the organization. Total sales for 2017 dropped 8 percent, to two.a million vehicles.

Ford Motor, the second biggest American automaker after G.M., was among the couple of manufacturers to report an increase for December, with sales growing 1.3 %. Like G.M., Ford were built with a big month in pickups, selling greater than 89,000 of their F-series models.

As well as the twelve month, Ford couldn’t buck the market’s trend. Its 2017 sales tucked almost 1 %, to two.six million vehicles.

A version want to know , seems in publications on , on-page B1 from the New You are able to edition using the headline: Unmatched 7-Year Increase In Auto Sales Involves Finish. Order Reprints Today’s Paper Subscribe

Advertisement

Global markets finish on record high after adding $9tn in 2017

Global stock markets are gone for good 2017 on record highs, gaining $9tn (£6.7tn) in value within the year as a result of strong worldwide economy, President Jesse Trump’s tax cuts and central banks’ go-slow method of easing financial support.

The FTSE 100 hit a brand new peak working in london, by having an all-time closing

a lot of 7687.77, getting earlier hit a brand new all-time peak of 7697.62. The key United kingdom index was boosted with a late boost in mining stocks as commodity prices rose against a less strong dollar and optimism increased concerning the Chinese economy, departing the index up 7.6% within the year.

In global terms, the MSCI all-country world index acquired 22% or $9tn around the year for an all-time a lot of 514.53. The rival attractions of bitcoin, up nearly 14 occasions within the year, and concerns about war with North Korea, political upheaval in Europe using the Catalan separatist movement in The country as well as an inconclusive German election unsuccessful to dampen the party mood.

MSCI all country exchange index

Craig James, chief economist at Sydney-based fund manager CommSec, stated those of the 73 bourses it tracks globally, basically nine have recorded gains in local currency terms this season. The important thing for 2018 is going to be whether central banks conserve a benign method of reducing their financial support, he added, using the Fed and Bank of England raising borrowing costs only progressively this season. Low interest and quantitative easing, where central banks buy bonds from banking institutions, happen to be a significant support for investors and asset prices recently.

“For the outlook, the important thing concern is if the low growth rates of costs and wages continues, thus prompting central banks to stay around the financial policy sidelines,” stated James. “Globalisation and technological change happen to be influential to keep inflation low. In a nutshell, consumers can purchase goods every time they want and wherever they’re.Inches

President Trump’s political agenda would be a main factor for investors in 2017. The United States president’s goverment tax bill, which finally undergone Congress in December, fanned hopes that companies would use their windfalls in the changes to grow their companies or return cash to shareholders. A spate of latest mergers, including Disney’s $66bn move for Rupert Murdoch’s 21st Century Fox, France’s Unibail-Rodamco buying shopping center specialist Westfield for $25bn and GVC saying yes an offer for Ladbrokes Barrier, also helped sentiment.

an electronic board shows Japan’s Nikkei 225 index Japan’s Nikkei 225 acquired 19% in 2017. Photograph: Toru Yamanaka/AFP/Getty Images

Regardless of the FTSE 100’s latest record, its annual 7.6% increase was dwarfed through the 19% gain recorded by Japan’s Nikkei 225, the 32% rise around the Nasdaq 100, the near 13% hop on Germany’s Dax and also the almost 26% boost towards the Dow jones Johnson Industrial Average.

FTSE chart

Within the year, the FTSE 100 has added £141bn to the need for Britain’s top companies. However it has lagged rivals because of concerns concerning the more and more tricky talks around the the UK’s departure in the EU. However, a breakthrough deal around the Irish border and citizens’ legal rights in December lifted a number of that cloud, and nearly 5% from the FTSE 100’s annual gain arrived the ultimate month of the season following a Brexit agreement. Its low reason for 7093 is at early Feb, as Trump’s first attempt for a travel ban upset investors.

There have been also currency issues for that FTSE 100. An incomplete recovery within the pound from the publish-referendum lows – sterling had fallen by almost 20% at its worst but ended the entire year lower under 10% – hit the overseas earners which dominate the 100 index, given that they take advantage of a less strong United kingdom currency.

The mid-cap FTSE 250 index, containing more domestically focused companies, also outperformed the FTSE 100, climbing greater than 14% within the year.

Craig Erlam, senior market analyst at online buying and selling group Oanda, stated: “The FTSE 250 began around the back feet at the beginning of the entire year when compared to FTSE 100 [because of Brexit concerns], with sentiment for the United kingdom economy being more pessimistic than now. Because the year has progressed though, it’s become obvious the downturn in the economy within the United kingdom is not as severe as some feared while progress within the negotiations provides expect domestic stocks, benefiting FTSE 250 companies within the FTSE 100.”

The very best performers within the FTSE 100 within the year were NMC Health, which pleased investors with news of their expansion into Saudi Arabia, Worldpay following a merger approach from US payments firm Vanti, and housebuilders Persimmon and Berkeley, which retrieved using their publish-EU referendum falls.

The New York Stock Exchange in New York City. The Brand New You are able to Stock Market in New You are able to City. Photograph: Came Angerer/Getty Images

Why stock markets have hit record high

Listed here are five reasons for the record-breaking run for global stock markets this season.

Boom in global growth

Almost ten years because the economic crisis sparked economic decline all over the world, 2017 was the entire year when global growth returned in an instant. Failure by rightwing populists to get power in Europe brought to political stability, enhancing the single currency bloc to recuperate after many years of tumult, while China stored up its rate of expansion despite fears more than a sharp slowdown. Based on the OECD, global real trade growth faster from 2.6% in 2016 to 4.8% this season and world GDP growth leaped from three.1% in 2016 to three.6% in 2017.

Loose tax and financial policy

Markets have obtained a dual boost from low interest and tax cuts this season, stimulating interest in shares. Jesse Trump’s US corporate tax rate cuts are anticipated to improve company profits within the world’s largest economy – therefore boosting returns to shareholders. Meanwhile, central banks stored pumping money in to the global economic climate through quantitative easing. These debt buying programmes have caused an autumn in bond yields – the eye rate they pay to investors – that has forced market professionals to search for greater returns from riskier assets, with stocks an investment of preference.

Low volatility

Referred to as Wall Street’s fear gauge, the Chicago Board Options Exchange Volatility Index has fallen to record lows this season – assisting to fuel the rally in shares. The gauge measures investor expectations for cost swings in the stock exchange more than a 30-day period, up or lower. The Vix fell to below 9 points in This summer and it has not gone anywhere close to the 20 mark, which generally signifies that situations are going awry and is a very common feature of falling markets.

Weak pound

In Great Britan, the FTSE 100, full of firms that earn a lot of their profit in foreign currency, has surged because of more powerful global growth and also the weak pound because the Brexit election. Even though it has staged a recovery this season, sterling continues to be almost 10% lower around the dollar, which benefits companies earning money in foreign markets.

Irrational complacency

An over-all feeling of confidence among investors within the condition from the global economy – and also the condition of geopolitics – continues to be key. However, investors might be ignoring problems laying underneath the top. The fund manager Alberto Gallo at Algebris Investments thinks you will find good reasons to be careful – with risks as a result of geopolitics, central bank policy and greater inflation. Markets barely blinked this season, despite faltering Brexit talks and concerns over North Korea’s nuclear weapons programme. Because of the rising quantity of one-sided bets for that sell to continue rising, the potential risks of a boost in volatility might be growing.

Richard Partington

Follow Protector Business on Twitter at @BusinessDesk, or join the daily Business Today email here.

Here’s what the GOP’s proposal to overhaul the tax code means for schools, students and parents

Republicans backed away from some of the most controversial education proposals in their finalized tax bill Friday, leaving in place a school supply deduction for teachers and breaks for student borrowers while also declining to tax tuition benefits, a prospect that had infuriated graduate students.

“On balance, the final bill is far better news — especially for students and families — than it could have been,” said Terry W. Hartle, senior vice president of the American Council on Education, which represents colleges and universities.

But public school advocates assailed the plan, which includes provisions that could hurt public school funding while providing tax breaks for parents who send their children to private schools.

Five groups that represent public school superintendents, school business officials and rural schools authored a letter opposing the tax overhaul, saying it “includes provisions that undermine the strength of our nation’s public school systems and compromises the ability of these systems to adequately and effectively provide educational opportunities and services to the students they serve.”

Here’s a round up of some of the ways the tax bill could affect parents, educators and students.

It’s good for parents of private school children and a win for school choice.

Under current law, tax-free 529 college savings accounts can be used only to pay for college. But the Republican proposal allows parents to use that money — up to $10,000 a year per child — to pay for private K-12 school tuition and home-schooling. Education Secretary Betsy DeVos has applauded the provision, calling it “a good step forward, reflecting that education should be an investment in individual students, not systems.”

Other advocates of school choice have pointed out that it largely benefits wealthier families who can afford to save for private schools. And public school advocates say it gives parents incentives to leave public schools, and that harms districts that rely on education funding based on how many pupils enroll.

It’s good for teachers who reach into their pockets to pay for school supplies.

Teachers spend about $500 of their own money on school and classroom supplies, according to one survey. In 2002, Congress gave educators who shelled out for pencils, art supplies, paper and other school supplies a $250 tax break. The House bill sought to eliminate that, leading to an outcry from cash-strapped teachers. The Senate bill aimed to double the deduction to $500. The final plan leaves the deduction at $250.

It may be bad for public school funding at all levels.

The proposal curtails the ability of taxpayers to deduct state and local taxes from their federal tax bill, limiting the deduction to $10,000. By increasing the federal tax burden on individuals, advocates worry that states, counties and school boards will have a tougher time raising money for schools, which get most of their resources from state and local tax revenues.

Public colleges and universities could also see a ripple effect. Though people will be able to deduct up to $10,000 in state and local taxes, that might not be enough to relieve pressure on states to cut their own taxes to compensate. And that could reduce revenue for public colleges and universities, which down the road could raise tuition to offset the loss of funding.

Additionally, the legislation bans school districts from using one kind of tax-free method to refinance their school bond debt, a move that has helped districts save millions of dollars, according to John Musso, executive director of the Association of School Business Officials International.

It could be good for tax credit scholarships that fund private school education.

Several states have tax credit scholarship programs that offer generous tax breaks — sometimes dollar-for-dollar tax credits — for donating to special state-administered scholarship programs that help families pay for private schools. With the curtailing of the state and local tax deduction, some are predicting wealthier people will pour more money into tax credit scholarship funds to reduce their state tax burden.

It’s good for graduate students and university employees.

Republicans backed away from House proposals to tax the value of college tuition benefits that universities provide graduate students and campus employees.

Thousands of graduate students staged walkouts across the country and called members of Congress to ensure that the tuition waivers they receive for working as teachers and research assistants were not counted as income. Their efforts were bolstered by the Senate’s decision to exclude the proposed repeal in its tax plan. A group of 31 House Republicans also asked party leaders to abandon the provision, arguing it would place an unfair burden on students.

Graduate students were also spared the loss of the Lifetime Learning Credit, a tax credit for up to $2,000 spent on tuition, books and supplies. People pursuing advanced degrees rely on the credit because there is no limit on the number of years it can be claimed, unlike the American Opportunity Tax Credit, which is good for only the first four years of college. House Republicans had proposed consolidating the tax credits into one that would be available only for five years, effectively limiting its usefulness to graduate students.

Campus employees scored a win in the final bill, which excluded a House provision to tax the tuition benefits they receive.

Janitors, secretaries and other employees at most colleges are afforded discounted or free tuition for themselves, their children and spouses. More than onethird of employees who take advantage of this benefit earn less than $50,000 a year, according to a survey from the College and University Professional Association for Human Resources.

It’s good for anyone paying for college.

People whose employers cover a portion of their college costs no longer have to worry about the money becoming taxable income, because the final bill excludes a House proposal that would have taxed that benefit.

It’s a mixed bag for colleges.

Let’s start with the good news. The final legislation axes a House provision that would have gotten rid of interest-free bonds that many private colleges use to fund construction on campus. It also holds the line on increasing the taxes colleges pay on unrelated business income, such as the money a school earns selling coffee mugs at the campus bookstore.

The not-so good news: Colleges can no longer use a loss in one business venture to offset a gain in another as a strategy to lower their taxes. Republicans adopted a Senate proposal requiring tax-exempt organizations, such as universities, to calculate losses and gains for each activity — a move that schools have said will raise their tax burden. The bill delivered Friday also gets rid of another form of bond financing that universities rely on to refinance debt at lower interest rates, known as advanced refunding bonds.

What’s more, it includes a controversial 1.4 percent excise tax on the net investment income on endowments at a handful of private colleges and universities. The tax will be applicable to schools with endowments worth at least $500,000 per full-time student, the threshold set in the Senate tax plan. About 30 colleges will be affected by the endowment tax, according to the American Council on Education. Opponents of the tax have argued it sets a dangerous precedent for all of higher education.

All colleges and universities could see a drop in charitable giving because of the GOP plan. Raising the standard deduction will result in fewer people itemizing their taxes, which is the only way you can deduct charitable contributions. That deduction has been a powerful fund-raising tool for colleges and universities of all sizes.

It’s good for student loan borrowers.

Taking a page from the Senate tax plan, the final bill will leave in place the student loan interest deduction. The benefit lets people repaying student loans reduce their tax burden by as much as $2,500. Because borrowers can claim the deduction even if they choose not to itemize, the tax benefit is available to anyone paying interest on education debt. But only single people earning less than $80,000 and married couples earning less than $160,000 can take advantage of the deduction.

Still, more than 12 million benefited from the deduction in 2015, according to the Internal Revenue Service. That’s just about 3 in 10 of the 44 million Americans with student loans. The higher the interest payments, the greater the deduction, which is why the benefit is especially valuable to people with large loan amounts.

The final bill also puts an end to the government counting as taxable income student debt that is forgiven because of death or disability. Anyone with a severe disability is eligible to have the government discharge their federal student loans. Every dollar forgiven by the government, however, is considered taxable income. Not anymore if this bill passes.

Officials demand delay of internet neutrality election over fake comments

prevalent irregularities associated with internet neutrality feedback, including a minimum of 1 million phony comments, have tainted the public commenting process. The allegations are buttressing an offer by online activists and government officials who oppose the FCC’s intend to dismantle internet neutrality rules.

In overview of FCC comments in the last six several weeks, Schneiderman’s office found that at least 1 million submissions may have impersonated Americans, including as much as 50,000 New You are able to residents — a possible breach of condition law. Millions more comments most likely were posted by nonexistent people, he stated. Still, based on Schniederman, the FCC has declined to provide help to find out who might be accountable for the alleged fake commenting. Schneiderman stated the inspector general’s office from the FCC offered its help only Monday morning, in front of the news conference.

Schneiderman known as for any federal analysis but for the FCC to break the rules its planned election to strip internet neutrality rules. “They have to stop this election,” he stated. “You cannot conduct the best election on the rulemaking proceeding for those who have an archive that’s in shambles, because this the first is.Inches

Tina Pelkey, a spokeswoman for that FCC, responded inside a statement Monday: “At today’s news conference, they didn’t identify just one comment relied upon within the draft order to be questionable. It is really an attempt by individuals who wish to keep your Obama Administration’s heavy-handed Internet rules to obstruct the election simply because they understand that their effort to defeat the program to revive Internet freedom has stalled.”

Some consumers have complained to the FCC their own names or addresses happen to be used without their permission to submit false comments they didn’t support. Opponents from the FCC’s plan also have pointed towards the strange appearance of comments posted by those who are deceased.

A week ago, Schneiderman’s office produced an internet site for people to check whether their identity have been accustomed to submit FCC comments. His office has gotten greater than 3,000 responses to date, he stated. Schneiderman highlighted three installments of stolen identity: a deceased lady, a 13-year-old girl and part of Schneiderman’s own staff, whose name and childhood address were utilised without her permission.

“It is obvious our process for serving the general public interest rates are damaged,” Rosenworcel stated in the news conference as she advised her colleagues to obstruct the election until an analysis is finished. “The integrity in our criminal record is on the line, and the way forward for the web depends upon it”

Also Monday, several 28 Senators, including Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), also called on the FCC to obstruct its election around the repeal of internet neutrality before the agency has conducted an intensive overview of the general public submissions. “[T]here’s valid reason to think the record might be replete with fake or fraudulent comments,” they wrote in instructions to FCC Chairman Ajit Pai.

Recently, FCC spokesman John Hart stated the agency lacks the sources to look at every comment. He said comments posted meant for internet neutrality were most likely associated with automated accounts. He stated that 7.5 million comments filed in support of the rules that made an appearance in the future from 45,000 distinct emails were “all generated with a single fake email generator website.” Additionally, based on Hart, 400,000 comments backing the rules appeared to result from a Russian mailing address.

“The most suspicious activity continues to be by individuals supporting Internet regulation,” Hart stated.

Conservative millionaire Koch siblings give $650m to assist Meredith buy Time

Meredith Corporation has announced that it’s purchasing the Time Corporation publishing group inside a “transformative” $1.8bn deal that joins two huge magazine companies.

Meredith, which owns a portfolio including Better Homes & Gardens, Family Circle, allrecipes and Shape, will fund the offer with the aid of the rightwing millionaire Koch siblings, who’ve contributed $650m of preferred equity.

well-known supporters of libertarian causes.

Their participation within the deal to purchase the writer of your time, Sports Highlighted, People, Fortune and Entertainment Weekly, has elevated questions regarding whether their interest rates are political.

But Meredith gone to live in play lower the significance of the funding by saying on Sunday night that Koch Equity Development, the brothers’ investment vehicle supplying the funding, won’t have a seat around the board from the recently merged group and won’t influence editorial decisions.

“[Koch Equity Development] won’t have a seat around the Meredith board and can don’t have any affect on Meredith’s editorial or managing operations,” Meredith stated inside a statement. “KED’s non-controlling, preferred equity investment underscores a powerful belief in Meredith’s strength like a business operator, its strategies, and how it can unlock significant value from the moment acquisition.”

The offer, that was unanimously approved by boards, is really a coup for Meredith, which held unsuccessful foretells buy Time captured as well as in 2013.

It’ll give news, business and sports brands to increase the Iowa-based publisher’s lifestyle titles. Analysts have stated that bulking on publishing assets could give Meredith the size needed to spin off its broadcasting arm right into a standalone company.

When combined, the Meredith and Time brands have a readership of 135 million people and compensated circulation of nearly 60m. The offer will also expand Meredith’s achieve with millennials, developing a digital media business with 170 million monthly unique tourists in the U . s . States and most 10bn annual video views.

Meredith pays $18.50 per be part of cash for Time’s nearly 100m outstanding shares.

Additionally towards the Koch investment, Meredith stated it had been using $3.55bn in financing commitments from a number of lenders. Before the announcement, Meredith had just $28 million in money on hands, based on its latest questionnaire.

Combined, the businesses published $4.8bn in revenue this past year. Meredith expects it’ll conserve to $500m in costs within the first couple of many years of operation and intends to “aggressively pay down” debt by 2020.

John Fahey, Time chairman, stated the purchase is at the very best interests of the organization and it is shareholders, noting the cost symbolized a 46% premium towards the closing cost of shares on 15 November, your day just before media reports concerning the deal.

Connected Press and Reuters led to this report.

Companies plead with Mark Carney to not raise interest rates 

Businesses have issued last-ditch appeals for that Bank of England to not raise rates of interest now, claiming a mix of weak growth and greater borrowing costs would tip battling retailers into insolvency. 

Mark Carney a few days ago faced pressure from business lobbies to help keep rates at in the past lower levels to aid consumer spending and company investment. The Financial Institution is broadly likely to raise rates the very first time inside a decade on Thursday.

The British Chambers of Commerce cautioned that the rate rise may be the “tipping point” that crashes business confidence and investment.

“It is fairly remarkable, considering that economic the weather is slowing, that we’re speaking about rate of interest increases,” stated Suren Thiru, a BCC economist.

The Financial Institution is broadly likely to raise rates the very first time inside a decade on Thursday Credit: PA

Tej Parikh, economist in the IoD, advised Mr Carney to hang about until progress is made within the Brexit negotiations. “There isn’t enough clearness on the way for economic growth yet. Several things have to be fleshed out when it comes to Brexit negotiations,” he stated.

Mr Parikh stated firms would face ­extra pressure from the rate rise his or her customers were already battling and could be extended by rising borrowing costs. Research from restructuring specialists R3 captured demonstrated 79,000 companies believed they’d be not able to pay back their financial obligations following a small increase in rates.

As European Central Bank Eases Emergency Measures, Risks May Lurk

FRANKFURT — The Ecu Central Bank started dismantling on Thursday a decade’s price of emergency measures that helped to help keep the eurozone from disintegrating throughout the economic crisis.

The bank’s action, following a meeting of their Governing Council, highlights the eurozone economy’s astonishing renaissance. However it may also expose weaknesses over the region — and possibly even provoke a brand new bout of monetary discord.

That’s the difficulty the central bank faces. Nobody knows without a doubt what uncomfortable surprises may lurk if this begins the entire process of so-known as tapering — removing the simple money that made it feasible for banks to lend and governments to gain access to despite investors had largely deserted them throughout the worst from the downturn.

The financial institution stated on Thursday it would hold its benchmark rate of interest steady in a historic low of 0 %, but provided a timetable for moving back purchases of presidency and company debt, a kind of virtual money-printing referred to as quantitative easing.

It absolutely was buying 60 billion euros, or about $70 billion, of these bonds each month, and can scale that to €30 billion per month for nine several weeks, beginning in The month of january. Which was consistent with analysts’ expectations.

Since early 2015, the financial institution has utilized recently produced money to purchase bonds along with other assets more vital than €2 trillion — an amount roughly comparable to the annual economic creation of India.

As that tide of money recedes, the risks that lurked underneath the surface can come into view. Their email list is lengthy. For just one, Italian banks continue to be laden with bad loans. Italy’s public debts are excessive the country spends 4 % of their gdp just having to pay interest.

Elsewhere, property prices the german language metropolitan areas like Frankfurt have risen a lot that there’s anxiety about a house bubble. Stock values are in record-high levels and could be past due for any correction. And Britain’s impending exit in the Eu will disrupt the economical order.

Consumers, companies and politicians have become familiar with — some would say spoiled by — low interest.

The central bank’s benchmark rate of interest is zero, and investors are extremely eager for safe places to place their cash that corporations like Daimler, the German automotive giant, have had the ability to issue bonds that don’t pay interest.

Low interest also have weakened the euro from the dollar along with other currencies, a benefit for exporters whose goods are usually cheaper for foreign customers consequently. The euro will likely rise as financial policy returns to normalcy.

The eurozone economy is humming, but which may be no insurance against another crisis. Such occasions have happened regularly because the world’s economic forces abandoned fixed forex rates in 1973, a current report by analysts at Deutsche Bank stated.

“It would therefore have a huge leap of belief to state that crises won’t continue being a normal feature of the present economic climate,Inches stated the report, which listed the withdrawal of central bank support as you component that might trigger the following meltdown.

To prevent provoking restored turmoil, the ecu Central Bank is moving very carefully.

The central bank’s Governing Council stressed inside a statement on Thursday it “stands ready” to improve the asset purchases as a result of worsening financial conditions or maybe inflation unsuccessful to increase.

“Ideally, the E.C.B. want to announce tapering as noiselessly as you possibly can,Inches analysts at Nederlander bank ING authored inside a note to clients.

Additionally, in the past low interest will stay in position for that near future. The central bank has stated it won’t begin raising rates until it’s stopped buying bonds, and just when the eurozone inflation rates are on the right track hitting the state target of two percent.

Still, some economists fear the finish of nearly free money can come like a shock for many less strong companies, free-spending consumers and excessively in financial trouble governments.

“The success of the relaxed financial course is obvious not at the start, however when it ends,” Jörg Krämer, the main economist of Commerzbank along with a critic of central bank policies, stated inside a note to clients. “There are lots of risks involved, and also the longer the E.C.B. delays before altering course, the higher they become.”

Correction: October 26, 2017

An early on version want to know , misstated the time where the European Central Bank tends to buy €30 billion of bonds each month. It will likely be for nine several weeks beginning in The month of january, not for any twelve month.

Lawrence Summers: One further time on who advantages of corporate tax cuts

lately stated that Kevin Hassett deserved a failing grade for his “analysis” projecting the Trump administration proposal to lessen the organization tax rate from 35 to twenty percent would enhance the wages of the average American family between $4,000 to $9,000. I selected harsh language because Hassett had, for which appeared like political reasons, impugned the integrity of individuals like Len Burman and Gene Steuerle who’ve devoted their lives to honest rigorous look at tax measures by calling the work they do “scientifically indefensible” and “fiction.” Since there has been a number of comments around the financial aspects of corporate tax reduction, some additional discussion appears warranted.

Case study from Hassett, chief from the White-colored House Council of monetary Advisors (CEA), depends on correlations between corporate tax rates and wages far away to reason that a decline in the organization tax rate would boost returns to labor very substantially. Possibly unintentionally, the CEA ignores our very own historic experience of their analysis. As Frank Lysy noted, the organization tax cuts from the late 1980s didn’t lead to elevated real wages. Really, real wages fell. This is also true within the Uk, as highlighted by Kimberly Clausing and Edward Kleinbard. These examples feel much more highly relevant to the organization tax issue analysis than comparisons to small economies and tax havens like Ireland and Europe where the CEA relies.

There’s been lots of backwards and forwards, but particularly nobody has defended the $4,000 claim like a “very conservatively believed lower bound,” not to mention endorsed the plausibility from the $9,000 claim. Actually, the Wall Street Journal op-erectile dysfunction page printed two very positive versions of the items the wage increase might be, that have been below CEA’s lower bound.

Casey Mulligan and Greg Mankiw also don’t defend CEA’s figures, but do utilize simple academic abstract models that don’t capture the reasons of the policy situation to reason that wage increases might be bigger compared to tax cut. The inadequacy of the analyses illustrate why well-resourced, team-based institutions having a strong culture of focus on detail such as the Congressional Budget Office, the GAO, the Joint Tax Committee Staff or even the Tax Policy Center are extremely important.

Mankiw’s blog is really a fine little bit of economic pedagogy. It asks students to gauge the outcome of the corporate rate reduction on wages inside a so known as “Ramsey” model or equivalently in a tiny fully open economy, with perfect capital mobility. Despite these assumptions, he doesn’t get solutions in the plethora of the CEA’s estimates.

Like a device for motivating students to learn to manipulate oversimplified academic models, Mankiw’s blog is terrific as you would expect from your outstanding economist and one of the main textbook authors of his generation. As helpful tips for the results from the Trump administration’s tax cut, I don’t believe it is very useful for 3 important reasons.

First, a decline in the organization tax rate from 35 to twenty percent in the existence of expensing of considerable or total investment has hardly any effect on the motivation to take a position. Think of the situation of full expensing. If your clients are allowed to subtract all its investment costs after which is taxed on all its investment profits, the tax rate doesn’t have impact whatsoever around the investment incentive. If investments are financed partly with deductible interest, as could be true even underneath the Trump plan (where expensing could be total), a decrease in the organization tax rate could easily lessen the incentive to take a position.  Mankiw assumes unconditionally that capital lasts forever and firms take no depreciation and interact in no debt finance.  This isn’t the planet we reside in.

Second, neither the Ramsey model nor the little open economy model is really a reasonable approximation for that world we reside in. Within the Ramsey model, savings are infinitely elastic, therefore the real rate of interest always returns with a fixed level. Actually, real rates of interest vary vastly through space and time, and generations of monetary research reveal that the savings rate instead of being infinitely responsive to interest rates are almost entirely insensitive towards the rate of interest.

The U . s . States isn’t a small open economy. Whether it were, the result of the effective investment incentive will be a major rise in the trade deficit as capital inflows forced an excessive amount of imports over exports. I suppose President Trump a minimum of feels that the greatly augmented trade deficit is harmful to American workers.

Third, a large decline in the organization rate does not occur in isolation like a break for brand new investment.  Mankiw’s model doesn’t recognize the potential of monopoly profits or returns to intellectual capital or any other ways that a company tax cut benefits shareholders without encouraging investment. This means either increases in other taxes or enlarged deficits, each of which have negative effects on households. Additionally, it implies that capital moves from the noncorporate sector in to the corporate sector, looking after hurt workers within the noncorporate sector.

Mulligan accuses me of rejecting the outcomes of my 1981 paper on Q Theory that they states like and educate. I’m flattered he appreciates my paper, but am fairly confident he draws the incorrect conclusions from this.

One central facet of this paper was very good the corporate tax rates are, unlike Mulligan and Mankiw’s assumption, not really a sufficient statistic for assessing the outcome from the corporate tax system.  When I described above, the paper emphasizes that to look at the outcome of the corporate tax change, it’s important to construct in assumptions about depreciation allowances, debt finance and so on, even when they are being held constant. If Mulligan did this, he’d obtain a completely different answer.

The primary reason for my paper, which Mulligan entirely ignores, was that due to slow adjustment costs, the outcome of tax changes was felt mainly on asset prices for any lengthy time. This resulted in as my paper demonstrated, the main impact of the corporate tax cut is always to raise after-tax profits and the stock exchange. Therefore, when i noted, mainly benefits wealthy individuals. Observe that just because a corporate rate cut benefits investments already made, this conclusion doesn’t rely on assumptions about depreciation allowances and so on that are essential for new investment.

Mulligan also does not notice that a company rate cut benefits capital and hurts labor outdoors the organization sector since it draws capital from the noncorporate sector, raising its marginal productivity and reducing those of labor. It is a fact when the organization sector is small, this effect is small when it comes to return, but by assumption it’s large as a whole since it pertains to a sizable volume of capital and labor.

It’s important to note that Ray Kotlikoff and Jack Mintz’s reaction to criticisms from the Trump tax plan is affected with exactly the same deficiencies as Mulligan’s. The authors include no corporate tax detail, no recognition from the impact from the tax proposal on asset prices, with no management of your budget effects of tax cuts.

The most recent boldest little bit of claim inflation concerning the goverment tax bill originates from the company Roundtable: “a competitive 20 % corporate tax rate could increase wages sufficient to aid 2 million new jobs.” This could, along with job growth forecasted even even without the a company rate cut, go ahead and take unemployment rate well below 3 %! I’d be very interested to determine the actual analysis.  I’d be amazed if it’s convincing.

Undoubtedly the greatest quality assessment of corporate tax issues continues to be supplied by Jane Gravelle, writing underneath the auspices from the Congressional Research Service.  It appears at the literature. It sees that the problems are complex and can’t be taken with a single model or regression equation. It doesn’t begin with an item of view. Regrettably it offers little support for claims that corporate rate cuts will raise revenue, assist the middle-class or spur rapid wage growth.

Within my years in government, I offered with 7 CEA chairs — Martin Feldstein, Laura Tyson, Joe Stiglitz, Jesse L. Yellen, Martin Baily, Christy Romer and Austan Goolsbee. I observed these fighting with people in politics within their Administrations because they was adamant that CEA analysis needed to be of the kind that might be respected and validated by outdoors economists. They declined to cheerlead for Administration policies at the fee for their professional credibility. I am unable to imagine them releasing a quote as not even close to the professional mainstream as $4000 to $9000 wage increase from the corporate rate cut claim. Chairman Hassett should with regard to their own credibility, those of the Administration he serves and also the institution he leads, back away.

Inflation hits its highest level in five-and-a-half years; MPC right to cut interest rates after Brexit vote says Carney

  • Inflation rises to 3pc, its highest level in five-and-a-half years; the increase will crank up the pressure on the Bank of England to hike interest rates next month to curb inflation
  • RPI remains at its highest since 2012; business rates will jump by 3.9pc next April as a result
  • Sterling sinks as Mark Carney speaks at a select committee; the pound falls 0.7pc against the dollar to below $1.32
  • FTSE 100 nudges higher as the pound retreats; theme park owner Merlin nosedives 20pc after a “difficult” summer of trading, blaming terrorism and bad weather

Auto update

4:26PM

Virgin Money insists its credit card business is safer than the bigger banks

Virgin Money chief executive Jayne-Anne Gadhia

Virgin Money has insisted it has a safer credit card business than Britain’s big banks, amid growing fears over ballooning consumer credit.

The challenger bank’s chief executive Jayne-Anne Gadhia told analysts today the company had conducted its own “extreme” in-house stress test of its expanding credit card book and found in a downturn it would face fewer problems than its peers.

Last month the Bank of England warned lenders they risked losing as much as £30bn on personal lending if the economy took a turn for the worse, with as much as a quarter of credit cards defaulting.

But Ms Gadhia said Virgin’s own credit card business – which has grown balances to £2.9bn – would fare better than its peers.

Read Iain Withers’ full report here

3:36PM

Dow Jones on course for another record finish; US industrial production rebounds

The Dow Jones has nudged up 0.1pc

US markets have opened and the Dow Jones has nudged up into positive territory, leaving it on course for another record finish. 

The index has been dragged up by UnitedHealth’s 4.8pc jump on hopes that a decline in medical costs at the health insurer could boost full-year figures.

There’s a bit of economics data to update you with from the States this afternoon. 

Industrial production growth bounced back in September to rise by 0.3pc after being disrupted by hurricane season the previous month. 

Paul Ashworth, chief US economist, said there were still “signs of disruption evident last month, leaving scope for a much bigger rebound in production in October”.

He added:

“Overall, with global trade and economic growth booming and the dollar still down substantially from its peak early this year, the outlook for US manufacturing looks bright. That optimism comes through in the upbeat survey evidence. As a result, we expect solid gains in manufacturing output in the fourth quarter.”

3:06PM

Revolution Bars suitor leaves empty handed as investors reject £100m bid

Investors have left Revolution Bars shaken after rejecting a cash offer for the company

Shares in Revolution Bars dropped as much as 8pc after a second potential suitor in two weeks was left unable to secure a deal.

Stonegate, the owner of the Slug & Lettuce chain, had bid 203p a share for its rival, valuing the chain at £100m. But it failed to secure shareholder support for its cash offer, sending the target’s shares down to 176p.

Owners of just 60pc of Revolution’s shares voted in favour of the Stonegate bid at each of the two separate Court and General meetings held by the company to allow investors to express their view on the deal.

To be successful, the bid needed 75pc of shareholders to vote in favour.

Read Bradley Gerrard’s full report here

2:27PM

Asos profits double as overseas growth offsets weak pound

Asos makes two thirds of its sales overseas

Asos profits have doubled in the past year as the online retailer’s rampant overseas expansion allowed it to storm past its struggling British high street rivals.

The fashion site has delivered a 145pc jump in pre-tax profits to a record £80m while group sales have surged by 33pc to £1.9bn in the year to August 31.

Asos’ upbeat numbers are partly down to the rapid consumer shift from traditional bricks and mortar shopping to clicks on mobile devices. This has resulted in the online fashion market growing at twice the rate of the overall fashion sector over the last five years.

However, Nick Beighton, Asos boss, said that it was “not enough to just be online”. He added: £There has been a continual channel shift as twentysomethings use their mobile phones, but you can’t just be digital, you’ve got to be selling what people want to buy.”

Read Ashley Armstrong’s full report here

2:09PM

Pearson stems decline in key US market

Pearson chief executive John Fallon is under pressure

The troubled education giant Pearson has suffered a further decline in its core American textbook business in the third quarter but avoided its worst fears, to the relief of investors.

On the back of a string of profit warnings, Pearson said the improved trend meant it could narrow its full-year profit forecast to the upper end of the range.

The company, which has cast off media assets such as the Financial Times to focus on education in recent years, now expects a minimum adjusted operating profit of £576m. The previous lowest prediction was £546m.

The improvement reflects a 5 percentage point cut to Pearson’s expected tax rate for the year to 16pc following the “favourable outcome of certain historical tax issues”.

Read Christopher Williams’ full report here

1:45PM

Inflation hits 3pc as cost of living squeeze intensifies 

Prices jumped by 3pc in the past year, the fastest rise in more than five years as imported inflation and higher energy prices pushed up the cost of living.

Food prices climbed as inflation in staples such as bread, rice and meat accelerated in September, while transport costs also rose as petrol became more expensive.

Computer games and theatre tickets also dragged up the consumer price index, the Office for National Statistics said.

Read Tim Wallace’s full report here

1:16PM

Carney grilling ends

Bank of England governor Mark Carney

Final question is about the gender pay gap and he replies that the gap is 24pc on a median basis at the Bank of England and 21pc on mean basis.

He says they are in the middle of a deliberate strategy of changing this at the central bank.

And with that, it’s over. Nothing much new there to be perfectly honest. He defended, as he always does, quantitative easing and the interest rate cut taken shortly after the Brexit vote while also allaying fears about ballooning household debt.

Sterling took a bit of a battering during that appearance, sinking 0.7pc to below $1.32 against the dollar and 0.3pc against a basket of the leading currencies.

1:03PM

Carney on QE: We’re clean and not addicted

We’ve move onto quantitative easing and Mr Carney is given a quote comparing it to heroin.

Extending the metaphor, he replies: “We’re clean and not addicted to QE or will go through withdrawal symptoms.”

He adds that the Bank of England will not just unwind for fun and prove a point, adding that the central bank will observe the Fed’s balance sheet unwinding programme.

12:50PM

Household debt only requires macro-prudential response

When asked if he is too relaxed on household debt, Mr Carney says that the Bank of England is taking action on household debt but to an appropriate degree. It only merits a macro-prudential response, adding that “we’re never relaxed about anything”. 

On Government fiscal policy, he says that he will not and cannot give his opinion and when asked if Help to Buy has pushed up house prices, Mr Carney says that it hasn’t had a multiplier effect on supply.

12:39PM

Carney: We shouldn’t take the lead on Brexit from the markets

Moving onto household debt, Mr Carney is relatively upbeat. He explains away fears of a car finance bubble and says that the quality of “borrowers has gone up substantially”. 

We shouldn’t take the lead from the markets on Brexit given its complexity, he adds. It matters more how households and businesses react.

12:20PM

New BoE policymakers lean on the dovish side

New deputy governor Sir Ramsden is not ready to vote for an interest rate hike

I missed new Bank of England policymakers Silvana Tenreyo and Sir Dave Ramsden’s grillings this morning but fortunately Reuters was watching. Here’s what happened:

New Bank of England rate-setter Silvana Tenreyro said she was not ready to vote to raise the Bank’s record low interest rates in November although she might do so in the coming months if inflation pressure builds in Britain’s labour market.

“My view is that we are approaching a tipping pint at which it would be necessary or justified to remove some of that stimulus,” she told British lawmakers on Tuesday.

New deputy governor Dave Ramsden said he was not close to voting for an interest rate hike, raising some questions for investors about when the BoE would make its widely expected first hike in more than a decade. 

Deputy Governor Dave Ramsden said he was not part of the majority of BoE policymakers who believe a rate hike is likely to be needed “in the coming months” because he saw little sign of inflation pressure building in Britain’s labor market.

They’re still questioning Mr Carney but the debate has centered on Brexit on which the governor can’t give many certain answers. They’ve just moved onto household debt. I must admit this select committee is lacking some teeth, he’s having quite an easy ride.

12:05PM

Sterling sinks against the dollar as Carney speaks

Since Mr Carney started speaking the benchmark 10-year Gilt yield has fallen 3.2 basis points to 1.30pc. Meanwhile on the currency markets, against a basket of the leading currencies, the pound has sunk to a 0.2pc loss for the session while against the dollar sterling has slipped 0.6pc to $1.32.

Spreadex analyst Connor Campbell commented on the appearances by MPC members this morning:

“There were conflicting messages from the BoE this Tuesday. The central bank’s newest deputy governor, Sir Dave Ramsden, stated he wasn’t one of the MPC members who said they were close to raising rates last month. In contrast, policymaker Silvana Tenreyro said she would be ‘minded to vote for a bank rate increase’ if the UK’s data justified it.  

“As for head honcho Mark Carney, he dismissed a question from the Treasury Committee asking whether it would be wise to raise borrowing costs in order to give the BoE room to cut in the case of a recession, arguing that it isn’t ‘appropriate or necessary given that policy can move quite nimbly’.”

11:51AM

Carney warns against moving clearing out of London; BoE working on hard Brexit contingency plan

They move onto the subject of clearing and Mr Carney warns against moving clearing out of London, saying that fragmenting European clearing would create costs for the European real economy.

He adds that the Bank of England is working on a contingency plan for a hard exit without any transition period but believes there will be a transition deal.

11:35AM

Carney: Interest rate cut after Brexit was not unnecessary 

Mr Carney disagrees with a select committee member arguing that the interest rate cut after Brexit was unnecessary.

The pound has largely been determined by the prospects of the trade deal with the European Union. It was the markets judgement on how Brexit will affect real incomes. 

That will ruffle a few feathers.

Raising rates now to potentially support the economy later with a cut is not consistent monetary policy, he says to another question.

He also reiterates that the MPC believes that a hike in interest rates in the coming months will be appropriate.

11:27AM

Watch Mark Carney here

11:26AM

Mark Carney Treasury Committee appearance begins

Bank of England governor Mark Carney has just started his appearance at the Treasury Commitee.

He said that the Bank of England expects inflation to peak in October, admitting that it is likely that he will be writing a letter to the Chancellor explaining why inflation is so far from the 2pc target rate.

He emphasises that the effects of monetary policy takes time to feed through, adding that some factors pushing up inflation are out of the central bank’s control such as rising oil prices.

11:19AM

Attention turns to tomorrow’s wage growth reading

All eyes will turn to tomorrow’s wage growth reading, which is expected to remain flat and lag far behind inflation at 2.1pc. Back to the reaction to today’s figures.

Capital Economics’ UK economist Paul Hollingsworth believes that the Bank of England “will probably be focussed more on tomorrow’s wage growth figures for any signs that domestic cost pressures are building”.

He added:

“Nonetheless, the fact that this is the last set of inflation figures before the key MPC meeting on 2nd November, they will be a key factor in the Committee’s thinking. What’s more, September’s inflation figures are used for the uprating of some benefits.”

Kate Smith, head of pensions at Aegon, explains how today’s figures affect the Lifetime Allowance:

“This month inflation figures are uniquely important because they are used by the government to calculate the rise in the Lifetime Allowance (LTA) for the first time. The increase for the LTA in 2018/19 will be £1,030,000 based on today’s figures, and following a series of reductions it is welcome that the base-level is set to start growing again, even if on the surface the numbers aren’t large.

“Despite being small, this is a complex area, so those affected should seek financial advice to make sure their pension is protected from additional tax charges”

A quick sitrep on the pound. Sterling has nudged a little further down against the dollar to a 0.3pc loss for the session at $1.3250 while against the euro it remains 0.2pc higher at €1.1270.

10:54AM

Inflation reaction: Painful squeeze on consumers will ease next year

Inflation will exceed 3pc in October before falling back towards the 2pc target by the end of 2018, according to Pantheon Macro

Just a reminder that Mark Carney and two other Bank of England policymakers are currently appearing in a Treasury Select Committee and we’ll bring you the latest from Parliament as it comes.

Let’s have a look at what the experts made of today’s figures.

Pantheon Macro UK economist Samuel Tombs believes that inflation will slip below 2pc by 2019, meaning that the MPC will be discouraged from raising interest rates more than once in the next 12 months.

He added: 

“Inflation looks set to fall sharply in 2018, now that retailers have nearly completed sterling-related price rises.

“Domestically-generated inflation has remained muted; indeed, inflation in the services sector was just 2.7% in September, well below its 3.7% average in the decade before the recession.”

EY ITEM Club’s chief economic advisor Howard Archer believes that it would take a surprisingly weak earnings figure tomorrow and particularly poor third quarter GDP growth to stop the MPC from lifting interest rates next month.

The painful squeeze on consumers will begin to gradually ease during 2018, he added. 

10:20AM

Inflation key takeaways

  1. Inflation nudged up to 3pc in September, its highest level since April 2012. Inflation remaining far above the Bank of England’s 2pc target rate will crank up the pressure on the central bank to raise interest rates at next month’s Monetary Policy Committee meeting.
  2. The ONS said that rising prices on food and recreational goods along with transport costs were the main factors putting upward pressure on the reading.
  3. RPI remained flat at 3.9pc, an almost six-year high, meaning that business rates (which are determined by today’s figure) will rise substantially next April. This “will be the last straw” for many SMEs, said the Federation of Small Businesses.
  4. The increase in the headline figure was forecast by economists and thus the pound is unchanged following the release, remaining 0.2pc lower against the dollar this morning at $1.3260.
9:58AM

RPI reading will heap more misery on small businesses

Although the Retail Price Index reading came in flat at 3.9pc, a slightly softer figure than economists were expecting, it will heap more misery on small businesses, according to the Federation of Small Businesses.

Today’s RPI reading means that business rates bills will rise by 3.9pc next April and that increase “will be the last straw many” SMEs, its national chairman Mike Cherry said.

He added:

“Today’s RPI figure follows six months of business rates misery for our small business community. Since April’s bruising revaluation we’ve had the staircase tax, introduction of an unworkable appeals platform and chronic delays to the Chancellor’s £435 million relief package. A near four per cent bill increase next April, on top of losing year one transitional caps, will be the last straw for many.

“The Chancellor should give careful consideration to his inaugural Autumn Budget. The last thing our businesses need is new tax increases or loss of entrepreneurial reliefs.”

9:46AM

3pc inflation turns up the heat on the Bank of England; sterling largely unchanged

Mr Carney will not be dusting off the parchment and pen to write the chancellor to explain why inflation has veered so far from the Bank of England’s 2pc target rate and he has done it by the skin of his teeth.

While the rise to 3pc was expected, inflation hitting its highest point in five-and-a-half years will  turn up the heat on the Bank of England’s Monetary Policy Committee. 

The central bank’s policymakers have dropped some very strong hints in the last month or so on raising interest rates but this combined with reasonably solid economics data of late will make it very difficult for the MPC to leave the base rate unchanged in November’s meeting.

Meanwhile on the currency markets, sterling has barely budged an inch after today’s headline CPI figure came in line with economists’ forecast 

9:34AM

Inflation hits a five-and-a-half-year high

Inflation increased to 3pc in September, its highest level in five-and-a-half years. The reading was in line with economists’ forecasts but will crank up the pressure on Bank of England policymakers to raise interest rates at the next Monetary Policy Committee in November. More to follow…

9:17AM

Merlin shares plunge after terror fears hit attractions

Shares in the Legoland owner have plunged today

Shares in the owner of Madame Tussauds and Alton Towers tumbled in early trade as it revealed the impact of recent terror attacks on trading in the UK.

Merlin’s latest trading figures confirmed the hit from terrorist attacks on UK attractions in the peak summer months, which left group like-for-like revenue growth almost grinding to a halt, edging up 0.3pc in the 40 weeks to October 7.

Poor weather across the UK and Northern Europe and extreme weather in Italy and Florida were also to blame, according to Merlin. Shares plunged 19pc to 365p.

Merlin also unveiled a deal to roll out new Peppa Pig attractions worldwide. The agreement with Entertainment One – which owns the rights to the popular children’s cartoon character – is to develop new attractions and themed accommodation based on the pre-school favourite.

Read the full report here

9:15AM

Inflation preview: what the experts say

Let’s have a quick round-up of what the experts are saying ahead of today’s inflation figures.

CMC Markets analyst Michael Hewson explains how Bank of England governor Mark Carney could be put in an embarrassing spot this morning:

“If CPI rises by more than 1% above the banks 2% target Governor Carney will have the unenviable task of having to write to the Chancellor explaining why inflation is above target, and what the Bank intends to do about it.  

“He can’t very well say, well Phil it turns out that rate cut last year wasn’t such a good idea, but don’t worry we’ve got it in hand and we’re going to put rates back to where they were beforehand.”   

It could be a busy day for Mr Carney will all this letter writing and select committees. Although I imagine he’s had that inflation letter saved in his drafts for some time now.

 Spreadex analyst Connor Campbell provided this preview:

“That’s because investors are eagerly awaiting September’s inflation reading, which is set to see the consumer price index finally hit a 5 year high of 3.0%. Such a reading would put even more pressure on the Bank of England to raise rates, though that hawkish urge may be tempered by the continued fall in real wages (set to be confirmed tomorrow) and a sharp month-on-month drop in retail sales (coming on Thursday).  

“For now, however, the pound is focused on inflation. Cable is up 0.1%, though admittedly half a cent away from the $1.33 levels it was tickling on Monday morning, while against the euro sterling has climbed 0.3%.”

8:54AM

Inflation expected to rise to a five-and-a-half-year high

Some have taken Bank of England policymakers’ sudden hawkish turn on interest rates with suspicion but today’s inflation figures are expected to bolster the consensus view that the Monetary Policy Committee will pull the trigger on interest rates next month.

The headline CPI figure is expected to rise to its highest level in five-and-a-half years and make an increase in the central bank’s base rate almost a done deal.

With no inflation report being released in conjunction with the headline CPI figure, there will be no press conference following the release but Mark Carney will be appearing in front of the Treasury Select Committee later today, who I’m sure won’t skirt around the issue.

Today will also be the best opportunity yet to size up the newest members of the MPC,  Silvana Tenreyro and Sir David Ramsden, who will be appearing alongside Mr Carney.

8:25AM

Agenda: Inflation figures dominate markets’ focus; Merlin plunges 20pc on flat revenue growth

It could be a rollercoaster day for Merlin Entertainment shares

UK inflation figures steal the limelight this morning with the headline CPI reading expected to nudge up to 3pc and confirm that the squeeze on UK households has become a little tighter.

If inflation pushes any higher, Bank of England governor Mark Carney will be put in the embarrassing predicament of having to write a letter to chancellor Philip Hammond explaining why the headline reading has strayed so far from the central bank’s 2pc target rate.

Combined with tomorrow’s wage growth reading, today’s figure is expected to crank up the pressure on the BoE’s Monetary Policy Committee to reverse last year’s emergency interest rate cut and push up the base rate to 0.5pc in November’s meeting.

Ahead of the figures, the pound is having a mixed morning on the currency markets, dipping 0.2pc to $1.3265 against the dollar and nudging up 0.2pc to €1.1271 against the euro.

On the retreating FTSE 100, theme park operator Merlin Entertainments has nosedived 20pc after enduring a “difficult” summer of trading. The Thorpe Park owner blamed terrorism and bad weather and admitted that revenue growth for 2017 is now expected to be “approximately flat”.

At the other end, publisher Pearson, which has suffered from a string of profit warnings of late, has popped 7pc after reporting that full-year operating profit will be in the upper end of estimates.

Interim results: B.P. Marsh & Partners

Full-year results: Utilitywise, Bioventix, Orchard Funding, Bellway, ASOS, DotDigital Group, Genedrive

Trading statement: SEGRO, Moneysupermarket.com, Merlin Entertainments, Pearson, Mediclinic International, Virgin Money, Evraz, BHP Billiton

AGM: Frontier Developments

Economics: PPI m/m (UK), RPI y/y (UK), CPI y/y (UK), HPI y/y (UK), Import Prices m/m (US) Industrial Production m/m (US), NAHB Housing Market Index (US), ZEW Economic Sentiment (EU), Final CPI y/y (EU)