inflation surges to 3.2pc in fastest monthly rise on record - live updates

© Dominic Lipinski /PA Rishi Sunak  - Dominic Lipinski /PA Lucian Grainge in line for $170m payday from Universal Music float Inflation surges to 3.2pc in August, up from 2pc in July FTSE 100 stalls, FTSE 250 inches lower   Ben Wright: Spooked businesses are already on the brink of an inflationary spiral Sign up here for our daily business briefing newsletter

Inflation accelerated at its fastest monthly pace on record last month, leapfrogging economists' expectations. 

Consumer prices surged 3.2pc in August compared to a year ago, the most since March 2012, after dipping back to the central bank’s 2pc target in July, the Office for National Statistics said this morning. 

The increase in inflation between July and August was the biggest since the current series of data started in 1997.

The higher-than-expected monthly rise in inflation and input prices testifies to supply shortages, building up further price pressure," said Debapratim De, senior economist at Deloitte.

Inflation jumped to 9.6pc in restaurants, cafes and dancing establishments - in a sign of the return to normality from Eat Out To Help Out a year ago.

Household furniture is up 8pc while camping kit is up by just over 10pc, coming after a period of working from home, which has encouraged home renovations, and travel restrictions, promoting UK holidays.

At 3.2pc, the CPI rate of inflation is above the Bank of England’s 2pc target, which will force its Governor, Andrew Bailey, to write a letter to the Chancellor to explain why prices are running so high.

The central bank has forecast that inflation will reach 4pc by the end of this year, double its target, and then fall back in both 2022 and 2023.

Some investors are anticipating that policy makers may have to boost interest rates as early as next year to keep the economy from overheating.

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08:27 AM

Fever tree shares rise as retail sales exceed expectations

inflation surges to 3.2pc in fastest monthly rise on record - live updates

© Neil Hall /Reuters Products from the drinks company Fever Tree - Neil Hall /Reuters 

Fever Tree shares are up 1.4pc this morning, after the drinks maker's sales jumped by more than a third over the first half of 2021. 

The company said retail sales surpassed its expectations across its regions and on-trade sales - which cover hospitality venues - have performed "well" as markets continue their recovery. 

It reported revenue growth of 36pc for the six months to June, compared with the same period last year.

Tim Warrillow, chief executive, commented: 

Looking ahead, the long-term opportunity for Fever-Tree continues to be enhanced by the structural trends we are seeing, including the growing interest in premium mixers and spirits, and the popularity of long mixed drinks. These trends are being supported by our retail and spirit partners, and Fever-Tree's ability to capitalise and drive this opportunity is unmatched by any other premium mixer brand.

08:15 AM

Fire shuts down key UK power station 

A fire is raging at a key electricity converter station in Kent, forcing a major cable that brings power from France to Britain to be shut down. 

Bloomberg has the details:

The outage couldn’t come at a worse time with supplies already short and prices at record highs. Britain is a net importer of power, with France its biggest supplier via two 2,000 megawatt cables that run across the English Channel.

Fightfighters have been battling the blaze since the middle of the night and smoke continues to billow from the site. 

The fire will still take several hours to put out, according to Kent Fire and Rescue Service.

Flows on the 2,000 megawatt IFA-1 cable halted just after midnight, according to National Grid Plc data. 

“With margins already tight for this winter,” the outage will “tighten those margins further, resulting in higher UK power prices,” said Adam Lewis, partner at Hartree Partners.

“This is also likely to tighten the UK gas markets as the U.K. will need to substitute imports with its own generation.”

Uh oh. Here’s the scene at Sellindge, where two big interconnectors from France plug into the UK national grid. Full story on the @TheTerminal

— Edward Evans (@evans_edward) September 15, 2021

08:11 AM

Countryside is latest developer to scrap doubling ground rents

Countryside has become the latest property developer to scrap contracts that meant leaseholders had to pay to ground rents that doubled every 10 to 15 years, following a Competition and Markets Authority (CMA) investigation into the practice.

Countryside will now set ground rent at the level when the homes were first sold and confirmed it no longer sells leasehold homes with doubling ground rents.

Taylor Wimpey, Barratt Developments and Persimmon Homes have all faced the same investigation as Countryside into the alleged mis-selling of leasehold homes.

In June, the CMA secured commitments from Persimmon and investor Aviva to remove the ground rent terms and confirmed it has written to other freehold investors asking for commitments.

CMA chief executive Andrea Coscelli said: "Other developers, such as Taylor Wimpey, and freehold investors now have the opportunity to do the right thing by their leaseholders and remove these problematic clauses from their contracts.

"If they refuse, we stand ready to step in and take further action - through the courts if necessary."

Read more about this story here: 

Major housebuilders accused of misleading leasehold buyers  'I ran out of hope': why some leaseholders have been trapped by reforms  

08:02 AM

Wagamama owner falls 2.3pc

inflation surges to 3.2pc in fastest monthly rise on record - live updates

© Jason Alden /Bloomberg Pedestrians pass a Wagamama Ltd. restaurant in Londo - Jason Alden /Bloomberg 

Shares of The Restaurant Group have fallen 2.3pc, after the Wagamama owner said sales dipped by 4.6pc to £216.8m for the six-months ending in July. 

Chief executive Andy Hornby said trading has outperformed the wider hospitality market but warned that the company is still dealing with industry-wide challenges. 

He said: "Whilst there are some well-documented sector challenges to navigate in the short term, particularly around labour availability and supply chain, we believe the group is well positioned for the long term."

The group, which also runs Frankie & Benny's, said its statutory losses had shrunk to £58.8m, compared with a £234.7m loss in the same period last year.

It also plans to roughly double its pub estate - which currently stands at 78 sites - in the long term.

07:47 AM

Darktrace shares surge 

Shares of Darktrace have jumped 9.8pc this morning, after the Cambridge based cybersecurity company increased its revenue growth forecast for its 2022 financial year. 

The company has experienced strong demand, with its customer base growing by 45.3pc year-on-year, as industries begin to pay more attention to the threat of ransomware attacks. 

Chief executive, Poppy Gustafsson, said:

At our first full-year earnings, we are very pleased to report robust financial and operational performance, and strong growth, during the period.

In this new era of cyber-threat, Darktrace is helping organisations from every industry sector, including providers of critical national infrastructure, to protect their digital assets, and avoid the serious disruption that cyber-attacks can cause. 

inflation surges to 3.2pc in fastest monthly rise on record - live updates

© Provided by The Telegraph Darktrace key facts

07:33 AM

FTSE risers and fallers

The FTSE 100 has dipped 0.1pc this morning, after data showed British inflation hit a more than nine-year high in August and reignited concerns about a sooner-than-expected policy tightening by the Bank of England.

The biggest drags on the index are currently Just Eat (down 2.4pc), Entain (down 2.3pc) and JD Sports Fashion (down 1.8pc) after its surge in share price yesterday. 

BAE systems was the top riser among the blue chips, up 1pc. 

The domestically focused mid-cap FTSE 250 index was also down 0.3pc, with Trustpilot making the biggest losses.

The review website fell 7pc on opening after it said its losses for the first half of the year grew from $6m to $17m.

The company said this was due to costs related to its March IPO.

07:16 AM

BoE 'likely to be one of the first major central banks to hike rates next year' 

Hugh Gimber, global market strategist at J.P. Morgan Asset Management, says:

Following sharp spikes in inflation across the Atlantic in recent months, the UK economy has now come to the inflation party.

The doves among the members of the Bank of England’s Monetary Policy Committee will take some comfort in the large contribution from restaurant and hotel prices, given that much of this was driven by the heavy discounts offered under the Eat Out to Help Out Scheme last summer. That said, there are also signs that inflationary pressures are increasingly broad based across many sectors of the economy.

The key question for investors is how this impacts the timing of the first rate hike. The Bank will be reluctant to move until it is also confident that the economy has successfully negotiated the end of the furlough scheme, yet record levels of job vacancies suggest ample scope for the bulk of furloughed workers to be re-absorbed into the labour market.

With inflation running hot and wages on the rise, the Bank looks quite likely to be one of the first major central banks to hike rates next year. In this context, the historically low level of UK gilt yields appears inconsistent with the inflationary pressures building in the economy.

07:09 AM

FTSE inches lower

The FTSE 100 has crept marginally downwards on opening this morning, falling 5.9 points or 0.1pc to 7,028.1. 

The FTSE 250 has also dipped 0.2pc or 37 points to 23,650.3.

06:57 AM

Inflation in graphs 

BIG jump in UK CPI inflation.

Up from annual rate of 2% in July to 3.2% in Aug.

Not just the highest level of inflation since 2012, it’s also the biggest month-on-month change in the level in the history of this inflation measure (going back to 1997)

— Ed Conway (@EdConwaySky) September 15, 2021

As expected UK inflation moving higher in Aug with CPI +3.2% YoY (+2.0% prev). Eat Out to Help Out base effects account for ~30bp of uplift. With energy price cap ⬆️12% in Oct & delayed pass through from higher input costs, CPI set to stay 3%-4% for few Qs before moving lower

— Simon French (@shjfrench) September 15, 2021

Renewed inflationary surge - @ONS data shows UK #inflation rose to 3.2% in Aug-21, highest rate since March 2012.

Sharp rise largely due to major base effects from last year’s VAT cut & Eat Out to Help Out which lowered restaurant prices in Aug-20, while this year prices rose.

— Suren Thiru (@Suren_Thiru) September 15, 2021

06:47 AM

Eat Out to Help Out scheme is 'key culprit'

inflation surges to 3.2pc in fastest monthly rise on record - live updates

© TOLGA AKMEN /AFP A server takes a customer's order as diners sit at tables outside a restaurant in London - TOLGA AKMEN /AFP

Dean Tuner, economist at UBS Global Wealth Management, comments: 

Once again, factors relating to the pandemic have driven a larger than expected move in inflation. Inflation was expected to rise this month following last month’s fall, but the jump in CPI to 3.2pc is higher than expected. The key culprit on this occasion is last August’s Eat Out to Help Out scheme where base effects led to the largest contribution to inflation from Restaurants and Hotels on record. Transportation, which includes petrol prices which are almost 20pc higher this August compared to last, again due to a base effect, also made a large contribution.

Over the coming months we expect that inflation will move higher, likely peaking in the early months of next year. Beyond that, as the base effects and impacts of the pandemic start to fade, inflation will trend downwards and may even fall below the Bank of England’s two percent target.

We don’t expect the Bank of England to react in any way to today’s figures, they will instead be focused on the medium-term outlook for prices and the labour market which, as seen in yesterday’s jobs market report, is holding up better than feared. These, we think, will keep the Bank of England in a hawkish mood, laying the ground for a rate hike in the first half of next year. In light of this, the prospects for the pound remain bright.

06:44 AM

More expert reaction: 'Inflation will fall back next year'

Paul Dales, chief UK economist at Capital Economics, says: 

The leap in CPI inflation from 2.0pc in July to a nine-year high of 3.2pc in August (consensus 2.9pc, CE 3.1pc) is the first step in a rise that may take inflation to 4.5pc by November. But as inflation will fall back almost as sharply next year, we don’t think the MPC will raise interest rates until 2023.

About 0.9ppts of the rise in CPI inflation in August was due to base effects linked to the sharp fall in consumer prices in August 2020, most of which was driven by the Eat Out to Help Out restaurant discount scheme. Back then catering services prices fell by 5.8pc m/m, but this August they rose by 0.2pc m/m, which was enough to push up catering services inflation from 1.4pc to 7.9pc. The rises in inflation in some areas, such as furniture (from 2.9pc to 3.7pc) and recreation (0.7pc to 2.4pc) was due to similar but smaller base effects.

But 0.3ppts of the rise was due to a strengthening in underlying price pressures. The 5.9pc m/m rise in hotel prices in August was much stronger than the 0.6pc m/m decline you usually get at this time of year, which pushed up its inflation rate from 5.7pc to 11.6pc. And the rise in food inflation from -0.6pc to +0.3pc is probably due to the pass-through of higher shipping and commodity costs as well as some product shortages.

06:34 AM

Expert reaction: Record jump for price rises 

inflation surges to 3.2pc in fastest monthly rise on record - live updates

© Mike Kemp /Telegraph The Bank of England in the City of London - Mike Kemp /Telegraph

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, responds: 

Inflation pressures remain predominantly driven by pandemic-related distortions, such as last year’s Eat Out to Help Out scheme and VAT cut on hospitality and tourism. This was alongside rising used car prices amid supply shortages in the new car market, and re-opening led demand strength in the service sector.

This means that for the time being the Bank of England is likely to stick to its narrative of transitory inflation as these temporary factors dissipate. But as we head into 2022, evidence of more persistent supply-demand imbalances and rising wage pressures could translate to stickier inflation and a more hawkish policy stance – with the MPC potentially pushing the button on rate hikes as early as May.

Yael Selfin, chief economist at KPMG UK, comments: 

While inflation may ease slightly in September, it is expected to remain elevated and could climb higher during subsequent months. Recruitment difficulties, cost pressures for businesses, supply chain issues and structural changes post-Covid are all pointing to higher inflation until at least the end of this year.

Higher inflation will inevitably raise questions for the Bank of England on the timing of tightening monetary policy and interest rate hikes to contain inflationary risks further down the line. However, any tightening now risks scuppering the recovery before it has a chance to take hold, so a delay until the middle of next year is likely.

Inflation in August reached its highest level since the start of 2012, with prices up by 3.2pc compared to a year ago. This was broadly in line with expectations as prices last August were pushed down by the impact of the Government’s Eat Out to Help Out scheme.

Richard Carter, head of fixed interest research at Quilter Cheviot, adds:

While last month saw inflation at a somewhat subdued level compared to expectations, prices have jumped in August as supply chain issues continued to bite with CPI up 3.2pc year-on-year. Restaurants and hotels and recreation made up the bulk of the price rises as the economy clearly shows the sign of life following the end of restrictions. However, the fact that the economy has over one million job vacancies is also adding upward pressure to wages which will likely feed through the system in the months ahead as businesses struggle to hire.

The Bank of England will have noted this morning’s release ahead of their next meeting on 23rd September when it’s possible they will take a more hawkish tone. With the ECB and Federal Reserve beginning to make their moves in terms of tapering, it won’t be long until the BoE feels it has to act as the recovery continues to take shape. It will be hoping, however, that the inflation pressures being experienced around the world will ultimately prove to be transitory given the latest consumer price data out of the US yesterday saw a tempering of price rises. We will wait to see if the worst is now behind us.

06:29 AM

Bailey must explain why prices are so high

More from my colleague Tim Wallace on this huge spike in consumer prices:

Inflation jumped to 9.6pc in restaurants, cafes and dancing establishments - in a sign of the return to normality from Eat Out To Help Out a year ago.

Household furniture is up 8pc while camping kit is up by just over 10pc, coming after a period of working from home, which has encouraged home renovations, and travel restrictions, promoting UK holidays.

At 3.2pc, the CPI rate of inflation is above the Bank of England’s 2pc target, which will force its Governor, Andrew Bailey, to write a letter to the Chancellor to explain why prices are running so high.

06:19 AM

Fastest annual rise since 2017, fastest monthly rise on record

Here's a quick take from my colleague Tim Wallace:

Inflation jumped to 3.2pc in August, the fastest annual increase since 2012 as the cost of meals in pubs and restaurants rebounded compared with last year’s Eat Out To Help Out discounts.

That is up from 2pc in July, marking the sharpest increase in the rate since records began.

The recovery from Covid has sent demand surging and left supply chains struggling to keep up in some products. This is reflected in global markets where booming oil prices have pushed petrol up to 135p per litre, a rise of 19pc on the year.

Electric prices climbed 5.8pc, while gas is down 4pc on the year - though capped prices due to jump 12pc in October to reflect spiralling wholesale market costs.

Other rises are on the way. The temporary VAT cut introduced for hospitality last year expires at the end of this month, with the tax increasing in stages until it returns to normal next year.

06:12 AM

Inflation surges to 3.2pc in August

Good morning.

Inflation accelerated at its fastest monthly pace on record in August, as it shot up to 3.2pc, a huge leap from July's level of 2pc to take it far above the Bank of England's target.

The jump of 1.2 percentage points is the largest ever recorded increase in CPI's annual rate since records began in 1997.

The steep increase risks fuelling fears of rocketing prices as the UK recovery takes hold as transport costs and prices at restaurants rose dramatically. Transport costs jumped by 0.87 percentage points in August as people travelled again after repeated lockdowns, while hospitality prices pushed inflation up by 0.65 percentage points, its highest ever contribution. 

But the Office for National Statistics said the spike will likely prove to be temporary, pointing to Rishi Sunak's Eat Out to Help Out scheme last summer pushed the cost of dining out artificially low.

5 things to start your day 

1) Deliveroo offers free delivery to Amazon Prime members Amazon has waded into the takeaway apps war by giving members of its Prime subscription service free delivery through Deliveroo.

2) Bailey blasts Brussels over clearing power grab The EU risks severely damaging the financial system if it goes ahead with a raid on London's currency clearing operations, BoE governor warns.

3) Dowden vows to protect Channel 4 in privatisation push The Culture Secretary will pledge today to protect the broadcaster’s public service remit as he defends the Government’s bid to privatise it.

4) Apple reveals new four new phones Company seeks to maintain its run of record iPhone sales with a series of new models that boost battery life and feature advanced cameras.

5) Fast-tracking lorry driver tests 'risks more crashes' Premiums may have to go up to pay for the increased risk, insurers say.

What happened overnight 

Asian shares fell on Wednesday as weak Chinese economic data reinforced worries about slowing growth globally as well as in the world's second-biggest economy amid fraught nerves over a still-dominant pandemic and tapering of central banks' stimulus.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.82pc, extending earlier losses after the release of the Chinese data, while Tokyo's Nikkei shed 0.89pc, moving off a more than 31-year closing-high the day before.

A burst of data out of China showed businesses were grappling with the impact of localised lockdowns following sporadic Covid outbreaks, supply bottlenecks and high raw materials costs.

Retail sales grew at the slowest pace since August 2020 and missed analysts' expectations, while industrial output also rose at a weaker pace from July, underscoring recent signs of slackening economic momentum in China and adding to expectations Beijing will offer more stimulus over coming months.

After the data, Chinese blue chips were down 0.73pc.

The Hong Kong benchmark shed 0.87pc dragged down by casino stocks as the gaming hub of Macau begins a consultation ahead of a closely watched rebidding of its multi-billion dollar casinos next year.

Shares of Wynn Macau at one point were down more than 30pc.

Coming up today

Corporate: Redrow (full-year results); Fevertree Drinks, Restaurant Group, Trustpilot Group, Tullow Oil (interims) Economics: Consumer prices index (UK), retail prices index (UK); industrial production (US); retail sales (China), industrial production (China); labour cost (EU)

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