Introduction: UK business inflation pressures hits three-year high;
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Having missed out on the Nobel Peace Prize, again, DonaldTrump is unlikely to trouble the scorers in Stockholm today when the economics equivalent is handed out.
Instead, Trump’s Middle Eastern conflict is proving – to no-one’s surprise – that high energy prices fuel inflation, and that geopolitical instability hurts growth.
Just this morning, a new report shows that UK businesses are facing the sharpest inflation pressures in three years, due to rising energy, fuel and raw material costs.
Accountancy and advisory firm BDO has reported that its inflation index rose to 103.65 in September, up from 102.18 in August and its highest reading since June 2023.
These elevated costs and weakening demand are putting renewed pressure on firms ahead of the Autumn Budget, BDO warns.
Their report has also found that output fell across UK manufacturing and services last month as domestic demand softened.
Scott Knight, head of growth at BDO, says:
“Businesses head into this Budget with one clear message: no surprises. Cost pressures continue to squeeze margins, hiring intentions are low and growth is starting to plateau.
Firms are not looking for grand interventions, but they do need certainty. Right now, concerns about further downside risks outweigh expectations of positive change.”
The oil price has dropped slightly this morning, though, after Trump declared that Ukraine and Russia have agreed to halt attacks on each other’s energy facilities following the US diesel-supply deal with Moscow announced on Friday night.
Brent crude had been down around 2% a few hours ago – but it’s now just 0.25% lower at $104.46 a barrel, a fairly small move really.
Kyle Rodda, senior financial market analyst at Capital.com, explains why:
A highly contentious US deal with Russia to allow the export of more diesel to ease pressure in the market for the critical industrial fuel helped slightly with optics.
But the true impact is piecemeal, especially as Middle East refining remains heavily compromised and Ukrainian forces strategically strike Russian refineries.
The agenda
All day: Paris Motor Show
From 10.45am BST: Nobel Prize for economics announced
2pm BST: Russia’s trade balance for August