Consumer confidence has tumbled amid rampant speculation about what the chancellor will announce in the budget, figures show.

The British Retail Consortium (BRC) blamed “strong hints” from the government of income tax hikes for the public’s falling expectations of how much they’ll spend over the next three months – even as Christmas beckons.

While a planned increase in income tax rates was scrapped last week, Sir Keir Starmer has refused to rule out freezing income tax thresholds – which the Conservatives argue amounts to a tax rise by stealth because it drags people into paying higher rates even if their wages increase.

BRC chief executive Helen Dickinson said months of uncertainty had “heightened public concern about their own finances and the wider economy”.

Consumer expectations for the state of the economy over the next three months have fallen significantly to minus 44, down from minus 35 in October, according to data from the BRC and Opinium.

Ms Dickinson said action was needed from Rachel Reeves to “bring down the spiralling cost burden facing retailers”, which she said would “keep price rises in check”.

Read more: Inflation eases but food costs rise

Signs of ‘fragile’ recovery in jobs market

In slightly more encouraging news for Ms Reeves ahead of her statement next Wednesday, new research suggests the jobs market may be on the up.

The Recruitment and Employment Confederation said the number of new job adverts last month was 754,359, up by 2.1% from September, taking the total to more than 1.6 million.

Ms Reeves’s decision to hike national insurance contributions for employers in last year’s budget was blamed for a slowdown in the market, and a rising unemployment rate.

The report said there has been an increase in adverts for medical radiographers, delivery drivers and couriers, and further education teaching professionals.

But it warned the apparent recovery was “fragile”.

Reeves set to back DLR extension

One man looking forward to the budget is Sir Sadiq Khan, who has welcomed reports that London’s DLR is set to be given funding for an extension.

According to the Press Association, the chancellor will back an extension to the Docklands Light Railway to Thamesmead at a cost of £1.7bn – unlocking thousands of new homes.

Thamesmead has been notoriously short of public transport links ever since it was developed in the 1960s.

The plan would see the line extended from Gallions Reach, near London City Airport, and include a new station at Beckton as well as in Thamesmead itself.

Sir Sadiq said the DLR extension “will not only transform travel in a historically under-served part of the capital but also unlock thousands of new jobs and homes, boosting the economy not just locally but nationally”.

It is also expected to unlock land for 25,000 new homes and up to 10,000 new jobs, along with almost £18bn of private investment in the area.

The world’s most valuable company has reported another series of expectation-beating results, heading off fears of the AI bubble bursting for now.

Nvidia’s revenue reached $57bn in the three months to October, higher than Wall Street estimates and the company’s own guidance.

That’s up 62% on the same time last year, and has been described by the business as an “outstanding” quarter.

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A profit measure called earnings per share was also better than expected at $1.30.

It matters as Nvidia has powered the artificial intelligence (AI) boom through its computer chips, which are key parts in AI chatbots such as ChatGPT.

Nvidia has major tech companies as clients and acts as a good proxy for whether the tens of billions of dollars invested in AI is paying off.

Its chief executive, Jensen Huang, has been described as the Godfather of AI and watch parties were organised for those looking to follow the Wednesday evening announcement.

The company has been a massive beneficiary of the push to put money into AI, with its share price reaching stratospheric highs.

In October, it became the first worth $5trn (£3.83trn), about the size of the German economy, Europe’s largest, and double the UK’s benchmark stock index, the FTSE 100.

What’s been announced?

Revenue from data centres reached a record high of $51.2bn, more than £10bn higher than the three months previous.

The outlook is for continuing strong sales in the final three months of the financial year, as the company forecasts revenue will be roughly $65bn.

Read more:
Nvidia boss defends against claims of bubble by ‘Big Short’ investor
Inflation slows to 3.6%, but food costs shoot upwards

Demand for Nvidia products continues to surpass expectations, while the business is “still in the early innings” of AI transitions, its chief financial officer Colette Kress said.

Mr Huang said sales of its blackwell chips are “off the charts” and its cloud graphics processing chips (GPUs) are “sold out”.

Why it matters

Developing AI infrastructure, like the construction of data centres, has been a significant contributor to US economic growth, as measured by gross domestic product (GDP).

A faltering of AI expansion, therefore, impacts the US economy, the world’s largest, which in turn affects the UK and global economies.

Anxiety around the massive valuations tech companies have accrued, on the hope of AI revolutionising the world, is likely to be staved off by the results announcement.

A fall in these tech company valuations could have meant a drop in the value of pension pots or savings.

Just seven dominant tech companies, many of which have borrowed to invest in AI, make up more than a quarter of major US stock index, the S&P 500.

In the last year alone, Nvidia’s share price has risen more than 230%.

Some, including US trader Michael Burry, famous for being played by Christian Bale in the Hollywood film The Big Short, have effectively bet that Nvidia’s share price would fall.

Addressing the topic of an AI bubble, Nvidia’s founder, Mr Huang, said, “From our vantage point, we see something very different”.

What next?

Regardless of the figures released on Wednesday evening, significant market moves were anticipated, given the attention paid to the results and the significance of the company.

Nvidia shares rose as much as 4% in after-hours trading.

The results also boosted the share price of its chip-making competitors like Broadcom and Advanced Micro Devices.

For now, the AI bubble remains intact.

The rate of inflation has eased to 3.6%, according to official figures that make for better reading for the economy and chancellor ahead of the budget.

The Office for National Statistics (ONS) said the slowdown in the consumer prices index (CPI) measure, from the annual 3.8% rate recorded the previous month, was largely down to weaker housing effects, especially from energy bills.

ONS chief economist Grant Fitzner said: “Inflation eased in October, driven mainly by gas and electricity prices, which increased less than this time last year following changes in the Ofgem energy price cap.

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“The costs of hotels was also a downward driver, with prices falling this month. These were only partially offset by rising food prices, following the dip seen in September. 

“The annual cost of raw materials for businesses continued to increase, while factory gate prices also rose.”

The final part of that statement will be seen as a risk to expectations from economists that the peak pace for price increases is now behind the UK economy after a spike this year that has caused concern among interest rate-setters at the Bank of England.

October’s data marked the first decline for the inflation rate since March.

It has been widely believed that the figure will ease gradually in the months ahead, helping to cushion household spending power from a slowdown in wage growth.

But key risks include shocks within the global economy and the impact of potential measures in the budget next week.

The chancellor’s first budget was blamed by business groups and economists for helping push up costs since April.

Then, firms passed on hikes to employer national insurance contributions and minimum pay levels imposed by Rachel Reeves.

That has been reflected in many supermarket prices, for example, as they are among the biggest employers in the country. The ONS data showed that food inflation rose from 4.5% to 4.9%.

Other factors have contributed too such as high global demand for chicken and shrinking UK cattle herds pushing up beef costs.

Poor cocoa and coffee harvests have resulted in prices spiking too this year, with chocolate standing at record levels this summer.

While food has been a main contributor to inflation, so too has energy, though bills have stabilised this year thanks largely to healthy global supplies of natural gas.

Petrol and diesel costs could become more of a problem for inflation, however.

The AA has blamed global factors for UK fuel prices nearing their highest level for seven months.

The motoring group said that but for the 5p cut in fuel duty under the last Conservative government, pump prices would have returned to pre-COVID levels.

There have been rumours that Ms Reeves could remove that reduction next Wednesday.

She said of the ONS figures: “This fall in inflation is good news for households and businesses across the country, but I’m determined to do more to bring prices down.

“That’s why at the budget next week I will take the fair choices to deliver on the public’s priorities to cut NHS waiting lists, cut national debt and cut the cost of living.”

When asked if she recognised a contribution to rising inflation from her first budget, she responded: “Food prices fell last month and they have risen this month.

“But I do recognise that there’s more that we need to do to tackle the cost of living challenges. And that’s why one of the three priorities in my budget next week is to tackle the cost of living, as well as to cut NHS waiting lists and cut government debt.”

The Bank of England’s most recent forecasts see its 2% inflation target not being met until the early part of 2027.

Stubborn inflation in the UK has threatened the pace of interest rate cuts but policymakers are expected, by financial markets at least, to agree a further quarter point reduction next month on the back of weakness in economic growth and the labour market.

Official figures last week showed the UK’s unemployment rate rising to 5% from 4.8% and the pace of wage growth continuing its gradual decline.

Economic output during the third quarter of the year also slowed further to stand at just 0.1%.

The Bank’s rate-setting committee voted 5-4 earlier this month to maintain Bank rate at 4%.

That decision allowed for more data to come in – such as the employment and growth numbers – and, crucially, for the budget to have taken place, ahead of its next meeting.