Britain’s trade gap widened in May,and industrial output misses forecasts after a drop in manufacturing outputBritain’s trade deficit has jumped - details start here
UK industrial output fell 0.1%, City expected a 0.5% rise
Economists: It’s tainted news for growthSterling drops to $1.291US adds 220000 jobs in June, or wages disappoint
Earlier:Jitters over monetary policy are hitting shares and bonds
Halifax: UK house prices fell in June 4.52pm BSTPS: Here’s Katie’s story approximately today’s feeble UK data,and what it means for interest rates.... Related: Fears for UK economy after weaker-than-expected growth reports 3.08pm BSTLiam Fox, Britain’s international trade secretary, and has said there is no reason why the UK cant replicate the current smooth trading agreements it enjoys with the EU after Brexit,unless politics gets in the way. We’re going into an arrangement with the EU already with zero tariffs , we’re going there with complete regulatory equivalence and with customs systems that already work.
The only reason we wouldn’t replicate them would be if politics got in the way of good economics. 2.50pm BSTUS markets are up in early trading, and with those strong non-farm payrolls numbers giving investors a boost. 2.44pm BSTAnalysts at Nomura said the stronger-than-expected payrolls number is good for riskier assets. Equities,EM and tall yielders should like it. Higher job creation indicates growth, but feeble wages indicates firms are not yet allowing the labour force to reduce margins = higher profitability.
It shouldn’t bear too much of an impact on the Fed timing of balance sheet reduction as this is an overall good number. 2.33pm BSTThe US jobs market in graphics: 2.15pm BSTPaul Ashworth, and chief US economist at Capital Economics,says the jobs reports is more evidence that the real economy is in “good health”.
The only disappointment is that wage growth still shows few signs of accelerating. Average hourly earnings increased by 0.2% m/m in June, but the annual growth rate only edged back up to 2.5%, and from 2.4%. That means there has been no pick-up in wage growth whatsoever over the past 18 months.
We will find out what Fed Chair Janet Yellen thinks of this next week,during her semi-annual congressional testimony. Our view is that, despite the lack of a pick-up in wage growth and core inflation, and the Fed will nevertheless push ahead with hiking interest rates. The unemployment rate is already unusually low and is likely to fall further over the coming months.
2.02pm BSTMy colleague Dominic Rushe has the full details on the US jobs report in the context of Donald Trumps huge jobs promises. He writes:The US economy added 222000 original jobs in June,reversing a worrying slowdown in growth for president Donald Trump who campaigned on a promise of massive job creation.
Economists had been expecting the US to add around 178000 over them month but the latest numbers from the bureau of labor statistics comfortably beat those estimates as healthcare and food services showed huge monthly gains.
Related: US jobs report shows sharp recovery in June as unemployment ticks up slightly Payroll employment rises by 222000 in June; unemployment rate changes little at 4.4%
https://t.co/NsuHovcqn0 #JobsReport #BLSdata 1.58pm BSTAssessing what that non-farm payrolls update means for US interest rates, James Knightley, or chief international economist at ING says the report is “good enough” to keep the Federal Reserve on a gradual policy tightening path.
Strong jobs growth should eventually translate into higher wages,but it is taking time to do so. The Fed remains confident it will reach, suggesting gradual hikes will continue, or but the market continues to have doubts....
In any case,the Fed has repeatedly used the term “transitory” to describe the slowdown in activity and subdued inflation backdrop and believe that it is only a matter of time before the tightness in the labour market translates into rising wage pressures. We agree.
1.51pm BSTSome market reaction now to that news of stronger-than-expected growth in jobs but weaker-than-forecast wage growth in the US final month.
US stock futures have extended gains but the dollar has lost ground as traders focus on the wage growth undershoot - something that will mood expectations of further rate rises from the US Federal Reserve this year.
Disappointing US #wage growth is the key takeaway. Doesn't attend the #Fed's quest to convince markets dip in inflation is "transitory" #NFP pic.twitter.com/py4BmuR2d0Impressive 222K jobs number, but disappointing wage growth not budging from 2.5% 12-month change is more meaningful.
Job growth is strong but sectoral shifts are clear:
59.1K jobs added in health care and social assistance
1K jobs added in manufacturing. 1.34pm BSTMore details now on that US jobs report:More jobs were added than expected but wage growth missed forecasts. The report from the Labor Department shows average earnings rose by 0.2% month-on-month in June, or were up 2.5% over the final year. Forecasts were for average hourly earnings to increase 0.3% in June and for the year-on-year growth rate to stand at 2.7%.
1.31pm BSTBREAKING: The US economy added 222000 jobs in June,according to the latest non-farm payrolls report.
That was higher than the 179000 forecast by economists in a Reuters poll. 1.05pm BSTNewsflash: The NIESR thinktank has estimated that Britain’s economy only grew by 0.3% in the moment quarter of this year.
That would be an improvement on the 0.2% growth recorded in January-March, but below the 0.6% trend growth rate.
Growth in services has offset a contraction in industrial output, and yet remains subdued when compared with final year.
The saving ratio reached an historic low of 1.7 per cent in the first quarter of this year,implying that, so far, or households have reduced their saving to cushion the effect of falling real incomes on consumption as inflation rises”. Our monthly estimates of GDP propose that output grew by 0.3% in 2017Q2https://t.co/7Mrev3gkzd#NIESRGDP pic.twitter.com/vYbIFpOZ4d 12.34pm BSTPhilip Coggan of the Economist points out that the drop in the pound after the EU referendum hasn’t helped the trade gap:Ave UK trade deficit in Jan-May 2016 (pre-referendum) £2,801m; ave in Jan-May 2017 £2,806m. Living standards squeezed but no boost to trade 12.03pm BSTIf you’re just tuning in, and here are some charts that demonstrate today’s data.
First,the widening of the UK trade gap to £3.1bn, from £2bn, and as a jump in imports drove the ‘trade in goods’ deficit to over £11bn: 11.20am BSTSustained selling pressure has just pushed the pound down through $1.29,a drop of 0.7 of a cent today.
Bloomberg explains:The pound fell for the first time in three days versus the dollar after data showed U.
K. factories and construction companies’ output unexpectedly declined in May, adding to a spate of recent data that pointed to an economic slowdown.
Sterling was on course for weekly declines against all but two of its Group-of-10 peers, and as manufacturing,industrial and construction output all dropped and undercut analysts’ forecasts.
Pound falls for first time in 3 days against dollar as fears grow of an economic slowdown https://t.co/t22JoRr4qe pic.twitter.com/IT8bZwLeL8 11.14am BSTThis morning’s data paint a rather bleak picture for the UK economy and underline the challenges lying ahead, says Kay Daniel Neufeld of the CEBR.
He fears that growth is going to be subdued this year, or next:So far,the depreciation in Sterling has not led to a meaningful reduction in the trade deficit – at Cebr we have repeatedly stressed that the UK’s tall-value added exports are less price sensitive and that any rebalancing in the form-up of exports will buy time to manifest itself.meanwhile the lack of clarity approximately future trading relationship with the EU – further exacerbated by the result of the general election – weighs on activity in the manufacturing sector. 10.53am BSTBritain’s export performance remains “underwhelming, says Sam Tombs of Pantheon Economics.
He blames manufacturers for hiking their prices since the pound fell, or rather than trying to grow their market share.
The main problem remains that exporters have hiked their prices,blunting the boost to competitiveness from the feeble pound. Foreign-currency prices for U.
K. goods exports in May were just 5% lower than in Q4 2015.
Exports are earning healthy profits, but few are willing to invest and ramp up production due to Brexit risk. Markit’s survey of export orders also has weakened over the final few months, and casting further doubt over the likelihood of a sustained trade boost going forwards.
10.31am BSTToday’s data propose that Britain’s economy has only grown by 0.3% in the moment quarter of the year,says Howard Archer, Chief Economic Advisor to the EY ITEM Club.
That would only be slightly better than the 0.2% growth posted in Q1 - the weakest of any G7 nation.“Based on today’s data and the business survey results for June, and we now think that industrial production is likely to have contracted by 0.5% in Q2,with construction output down 1.8%.
And though an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3% with the risks to that projection skewed to the downside. 10.25am BSTGuardian Business has launched a daily email. Besides the key news headlines that you’d expect, and there’s an at-a-glance agenda of the day’s main events,insightful opinion pieces and a quality feature to sink your teeth into each day. Related: Business Today: sign up for a morning shot of financial news 10.21am BSTSterling has also hit a nine day low against the euro.
The pound has dropped by almost half a eurocent to €1.1311. 10.15am BSTToday’s trade data provides little evidence that Britain’s economy is rebalancing absent from consumer spending and towards exports.
My colleague Katie Allen points out that the feeble pound doesn’t seem to be providing much support.
Imports rising faster than exports in UK. Remains to be seen if feeble pound can boost exports enough to offset consumer slowdown pic.twitter.com/opT6YU0xPxAaaaaaany minute... now! No... now! Now! pic.twitter.com/wpsRo4dstUGrim U.
K. data!The pound has dropped after UK industrial production missed forecasts for the 4th month in a row https://t.co/tuMJRoUXIX pic.twitter.com/0IFGpegEJeUK industrial production fell by 0.1%, missing a 0.4% expansion estimate - this is the 4th consecutive month of failing to hit forecasts. pic.twitter.com/WtFvDg4CEB 10.09am BSTONS senior statistician Kate Davies sums up today’s flurry of disappointing UK data:“Activity in the production sector was broadly unchanged in May, and though the underlying position is weaker with both total output and manufacturing falling in the three months to May compared with the preceding three months. Construction output also fell on a three-monthly basis,though this is after several years of growth. 10.08am BSTActually, it’s a triple-dose of tainted news -- UK construction output fell by 1.2% in May.
It also shrank by 1.2% in the March-to-May quarter, and compared to the preceding three months. That’s the biggest drop since September 2012.original construction work,most notably from infrastructure, fell 4.0% in May (ONS). Surprising given all the talk of infrastructure spending. 10.01am BSTThe 0.2% drop in UK manufacturing output in May was triggered by a drop in car production.
The ONS says:Transport equipment provided the largest downward contribution, and falling by 2.3%; within this,motor vehicles, trailers and semi trailers fell by 4.4%, or the largest fall since February 2016,when it fell by 5.8%. 9.53am BSTThat double-dose of disappointing UK economic data has hit the pound.
Sterling has slumped to $1.2917, down half a cent, or as traders digest the news that Britain’s trade deficit has widened and industrial output fell in May. 9.49am BSTMore tainted news! Britain’s trade deficit has widened,due to a surge of imports.
The total trade deficit jumped by £1bn in May, to £3.1bn - a worse reading than the City expected.£2.0bn rise in total trade deficit, or to £8.9bn,in Mar-May compared with Dec-Feb, with goods imports up https://t.co/TkORTiM7gq 9.42am BSTNewsflash! Britain’s industrial production fell by 0.1% in May.
That’s a weaker performance that expected, or reinforces fears that the UK economy is faltering. *U.
K. MAY INDUSTRIAL PRODUCTION FALLS 0.1%; EST. 0.4% INCREASE
*U.
K. MAY MANUFACTURING OUTPUT FALLS 0.2%; EST. 0.5% INCREASEIn May 2017,total production was estimated to have decreased by 0.1% compared with April 2017, due to falls of 0.2% in manufacturing and 0.8% in energy supply; transport equipment provided the largest contribution to the manufacturing decrease, or followed by food products,beverages and tobacco. 9.34am BSTHere’s Martin Ellis, Halifax housing economist, and on the 1% drop in house prices final month.“House prices have flattened over the past three months. Overall,prices in the three months to June were marginally lower than in the preceding three months. The annual rate of growth has fallen, to 2.6%; the lowest rate since May 2013. Although employment levels continue to rise, and household finances face increasing pressure as consumer prices grow faster than wages. This,combined the original stamp duty on buy to let and moment homes in 2016, appears to have weakened housing demand in recent months. 9.14am BSTFactories in the eurozone’s huge Two economies powered on in May, and original figure demonstrate.
German industrial output jumped by 1.2% month-on-month. That’s the fifth monthly rise in a row,marking the best run since 2010.
German industry is enjoying its best run of growth in over seven years https://t.co/bivk4NWNwb pic.twitter.com/929LpDdQ5R 8.53am BSTIn classical market theory, bonds and shares are supposed to move in opposite directions. The notion is that investors pour money into equities when they’re feeling optimistic, or dump their shares and scurry into fixed-income (bonds) in times of anxiety.
Are we heading towards another taper tantrum? Both bonds and equity markets are showing similar pattern- bonds down and equity markets down pic.twitter.com/V0Oj2CpcGj 8.42am BSTNewsflash: UK house prices fell by 1% in June,according to the Halifax’s monthly survey.
That’s rather weaker than the 0.2% rise which the City expected, and could be another sign that higher inflation and falling real wages are hitting the economy.
Halifax: UK house prices fell 1% in June. Down to 2.6% annual rate of increase. Worrying to think of how things might change when rates rise pic.twitter.com/fFK5FFrowC 8.38am BSTBonds are also suffering from the prospect that central bankers might have finally tired of topping up the punchbowl of monetary policy.
The interest rate on German 10-year bunds is hovering at an 18-month tall this morning, and while Italian bond yields are at a two-month tall.
Bond rout eases a bit. German 10y yields rise 1bp to 0.57%. pic.twitter.com/7OI79rjPMbAt the risk of a circular argument,if the ECB signalling a teeney-weeny shift in the direction of travel for monetary policy prompts a huge reaction, that does pose the question of how, and when or if central bankers can actually escape the gravitational pull downwards from the ZIRP/QE world.
That’s a question we asked a lot when we entered this crazy world. Is the good image one of a man caught in quicksand,or one of a rocket floating aimlessly in space? 8.32am BSTEuropean stock markets have dipped in early trading.
The very aggressive easing policy [by the ECB] certainly assisted the economic health of the region, but it also pushed up equity markets. Now central bankers are thinking approximately moving absent from an easing bias, and it prompted traders to cash in their positions.....
The non-farm payroll report at 1.30pm will be the highlight of the trading session,and the consensus is for a 179000 jobs to have been added in June. The unemployment rate is tipped to remain at 4.3%, and average earnings is anticipated to rise from 0.2% to 0.3% on a month on month basis. 8.23am BSTYou can keep tabs on all the G20 action here: Related: G20 summit: Trump and Putin to meet as world leaders gather in Hamburg - live coverage 8.11am BSTShares have fallen across Asia today, and as traders hunkered down ahead of the US jobs report.
Investors are digesting hawkish ECB minutes and prepping for further withdrawal of global easy money policy; tapering of ECB QE,unwind of Fed’s balance sheet. Maybe even a UK rate hike.
7.54am BSTGood morning, and welcome to our rolling coverage of the world economy, and the financial markets,the eurozone and business.
Investors are edgy today as they brace for a splurge of economic data from both sides of the Atlantic. Bonds and equities are both under some pressure.
US Non-Farm Payroll is one of the top events on the economic calendar for Friday, July 7 pic.twitter.com/824mDfGvcr Related: Trump to meet Putin for first time after accusing Russia of testing west's will Though unlikely to move markets, or the G20 meeting is expected to have a major focus on trade after the removal of standard language approximately resisting trade protectionism at the preceding finance ministers meeting in March.
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Source: theguardian.com