BUSINESS LIVE: CPI flatlines at 6.7%; Barratt warns of ‘uncertain’ outlook; Whitbread

Goldman Sachs’s boss yesterday admitted that ‘with hindsight you’ll do certain things differently’ as the Wall Street giant reported a sharp fall in quarterly earnings.

Profits fell by 36 per cent to £1.54billion in the third quarter partly thanks to an ill-fated foray into consumer banking.

The pound fell yesterday after figures showing a slowdown in wage growth boosted expectations that the Bank of England will not need to raise interest rates next month.

Sterling dipped by nearly a cent to as low as $1.2132 after the Office for National Statistics (ONS) said average earnings grew by 7.8 per cent in the three months to August.

Marcus Brookes, chief investment officer at Quilter Investors:

‘Clearly the UK is not winning any races with this trajectory as inflation still remains incredibly elevated and much more so than peers. With geopolitical tensions rising, energy and petrol prices are once again on the way up and inflationary pressures risk hitting an economy that has gone through a painful cost of living crisis.

‘For now, the higher for longer interest rate narrative will continue to persist.

‘However, while wages are now rising faster than prices, for many the pain is yet to be truly felt and the Bank of England is in a difficult position. It paused on raising interest rates at its last meeting, but this reading means we are likely to see at least another rate rise.

‘The question becomes when they have done enough, but with inflation taking so long to come back down to more palatable levels that is a difficult question to answer and risks policy misstep.

‘We think the Bank of England has done enough and will be led by external factors, such as the Federal Reserve, but they will not want to appear to be doing nothing, especially when inflation remains so high.

“This elevated period of inflation and interest rates also makes the economic pain and potential recession more likely in 2024.’

George Lagarias, chief economist at Mazars:

‘Inflation comes in waves. The picture from the data is unfortunately a simple one. As food and goods prices begin to fall, energy prices are rising again.

‘This is a sign that the second wave of inflation is subsiding, but the third wave is ahead of us. The swiftly rising tensions in the Middle East are exacerbating the situation.

‘Would a de-escalation of hostilities help? Absolutely. A quick end to oil price speculation could, all other things being equal, stop the third inflation wave at the onset and allow prices to normalise.’

Premier Inn owner Whitbread has posted a 44 per cent rise in half-year profits, driven by strong demand and resilient spending at its pubs and restaurants.

Adjusted profit before tax rose to £391million for the first half of the year, up from £272million, giving the Brewers Fayre owner the financial space to announce a £300million share buyback programme.

Dominic Paul, Whitbread CEO, said: ‘The Group is in excellent shape, trading well and has significant growth potential, both in the UK and Germany.

‘Based on our strong performance to-date and an encouraging forward booked position, we remain optimistic about the full year outlook and look forward with confidence as reflected by our increased interim dividend and further planned share buy-back.’

Barratt Developments has warned its trading outlook is ‘uncertain’ in the wake of a challenging mortgage market.

Britains biggest housebuilder refrained from providing any annual profit forecast and said it will focus on driving revenue through multi-unit sales to the private rental and affordable housing sectors, besides doling out incentives to customers to boost sales.

The group said: ‘Our focus during FY24 will remain driving revenue through targeted use of incentives, whilst continuing to manage build activity and control our cost base.

‘This will be supported by our highly selective approach to land buying whilst continuing to lead the industry on sustainability.

‘We continue to expect to deliver total home completions of between 13,250 and 14,250 homes in FY24, including c. 650 home completions from our JVs and c. 750 completions for the private rental sector. All other guidance from our FY23 results on 6 September 2023 also remains unchanged.’

Consumer price inflation was unchanged at 6.7 per cent in September, higher than forecasts of 6.6 per cent and leaving the Bank of England with food for thought at its November meeting after it opted to pause interest rate hikes in September.