Bank of England ‘could worsen recession’ without interest rate cuts soon; Israel’s economy shrinks in Q4 – business live

Israel is on the brink of a technical recession after its economy shrank sharply after the war with Hamas began.

Israel’s GDP contracted at an annualised rate of 19.4% in the final quarter of 2023, new data from the Central Bureau of Statistics shows.

That’s the equivalent of a quarterly drop of almost 5% during the quarter.

[explanation: Annualised GDP extrapolates a quarterly change in activity to show how much an economy would grow, or shrank, if it was continued over a whole year]

The statistic bureau says:

“The contraction of the economy in the fourth quarter of 2023 was directly affected by the outbreak of the Iron Swords War on October 7,”

The Times of Israel reports that this is the deepest decline since the second quarter of 2020, when pandemic lockdowns hit consumer spending and left many businesses closed.

Reuters reports that the economy was hit by a 26.9% drop in private spending, an 18.3% fall in exports and 67.8% slide in investment in fixed assets, especially in residential building.

Government spending, mainly on war expenses, jumped 88.1%.

Israel’s economy grew at an annualised rate of 1.8% in the third quarter of 2023, down from a previous estimate of 2.7%. That’s the equivalent of 0.45% growth in Q3.

A technical recession is defined as two quarterly falls in GDP in a row.

Germany is likely to follow the UK into a technical recession, the country’s central bank has warned today.

The Bundesbank has warned that economic output is likely to decline again, slightly, in the first quarter of this year, following the drop in the final quarter of 2023.

That would put Germany into a technical recession, the Bundesbank points out in its latest monthly report, adding:

While this would mean the ongoing period of weakness in the German economy following the start of the Russian war of aggression against Ukraine would continue, there is still no evidence of a recession in the sense of a persistent, broad-based and distinct drop in economic activity, nor is such a recession currently on the cards.

The Bundesbank also warns that there is “no recovery in the German economy yet”, pointing to factors such as a drop in foreign industrial demand, cautious consumer spending, and higher funding costs which may constrain domestic investment.

Shares in Nintendo are down over 5% this morning following reports that its next-generation console will launch later than hoped.

Bloomberg reported today that game-makers have been told Nintento is pushing back the launch of its Switch successor to the beginning of 2025, rather than later this year as expected.

Some of Nintendo’s partners were advised not to expect the still-unannounced console until March 2025 at the earliest, Bloomberg adds.

AJ Bell investment director Russ Mould says:

“The release of a next generation console is a big staging post for a games company so it’s no surprise investors have reacted with shock and disquiet to speculation Nintendo may not get its new iteration of the Switch to market this year. Reports say the company is guiding its game publishing partners that the new machine won’t hit the shelves until the early months of 2025.

“While a blow, the importance attached to these releases means ultimately it is sensible for Nintendo to delay if it means the finished product is released without any technical issues.

“Nintendo has enjoyed a renaissance over the last decade or so, with the release of Pokémon Go and the success of the original Switch helping to make the brand relevant to a whole new generation of gamers.

“More recently, the company has been tapping into its catalogue of IP and the massive success of the Super Mario Bros movie lights up a big potential avenue for licensing revenue in the future.

“Nintendo also benefits from its cross-generational appeal with less sophisticated hardware which is cheaper to make, helping to underpin strong margins on its flagship console when for rivals these sales are a loss leader.”

Elsewhere in Britain’s property sector, growth in rental costs have slowed to a 13-month low.

Estate agent Hamptons reports that the average rents on newly let properties rose 8.3% across Great Britain in the year to January. That’s the lowest rental inflation in just over a year, after it peaked at 12% in August.

Hamptons reports that 59% of landlords achieved a higher rent when a new tenant moved in last month, down from a peak of 81% in January 2022.

Rents jumped as the Bank of England started to raise interest rates at the end of 2021, meaning higher borrowing costs for landlords who rolled onto new mortgage deals.

But rental growth is likely to remain sticky, Hamptons predicts, and run ahead of inflation for the remainder of 2024.

Aneisha Beveridge, head of research at Hamptons, says:

“Last summer looks like it may have been the high watermark for rental growth. Since then, fewer landlords have been putting up the rent. Where they have, in cash terms, monthly increases have tended to be in double rather than triple figures.

Shares in electrical goods retailer Currys have surged by up to 35% at the start of trading, as a takeover battle looms.

US investment group Elliott and China’s e-commerce group JD.com are both circling Currys.

Currys confirmed yesterday it had rejected a takeover bid from Elliott, worth 62p per share, saying the offer significantly undervalued its business.

JD.com has thrown its hat in too, telling the City this morning it is in the “very preliminary stages of evaluating” whether to make a cash offer for Curry’s.

JD.com says:

There can be no certainty that any offer will ultimately be made for Currys, nor as to the terms on which any offer might be made. A further announcement will be made if and when appropriate.

Currys was founded in 1884 by Henry Curry as a bicycle-building business before diversifying into the sale of toys, gramophones and radios when it listed on the London Stock Exchange in 1927.

Currys’ shares have hit nearly 65p this morning, up from 47p on Friday night, their highest level since March 2023.

The UK government has announced proposals to rein in the growth of short-term holiday lets in tourist hotspots in England – but they won’t prevent the practice.

Changes in planning rules announced today will mean:

• Planning permission will be required for future short-term lets

• A mandatory national register will provide valuable information and help ensure accommodation is safe

• Homeowners can continue to let out their own main or sole home for up to 90 nights a year

The government says its proposals will give communities greater control over future growth in short-term lets, to prevent a “hollowing out” of communities, and address anti-social behaviour.

Under the reforms councils will be given greater power to control short-term lets by making them subject to the planning process.

Last April, the governmnent proposed that people who convert homes into short-term holiday lets would require planning permission in tourist hotspots in England.

Today they are also confirming that a new mandatory national register will give local authorities the information they need about short-term lets in their area.

Airbnb, which has helped drive the growth in short-term letting, has welcomed the government’s plans (which is a sign that the proposals are unlikely to damage the market much!).

Amanda Cupples, general manager for Northern Europe at Airbnb, says:

The introduction of a short-term lets register is good news for everyone. Families who Host on Airbnb will benefit from clear rules that support their activity, and local authorities will get access to the information they need to assess and manage housing impacts and keep communities healthy, where necessary.

Here’s some reaction to Rightmove’s report that UK house asking prices rose again this month, from Tomer Aboody, director of property lender MT Finance:

“As confidence starts to creep back into the market due to the reduction in mortgage rates and lower inflation, we are seeing higher sales volumes, with vendors encouraged to sell.

“Encouragingly, while sales have picked up, vendors are pricing correctly in order to attract buyers. This, in turn, is making a property purchase more affordable and appealing to buyers. Unless there is some dramatic intervention from the Government, we don’t expect to see a huge increase in pricing in the forthcoming 12 months or so.”

Nigel Bishop of buying agency Recoco Property Search says:

“We have seen first-hand that buyer confidence has returned to some degree, particularly if compared to this time last year. This uplift in market activity is largely driven by the availability of more affordable mortgage products but also falling inflation. Equally, sellers have become more motivated to put their property up for sale which is resulting in buyers having a larger pool of properties to choose from.

House hunters at the higher end of the market, of homes priced £2mn and above, however, are generally less dependent on a mortgage and remain cautious amid the potential impact of this year’s election and upcoming Spring Budget. Cash or chain-free buyers who are currently making an offer are less likely to settle on the seller’s asking price and willing to enter tough price negotiations.”

There’s some encouraging economic data from China this morning as the Lunar New Year break ends, and some less positive statistics too.

On the upside, tourism revenues in China during the Lunar New Year holiday surged by 47.3% year-on-year and surpassed 2019 levels.

Domestic tourism spending hit 632.7 billion yuan (£69.7bn), according to government figures, thanks to a domestic travel boom amid a longer-than-usual break.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

The week starts with the soothing news that the Chinese traveled and spent more than they did in the same period of 2019. As such, the Chinese stock markets return from the CNY break on a cheery note.

The CSI 300 index of Chinese stocks is up 1.1% today.

Dampening the mood, though, is data showing that foreign businesses’ direct investment (FDI) into China last year increased by the lowest amount since the early 1990s.

China’s direct investment liabilities, a broad measure of FDI, rose by $33bn in 2023, down 81.7% from 2022, according to data from the State Administration of Foreign Exchange released on Sunday.

The slowdown commes amid rising tensions with the West which are making it harder for China to attract foreign capital.

The Bank of England risks making the UK’s recession worse unless it cuts interest rates soon, the central bank’s former chief economist has warned.

Andy Haldane, who left the Bank in 2021 after a 32-year stint, says his former colleagues should consider loosening policy to support the economy.

Concerns over the economy have risen since the UK fell into a technical recession at the end of last year, GDP data released last Thursday showed.

Some economists have predicted that the economy is picking up this year.

But, asked whether the BOE could worsen the recession unless it loosened policy soon, Haldane told Bloomberg’s UK Politics podcast:

“I think that’s where the balance of risks lies, yes.”

“For me the case for putting in place some upfront, early insurance on the monetary policy side is strong and strengthening, and I’m fearful we leave that insurance a little too late in the year.”

Eaarlier this month the BoE left interest rates on hold at 5.25%, with just one of its nine policymakers voting for a cut (two wanted a rise).

There was relief last week when UK inflation was lower than expected in January, at 4% (twice the Bank’’s target). But BoE governor Andrew Bailey then doused hopes that this could lead to faster cuts in interest rates.

The City money markets are currently anticipating around three interest rate cuts this year, bringing Bank rate down to 4.5% by December, with the first cut expected by June.

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

The UK property market is picking up this month, at least for sellers who price their homes correctly.

Property portal Rightmove reports this morning that the average asking price for a home rose by 0.9% or £3,091 this month to £362,839.

The increase means sellers are asking 0.1% more for their homes than a year ago, on average, as the fall in asking prices last year is reversed.

Rightmove reports that momentum is building in the market, with 7% more new listings coming to market than last year, and a 7% rise in the number of buyers making enquiries too.

Agreed sales in the first six weeks of 2024 are 16% higher than over the same period last year, when the market was reeling from the jump in mortgage costs after the mini-budget of September 2022.

Rightmove’s Tim Bannister suggests sellers should take advantage of the situation while it lasts. He says:

Mortgage rates have fallen considerably from their peak and are now remaining broadly stable after the uncertainty of late 2022 and 2023.

Momentum to move in 2024 is continuing to build, but prospective sellers mustn’t get carried away. Buyers now have more choice of property for sale and many are still very price-sensitive, with mortgage rates remaining elevated.

Sellers who are serious about moving this year would be well-advised to ride this wave of increased buyer confidence with an attractive asking price before any pre-election jitters or unexpected events dampen the momentum.

Zoopla, the property search site, has also reported a pick-up in activity this month:

However, although activity levels are higher, Rightmove reports it is taking the average seller 16 days longer to find a buyer than a year ago.

That suggests that while “accurately and competitively priced” properties are being snapped up, over-priced ones are being shunned.

Also coming up today

The war between Brussels and Big Tech could be escalating, with Apple facing its first ever fine from the EU for allegedly breaking the law over access to its music streaming services.

The FT reports that the penalty is in the region of €500m and is expected to be announced early next month.

It follows an inquiry into whether Apple blocked apps from telling iPhone users there were cheaper alternatives to access music subscriptions outside the App Store.

The agenda