BUSINESS LIVE: CPI falls to 3.9%; Kin and Carta takeover bid upped; Home REIT value slumps

Thomas Pugh, economist at RSM UK:

‘Inflation is now almost a full percentage below the forecast the MPC made only back in November. If this trend continues it suggests that the MPC may be able to start cutting interest rates as early as May.

‘The sharp drop in inflation will also be important for the labour market. Real wage growth will pick up sharply in Q4, which should help the economy to avoid a recession at the end of the year. The sharp fall in November should also help to anchor inflation expectations slow nominal wage growth, reducing one of the key risks for the MPC.

‘Inflation will probably hover around current levels for the rest of the year before taking another leg down in the spring. However, while today’s data is good news for the economy it is worth sounding a note of caution. Services inflation at 6.3% is still far too high for the MPC to be comfortable with and unless wage growth slows sharply, the MPC may not be ready to cut interest rates as early as the market is now pricing in.’

A third of UK chief executives have considered moving their listing overseas, according to figures that deliver a fresh blow to London’s stock exchange.

The findings from advisory firm Teneo show 32 per cent of bosses have discussed with their board the possibility of moving away from the UK market.

It comes a day after a senior executive at US exchange Nasdaq admitted it was on the hunt for more British companies to list in New York.

Ed Monk, associate director at Fidelity International:

‘Another significant drop in inflation in November only adds to the case that interest rates will fall sooner than expected. The Bank of England has been talking tough, but price rises appear on a rapid decline back towards the Bank’s target range and it may soon be that the risk for rate-setters is not under-tightening but over-tightening.

‘The last portion of above-target inflation may still prove difficult to shift – wages may have peaked but remain high by historical standards – and the Bank of England will want to be sure that enough demand has seeped out of the economy before it eases borrowing costs.

‘For investors, today’s fall in inflation is good news and may add to the momentum in markets that has been gathering for the past month or so. However, markets are priced for perfection, with inflation falling back to target next year with no accompanying recession. Anything less than that could see a sharp correction to today’s market levels.

‘The further fall in inflation means cash savers should continue to see a real terms return on their money. Savers should understand, however, that falling inflation benefits not only cash returns but also those of risk-assets like shares, where returns this year have far exceeded those from cash accounts.‘

Consumer price inflation fell to 3.9 per cent in November, down from 4.6 per cent in October and lower than economist forecasts of 4.4 per cent, fresh data from the Office for National Statistics shows.

Thomas Pugh, economist at RSM UK:

‘Inflation is now almost a full percentage below the forecast the MPC made only back in November. If this trend continues it suggests that the MPC may be able to start cutting interest rates as early as May.

‘The sharp drop in inflation will also be important for the labour market. Real wage growth will pick up sharply in Q4, which should help the economy to avoid a recession at the end of the year. The sharp fall in November should also help to anchor inflation expectations slow nominal wage growth, reducing one of the key risks for the MPC.

‘Inflation will probably hover around current levels for the rest of the year before taking another leg down in the spring. However, while today’s data is good news for the economy it is worth sounding a note of caution. Services inflation at 6.3% is still far too high for the MPC to be comfortable with and unless wage growth slows sharply, the MPC may not be ready to cut interest rates as early as the market is now pricing in.’

A third of UK chief executives have considered moving their listing overseas, according to figures that deliver a fresh blow to London’s stock exchange.

The findings from advisory firm Teneo show 32 per cent of bosses have discussed with their board the possibility of moving away from the UK market.

It comes a day after a senior executive at US exchange Nasdaq admitted it was on the hunt for more British companies to list in New York.

Ed Monk, associate director at Fidelity International:

‘Another significant drop in inflation in November only adds to the case that interest rates will fall sooner than expected. The Bank of England has been talking tough, but price rises appear on a rapid decline back towards the Bank’s target range and it may soon be that the risk for rate-setters is not under-tightening but over-tightening.

‘The last portion of above-target inflation may still prove difficult to shift – wages may have peaked but remain high by historical standards – and the Bank of England will want to be sure that enough demand has seeped out of the economy before it eases borrowing costs.

‘For investors, today’s fall in inflation is good news and may add to the momentum in markets that has been gathering for the past month or so. However, markets are priced for perfection, with inflation falling back to target next year with no accompanying recession. Anything less than that could see a sharp correction to today’s market levels.

‘The further fall in inflation means cash savers should continue to see a real terms return on their money. Savers should understand, however, that falling inflation benefits not only cash returns but also those of risk-assets like shares, where returns this year have far exceeded those from cash accounts.‘

Consumer price inflation fell to 3.9 per cent in November, down from 4.6 per cent in October and lower than economist forecasts of 4.4 per cent, fresh data from the Office for National Statistics shows.