A warm glow emanated from the Conservative Party Conference yesterday, caused by the setting light to a Tory flag outside the venue in Birmingham. It was quickly extinguished by someone called Tobias wearing suede loafers and a 'In Liz We Truss' badge. Warmth elsewhere was hard to find.
There was a definite chill in the air at the Bank of England this afternoon (Thursday 6 October), as their latest survey revealed the level of overall business uncertainty has further increased in the past month, with more than two-thirds of respondents reporting that uncertainty for their business was “high” or “very high”, 6 percentage points higher than in August. Businesses are less likely to invest in periods of high uncertainty, which could limit growth. Business leaders in the central bank’s decision maker panel forecast in September that they would increase prices by 6.6 per cent in the year ahead, up from 6.5 per cent in August, the highest since the survey began in 2017.
Increases in factory gate prices lead to higher inflation, which leads to higher interest rates and more debt, which leads to decreased demand, which leads to lower profits, which leads to an increase in prices, which leads to higher inflation ...
... we may need to go round one more time, as Kwasi and Liz are taking notes.
84 per cent of business leaders report they are finding it harder than usual to recruit new employees and all of the above increases the level of overall business uncertainty, with more than two-thirds of respondents reporting that uncertainty for their business was “high” or “very high”, 6 percentage points higher than in August. All of this as growth in the dominant services sector ground to a halt for the first time in 18 months in September, increasing fears that the economy is on the brink of a recession. Growth expectations in the sector were cut to the lowest level in almost two and a half years in September.
The dice is rolling, and some are putting their money on a peak of interest rates at 4 per cent by February next year, whilst others are gambling on more like 4.5 to 5, but all bets are off against the Bank of England's monetary committee raising interest rates by a full percentage point at their next meeting on 3 November.
Meanwhile who chose to sit next to Liz Truss at the inaugural super-summit to found a “European Political Community”, her first trip on the global stage as Pritish prime minister? It seems only President Erdogan of Turkey was up for it and he is not renown for his table manners.