BUSINESS LIVE: Inflation edges down to 6.7%; Dunelm profits slip; Galliford Try boosted: M&G profits

Charlie Huggins, of The Wealth Club, said: ‘We are not yet out of the woods. Wages are rising rapidly, sterling still remains weak and oil prices are going up.

‘All of these things have potential to cause further inflationary headaches for the Bank of England.

‘For now though, the trend is in the right direction. While price rises are still much higher than anyone would like, there is no longer a sense that inflation is out of control.’

Julian Jessop, economics fellow at the Institute of Economic Affairs, says: ‘Today’s better than expected UK inflation data show why forecasters and policymakers should pay more attention to monetary aggregates.

‘Inflation was widely expected to jump due to higher fuel prices. In fact, it fell, which is consistent with the sharp deceleration in the growth of the money supply over the last year.

‘The Bank of England should have hit the pause button on interest rates several meetings ago to assess the full impact of the tight squeeze that is already in place.

‘Even if the MPC does decide to hike one more time this week, they should signal that rates are then on hold for a long period – and that the next move is just as likely to be a cut.’

Victoria Scholar, of Interactive Investor, says: ‘The surprise drop in inflation has pushed the pound lower against the euro and the dollar.

‘It has also solidified expectations that we’re inching towards the end of the tightening cycle.

‘Markets are now pricing in a 45 per cent chance of no change to interest rates on Thursday, a steep increase from 20 per cent on Tuesday.

‘However, it looks like interest rates will remain high for some time, with little chance of a rate cut before the second half of next year.’

House price growth fell to 0.6 per cent in the 12 months to July, as the impact of higher interest rates continues to filter through.

The average house price was £290,000 in July 2023, according to the latest house price index from the Office of National Statistics, which is based on sold prices.

This means house prices are £2,000 higher than 12 months ago, but £2,000 below the recent peak recorded in November 2022.

Top of the FTSE 100 leaderboard is Taylor Wimpey with shares up 5.4 per cent this morning. Pearson tops the fallers list, with share prices down 2.85 per cent.

The FTSE 100 index at 11:35am was up 57.92 at 7718.12.

The best easy-access deal pays 5.05 per cent, the best fixed rate deal pays 6.2 per cent – creeping up to the current inflation measure, but still some way off…

We look at the best deals.

At the start of this year, Rishi Sunak promised to halve inflation by the end of 2023.

The Prime Minister, along with the rest of the country, will have breathed a sigh of relief as the latest ONS figures showed the UK’s stubbornly high inflation slowed in August to 6.7 per cent.

While it doesn’t mark a huge drop from a 6.8 per cent annual reading in July, markets had expected inflation to rise as much as 7.1 per cent. Most importantly core inflation has fallen from 6.9 per cent to 6.2 per cent.

Warpaint London revealed record sales and profits in its interim results with the group believing it is ‘very well positioned for further growth’.

The company’s group sales increased by 46 per cent to £36.7million for the six months to 30 June, with UK revenue increasing by 28 per cent to £13.3million.

The firm’s adjusted earnings before interest, taxes, depreciation, and amortisation increased to £7.9million, up from £4.4million.

Dunelm saw profits decline despite achieving record sales amidst a ‘period of extensive economic uncertainty’.

The homeware retailer said that profit before tax decreased by 7.8 per cent to £192.7million for the 52 weeks to 1 July.

Dunelm achieved record sales of £1.4billion, up 5.5 per cent on last year but below the level of consumer prices inflation that reflects the rise in prices over the past year.

The retailer was a pandemic winner as homeowners spruced up their properties, which saw Dunelm shares top 1,500p. The stock halved to lows below 700p last September but Dunelm shares have rallied since and are up 37.6 per cent over the past year and 8.4 per cent this year.

M&G has reported higher-than-expected profits off the back of improved market conditions and rising interest rates.

The investment firm revealed a jump in adjusted profits before tax from £298million to £390million in the six months to the end of June. This came well ahead of the expected £284million.

M&G also said it had re-entered the defined benefit pension market through two deals with a combined premium of £617million.

Matt Britzman, equity analyst at Hargreaves Lansdown said: ‘This marks the first business it’s done in the area since closing the annuity book back in 2016 – it’s becoming a hot spot for some of the big insurers so competition is likely to heat up, but nonetheless provides another string to M&G’s bow.’

Inflation has fallen but remains above the level seen in comparable countries.

Investment firm M&G has revealed a jump in adjusted profits before tax from £298million to £390million in the six months to the end of June.

It said this: ‘Reflects a strong contribution from our Retail and Savings segment driven by an improved result from with-profits business and higher returns from excess assets in the shareholder annuity portfolio following the rise in interest rates.’

Construction group Galliford Try has reported good results aided by no longer having a housing arm, with profits up almost 20 per cent.

Andy Murphy, at investment research firm said Edison Group commented: ‘Galliford Try has posted a very encouraging set of results today, with profits rising by 18.4 per cent from £18.5m to £21.9m.

‘Galliford Try specialises in infrastructure and environmental projects, and shed its housebuilding arm in 2020. These choices have made Galliford Try’s business model uniquely resilient during what is a challenging period for the sector, and for the economy at large.

‘Infrastructure projects are counter-cyclical, and the drive to net zero has increased demand for environmental projects. What’s more, divestment from housebuilding has shielded the company from the decline of the residential property market, which began earlier this year.

‘As uncertainty over property markets abounds, Galliford Try finds itself well-positioned to take advantage of many of the long-term trends in British construction.’

The nudging down of CPI inflation in August to 6.7 per cent takes it to its lowest level since February last year.

The fall was also contrary to expectations, with economists and the Bank of England predicting a rise from 6.8 per cent in July to 7.1 per cent. That was expected to come from a sharp rise in petrol and diesel prices.

But while today’s figures will be well recieved, things don’t look so good for the next inflation reading, as the oil price climbs towards $100 and sends fuel costs rising further.

Dunelm revealed a dip in annual profits as rising costs and the slowdown in the property market took their toll.

The previously high-flying homeware retailer said it expected to return to growing its profits in the year ahead.

Dunelm revealed a 9.4 per cent drop in pre-tax profits to £192.7 million for the year to July 1.

Dunelm said consumer behaviour remains ‘unpredictable’, but forecast growth in sales and pre-tax profits over 2023-24.

The FTSE 100 was trading up 0.1 per cent or 7 points at 7,660.2 just after open this morning.

The ONS revealed at 7am that inflation had edged down to 6.7 per cent in August from 6.8 per cent in July.

A drop in the key core CPI figure from 6.9 per cent to 6.2 per cent will be seen as good news.

This takes some pressure off the Bank of England ahead of tomorrow’s base rate decision. The Bank is still widely expected to raise base rate by 0.25 percentage points to 5.5 per cent but this could be its last move upwards.

In the data the ONS said:

• The largest downward contributions to the monthly change in CPI annual rates came from food, where prices rose by less in August 2023 than a year ago, and accommodation services, where prices can be volatile and fell in August 2023.
• Rising prices for motor fuel led to the largest upward contribution to the change in the annual rates.
• Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.2% in the 12 months to August 2023, down from 6.9% in July; the CPI goods annual rate rose slightly from 6.1% to 6.3%, while the CPI services annual rate slowed from 7.4% to 6.8%.