The FTSE 100 Index bucked the global trend during September, posting an increase of 2.3% over the month as sterling’s weakness and higher oil prices provided a boost for blue chips.
- The Bank of England maintained rates at 5.25%
- Inflation eased unexpectedly
- House prices continued to weaken
Blue chips outperform in September: the FTSE 100 Index bucked the global trend during September, posting an increase of 2.3% over the month as sterling’s weakness and higher oil prices provided a boost for blue chips. In comparison, mid caps – represented by the FTSE 250 Index – fell by 1.8% over the month.
“The pound fell to its lowest level against the US dollar since March”
Sterling weakens: the pound fell to its lowest level against the US dollar since March during September, dropping as low as US$1.21 amid mounting concerns over economic growth prospects and expectations that the Bank of England (BoE) is reaching the end of its tightening cycle. After 14 consecutive rate increases , BoE policymakers voted by five to four in favour of holding the key base rate steady at 5.25%. During evidence given to the Treasury Select Committee, BoE Governor Andrew Bailey indicated that rates were close to or at their peak.
Inflation eases: the rate of consumer price inflation eased unexpectedly in August, falling for a third consecutive month from 6.8% to 6.7%, and the BoE expects inflation to “fall significantly further” in the near term. The Organisation for Economic Cooperation & Development (OECD) forecast UK inflation to average 7.2% this year – a higher level than any other G7 member country – falling to an average of 2.9% in 2024.
Housing market under pressure: UK house prices fell at an annualised rate of 5.3% in the year to August, according to mortgage lender Nationwide , representing their weakest rate since 2009. The price of an average house in the UK fell to £259,153. According to HMRC , residential property transactions fell by 9% between June and July, posting a 22% drop year on year. Mortgage approvals in the UK reached their lowest level since February during August.
Unemployment on the up: the value of retail sales rose by 4.1% during August year on year, reflecting to some extent an uptick in consumer confidence, according to the British Retail Consortium . Nevertheless, persistent inflationary pressures are likely to have masked a drop in sales volumes. Elsewhere, the UK’s labour market appears to be weakening: the rate of unemployment rose from 3.8% to 4.3% in the three months to July, while job vacancies fell below one million. Meanwhile, average earnings (excluding bonuses) rose at an annualised rate of 7.8% over the same period.
To view the series of market updates through September, click here
