{"id":9025,"date":"2022-11-02T11:40:39","date_gmt":"2022-11-02T11:40:39","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/11\/02\/economic-review-october-2022\/"},"modified":"2022-11-02T11:53:19","modified_gmt":"2022-11-02T11:53:19","slug":"economic-review-october-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/11\/02\/economic-review-october-2022\/","title":{"rendered":"Economic Review – October 2022"},"content":{"rendered":"
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Chancellor\u2019s\nfiscal statement delayed<\/strong><\/p>\n<\/div>\n\n

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The\ngovernment has pushed back the date of its much-anticipated Medium-Term Fiscal\nPlan in order to ensure it is based on the \u201cmost\naccurate\u201d<\/em> economic forecasts available.<\/strong><\/p>\n<\/div>\n\n

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Chancellor Jeremy Hunt had been due to\ndeliver his first fiscal statement detailing how the government plans to repair\nthe country\u2019s public finances on 31 October, but following Rishi Sunak\u2019s\nappointment as Prime Minister, it was decided to move the announcement back by\ntwo-and-a-half weeks.<\/p>\n<\/div>\n\n

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The fiscal event, which will now be delivered\non 17 November, has also been upgraded to a full Autumn Statement, paving the\nway for wider taxation policies to be announced. The Chancellor\u2019s tax and\nspending plans will also be accompanied by updated economic growth and\nborrowing forecasts produced by the independent Office for Budget\nResponsibility (OBR).<\/p>\n<\/div>\n\n

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When announcing the postponement, Mr Hunt\nsaid, \u201cOur number one priority is\neconomic stability and restoring confidence that the United Kingdom is a country\nthat pays its way. I’m willing to make choices that are politically\nembarrassing if they’re the right thing to do for the country, if they’re in\nthe national interest.\u201d<\/em><\/p>\n<\/div>\n\n

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Financial markets were relatively calm after\nthe news broke with analysts describing the delay as understandable, and both\nsterling and government bond prices were little changed by the announcement.\nThe International Monetary Fund, which had criticised the previous Chancellor\u2019s\nunfunded tax cuts, offered support to the incoming Prime Minister, with the\norganisation\u2019s Chief Kristalina Georgieva suggesting Rishi Sunak will bring \u201cfiscal discipline\u201d<\/em> to the UK.<\/p>\n<\/div>\n\n

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The\nChancellor has been keen to demonstrate his fiscal credentials, reiterating his\ncommitment to \u201cdebt falling over the\nmedium term.\u201d<\/em> This suggests the government will have some tough tax and\nspending decisions to make in order to fill the budget black hole, with\nTreasury officials warning people \u201cshould\nnot underestimate the scale of this challenge.\u201d<\/em><\/p>\n<\/div>\n\n

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Inflation back at 40-year\nhigh<\/strong><\/p>\n<\/div>\n\n

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Soaring food prices\nhave pushed the UK inflation rate back to a four-decade high, fuelling\nexpectations of a sharp interest rate hike at<\/strong> the\nnext Bank of England (BoE) Monetary Policy Committee (MPC) meeting in early\nNovember.<\/strong><\/p>\n<\/div>\n\n

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Data\nreleased last month by the Office for National Statistics (ONS) showed that the\nheadline rate of inflation rose to 10.1% in September after dipping to 9.9% in\nAugust. This was slightly above analysts\u2019 expectations and took consumer price\ninflation back to a 40-year high previously hit in July.<\/p>\n<\/div>\n\n

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The\nfood and non-alcoholic drinks sector was the biggest upward contributor to\nSeptember\u2019s rise, with prices in this category recording their biggest jump\nsince April 1980. ONS said the price of most key items in an average\nhousehold\u2019s food basket rose, including fish, sugar, fruit and rice, as the war\nin Ukraine and recent weakness in the pound made both food products and\ningredients more expensive.<\/p>\n<\/div>\n\n

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This\nfurther jump in inflation has placed additional pressure on the BoE to raise\ninterest rates when its next MPC meeting concludes on 3 November. Speaking at a\nG30 event in Washington in mid-October, Bank Governor Andrew Bailey\nacknowledged rates may need to rise by more than the BoE had previously\nenvisaged. The Governor said, \u201cWe will\nnot hesitate to raise interest rates to meet the inflation target. And, as\nthings stand today, my best guess is that inflationary pressures will require a\nstronger response than we perhaps thought in August.\u201d<\/em><\/p>\n<\/div>\n\n

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While\nthe Chancellor\u2019s decision to delay his fiscal statement until after the Bank\u2019s\nNovember meeting will make policymakers\u2019 deliberations more difficult, analysts\nstill expect them to take decisive action. Indeed, over half of respondents in\na recent Reuters poll of economists expect rates to rise by 0.75% in November,\nwith most of the others predicting a 1% increase.<\/p>\n<\/div>\n\n

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Markets <\/strong>(Data compiled by TOMD)<\/strong><\/p>\n<\/div>\n\n

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As October drew to a close, UK stock markets benefited\nfrom a Halloween rebound. The blue-chip FTSE 100 index closed the month at a\nfive-week high, up 2.91% to 7,094.53, buoyed <\/strong>by gains across Britain\u2019s high street banks, amid\nexpectations of an imminent Bank Rate rise. The FTSE 250 registered a gain of 4.20%<\/strong>, while the FTSE AIM ended October\nwith a small loss of 0.03%.<\/strong><\/strong><\/p>\n<\/div>\n\n

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On the continent, the Euro Stoxx 50 closed\nthe month up 9.02%. Eurozone annual inflation reached a record\nhigh of 10.7% in October, ahead of analyst expectations of 10.3%. In Japan, the\nNikkei 225 closed October on 27,587.46, up 6.36%. The Bank of Japan has chosen to\nmaintain ultra-low interest rates, bucking the tightening trend among global\ncentral banks.<\/p>\n<\/div>\n\n

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Across the pond, earnings season is in full swing and US markets\nare awaiting the highly anticipated Federal Reserve rates meeting in early\nNovember. Following a challenging September, markets made a comeback in October,\nwith the\nDow closing the month up 13.95% on 32,732.95, its best monthly advance since\nJanuary 1976. Meanwhile the tech-orientated Nasdaq closed October on 10,988.15, up 3.90%. <\/p>\n<\/div>\n\n

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On the foreign exchanges, the euro closed at \u20ac1.16 against\nsterling. The US dollar closed the month at $1.14 against sterling and at $0.98\nagainst the euro. <\/p>\n<\/div>\n\n

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Gold is currently trading at around $1,639 a troy ounce, a loss of 1.96% on the month. Pressure from anticipated rate hikes, rising yields and the relative strength of the dollar are weighing on the precious metal. Brent Crude closed the month trading at around $91 a barrel, a gain of 7.05%, following a decision by the Organization of the Petroleum Exporting Countries (OPEC+) alliance to make sizable cuts to output from November. <\/p>\n<\/div>\n\n

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\"\"<\/figure><\/div>\n<\/div>\n\n
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UK\neconomy unexpectedly shrinks<\/strong><\/p>\n<\/div>\n\n

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Growth\nstatistics released by ONS show the economy unexpectedly contracted in August\nwhile forward-looking indicators point to further deterioration following the\ncountry\u2019s recent political and market turmoil. <\/strong><\/p>\n<\/div>\n\n

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According to the latest gross domestic\nproduct (GDP) figures the UK\neconomy shrank by 0.3% in August with output in both the production and\nservices sectors falling back. ONS noted that a number of customer-facing\nbusinesses, including retail, hairdressers and hotels, had all fared \u2018relatively poorly\u2019<\/em> during the month.<\/p>\n<\/div>\n\n

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August\u2019s figure was significantly weaker than\nanalysts\u2019 expectations, with the consensus from a Reuters poll of economists\npointing to zero growth. July\u2019s GDP figure was also revised down to 0.1% from a\nprevious estimate of 0.2%; as a result, output across the three months to\nAugust as a whole fell by 0.3%.<\/p>\n<\/div>\n\n

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Analysts have warned that September could see\nan even sharper decline, partly due to the extra Bank Holiday to mark the\nQueen\u2019s funeral and reduction in business opening hours during the period of\nmourning. Recent survey\nevidence also suggests the downturn is set to intensify, with October\u2019s\npreliminary headline reading of S&P Global\u2019s Purchasing Managers\u2019 Index\nshowing the pace of economic decline \u2018gathered\nmomentum after the recent political and financial market upheavals<\/em>.\u2019<\/p>\n<\/div>\n\n

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Unemployment\nrate falls again<\/strong><\/p>\n<\/div>\n\n

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The latest labour\nmarket statistics showed that the rate of unemployment in the UK declined to\nits lowest level in nearly 50 years, driven by an increase in the number of\npeople leaving the workforce.<\/strong><\/p>\n<\/div>\n\n

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ONS\nfigures showed the unemployment rate\nfell to 3.5% in the three months to August, its lowest level since December to\nFebruary 1974. This decline, however, was due to an increase in the number of\nworking-age adults who are neither working nor looking for work.<\/p>\n<\/div>\n\n

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The\neconomic inactivity rate, which measures the proportion of 16 to 64-year-olds\nwho are not in the labour force, rose to 21.7% in the June to August period, an\nincrease of 0.6 percentage points\nfrom the\nprevious quarter. This rise was partly driven by an increase in student\nnumbers, as well as a rise in the number of people suffering with a long-term\nillness, which rose to a record high.<\/p>\n<\/div>\n\n

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This\nresulted in the ratio of\nunemployed people to job vacancies dropping to a record low, despite the latest\ndata revealing a decline in the total number\nof vacancies. ONS noted that the fall in vacancies was due to a number of\nemployers reducing recruitment \u2018due to a\nvariety of economic pressures<\/em>.\u2019<\/p>\n<\/div>\n\n

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All details are correct at the time of writing (01\nNov 2022).<\/strong><\/strong><\/p>\n<\/div>\n\n

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It\nis important to take professional advice before making any decision relating to\nyour personal finances. Information within this document is based on our\ncurrent understanding and can be subject to change without notice and the accuracy\nand completeness of the information cannot be guaranteed. It does not provide\nindividual tailored investment advice and is for guidance only. Some rules may\nvary in different parts of the UK. We cannot assume legal liability for any\nerrors or omissions it might contain. Levels and bases of, and reliefs from,\ntaxation are those currently applying or proposed and are subject to change;\ntheir value depends on the individual circumstances of the investor. No part of\nthis document may be reproduced in any manner without prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

Chancellor\u2019s fiscal statement delayed The government has pushed back the date of its much-anticipated Medium-Term Fiscal Plan in order to ensure it is based on the \u201cmost accurate\u201d economic forecasts available. Chancellor Jeremy Hunt had been due to deliver his first fiscal statement detailing how the government plans to repair the country\u2019s public finances on […]<\/p>\n","protected":false},"author":12,"featured_media":9028,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[116],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/9025"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=9025"}],"version-history":[{"count":1,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/9025\/revisions"}],"predecessor-version":[{"id":9039,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/9025\/revisions\/9039"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/9028"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=9025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=9025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=9025"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=9025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}