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Mark Carney: Bank of England will tolerate higher inflation – business live Mark Carney: Bank of England will tolerate higher inflation – business live
(35 minutes later)
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European new car sales rose 7.2% in September, figures published earlier showed.
It was slower than the 9.8% growth in the same month last year, held back by weaker sales in the UK.
A total of 1.45m new cars were registered last month according to European Automobile Manufacturers Association (ACEA), the highest September total on record.
Sales in Italy were up 17.4% over the month at the top end of the table, but rose by just 1.6% in the UK.
Carlos DaSilva at IHS Markit said there was no sign of a Brexit impact in the data.
After a bumpy ride through the summer months, with a disappointing July followed by a surprisingly strong August, the European passenger car market came back to a more normal pattern in September − one of solid but not outstanding growth.
By and large, September was broadly in line with expectations with still no evidence of any impact from the UK’s vote to leave the European Union.
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PM's spokeswoman brushes off Tusk's Brexit commentsPM's spokeswoman brushes off Tusk's Brexit comments
Britain is committed to leaving the European Union, a spokeswoman for Theresa May said, brushing off a suggestion by the European Council President Donald Tusk that the country might change its mind.Britain is committed to leaving the European Union, a spokeswoman for Theresa May said, brushing off a suggestion by the European Council President Donald Tusk that the country might change its mind.
Tusk said on Thursday that Britain was facing a choice between hard Brexit, or no Brexit.Tusk said on Thursday that Britain was facing a choice between hard Brexit, or no Brexit.
She said:She said:
The Prime Minister has been very clear ... that the British people have made their decision and we are now going to get on with that, with taking the UK out of the EU and on making the most of the opportunities ahead.The Prime Minister has been very clear ... that the British people have made their decision and we are now going to get on with that, with taking the UK out of the EU and on making the most of the opportunities ahead.
The spokeswoman pointed out that Tusk had also said Brexit talks should be approached in good faith:The spokeswoman pointed out that Tusk had also said Brexit talks should be approached in good faith:
That is the sort of spirit the Prime Minister wants to encourage and foster with other European partners, that we approach this constructively.That is the sort of spirit the Prime Minister wants to encourage and foster with other European partners, that we approach this constructively.
There are opportunities both for the UK and for the EU with the decision to leave and so we now need to come together, work together effectively to agree on a new arrangement, a new relationship that can work in the interests of all of us.There are opportunities both for the UK and for the EU with the decision to leave and so we now need to come together, work together effectively to agree on a new arrangement, a new relationship that can work in the interests of all of us.
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Weak UK construction data for August shows that the government needs to invest more in infrastructure, according to the TUC.Weak UK construction data for August shows that the government needs to invest more in infrastructure, according to the TUC.
Frances O’Grady, the TUC general secretary, says:Frances O’Grady, the TUC general secretary, says:
Today’s construction figures are a timely reminder for the chancellor. We are not building enough homes, roads and railways.Today’s construction figures are a timely reminder for the chancellor. We are not building enough homes, roads and railways.
Philip Hammond must use next month’s autumn statement to green light investment in housebuilding, high-speed rail and a new runway at Heathrow.Philip Hammond must use next month’s autumn statement to green light investment in housebuilding, high-speed rail and a new runway at Heathrow.
With investors twitchy after Brexit, the government needs to step up.With investors twitchy after Brexit, the government needs to step up.
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Mark Carney: Bank of England will tolerate inflation overshootMark Carney: Bank of England will tolerate inflation overshoot
Mark Carney has said he is willing to tolerate an overshoot of the Bank of England’s 2% inflation target.Mark Carney has said he is willing to tolerate an overshoot of the Bank of England’s 2% inflation target.
The governor’s comments suggest that the Bank’s policymakers will focus on supporting economic growth through low interest rates following the Brexit vote, rather than acting to bring inflation down.The governor’s comments suggest that the Bank’s policymakers will focus on supporting economic growth through low interest rates following the Brexit vote, rather than acting to bring inflation down.
Speaking at an event in Nottingham, Carney said:Speaking at an event in Nottingham, Carney said:
Our judgment in the summer was that we could have seen another 400,000-500,000 people unemployed over the course of the next few years. So we’re willing to tolerate a bit of overshoot in inflation over the course of the next few years in order to avoid that situation, to cushion the blow.Our judgment in the summer was that we could have seen another 400,000-500,000 people unemployed over the course of the next few years. So we’re willing to tolerate a bit of overshoot in inflation over the course of the next few years in order to avoid that situation, to cushion the blow.
UK inflation was 0.6% in August, well below the 2% target. But the Bank and other commentators have warned that inflation will soon start to rise, as the sharp fall in the pound since the Brexit vote starts to feed through to higher import prices.UK inflation was 0.6% in August, well below the 2% target. But the Bank and other commentators have warned that inflation will soon start to rise, as the sharp fall in the pound since the Brexit vote starts to feed through to higher import prices.
Carney also conceded that it’s “going to get difficult” for people on lower incomes as prices start to rise at a faster pace.Carney also conceded that it’s “going to get difficult” for people on lower incomes as prices start to rise at a faster pace.
Carney says inflation is going to rise. Food first, goods and services over the next "few years". "It will show up."Carney says inflation is going to rise. Food first, goods and services over the next "few years". "It will show up."
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George Osborne decisively backs Heathrow expansionGeorge Osborne decisively backs Heathrow expansion
The former chancellor George Osborne has made it very clear that he is not ready for a quiet life on the backbenches.The former chancellor George Osborne has made it very clear that he is not ready for a quiet life on the backbenches.
In a series of tweets on the controversial and long running subject of UK airport expansion, Osborne decisively backed Heathrow.In a series of tweets on the controversial and long running subject of UK airport expansion, Osborne decisively backed Heathrow.
A formal decision is expected next Tuesday ...A formal decision is expected next Tuesday ...
Time for a decision on airports & go for Heathrow. Economic case overwhelming;connects Northern Powerhouse;ensures Britain is open to world.Time for a decision on airports & go for Heathrow. Economic case overwhelming;connects Northern Powerhouse;ensures Britain is open to world.
If we want Britain to be outward-looking,free-trading & global, we must expand the great airport that connects us to that world & that tradeIf we want Britain to be outward-looking,free-trading & global, we must expand the great airport that connects us to that world & that trade
We can consider Gatwick expansion. But not at the expense of Heathrow - and not in parallel or else, in practice, nothing will get built.We can consider Gatwick expansion. But not at the expense of Heathrow - and not in parallel or else, in practice, nothing will get built.
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The former chancellor George Osborne has said Britain must work hard to retain its status as the world’s financial centre.The former chancellor George Osborne has said Britain must work hard to retain its status as the world’s financial centre.
Comments this morning from Michel Sapin, the French finance minister, show that London’s rival European cities for finance are prepared for a fight to win business in the post-Brexit vote world.Comments this morning from Michel Sapin, the French finance minister, show that London’s rival European cities for finance are prepared for a fight to win business in the post-Brexit vote world.
Just opened the huge new@UBS office in City. I broke the ground here in 2012. We must work hard to keep UK the global centre of financeJust opened the huge new@UBS office in City. I broke the ground here in 2012. We must work hard to keep UK the global centre of finance
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Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, says the weak construction data suggests that the sector has relapsed into recession.Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, says the weak construction data suggests that the sector has relapsed into recession.
He adds:He adds:
The construction sector’s outlook will brighten if the chancellor cancels planned cuts to public sector investment in next month’s autumn statement.The construction sector’s outlook will brighten if the chancellor cancels planned cuts to public sector investment in next month’s autumn statement.
But with firms’ investment intentions still depressed by the Brexit vote, commercial construction work looks set to fall sharply. Meanwhile, the recent flat trend in housing starts and skilled labour shortages suggest that housebuilding will continue to track sideways for now.But with firms’ investment intentions still depressed by the Brexit vote, commercial construction work looks set to fall sharply. Meanwhile, the recent flat trend in housing starts and skilled labour shortages suggest that housebuilding will continue to track sideways for now.
Construction output down 1.5% m/m in August; decline broad-based. Barring a surge in Sept, construction sector relapsed into recession in Q3 pic.twitter.com/YCTaokwFhNConstruction output down 1.5% m/m in August; decline broad-based. Barring a surge in Sept, construction sector relapsed into recession in Q3 pic.twitter.com/YCTaokwFhN
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Supplementary point on Marmite-gate ...Supplementary point on Marmite-gate ...
Unforeseen Brexit benefits #1: Iceland giving away free big jars of Marmite (with voucher). Have a slice of toast on me @hwallop. #deflation pic.twitter.com/DbEuh6rPMQUnforeseen Brexit benefits #1: Iceland giving away free big jars of Marmite (with voucher). Have a slice of toast on me @hwallop. #deflation pic.twitter.com/DbEuh6rPMQ
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The detail of the UK construction output data shows the biggest drag in August came from a 5.1% monthly drop in infrastructure building. It followed a 6.1% increase in July.The detail of the UK construction output data shows the biggest drag in August came from a 5.1% monthly drop in infrastructure building. It followed a 6.1% increase in July.
The ONS said infrastructure is particularly volatile because of “the range of products that are included within this type of work”. That sub-sector of the construction industry covers a range of big projects such as windfarms, roads, railways and nuclear plants.The ONS said infrastructure is particularly volatile because of “the range of products that are included within this type of work”. That sub-sector of the construction industry covers a range of big projects such as windfarms, roads, railways and nuclear plants.
New house building meanwhile fell by 1.3% over the month.New house building meanwhile fell by 1.3% over the month.
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Tesco wins Marmite-gate as FTSE's top riserTesco wins Marmite-gate as FTSE's top riser
As far as investors are concerned, Tesco came out on top following its spat with product supplier Unilever over prices.As far as investors are concerned, Tesco came out on top following its spat with product supplier Unilever over prices.
Tesco is the FTSE 100’s best performer this morning, with shares up 3.9%. Unilever on the other hand is near the bottom of the pack, with shares down 0.4%.Tesco is the FTSE 100’s best performer this morning, with shares up 3.9%. Unilever on the other hand is near the bottom of the pack, with shares down 0.4%.
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Surprise fall in UK construction output in AugustSurprise fall in UK construction output in August
Construction output fell 1.5% in August, surprisings economists who had forecast a 0.2% rise.Construction output fell 1.5% in August, surprisings economists who had forecast a 0.2% rise.
The slightly better news was that the Office for National Statistics revised up the figure for July from zero to 0.5% growth.The slightly better news was that the Office for National Statistics revised up the figure for July from zero to 0.5% growth.
Kate Davies, a statistician with the ONS, said the fall didn’t appear to be related to the Brexit vote:Kate Davies, a statistician with the ONS, said the fall didn’t appear to be related to the Brexit vote:
Construction output has fallen back quite sharply in recent months and contracted by 1.5% in August. As the fall this month is led by infrastructure, it seems unlikely that post-referendum uncertainties are having an impact.Construction output has fallen back quite sharply in recent months and contracted by 1.5% in August. As the fall this month is led by infrastructure, it seems unlikely that post-referendum uncertainties are having an impact.
Monthly construction data can be quite erratic, though, so we would warn against trying to read too much into one set of figures.Monthly construction data can be quite erratic, though, so we would warn against trying to read too much into one set of figures.
The annual rate of growth in construction output was 0.2% in August, better than July’s -1% but much weaker than the 1.5% predicted by economists.The annual rate of growth in construction output was 0.2% in August, better than July’s -1% but much weaker than the 1.5% predicted by economists.
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Berenberg’s “chart of the week” is entitled migration to Germany: beyond the big surge.Berenberg’s “chart of the week” is entitled migration to Germany: beyond the big surge.
The German bank says the number of new arrivals has fallen sharply this year for a number of reasons, including the German government’s decision to tighten its policies since early 2016. It follows a huge surge in 2015, when about 890,000 asylum seekers went to Germany, adding 1.1% to the resident population.The German bank says the number of new arrivals has fallen sharply this year for a number of reasons, including the German government’s decision to tighten its policies since early 2016. It follows a huge surge in 2015, when about 890,000 asylum seekers went to Germany, adding 1.1% to the resident population.
The equivalent annual number for 2016 is about 160,000-170,000, which the bank says should be manageable in “economic, fiscal and political terms”.The equivalent annual number for 2016 is about 160,000-170,000, which the bank says should be manageable in “economic, fiscal and political terms”.
Here is the chart:Here is the chart:
Holger Schmieding, chief economist, says:Holger Schmieding, chief economist, says:
Providing for the migrants and refugees is adding to German government spending. Partly as a result of this, the growth rate of government consumption in Germany has risen from an average of 2.5% year on year in the first half of 2015 to 4.1% in the first half of 2016.Providing for the migrants and refugees is adding to German government spending. Partly as a result of this, the growth rate of government consumption in Germany has risen from an average of 2.5% year on year in the first half of 2015 to 4.1% in the first half of 2016.
This amounts to a fiscal stimulus worth 0.3% of GDP. The mostly state-financed consumer spending of migrants and refugees and the impact on housing construction add to that.This amounts to a fiscal stimulus worth 0.3% of GDP. The mostly state-financed consumer spending of migrants and refugees and the impact on housing construction add to that.
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The pound has fallen below $1.22, currently down 0.6% at $1.2176.The pound has fallen below $1.22, currently down 0.6% at $1.2176.
Connor Campbell, financial analyst at Spreadex, says the Brexit comments from French finance minister Michel Sapin, and those from Donald Tusk on Thursday (“it’s hard Brexit or no Brexit”) are weighing on the pound:Connor Campbell, financial analyst at Spreadex, says the Brexit comments from French finance minister Michel Sapin, and those from Donald Tusk on Thursday (“it’s hard Brexit or no Brexit”) are weighing on the pound:
The President of the European Council (Donald Tusk) poured cold water on the idea, propounded by Boris Johnson, that Britain could potentially strike a better deal with the EU post-Brexit, claiming that a hard exit is the only offer on the table. Sapin, the French finance minister, then stated this morning that some US banks are already looking to move their operations out of London in favour of the continent.The President of the European Council (Donald Tusk) poured cold water on the idea, propounded by Boris Johnson, that Britain could potentially strike a better deal with the EU post-Brexit, claiming that a hard exit is the only offer on the table. Sapin, the French finance minister, then stated this morning that some US banks are already looking to move their operations out of London in favour of the continent.
Unsurprisingly this kind of rhetoric hasn’t been welcomed by the pound, which has fallen half a percent against the dollar and 0.1% against the euro. While this keeps sterling above the week’s (and, indeed, decades’) lows, that fact will provide mere crumbs of comfort for the currency.Unsurprisingly this kind of rhetoric hasn’t been welcomed by the pound, which has fallen half a percent against the dollar and 0.1% against the euro. While this keeps sterling above the week’s (and, indeed, decades’) lows, that fact will provide mere crumbs of comfort for the currency.
The FTSE 100 is faring better, as Campbell points out:The FTSE 100 is faring better, as Campbell points out:
As for the FTSE, the abrupt end to Marmite-gate last night, with Tesco and Unilever coming to a price agreement, and a rebound from its mining stocks has allowed the UK index to climb back above the 7000 mark.As for the FTSE, the abrupt end to Marmite-gate last night, with Tesco and Unilever coming to a price agreement, and a rebound from its mining stocks has allowed the UK index to climb back above the 7000 mark.
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China: inflation rises more than expectedChina: inflation rises more than expected
Higher food prices pushed official inflation in China to 1.9% in September, from 1.3% in August.Higher food prices pushed official inflation in China to 1.9% in September, from 1.3% in August.
It was higher than the 1.6% predicted by economists, and helped to ease investor fears about the health of the world’s second largest economy after disappointing trade data on Thursday unnerved global markets.It was higher than the 1.6% predicted by economists, and helped to ease investor fears about the health of the world’s second largest economy after disappointing trade data on Thursday unnerved global markets.
Producer prices (or factory gate prices) also rose unexpectedly in September for the first time in almost five years because of higher commodity prices.Producer prices (or factory gate prices) also rose unexpectedly in September for the first time in almost five years because of higher commodity prices.
Michael Hewson, chief market analyst at CMC Markets UK, said it was good news:Michael Hewson, chief market analyst at CMC Markets UK, said it was good news:
In an encouraging sign this morning’s Chinese consumer prices inflation data does appear to show that inflation is gaining traction, with CPI coming in at 1.9%, above expectations.In an encouraging sign this morning’s Chinese consumer prices inflation data does appear to show that inflation is gaining traction, with CPI coming in at 1.9%, above expectations.
Factory gate prices still remain sluggish, though they have finally made it into positive territory at 0.1%, the first time that has happened since February 2012. Chinese PPi prices have been slowly improving for several months now so this return to positive territory is welcome news, especially so when prices were -5.9% at the beginning of this year.Factory gate prices still remain sluggish, though they have finally made it into positive territory at 0.1%, the first time that has happened since February 2012. Chinese PPi prices have been slowly improving for several months now so this return to positive territory is welcome news, especially so when prices were -5.9% at the beginning of this year.
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FTSE 100 climbs back above 7,000FTSE 100 climbs back above 7,000
After hitting an record intraday high on Tuesday, the FTSE 100 slipped back below 7,000 on Thursday when disappointing trade data from China hit mining stocks.After hitting an record intraday high on Tuesday, the FTSE 100 slipped back below 7,000 on Thursday when disappointing trade data from China hit mining stocks.
It’s a different story this morning, with European markets up across the board:It’s a different story this morning, with European markets up across the board:
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Ratings agency Standard & Poor’s says the pound could lose its status as a save haven currency following the Brexit vote.Ratings agency Standard & Poor’s says the pound could lose its status as a save haven currency following the Brexit vote.
Ravi Bhatia, S&P’s director of sovereign ratings for Britain, told the Telegraph:Ravi Bhatia, S&P’s director of sovereign ratings for Britain, told the Telegraph:
To be a reserve currency means that the world has trust in you and is happy to hold its savings in your currency. It creates a pool of available capital. If you lose this and sterling becomes just another currency, a key advantage is lost.To be a reserve currency means that the world has trust in you and is happy to hold its savings in your currency. It creates a pool of available capital. If you lose this and sterling becomes just another currency, a key advantage is lost.
He also suggested some complacency on the part of the UK government as it prepares to negotiate its way out of the EU:He also suggested some complacency on the part of the UK government as it prepares to negotiate its way out of the EU:
There seems to be this view that ‘we’re a big important economy, the Europeans export a lot to us, so they have got to give us what we want’, but is that really true?There seems to be this view that ‘we’re a big important economy, the Europeans export a lot to us, so they have got to give us what we want’, but is that really true?
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Pound hovers around $1.22Pound hovers around $1.22
The pound is down slightly against the dollar this morning, by 0.4%, but is just about managing to stay above the $1.22 level. It is currently at $1.2206.The pound is down slightly against the dollar this morning, by 0.4%, but is just about managing to stay above the $1.22 level. It is currently at $1.2206.
It is also holding steady against the euro, down -0.1% at €1.1075.It is also holding steady against the euro, down -0.1% at €1.1075.
European markets have opened higher. Full details to follow.European markets have opened higher. Full details to follow.
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Introduction: France says London will lose US banksIntroduction: France says London will lose US banks
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Marmite-gate might have been settled for now (read here how yesterday’s dramatic events unfolded), but there are other tales this morning of how Brexit might negatively affect Britain.Marmite-gate might have been settled for now (read here how yesterday’s dramatic events unfolded), but there are other tales this morning of how Brexit might negatively affect Britain.
The French finance minister Michel Sapin has told a press conference in Paris that US banks are definitely pressing ahead with plans to move some operations out of the UK in favour of other European countries.The French finance minister Michel Sapin has told a press conference in Paris that US banks are definitely pressing ahead with plans to move some operations out of the UK in favour of other European countries.
Sapin was in Washington last week for the IMF meetings and he says that now that Britain’s exit form the EU seems certain, US banks are busy making plans to leave the UK.Sapin was in Washington last week for the IMF meetings and he says that now that Britain’s exit form the EU seems certain, US banks are busy making plans to leave the UK.
Paris, of course, would welcome the banks with open arms, but it will undoubtedly encounter stiff competition from other cities such as Frankfurt.Paris, of course, would welcome the banks with open arms, but it will undoubtedly encounter stiff competition from other cities such as Frankfurt.
Of course we’ve heard it all before that banks will consider moving out of London, but Sapin suggests the plans have moved up a gear.Of course we’ve heard it all before that banks will consider moving out of London, but Sapin suggests the plans have moved up a gear.
Here is what he had to say about US banks:Here is what he had to say about US banks:
For them, until now, the question was ‘will Brexit take place? Will it really be implemented? You talk about two years but maybe it will last three or four years?’.For them, until now, the question was ‘will Brexit take place? Will it really be implemented? You talk about two years but maybe it will last three or four years?’.
That’s over now, there’s no more of that. It’s no longer ‘will there be’ or ‘if’ there’s a Brexit. It’s ‘there will be a Brexit in two years and after two years we will have to take decisions.That’s over now, there’s no more of that. It’s no longer ‘will there be’ or ‘if’ there’s a Brexit. It’s ‘there will be a Brexit in two years and after two years we will have to take decisions.
Sapin said some banks had already decided that activities will be transferred to the continent.Sapin said some banks had already decided that activities will be transferred to the continent.
Those are their words, not mine. [It is an] inevitable outcome, whatever the result of the Brexit negotiations.Those are their words, not mine. [It is an] inevitable outcome, whatever the result of the Brexit negotiations.
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