UK inflation drops as Black Friday sales push clothing prices down – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Inflation in the UK has slowed sharply last month, dragged down by falling prices for clothing amid the Black Friday sales rush last month.

The consumer prices index rose by just 0.3% in the 12 months to November, down from 0.7% in October, the Office for National Statistics reports.

Food and non-alcoholic drinks also pulled the cost of living down last month, the ONS adds, while accommodation and some games prices rose.

It says:

• Falling prices for clothing, and food and non-alcoholic beverages resulted in the largest downward contributions (of 0.17 and 0.09 percentage points respectively) to the change in the CPIH 12-month inflation rate between October and November 2020.
• These were partially offset by upward contributions from games, toys and hobbies, and accommodation services.

Clothing prices were a major cause of the drop in inflation last month, the ONS says, with clothing and footwear prices down 2.6% in November compared to October.

It points to the surge of discounting on Black Friday last month as retailers tried to boost sales, particularly online, after a very rough year.

The ONS explains:

Prices overall fell by 2.6% between October and November 2020, compared with a rise of 1.0% between the same two months a year ago. Prices usually rise between these two months but price movements across 2020 have been unusual compared with previous years and appear to have been affected by the coronavirus lockdowns.

The price fall in November this year reflects increased discounting and there have been media reports that some Black Friday sales may have spread further across the month.

More details and reaction to follow…

Also coming up today

A flurry of surveys of purchasing managers from the UK, eurozone and the US will indicate how companies are faring this month.

These flash PMIs are likely to show that Britain’s private sector returned to growth this month, after output slumped during England’s November shutdown, with factories growing faster than the service sectors.

The eurozone economy may still be shrinking, though, as tougher restrictions are imposed to fight the second wave of Covid-19.

Michael Hewson of CMC Markets explains:

The latest flash PMIs for the UK are also expected to paint a slightly better picture for the UK economy after the slowdown in November, with an improvement in both manufacturing and services, with manufacturing expected to remain fairly resilient at 56, due to an element of pre-Brexit stock-piling, while services are expected to rebound to 50.7, after the economic reopening as the November restrictions came off.

The announcement of extended lockdowns for the likes of Germany, and the Netherlands earlier this week, along with an extension of some restrictions in France augurs ill for the outlook for northern Europe’s largest economies over the next few weeks. Today’s flash PMI for manufacturing and services is expected to deepen that economic gloom, even as manufacturing continues to help offset the hit the services sector is taking.

The prognosis was already looking bleak after the extended restrictions that were announced at the beginning of November, in both France and Germany, as the optimism of the summer recovery has given way to the pessimism of a long dark winter

Later, the US central bank, the Federal Reserve, will hold its final meeting of the year.

The agenda

• 9am GMT: eurozone flash PMI index of services and manufacturing for December. Expected to rise to 45.8 from 45.3, showing a contraction.
• 9.30am GMT: UK flash PMI index of services and manufacturing for December. Expected to rise to 53.1 from 49, showing a return to growth
• 1.30pm GMT: US retail sales for November. Expected to fall by 0.3% month-on-month
• 2.45pm GMT: US flash PMI index of services and manufacturing for December. Expected to drop to 55.7 from 56.7, showing slower growth
• 7pm GMT: Federal Reserve’s FOMC meeting
• 7.30pm GMT: Federal Reserve press conference