We start this weekly covering the Autumn Statement, delivered by Chancellor Jeremy Hunt. Mr Hunt has been Chancellor for 13 months and if you remember back to his appointment under then Prime Minister Liz Truss, his first acts were to shred her disastrous economic plans.
“Autumn statement for growth” was the main theme as Mr Hunt announced the key measures of the 110 policies. Arguably the greatest change was the reduction to National Insurance contributions from 12% to 10%. This is set to be implemented from the beginning of 2024 affecting 28 million people, an average saving of £450. Prime Minister Rishi Sunak, sat to the right of Mr Hunt, was acknowledged by the Chancellor for delivering on his promise to the UK to halve inflation in 2023. Further promises were made to grow the UK economy and the OBR have adjusted forecasts for GDP from shrinking by 0.2% to growing by 0.6% in 2023. As pre-announced, the national living wage is also set to rise to £11.44 from April 2024. The increase is aimed at easing some of the cost-of-living burden people are facing.
On Thursday it was announced that UK energy regulator, Ofgem, will raise the price cap by 5% in January 2023. While energy prices are lower than 12 months ago, it’s worth remembering that households were given around £400 in support for energy bills last winter – this time there are no equivalent measures. The Labour party has discussed further windfall taxes on oil and gas companies as a way to help with energy bill support.
Oil prices have trended lower from the spike we saw in early October when brent crude rose to $96 a barrel, and we saw a 4% dip on Wednesday as OPEC (Organisation of Petroleum Exporting Countries) postponed their output policy meeting. The meeting has been pushed back to next week Thursday as producers around the world struggled to agree on output levels heading into 2024. It is rumoured that African countries such as Nigeria and Angola have pushed against consensus for greater oil output. We also saw inventory data released from the US which showed a much higher level of oil inventory than anticipated, potentially signalling softer oil demand.
Sam Altman, the CEO of Open AI, has had a tense week as he was fired and rehired from the firm in just five days. The developer of ChatGPT was fired last Friday over concerns the artificial intelligence (AI) development was too rapid, lacking the safety required. Mr Altman is certainly a popular figure as over 80% of his 750 strong workforce threatened to resign if his reinstatement was not imminent. Microsoft, Open AI’s largest investors also intervened as they hired Altman on Monday in a de facto role. The possibilities of AI are incredible, and it is key there is stability within the management teams developing it.
Nvidia released their Q3 results this week and once again delivered stellar revenue and earnings growth. However, there was some cautionary messaging from the company around Chinese restrictions, which would be a headwind to 2024 growth. The share price has been exceptional in 2023, however, despite the very strong Q3 numbers the China news held the shares back. While Nvidia is currently a clear market leader in GPU chips for artificial intelligence, it will be interesting to see how the competitive landscape evolves over the coming years as more competitors enter the market place.
In a week light of economic data there were some positives to be taken from manufacturing and services PMIs which came in above estimates in Europe and the UK. US jobless initial claims data was lower than expected, another positive sign for the labour market. While the global economy is far from firing on all cylinders, it is yet to show any major signs of cracking, despite what economists predicted 12 months ago.
There was much excitement heading into the Autumn Statement, although this quickly fizzled out as the Chancellor played with a straight bat. Nevertheless, there are some policy measures which should help ease some of the burden on consumers, while also stimulating investment from businesses. The reaction from markets to the statement were fairly muted, with bonds and equities broadly trading sideways this week. Trading volumes have been thin in the US, with the market shut for Thanksgiving yesterday. Next Friday sees us move into December, with many investors hoping that the Santa Rally, which appears to have begun a little early this year, can continue.
Nathan Amaning, Investment Analyst
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