Closing post Time to wrap up, with just one trading session to go in the City before Christmas. Here’s today’s main stories. UK private sector growth has slowed to its weakest pace since lockdowns were lifted in the spring, with service sector firms hit by uncertainty over Omicron. Growth is expected to keep slowing in the next few months. UK car production slumped again last month, with fewer cars built than in any November since 1984 due to supply chain shortages. Output of engines also fell. Dining out numbers have tumbled, as people avoid restaurants and pubs for fear of catching Covid, as infections hit record levels. Spending at Pret branches has also dropped, as more workers stay at home. British consumers have been warned that energy bills could rise by 50% next April, intensifying the cost of living crisis. In the US, the PCE measure of consumer inflation has jumped to 5.7%, the highest in almost 40 years. But jobless claims remain low, and consumer confidence has risen this month. European markets have hit one-month highs, as fears that omicron would badly hurt global growth faded. On Wall Street, stocks are near record levels. And the Turkish lira has continued to rally, after a new ‘savings scheme’ was launched, and the central bank moved to prop up the currency. Good night.... GW The billionaire US hedge fund boss Dan Loeb has launched a scathing attack on activist investors targeting his London-listed fund, calling them “juvenile” and “underhanded” after its chair resigned. Loeb’s New York-based Third Point is one of the most prominent and aggressive activist hedge funds, which take stakes in companies to push for changes that they believe will make them more valuable. Loeb has tussled with companies ranging from Sony to Sotheby’s and Prudential, and he is now agitating for a break-up of Shell. However, in an unusual twist, it is Loeb’s London fund that is now the target of activist investors, triggering an extraordinary public spat between investment firms. Steve Bates, the chair since 2019, stepped down after claiming that he had received “personal threats” from a shareholder in a meeting who said they would “attack him in other business areas”, Third Point said FTSE 100 closes near pandemic high In the City, shares have closed near to their highest levels this year. The blue-chip FTSE 100 index has ended nearly 32 points higher at 7373 points, up 0.4% today. That’s only 11 points shy of the pandemic closing high set six weeks ago. European stock markets also rallied, hitting one-month highs, as investors welcomed two studies suggesting people infected with Omicron are at less risk of being hospitalised than people infected with Delta. Airline group IAG was the top riser on the FTSE 100, gaining 2%, as travel and hospitality stocks gained ground. Edward Moya of OANDA says: Omicron is looking more like a short-term disruption to the economic outlook and not a destructive headwind that knocks the economy off its course. A wrath of US economic data, which was mostly pre-Omicron painted a picture that showed the economic was moderating, but growth and inflation remained strong. Jobless claims continue to head into the right direction, higher prices dragged down both incomes and spending, and the Fed’s preferred inflation measure came in much hotter-than-expected. If the US was not battling the Omicron variant, US stocks would be dancing higher as the Santa Clause rally would have kept the climb going into uncharted territory. It is too early to say for sure if we will get a Santa Claus rally, but given all the short-term risks of Fed tightening, Chinese weakness, fiscal support uncertainty and COVID, Wall Street is not complaining as the S&P 500 is less than a percentage point from record highs. Gas prices tumble back Gas prices have dropped back sharply from this week’s record highs. The next-day price of UK gas is down 20% today at 320p per therm, having hit an all-time high of 457p on Tuesday. That’s still remarkably expensive - gas cost under 60p per therm at the start of the year, but it will bring some relief to suppliers who are facing unprecedented pressures. News that some ships carrying gas are rerouting from Asia to Europe, lured by record prices, may be helping. But Europe still faces a severe energy crunch this winter. Kozovo is to start rolling two-hour blackouts for most consumers from Thursday, electricity distributor KEDS says. More here: The drop in indoor dining and spending at Pret branches last week has fuelled concerns that the UK economy could shrink in December and January. The latest high-frequency data on mobility, retail footfall and credit card transactions, showed “much lower levels of activity in consumption sectors in December”, said Andrew Goodwin, chief UK economist at Oxford Economics. More here on the FT. Get next year’s diary out... UK chancellor Rishi Sunak has asked Britain’s independent budget office to produce new economic and fiscal forecasts for Wednesday March 23. That rather suggests he is planning to deliver his mid-year Spring Statement update on that day. Back in the UK, celebrity makeup artist Charlotte Tilbury’s company has repaid £3.2m in furlough money after sales soared during the pandemic as shoppers switched to buying online. Accounts filed at Companies House also reveal that Tilbury sold her business for £1.3bn – considerably more than the up to £1bn previously thought – to the Spanish cosmetics and fragrance group Puig last year. The scale of the deal means that Tilbury, who personally held a controlling stake in the business of between 50% and 75%, is likely to have received hundreds of millions from the takeover of the company in which she remains a minority shareholder. US consumer confidence has ticked up this month, although the Omicron variant may yet depress morale. The University of Michigan’s consumer confidence index rose to 70.6 this month, up from November’s 67.4. Americans said economic prospects had improved, while current conditions were slightly better -- although both measures were weaker than a year ago. Surveys of Consumers chief economist, Richard Curtin, says the gains were driven by poorer households, who are anticipating wage increases (to help keep up with inflation). Indeed, the bottom third expected their incomes to rise during the year ahead by 2.8%, up from 1.8% last December, and the highest level since 2.9% was recorded in 1999. There have only been five times in the past half century that income expectations among low income households have exceeded the December 2021 level. The announced increase in Social Security payments of 5.9% in 2022 was partly responsible for the gain, and 5.0% increases in expected wage among the youngest workers. Curtin cautions, though, that too few interviews were conducted to capture the impact of the rapid spread of the Omicron variant in the U.S. Confidence and spending are likely to be depressed in January, but it is too early to know the eventual impact of Omicron on the economy. One-in-four households specifically cited the negative impact of inflation on their living standards, Curtin adds -- showing how surging consumer prices hits families. Wall Street has opened higher, as anxiety over the omicron variant eases. The Dow Jones industrial average has gained 0.6%, or 206 points, to 35,960, led by chemicals firm Dow Inc (+2.5%), American Express (+2%), Cisco (+2%) and Caterpillar (+1.7%). Here’s Robert Frick, corporate economist at Navy Federal Credit Union, on the US weekly jobless report: “Weekly unemployment insurance claims held steady at 205,000, and it appears we may have finally settled into a normal, pre-pandemic level. The rapid rise of Omicron cases may cause a temporary increase in claims, but hiring is strong and employers continue clinging to workers who are tough to hire and quick to quit. Also, continuing claims hit their lowest level since March of 2020, and while this is partially a measure of those who have left the labor force, it shows many long-term unemployed Americans are back at work.” November’s jump in the PCE index shows that US inflation shows no sign of slowing down anytime soon, warns CNN: Here’s their take: A key measure of US inflation rose 5.7% in the 12 months ended in November, the Bureau of Economic Analysis said Thursday. It was the fastest increase in the consumer spending price index since July 1982. For anyone hoping there would be an end to the exorbitant climb in prices before year-end, this was a disappointment. Prices rose 0.6% last month, less than the 0.7% increase from October. Excluding volatile food and energy costs, prices rose 0.5%, unchanged from the prior month. American incomes also rose last month, but not as quickly as prices. Total incomes rose by 0.4%, or $90.4 billion, while disposable incomes also increased by 0.4% last month, corresponding to $70.4 billion. More here: A key inflation measure just hit a nearly four-decade high US PCE inflation measure hits 39-year high US consumer prices rose at the fastest pace in 39 years, as inflation continues to ripple through America’s economy. The US personal consumption expenditures index, which tracks price changes in consumer goods and services, jumped by 5.7% per year in November. That’s the fastest rise since 1982, up from 5.1% in October. The PCE is the Federal Reserve’s preferred inflation measure. This surge will reassure the Fed it was right to speed up the tapering of its stimulus programme last week. In a pre-Christmas splurge of data, the Commerce Department reports that consumer spending rose by 0.6% in November. That follows a 1.4% rise in October when consumers started their Black Friday and Christmas shopping early. Durable goods spending jumped 2.5% in November. But personal incomes lagged behind both inflation and consumer spending, rising 0.4% in the month. The number of Americans filing new jobless claims held steady last week, as a tight labour market saw firms hold onto workers. There were 205,000 new ‘initial claims’ for unemployment support filed last week, the same as the previous seven days, having dropped back to pre-pandemic levels this autumn to hit a 52-year low. This suggests that the omicron variant hasn’t yet led to an increase in layoffs among US firms. The number of continuing claims (people receiving support for at least two weeks) dipped by 8,000 to 1.859m, a pandemic low.