UK retail sales rebound after Christmas slump; company insolvencies rise – as it happened

Time to wrap up after a busy week, in which UK wage growth slowed, inflation remained steady, and the economy fell into recession.

Here’s today main stories so far:

Just in: US producers raised their prices at a faster rate than forecast last month, dampening hopes that inflationary pressures were ebbing.

Producer prices rose by 0.3% in January, following a 0.1% drop in the PPI index in December.

This was driven by a 0.6% rise in prices for services, while goods prices fell 0.2%.

On an annual basis, prices were 0.9% higher than a year ago, higher than the 0.6% expected but a little lower than December’s 1%.

Worryingly, core PPI inflation (stripping out foods, energy, and trade services) increased by 2.6% year-on-year.

This has lifted the dollar, with the pound down half a cent at $1.255.

Bond yields are also rising, as investors dial back hopes of early interest rate cuts.

A former Goldman Sachs analyst has been jailed for 22 months after being convicted of insider trading and fraud.

Mohammed Zina, 35, was found guilty by a London jury yesterday. He had used information obtained at Goldman Sachs to trade in stocks including semiconductor designer Arm, ahead of its takeover by SoftBank, and pub company Punch Taverns.

Zina had been employed by Goldman Sachs International in its conflicts resolution group in London.

At Southwark Crown Court, Judge Tony Baumgartner told Zina he had thrown away a promising banking career, saying:

“You betrayed the trust of your employer, as well as cheated honest investors in the shares you traded using inside information you saw at work.

“What you did strikes at the very heart of our financial markets and the trust and confidence the public places in them.”

A Goldman Sachs spokesperson said:

“Mohammed Zina betrayed the trust we placed in him and his misuse of client information was in direct contradiction of our values. We have zero tolerance for this conduct.”

Zina had made a profit of about £140,000 from the insider trading, financed with loans obtained from Tesco Bank that were meant for home improvements.

The cap on UK energy bills is set to fall by 15% when it is next set, analysts at Cornwall Insight say.

Cornwall estimates that the price cap will drop to £1,635 per annum, for a typical household, in April.

This is a fall of 15% (£293) from the current price cap which was set at £1,928 per year from January, and should bring some relief to households struggling to pay their bills.

The cap is set four times a year by the regulator, Ofgem, and sets the maximum price per unit of energy that suppliers can charge (there is no cap on the maximum bill).

Cornwall also expect the cap will fall again in July, followed by a small rise in October.

Dr Craig Lowrey, principal consultant at Cornwall Insight, says:

“Forecasts show energy bills returning to their lowest levels in over two years, providing a much-needed respite for a nation struggling with a cost of living crisis.

“Fairly healthy gas supply across the Atlantic, coupled with high storage levels in Europe, are helping to keep bills down. But we mustn’t get too complacent. Our energy system is still walking a tightrope, and we cannot be sure another political or economic crisis won’t send bills straight back up.

“Even with the drop, prices will remain a struggle for many. We need to remember, bills remain hundreds of pounds above pre-pandemic levels, and if we don’t speed up the switch to sustainable energy and cut down on volatile imports, they are likely to stay that way.”

Newsflash: Russia’s central bank has held interest rates at 16%, after five hikes in a row since last summer.

The Bank of Russia says:

Current inflationary pressures have eased compared with the autumn months but remain high. Domestic demand is still outstripping the capabilities to expand the production of goods and services.

A judgement on the sustainable nature of emerging disinflationary trends would be premature. The Bank of Russia’s monetary policy is set to solidify disinflation processes unfolding in the national economy.

Russia’s interest rates have been volatile since the full-scale invasion of Ukraine.

The Bank of Russia doubled rates to 20% in March 2022 to support the rouble, but then lowered them through 2022 to 7.5%, before starting to hike in summer 2023:

Just in: The number of registered company insolvencies in England and Wales jumped 5% on an annual basis last month, although it was lower than in the peak last autumn.

There were 1,769 company failures in January, the Insolvency Service reports, up from 1,685 in January 2023, as companies struggled in the tough economic climate.

The Insolvency Service reports:

The company insolvencies consisted of 339 compulsory liquidations, 1,294 creditors’ voluntary liquidations (CVLs), 120 administrations and 16 company voluntary arrangements (CVAs). CVL numbers were lower than in January 2023, while compulsory liquidation and administration numbers were higher.

It’s lower than the 2,470 insolvencies reported in November, though which was the highest since last May.

David Hudson, restructuring advisory partner at FRP, says high interest rates and rising costs are hitting firms:

“A real concern is that current financial distress spreads further. Last year’s insolvency data shows a large proportion of Creditor’s Voluntary and compulsory liquidations – a sign that many of the closures were among SMEs. Should more mid-market firms start to fail, the impact is likely to have even greater ramifications up and down supply chains. A larger stone ultimately ripples much wider.

“Significant trading risks abound for the months ahead. Early interest rate cuts still look unlikely, meaning capital and debt costs will remain high for some time yet. And companies, particularly retailers and hospitality firms, will be bracing themselves for the rise in the National Living Wage in April, which could add further strain to already stretched bottom lines.

“There’s good reason to be optimistic that economic conditions will improve this year, but for now businesses are still driving down a bumpy road.”

Britain’s fall into recession yesterday sparked talk that the Bank of England could lower interest rates sooner than expected, to prod the economy into growth.

But Moody’s Analytics reckons that borrowers may need to wait six months for a cut.

In a report released last night, their economist Barbara Teixeira Araujo says:

“While the GDP figures for the fourth quarter were extremely bad, we haven’t changed our outlook for the U.K. economy and for monetary policy. We expect that the economy to hold its ground in 2024 and that the momentum will gradually improve throughout the year. We are pencilling in a 0.3% rise in GDP in 2024, up from 0.1% in 2023.

Regarding the BoE, we think the central bank would rather risk waiting a bit too long than cut a bit too early. We still expect a first rate cut in August.”

The money markets are expecting the first rate cut by June, from 5.25% to 5%, with rates seen at 4.5% by the end of 2024.