UK shop prices saw their sharpest decline since 2021 in September, led by discounts on non-food items. However, fresh food inflation rose due to surging costs for products like olive oil and cocoa.
The British Retail Consortium (BRC) recorded a 0.6% fall in overall shop prices for the month, following a 0.3% drop in August.
The decrease was mainly driven by lower prices in non-food categories such as clothing and furniture, as retailers contended with weaker demand caused by unseasonal weather and ongoing pressure on household budgets from rising energy and grocery costs.
China talks
According to Sky News, British finance ministry officials are in advanced discussions with their Chinese counterparts to organise the first high-level meeting between senior finance officials since 2019.
New finance minister Rachel Reeves is reportedly considering a trip to Beijing in early 2025 to attend the UK-China Economic and Financial Dialogue—a platform for trade, investment, and other economic matters discussions.
Last month, Chinese state media quoted Vice Premier He Lifeng expressing China’s willingness to resume economic talks with Britain following his phone call with Reeves.
Relations between the two nations have been strained in recent years due to the UK’s concerns over Beijing’s national security law in Hong Kong, alleged human rights abuses in Xinjiang, and security risks linked to Chinese involvement in critical infrastructure projects.
Energy bills
Prime Minister Keir Starmer is under pressure to act as average energy bills increase by £149 a year from Tuesday, with the Resolution Foundation urging more support for vulnerable households struggling with rising costs.
The think tank called on the prime minister to aid those no longer eligible for winter fuel payments and households that have never qualified. Their research shows that 7.7 million households will likely face difficulties heating their homes this winter.
Starmer has faced criticism for cutting winter fuel payments for all but the lowest-income pensioners receiving pension credit.
From October to December, the energy price cap set by Ofgem will rise by 10% to £1,717 annually for an average dual-fuel household paying by direct debit. This increase, driven by higher wholesale energy costs, marks a significant jump from the previous cap of £1,568, adding further strain on household budgets as colder weather sets in.
Renewable jobs
A record 2.5 million jobs were created in the renewable energy sector in 2023, with the majority in China, according to a joint report by the International Renewable Energy Agency (IRENA) and the International Labour Organization (ILO).
China installed nearly two-thirds of the world’s new solar and wind power capacity, adding 1.84 million renewable energy jobs.
Global employment in the industry rose by 18%, from 13.7 million to 16.2 million. However, the report highlighted concerns over an “uneven global picture,” as China alone accounts for 7.4 million jobs, or 46% of the total.
In comparison, the sector employs 1.8 million people in the European Union, 1.56 million in Brazil, and nearly one million each in the United States and India.
Gold demand
According to industry experts and analysts, physical gold demand has dropped sharply across key markets as rising prices prompt some retail investors to sell and lock in profits.
Spot gold reached a record $2,685.42 per ounce on 26th September and has surged by 29% this year—on track for its largest annual gain in 14 years—driven by US Federal Reserve rate cuts and heightened geopolitical tensions.
“Physical demand in general is super low everywhere now,” said Robin Kolvenbach, head of Swiss refinery Argor-Heraeus SA. “There was a spike in demand in August when India cut its import duty, but since then it has gone completely dead again.”
Confidence drop
Chancellor Rachel Reeves’s “gloomy messaging” about the economy has led to a sharp drop in confidence among UK manufacturers, according to the latest S&P Global purchasing managers’ index.
The index revealed that business confidence fell to its lowest level in nine months, as factory leaders delayed major decisions ahead of the upcoming Budget.
Rob Dobson, director at S&P Global Market Intelligence, described the decline as “striking”, surpassed only by the plunge seen in March 2020 before the Covid lockdowns.
“Manufacturers have become more nervous about the outlook,” Dobson said, noting that business optimism has dropped sharply. “Uncertainty over government policy ahead of the autumn Budget, coupled with recent pessimistic messaging, is a key factor, along with concerns about global geopolitical and economic risks.”
China funds
China funds led the performance tables in September, buoyed by Beijing’s economic pledges, while UK smaller companies’ funds struggled due to speculation about potential tax increases on AIM investments.
On average, China funds rose by over 16% during the month, with most of the gains occurring in the final week.
“The top 44 funds last month were all China funds, followed by an Emerging Markets fund at 45th place, then back to China again,” said Ben Yearsley, director of Fairview Investing.
Inflation slowdown
Eurozone inflation is estimated to have dropped to 1.8% in September, its lowest level since April 2021 and down from 2.2% in August. This brings it below the European Central Bank’s (ECB) target of 2%.
Energy prices fell by 6%, while inflation for services eased to 4%.
However, prices for food, alcohol, and tobacco saw a slight increase.
Although overall inflation dipped below the ECB’s target, core inflation—which excludes more volatile items—remained higher at 2.7%.
Nationwide takeover
Nationwide has finalised its £2.9bn acquisition of Virgin Money, marking the UK’s largest banking merger since the financial crisis and reflecting a consolidation trend among mid-sized lenders.
Following approval from a specialist companies court last week, Nationwide announced it now holds Virgin Money’s entire share capital.
With the takeover complete, Virgin Money’s CEO David Duffy has stepped down and been succeeded by former Nationwide CFO Chris Rhodes.
The merger between the UK’s largest building society and the sixth-largest bank, announced in March, surprised the City. It received clearance from the competition watchdog in July and approval from financial regulators in September.
