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The US economy grew a stellar 4.9% from July through September, driven by robust consumer spending despite the Federal Reserve’s efforts to slow the economy with high-interest rates.

Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product — the broadest gauge of the economy’s total output of goods and services — was the fastest quarterly advance in nearly two years.

Last quarters robust GDP growth was far above the 2.1% growth rate in the April-to-June quarter.

Despite inflation, the Commerce Department reported that Americans drove the economy by stepping up their spending, splashing out on everything from movies and Taylor Swift concert tickets to restaurant meals.

However, the economy is expected to experience a steady slowdown in the current October-to-December quarter and into early 2024, especially if the Fed implements another interest rate hike and the housing market remains sluggish.

A recent survey by CNBC-Morning Consult showed just that, with more than three-quarters of respondents, 76%, saying they plan to be frugal through the holidays.

Of the 4,403 US adults polled last month, 62% said they plan on budgeting sometimes or more often in the upcoming six months, CNBC found — during retailers all-important holiday shopping season.

On top of sky-high borrowing rates currently plaguing the housing market — the average long-term rate hit 8% for the first time since 2000 last week, per Mortgage Daily News — some 30 million Americans began repaying student loans, which could slow their ability to spend in the fourth quarter.

Those loan repayments had been suspended since the pandemic first struck three years ago.

Brisk consumer spending typically leads companies those that sell physical goods as well as those, like restaurants and entertainment venues, in the economys vast service sector to raise prices, thereby fueling inflation.

Fed officials have acknowledged the pickup in growth, which could potentially undercut their efforts to fight inflation, which rose 3.7% in September.

Last month’s advance was more than economists expected — and a sharp decline from June 2022’s four-decade high of 9.1% — though it’s still well above central bankers’ 2% goal.

A blockbuster September employment report revealed that the US economy added a whopping 336,000 jobs last month an unexpected surge that contradicts the notion the Fed may tamp down its aggressive tightening regime.

However, it still remains unclear whether the latest GDP figure will have much impact on the Fed’s upcoming Nov. 1 decision on interest rates, which officials have suggested may increase one more time ahead of the new year.

Fed Chari Jerome Powell said in a discussion at the Economic Club of New York last week: “We certainly have a very resilient economy on our hands.”

“Many forecasts called for the US economy to be in recession this year. Not only has that not happened; growth is now running for this year above its longer-run trend. So thats been a surprise,” he added.

If those trends continue, it could allow the Fed to achieve a highly sought-after soft landing, in which the central bank would manage to slow inflation to its 2% target without causing a deep recession.

At the same time, Powell has suggested that if the economy keeps growing robustly, the Fed might have to raise rates further. Its benchmark short-term rate — which affects the rates on many consumer and business loans — currently sits between 5.25% and 5.5%, a 22-year high.

Last month, Fed officials unanimously decided to hold the record-high rate steady for the second time in six policy meetings so far this year.

“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said last week.

With Post wires.

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Entertainment

PM’s rap battle with Sky’s Beth Rigby goes viral – and one of the AI satirists behind it explains why

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PM's rap battle with Sky's Beth Rigby goes viral - and one of the AI satirists behind it explains why

Satire has long been an occupational hazard for politicians – and while it has long been cartoons or shows like Spitting Image, content created by artificial intelligence (AI) is increasingly becoming the norm.

A new page called the Crewkerne Gazette has been going viral in recent days for their videos using the new technology to satirise Rachel Reeves and other politicians around the budget.

On Sky’s Politics Hub, our presenter Darren McCaffrey spoke to one of the people behind the viral sensations, who is trying to remain anonymous.

He said: “A lot of people are drawing comparisons between us and Spitting Image, actually, and Spitting Image was great back in the day, but I kind of feel like recently they’ve not really covered a lot of what’s happening.

“So we are the new and improved Spitting Image, the much better Have I Got News For You?”

He added that those kinds of satire shows don’t seem to be engaging with younger people – but claimed his own output is “incredibly good at doing” just that.

Examples of videos from the Crewkerne Gazette includes a rapping Kemi Badenoch and Rachel Reeves advertising leaky storage containers.

More on Beth Rigby Interviews

They even satirised our political editor Beth Rigby’s interview with the prime minister on Thursday, when he defended measures in the budget and insisted they did not break their manifesto pledge by raising taxes.

“Crewkerne Man” says providing satire for younger people is important as Labour is lowering the voting age.

Asked why he is trying to be anonymous, the man said the project is not about one person – or even the whole group – but rather their output.

He also claimed the UK is “increasingly seeing arrests – especially with comedians”, pointing to the Graham Linehan case.

“So we just never know where the Labour Party is going to drive the policy next, in regards to free speech,” he said.

“So for me, certainly it’s a matter of safety.”

Watch Beth Rigby’s actual interview with Sir Keir Starmer below.

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The prime minister defends the budget

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Business

Budget 2025: Hospitality pleads for ‘lifeline’ as Rachel Reeves accused of imposing ‘stealth tax’

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Budget 2025: Hospitality pleads for 'lifeline' as Rachel Reeves accused of imposing 'stealth tax'

Rachel Reeves has been accused of failing to “support the great British pub” as she promised in the budget, with owners facing skyrocketing business rates bills.

In her speech in the House of Commons on Wednesday, the chancellor said she was backing small businesses by introducing “permanently lower tax rates for over 750,000 retail, hospitality and leisure properties – the lowest tax rates since 1991”.

But while the government gave itself the powers to discount the business rates bills for high street businesses through legislation earlier this year, the chancellor only implemented a reduction of a quarter of what the government is able to, and she is being accused of imposing a “stealth tax”.

It has left small retail, hospitality, and leisure businesses questioning whether their businesses will be viable beyond April next year.

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Sky’s Ed Conway looks at the aftermath of the budget and explains who the winners and losers are.

A Treasury spokesperson said: “We’re protecting pubs, restaurants and cafes with the budget’s £4.3bn support package – capping bill rises so a typical independent pub will pay around £4,800 less next year than they otherwise would have.

“This comes on top of cutting licensing costs to help more venues offer pavement drinks and al fresco dining, maintaining our cut to alcohol duty on draught pints, and capping corporation tax.”

Business rates, which are a tax on commercial properties in England and Wales, are calculated through a complex formula of the value of the property, assessed by a government agency every three years, combined with a national “multiplier” set by the Treasury, giving a final cash amount.

More on Budget 2025

Chancellor Rachel Reeves has been accused of imposing a "stealth tax" on hospitality businesses. Pic: PA
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Chancellor Rachel Reeves has been accused of imposing a “stealth tax” on hospitality businesses. Pic: PA

Over the last few years, small businesses were given business rates relief of 75% to support them over the COVID pandemic, and Ms Reeves reduced that to 40% at last year’s budget.

The idea was that at the budget this year, the chancellor would remove that remaining relief in favour of reforming the business rates system to compensate for that drop, while shifting the tax burden on to much bigger businesses and companies like Amazon with lots of warehouse space.

However, the chancellor only announced a 5p in the pound discount for small retail, hospitality, and leisure businesses, rather than the assumed 20p drop which the government gave itself the powers to implement, and which trade bodies had been lobbying for.

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How will your personal finances change following the budget announced by the chancellor?

On top of that, small businesses have seen the government-assessed value of their property increase dramatically, which wipes out the discount, and sees their business rates bill shoot far above what they had previously been paying.

One pub owner near Hull, Sam Caroll, has seen the assessed value of one of his two properties increase from £67,000 to £110,000 in just three years – a 64% increase.

He told Sky News that there is a “continual question” of business viability, and while he thinks they can “adapt” in the short term, “there will be a tipping point at some point”. Even at the moment, packing out their pubs seven nights a week, “it’s difficult for us to break even”, he said.

There will be a discount for small businesses to transition to the higher business rates level, but by year three, almost the full amount is expected to be payable, and Mr Carroll described it as “getting f***** slowly, instead of getting f***** overnight”.

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Sean Hughes, who owns multiple hospitality venues in St Albans, has also seen vast increases in the assessed value of his properties, and was sharply critical of the transitional arrangements the government is implementing.

He told Sky News: “Fundamental business rate reform was promised and we have total chaos. If [the system] was fair, why would they need transitional relief periods?”

A spokesperson of the Valuation Office Agency (VOA), which assesses the value of commercial properties for business rates purposes, told Sky News: “At the last revaluation, some sectors including hospitality were significantly affected by the pandemic, which resulted in much lower rateable values than they would have seen otherwise. Businesses that have now seen a recovery in trade are also likely to see an increase in their rateable value.”

Read more:
Reeves accused of deliberately making UK finances look worse
Budget is a big risk for Labour’s election plans

However, Sky News has seen evidence of businesses whose assessed value did not decrease when assessed during the pandemic, but actually rose, and has risen dramatically this year.

Data compiled by the Pubs Advisory Service, shows that the number of pubs in the UK has decreased by nearly 5% in three years, but the average value of the properties has risen by an average of 36.82% per pub.

And analysis by UK Hospitality, the trade body that represents hospitality businesses, has found that over the next three years, the average pub will pay an extra £12,900 in business rates, even with the transitional arrangements, while an average hotel will see its bill soar by £205,200.

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The prime minister has defended the budget after he and the chancellor were accused of breaking their promise to voters.

The body adds that by 2028/29, an average pub’s business rates will have increased by 76% and an average hotel’s by 115%, compared to 16% for a distribution warehouse like the ones the web giants use.

It’s not just the business rates rise that is worrying owners – it is the increase in employers’ national insurance implemented at the last budget, the increase in energy bills over the last few years, and the rise in the minimum wage, particularly for young people.

With the budget set to squeeze disposal income, there is little room for price increases to make up the shortfall either.

In a letter to the chancellor on Friday, Liberal Democrat deputy leader Daisy Cooper said small business owners “have been pushed to tears as they’re hit with the bombshell of higher business rates bills”, noting that “the government has chosen not to use the full powers it gave itself to throw high streets a lifeline”.

She added that businesses had been promised “permanently lower business rates”, but it appears the government has “broken yet another promise, by imposing a stealth tax not just on people, but on treasured high street businesses too”, and called on ministers to “throw our high streets and Britain’s hospitality sector a lifeline”.

Conservative shadow business secretary Andrew Griffith published his own analysis of the government’s budget measures on Friday morning, that found they will “hammer British pubs”.

Of the chancellor, he said: “She pretended in her budget speech to be supportive, whilst the true detail is that a combination of rate revaluations and scrapping reliefs will leave most pubs paying thousands of pounds more than they cannot afford.”

Kate Nicholls, Chair of UKHospitality, said in a statement: “The government promised in its manifesto that it would level the playing field between the high street and online giants. The plan in the budget to achieve this is quickly unravelling, and will deliver the exact opposite.”

She said they “repeatedly warned the Treasury” of the impending impacted of the value reassessment, but nonetheless, hospitality businesses are now facing “eye-watering increases”.

She added: “We agree with its reforms to deliver permanently lower business rates for hospitality and we appreciate the package of transitional relief, but its current proposal is not delivering lower bills. A 20p discount for hospitality would. We urge the chancellor to revisit.”

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Software issue hits thousands of Airbus A320 planes – UK passengers warned of potential disruption

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Software issue hits thousands of Airbus A320 planes - UK passengers warned of potential disruption

Passengers have been warned of potential disruption after thousands of Airbus planes were hit by a software issue.

The aircraft affected are from the A320 family – which are used by numerous airlines – and need a systems update before they can fly again.

Airbus issued the alert after analysis of a flight involving an A320 showed “intense solar radiation may corrupt data critical to the functioning of flight controls”.

The Airbus A320 family is the most-delivered jetliner in history.. File pic: iStock
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The Airbus A320 family is the most-delivered jetliner in history.. File pic: iStock

It is understood the incident that triggered the warning involved a JetBlue flight from Cancun, Mexico, to Newark on 30 October.

That flight was diverted to Tampa International Airport after it suffered a flight control issue and experienced a sharp loss of altitude, which injured at least 15 passengers.

An Airbus spokesperson told Sky News the software change would affect up to 6,000 planes.

The fix involves A320 aircraft reverting to an earlier software version and Airbus stressed it would only take two to three hours for most planes.

However, it said some jets would also need new hardware and therefore would be affected for longer. Industry sources estimated about 1,000 aircraft could be in this position.

America’s aviation watchdog has issued an emergency order to immediately replace or modify the software, mirroring one from the European Union Aviation Safety Agency.

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Solving Airbus software issue could take ‘several hours per aircraft’

‘Very concerning’

Gatwick said a “small number” of carriers based there were affected, but warned disruption was still possible. It urged passengers to contact their airline.

Heathrow said it wasn’t expecting any disruption.

“The good news is it seems the impact on UK airlines seems limited, with a smaller number of aircraft requiring more complex software and hardware changes,” said Transport Secretary Heidi Alexander.

She said it was “heartening this issue has been identified and will be addressed so swiftly”.

Airbus is understood to have traced the issue to the ELAC (Elevator and Aileron Computer) system, which sends commands to elevators on the plane’s tail. These in turn control the aircraft’s pitch or nose angle.

Travel expert Simon Calder said the situation was “very concerning” but stressed “aviation remains extraordinarily safe”.

He warned customers might not be entitled to compensation if they’re delayed as the issue would be considered out of airlines’ control.

Read more:
Which airlines are affected by Airbus disruption?
Why plane’s altitude drop led to thousands needing updates

What have airlines said?

EasyJet said it had already completed the software update on many aircraft and was working closely with safety authorities.

“We plan to operate our flying programme normally on Saturday and ask that customers travelling continue to monitor their flights on flight tracker,” it added.

The airline said passengers would be informed of any changes by email, SMS, or the flight tracker

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How the US is affected by Airbus software issue

British Airways said it wasn’t expecting any problems and that only three of its planes were affected.

For American Airlines – the world’s largest operator of the A320 – the issue was more significant, with 209 aircraft needing an update.

It comes on a huge travel weekend stateside as many travel home after Thanksgiving. However, the US carrier said the fix would be completed for the vast majority of its planes on Friday.

Others affected include Japan’s All Nippon Airways, which cancelled 65 domestic flights on Saturday, and Air France – which said it was cancelling 35 flights.

Ireland’s Aer Lingus said a limited number of aircraft were impacted, while Wizz Air has started the software update but said some weekend flights could still be affected.

“Passengers who booked directly with Wizz Air via the website or mobile app will be notified of any schedule changes,” the airline said.

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