UK news

If the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission…

Powered by Guardian.co.ukThis article titled “Democratic decisions on benefits of the EU” was written by Letters, for The Guardian on Tuesday 15th December 2015 19.32 UTC

Zoe Williams misses the point about Cameron’s negotiations with EU member states (There is no master plan. On the EU, Cameron is flailing, 14 December). Restricting benefits to EU migrants may or may not be a sensible, legal or logical way to meet the concerns of people, be they “Ukip-minded” or not. But once our PM had to ask permission to do so, the issue was completely transformed. It is no longer one of EU migrants’ access to benefits, but the far more fundamental question of who decides how British taxpayers’ money is spent. It became a question of national sovereignty. That’s why organisations such Trade Unionists Against the EU are not awaiting the outcome of “negotiations” and are campaigning to get the UK out. The issue is as simple as it is clear: if the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission. This will continue to be the case while the UK remains a member of the EU.
Fawzi Ibrahim
Trade Unionists Against the EU

• David Cameron’s negotiations on limiting in-work benefits for EU immigrants appear to have won little support. One simple approach might be to limit levels of benefit to those payable in the country of origin of the European migrant. That would deter those seeking to exploit the system and could disarm politicians in other member states, who would no longer be able to claim that their emigrants were being monetarily disadvantaged. It would leave the fundamental right of freedom of movement untouched.
Ken Daly
Aisholt, Somerset

• Hans Dieter Potsch, the chairman of Volkswagen, glosses over the truth of what his company did to cheat emission tests: it wasn’t a “chain of errors”, it was a chain of liars prepared to sanction a management mindset (VW admits to ‘chain of errors’ at company, 11 December). Or is he not admitting responsibility, even though he is no doubt paid a monstrous salary on the basis of being in charge? This incident just confirms that all companies need active oversight from outside to try and stop such appalling actions. They cannot be trusted any more than managers of banks and other financial groups. This is why we need the EU and strong legislation trying to stop such abuses in companies that think they can do what they like.
David Reed
London

• Join the debate – email guardian.letters@theguardian.com

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Seven years following the banking crisis, senior bankers are still moaning about over-regulation, but with the government still owning major stakes in banks this is no time to water down the rules. This is not a normal state for the banking industry…

 

Powered by Guardian.co.ukThis article titled “The banking crash seven years on: it’s not yet business as usual” was written by Jill Treanor, for theguardian.com on Monday 12th October 2015 11.25 UTC

Seven years ago this week, Gordon Brown – the then prime minister – was in full combat mode. Royal Bank of Scotland (RBS) and HBOS were on the brink of collapse and risked bringing down the rest of the financial system with them. Brown was left with little option but to step in with billions of pounds of taxpayers’ money to act as a “rock of stability” to prevent the financial sector collapsing.

The intervening years have led to soul-searching through inquiries and changes in the rules about the amount – and type – of capital banks must hold to protect against collapse. Rules about the way bonuses are paid to top bankers have changed: deferral and payment in shares are now the norm for the most senior bankers. Changes are also being made to the way banks are structured following the recommendations by the Independent Commission on Banking, chaired by Sir John Vickers.

The government still owns 73% of RBS, down from 79%, and is yet to get rid of all its shares in Lloyds Banking Group, formed when HBOS was rescued by Lloyds TSB during the crisis. This is not a normal state for the UK banking industry.

Yet senior bankers are moaning about the difficulties their businesses face because of regulation. John McFarlane, the chair of Barclays, is again talking about national champions in investment banking. He raised it in July and again this week by suggesting that a merger of European investment banks (£) might allow a regional champion to be created to compete with US rivals.

Such remarks may help explain why, just a few weeks ago, Paul Fisher, a senior Bank of England official, issued a warning against watering down the post-crisis rules. “We probably won’t know for sure just how effective the new regime is until we reach another crisis. Meanwhile, we need to guard against the reforms being rolled back as a result of a period without crisis,” Fisher told an audience in London.

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A £500m rise in cars shipped abroad fails to ease prospects of huge UK trade deficit in third quarter fueled by strong pound plus eurozone woes and declining oil industry. The significant improvement seen in Q2 now considered as “only temporary”…

 

Powered by Guardian.co.ukThis article titled “Car exports cut monthly UK trade deficit but quarterly gap is growing” was written by Phillip Inman Economics correspondent, for theguardian.com on Friday 9th October 2015 11.47 UTC

A rise in car exports helped improve Britain’s trade deficit in August, according to official figures.

The monthly shortfall in the trade balance for goods narrowed to £3.3bn from £4.4bn in July. However, the UK was still heading for a huge deficit in the third quarter of the year after an upward revision to July’s shortfall.

Paul Hollingsworth, UK economist at Capital Economics, said: “Even if the trade deficit held steady in September, this would still leave the deficit in the third quarter as a whole at around £11bn, far higher than the £3.5bn deficit recorded in the second quarter.”

He said this suggests that net trade is probably making “a significant negative contribution to GDP” at the moment.

Hollingsworth warned that the strong pound and weakness in demand overseas as the US economy stuttered and the eurozone remained in the doldrums meant the government’s hopes of a significant rebalancing towards manufacturing exports would be dashed in the near term.

Alongside the £500m rise in car exports in August, the chemicals industry sent more of its production to the US, the ONS said. Total goods exports increased by 3.5% to £23.6bn in August 2015 from £22.8bn in July 2015.

But this positive news was offset by the continued decline in Britain’s oil industry, which has been a major factor holding back progress this year.

Lower production and the lower oil price have dented exports, and though oil imports are likewise cheaper, they continue to rise in volume.

The mothballing and subsequent closure of the Redcar steel plant could also have had an impact as the export of basic materials dived in August by more than 10%.

The services sector recorded an improvement in its trade balance, but the ONS pointed out that the UK continued to rely heavily on the financial services industry to pay its way in the world.

Figures for the second quarter showed that the surplus on trade in services was £22.8bn, of which almost half – £10.1bn – was contributed by banks, insurers and the fund management industry.

David Kern, chief economist at the British Chambers of Commerce, said the narrowing of the deficit in August was welcome, but taking the July and August figures together pointed towards a deterioration.

“This confirms our earlier assessment that the significant improvement seen in the second quarter was only temporary.

“The large trade deficit remains a major national problem. This is particularly true when we consider that other areas of our current account, notably the income balance, remain statistically insignificant.”

Kern urged the government to adopt measures that will “secure a long-term improvement in our trading position”.

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U.K. Manufacturing Sector growth slows in September, prompting manufacturers to lay off workers, against backdrop of uncertain global outlook. Eurozone manufacturing also lost momentum and output from Chinese factories continued to fall…

Powered by Guardian.co.ukThis article titled “UK manufacturing sector suffers job losses for first time in two years” was written by Julia Kollewe and Katie Allen, for theguardian.com on Thursday 1st October 2015 18.52 UTC

Tough export markets and weaker consumer spending continued to take their toll on UK factories last month, prompting the first job losses for the sector in more than two years, according to a survey that echoed signs of manufacturing weakness around the world.

The performance at UK factories was lacklustre in September, when growth slipped to a three-month low. Against the backdrop of warnings about the uncertain outlook for global growth, eurozone manufacturing also lost momentum and output from Chinese factories continued to fall.

For the UK, the first snapshot of manufacturing performance in September continued a downbeat trend. The key measure of factory activity slipped back to within a whisker of June’s two-month low, according to the Markit/CIPS manufacturing PMI report.

At 51.5 the main balance was still above the 50-mark that separates growth from contraction, but it marked a slowdown from 51.6 in August and economists said it would further convince policymakers at the Bank of England to hold off from raising interest rates from their current record low of 0.5%.

The survey reported manufacturing job losses for the first time since April 2013.

“Job cuts send a signal that manufacturers are becoming more cautious about the future, which may lead to a further scaling back of production at some firms in coming months,” said Rob Dobson, senior economist at Markit.

“The ongoing malaise of the manufacturing sector will add to broader growth worries and supports dovish calls for a first rise in interest rates to be held off until the industry returns to a firmer footing.”

The manufacturing sector has been growing for 30 months, according to the survey, but the pace has slowed since the start of the summer. While output growth improved slightly last month, growth in new orders tailed off to the weakest rate seen this year.

Manufacturing growth
Manufacturing growth in the UK. Illustration: Markit/CIPS

Manufacturing growth across the eurozone slowed to a five-month low, according to separate reports from Markit. Its factory PMI for the currency bloc slipped to 52.0 from 52.3 in August. Activity slowed in Germany and Spain, while the French factory sector is expanding again.

The slump at China’s factories also continued, but there were some signs of stabilisation. The Caixin China general manufacturing PMI found that production was still falling, forcing firms to lay off more people. The official manufacturing PMI published by the Beijing government also showed that manufacturing was still contracting, but at a slower rate.

Economists drew links between China’s downturn and the pressures on UK manufacturers already grappling with a relatively strong pound, which makes their goods more expensive to overseas buyers.

“Manufacturing continues to face headwinds from weaker demand from China and emerging markets – where the UK sends up to 15% of its exports – in addition to strength in sterling which is up 15% in effective terms compared to its February 2013 low,” said Kallum Pickering, senior UK economist at Berenberg bank.

He saw little prospect of manufacturing having boosted the wider economy in recent months but was optimistic EU and US demand would help the sector.

“For now, UK manufacturers might see export demand dwindling as the developing world struggles with slowing Chinese demand and weak commodity prices, but in the medium term rising demand from the UK’s biggest and closest trading partners should help underpin a recovery in UK manufacturing,” Pickering added.

Separate UK figures on productivity also pointed to recent weakness in the manufacturing sector. There was a 0.5% fall in factory output per hour in the second quarter, bucking the improving trend for the wider economy, according to the Office for National Statistics (ONS).

Across all sectors, productivity grew by 0.9% from the first to the second quarter on an output per hour measure. That took productivity to the highest level on record, but it was still 15% below where it would have been had pre-downturn trends continued, the ONS said.

Zach Witton, a deputy chief economist at EEF, the manufacturers’ organisation, said: “Today’s data suggests the challenging export environment and weak demand for investment goods in the oil and gas sector has started to take a toll on business confidence.”

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Financial markets focused on the more downbeat indicators of construction and industrial production that some say might be a sign that the UK economy may be losing steam along with its largest trading partner the eurozone…

– >

Powered by Guardian.co.ukThis article titled “Official data points to loss of momentum in UK economy” was written by Katie Allen, for The Guardian on Friday 9th January 2015 16.30 UTC

Further evidence of a slowing British economy came on Friday as official figures showed a surprise drop in construction in November and falling industrial output as oil and gas output declined sharply.

But the data showed a bounceback in factory output that buoyed hopes for the manufacturing sector and good news on exports suggested UK companies could weather troubles in their biggest trading partner, the eurozone.

Financial markets focused on the more downbeat indicators, taking them as the latest evidence the economy lost steam in the final months of 2014. The pound lost ground against the dollar as traders bet the Bank of England would be in no hurry to raise interest rates from their record low, given the mixed signals on the economy.

“Disappointing official data are adding to survey evidence which indicate that the rate of UK economic growth slowed towards the end of last year,” said Chris Williamson, chief economist at data analysts Markit.

“Looking at all of the official statistics and survey evidence currently available, the data collectively point to the economy growing 0.5% in the fourth quarter, down from 0.7% in the third quarter,” he added.

While economists said it was too soon to say whether the slowdown at the end of the year continued into 2015, the latest figures will be unwelcome to the Conservatives as they seek to convince voters that the recovery remains on track.

“On balance, there is further evidence that UK growth is slowing as we head towards the general election,” said Simon Wells, chief UK economist at HSBC.

Among the bright spots for the economy in a clutch of reports from the Office for National Statistics was the news that manufacturing output rose by 0.7% in November, reversing October’s fall and beating economists’ expectations for growth of just 0.3%. On the year, output was up 2.7%.

But the wider industrial sector which also includes utilities, mining and oil and gas production, fell 0.1%. That drop was driven largely by a 5.5% fall in oil and gas output. The ONS said the weakness was partly down to maintenance work at two North Sea oil fields.

Respected thinktank the National Institute of Economic and Social Research said following the latest industrial production numbers it estimated growth slowed to 0.6% in the final three months of last year, after 0.7% in the three months to November 2014.

Separate official figures from the construction sector showed output fell by 2.0% on the month in November, defying economists’ forecasts for growth and contrasting with surveys of the sector.

The news on trade was more encouraging, however, as the ONS reported the narrowest trade deficit since June 2013.

The manufacturing sector is still not back to its pre-crisis strength and exports have not grown as fast as the government would have hoped. Progress has been slow in the government’s push to rebalance the economy away from overdependence on domestic demand, but some economists are predicting a strong 2015 for manufacturing.

A drop in oil prices to their lowest level in more than five years has buoyed hopes for the sector. Maeve Johnston at the thinktank Capital Economics cautioned it was far from certain oil prices will remain so low, but the fall should help “reinvigorate the recovery”.

“Indeed, if low oil prices are sustained, it should greatly reduce costs for the manufacturing sector, providing some welcome support over 2015. And sustained low oil prices would also ensure that the improvement in the trade deficit proves to be more than a flash in the pan,” she said.

The trade numbers beat expectations as the ONS reported the goods trade gap narrowed by £1bn to £8.8bn in November, as exports edged down but imports fell faster. Economists had forecast a £9.4bn gap. The less erratic figures for the three months to November showed exports grew by £2bn and imports shrank by £0.5bn.

The details showed exporters continued to benefit from targeting markets beyond the deflation-hit eurozone. Exports to countries outside the European Union increased by £2.1bn, or 6.0%, in the three months to November from the previous three months. Exports to the EU decreased by £0.1bn, or 0.3%. At the same time, the UK recorded its largest ever deficit with Germany, reflecting a decrease in exports and a slight increase in imports.

The trade gap for goods and services taken together fell to its lowest since June 2013, at £1.4bn in November.

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Live coverage of the latest GDP data, showing that the UK economy is, at long last, larger than in 2008 as it grew by 0.8% in April-June quarter. But on a per capita basis, GDP is still below the peak. Service sector surged, while construction shrank…

 


Powered by Guardian.co.ukThis article titled “UK economy finally above pre-crisis peak, as GDP rises by 0.8% in Q2 – business live” was written by Graeme Wearden, for theguardian.com on Friday 25th July 2014 12.05 UTC

The first quarter of 2008 was also the time in which Northern Rock, stricken by the credit crunch, was formally nationalised by the Labour government.

Northern Rock was later sold to Virgin Money. And today, they’ve announced they are creating 200 new jobs this year, including 120 in the North East.

The announcement coincides with George Osborne’s trip to Newcastle today.

Updated

Here’s a video clip of George Osborne explaining how Britain hasn’t completed the task of recovering from the Great Recession.

Read the news story here

Rather than trudging back to 9.30am, new readers might prefer to read our news story on today’s growth figures:

GDP surpasses pre-recession high as economic growth hits 0.8%

Larry Elliott: Chancellor is right not to be smug

Our economics editor, Larry Elliott, says the chancellor is wise to resist crowing today (as I flagged up earlier, George Osborne tweeted that there’s still “a long way to go” to complete the recovery).

Larry writes:

For one thing, this has been the mother and father of a recession and it has taken far longer than Osborne expected for the economy to respond to the Bank of England’s cheap money medicine.

There have been four deep downturns since the second world war; two presided over by Labour governments, two by Conservative. After the first oil shock in the mid-1970s, it took 12 quarters for the economy to return finally to its pre-recession level of output; after the recession in Margaret Thatcher’s first term it took 16 quarters; after the recession following the Lawson boom of the late 1980s its took 10 quarters. This time it has taken 25 quarters.

The second reason it makes sense for Osborne not to crow too much is that in terms of output per head of population, the downturn is still not over. The population has risen since the economy went into recession in early 2008 and at the current rate it will be 2017 or 2018 before the losses in per capita GDP are made up.

More here: George Osborne is right not to be smug over GDP numbers

Updated

Unions are flagging up up that most people are not feeling the recovery in their pocket:

Wage growth, or rather the lack of it, is one of the clearest signs that Britain’s recovery isn’t feeding through to the workers.

Pay rises have been lagging behind inflation since the crisis began, and hit their lowest level since 2001 in the three months to May (at just +0.7%).

Today’s GDP report is only the first stab at assessing the UK economy’s performance in the second quarter of 2014.

It doesn’t actually contain any data from June at all — the Office for National Statistics just estimates how the various sectors performed, based on history and the data from April and May.

John Bulford, economic advisor to the EY ITEM Club, reckons the 0.8% growth reading could be revised up next month:

The disparity between official figures, which show manufacturing output growing by just 0.2% and construction contracting by 0.5%, and business survey data, which show both sectors roaring ahead, is glaring. With that in mind, it would not be a surprise to see the Q2 figures revised up in the next release in mid-August.”

Guess who had another ‘helpful suggestion’….

Updated

Ben Chu has pulled together another great chart, showing how Britain’s GDP per capita (economic size divided by the total population) has also lagged most of the G7 group of advanced economies since 2008.

Updated

Chart: How Britain lagged the G7 since 2008

Italy is the only member of the G7 to have recorded slower growth than the UK since the first quarter of 2008

That was the time when the credit crunch was transforming into the biggest financial crisis to grip the world since the Great Depression.

Ben Chu of the Independent has helpfully tweeted this chart to show it:

At which point, the Conservative team at the Treasury suggested he might like to rescale it to 2010 (when the coalition took power).

Better, but still not top of the class…

Guy Ellison at Investec Wealth & Investment, says Britain’s recovery has been “a long slog”:

The UK is the second to last member of the G7 group of economies to reach the milestone and took much longer to rebound than in past recessions.

Geraint Johnes, director at Lancaster University’s Work Foundation, has rubbished the notion that today’s growth figures are a triumph for George Osborne’s austerity programme.

After all, the chancellor did (sensibly) drop the idea of eliminating the deficit in this parliament after it became clear that he was spiralling off course.

Johnes says:

“What do the figures say about the effectiveness of austerity and the management of the economy? The Chancellor’s actions trump his rhetoric. Austerity was effectively abandoned a couple of years ago, and the economy has flourished – albeit in patches – since.

And next year’s growth is unlikely to match the “rather remarkable results” being achieved at present, Johnes adds.

Updated

Summary

Rob Wood, economist at Berenberg, agrees that growth was “not balanced this quarter”:

The service sector (+1.0%) was strong while manufacturing (+0.2%) and construction (-0.5%) were weak. The longer the recovery remains unbalanced the less sustainable it may seem to aim for growth continuing around these rates.

That being said, manufacturing and construction suffered from an usually weak May and could bounce back strongly in June and through Q3

Manufacturing data from other European countries was also weak in May, suggesting the global economy had a hiccup.

A lot of people are hammering home the fact that the UK’s recovery has been the slowest in living memory.

This tweet from RBS shows the tortoise-like nature of the rebound:

And the FT explains just how badly it compares it to previous recessions over the last 100 years:

Ed Balls: GDP per head won’t recover till 2017

Better late than never, George.

That broadly sums up Ed Balls’ response to the GDP data, who points out that America’s economy hit its pre-crisis peak back in 2011.

The shadow chancellor says:

“At long last our economy is back to the size it was before the global banking crisis – three years after the US reached the same point.

“But with GDP per head not set to recover for three more years and most people still seeing their living standards squeezed this is no time for complacent claims that the economy is fixed.”

Balls adds that Labour measures, such as more free childcare and a 10p starting rate of tax, will make the recovery fairer. More here.

Jeremy Cook, chief economist at currency company World First, says the recovery is “engendered, sustainable and flourishing”.

“Once again, it was services that drove the economy onwards, rising by 1%. Construction slipped back in Q2, falling by 0.5% following a strong Q1 helped by home building and repair efforts to flooded properties in the west country.

“Industrial production rose 0.4%. The recession prompted a renewal of the phrase “Keep Calm and Carry On” and all in the UK will be hoping that this expansion does just that.”

 

Simon Baptist, of the Economist Intelligence Unit, points out that the recovery has been “notable for its extremely slow pace”:

Austerity in this parliament has been a drag on growth.

Markets needed to see a long term plan to big ticket items like pensions, healthcare and welfare spending; the government has done some of this for which it deserves credit, but growth now is in spite of austerity not because of it.

GDP reaction starts here

Ben Brettell, senior economist at Hargreaves Lansdown, warns that the UK economy “isn’t as strong as it looks”.

He also points out that GDP per person is still lagging (check out this chart)

While it has surpassed its pre-crisis peak in absolute terms, a larger population means GDP per capita is around 6% lower. The economy has been growing by adding jobs, but there is an underlying issue with productivity, and this is why we are not seeing any meaningful increase in wages.

Despite another upgraded growth forecast from the IMF I believe significant challenges lie ahead.

Don’t forget, GDP per capita is still below 2008 peak

I flagged this up earlier, but it really can’t be repeated too many times:

Britain’s GDP per person is nowhere near the level it reached before the recession.

The ONS hasn’t issued a new estimate today but, based on earlier data, GDP per capita is probably at least 5% smaller than in 2008.

Updated

The Liberal Democrats want their share of the credit, declaring that they have “cleared up Labour’s economic mess”.

Lib Dem Treasury Minister Danny Alexander says Britain has passed a major milestone today.

“The main reason that we stepped forward to form the coalition was to sort out Labour’s economic mess and rebuild a stronger economy and a fairer society for the future.

“By forming the coalition we gave the country a long term economic recovery plan based on Liberal Democrat values and policies and the stability to see it through.”

George Osborne: we’ve got a long way to go

Chancellor George Osborne is touring the North of England today – designed to show that the government takes regional regeneration seriously.

He’s tweeting from Newcastle:

Britain’s manufacturing sector didn’t enjoy a blowout quarter — its activity expanded by just 0.2% in the April-June quarter, down from 1.5% in January-March.

The key chart: GDP finally over pre-crisis peak

And here’s confirmation that the 0.8% growth in the last quarter was almost totally due to the service sector (which makes up around three-quarters of the economy)

Britain’s agriculture sector also shrank during the quarter, by 0.2%.

On an annual basis, the UK economy is 3.1% bigger than a year ago.

The construction sector contracted during the quarter – with its output shrinking by 0.5%.

Britain’s industrial sector grew by just 0.4% in the quarter, a slowdown compared to the 0.7% in Q1.

Britain’s service sector continues to drive the recovery.

It expanded by 1.0% between April and June, which is the strongest growth since the third quarter of 2012.

The Office for National Statistics confirms that the UK economy is now 0.2% larger than at the previous peak, in the first three months of 2008.

UK economy grew by 0.8% in second quarter of 2014

Here we go! The UK economy grew by 0.8% in the second quarter of this year.

That’s means Britain’s GDP is finally above the previous peak set in 2008.

Lots more detail and reaction to follow…

Ed Balls has rather pre-empted today’s growth figures, in an article in today’s Guardian.

In it, the shadow chancellor argues that there’s no cause for complacent celebrations, just because GDP has reached its pre-crisis levels (assuming it does….)

Not only is it two years later than the chancellor’s original plan said, and three years after the US reached the same point, it’s also the case that GDP per head won’t recover to where it was for around another three years – in other words, a lost decade for living standards.

Conservative complacency won’t help working people

Just over 20 minutes to wait until we learn how fast the UK economy grew in the second quarter of 2014.

Paul Hollingsworth of Capital Economics says it will be “another milestone for the recovery”, if GDP comes in at +0.8% as expected, 0.2% above the 2008 previous peak.

GDP per capita still lagging behind

There’s a very important reason to be cautious about today’s growth numbers, which explains why many people don’t feel the benefits of the recovery.

GDP per capita (ie, the amount of economic output divided by the number of people in Britain) is still more than 5% below the pre-crisis peak.

As the ONS said this month, “GDP per head has recovered relatively slowly since 2009″, and was 5.6%. This chart confirms it:

Tax campaigner Richard Murphy comments:

And that means almost everyone in this country is still worse off than they were in 2008. That’s nothing for the government to celebrate.

Lloyds close to Libor deal

RBS isn’t the only bank tackling “conduct and litigation issues”, of course.

Its UK rival, Lloyds Banking Group, has confirmed this morning that it is close to reaching a settlement over its role in Libor-rigging.

This is the scandal in which traders allegedly conspired to fix benchmark interest rates that underpin many financial markets. Lloyds is expected to pay a fine of £200-£300m.

Updated

Today’s GDP figures should also show that the UK economy has grown for the last six quarters — the longest sustained run of rising output since 2008.

RBS shares surge 12% after rushing out better-than-expected results

Royal Bank of Scotland has surprised the City by rushing out its results a week early, in the latest sign that conditions are improving in the UK economy.

RBS, which was rescued by the taxpayer after the great recession struck, has reported an unexpected rise in pre-tax profits, thanks to a fall in bad loans and a general improvement in economic conditions.

Shares surged by over 12% when trading began in London, even though CEO Ross McEwan cautioned that it still faces a number of “conduct and litigation issues”.

Here’s our full story:

RBS reports largest profits since bailout as share price soars

To hit its pre-crisis peak, UK GDP must have risen by at least 0.6% in the last quarter, I reckon.

Most economic data from April, May and June has suggested that growth remained quite strong, which is why economists expect GDP to have risen by 0.8% or 0.9%.

The slowest recovery since at least 1920

It’s wise to be cautious when economists talk about X or Y being the best or worst ‘on record’.

Reliable statistics don’t go back terribly far — for example, the central bankers faced with the Great Depression were hampered by limited knowledge about how their economies were faring*.

But it’s clear that this UK recovery has been the slowest in at least 100 years.

This graph from the NEISR thinktank (which includes their estimate for today’s GDP data) compares the last six recessions, going back to 1920.

* – the excellent Lords of Finance explains this well.

UK growth figures to show state of the recovery

Good morning.

After the longest downturn in recent UK economic history, has Britain’s economy finally returned to the levels before the 2008 financial crisis?

Economists think so, and we’ll find out for sure at 9.30am this morning when the Office for National Statistics issues its first estimate of UK growth for the second quarter of 2014.

The ONS is expected to report that GDP expanded by 0.8% or 0.9% between April and June. That would match, or exceed, the growth seen in the first three months of this year, showing that the UK recovery continues to outpace other advanced economies.

And with an election just 10 months away, the figures are eagerly awaited in both Westminster and the City.

Just yesterday, the International Monetary Fund upgraded its forecast for UK growth again – it now expects GDP to rise by a punchy 3.2% this year. Good news for George Osborne.

IMF predicts Britain’s GDP growth rate will surge to 3.2% by year end

But critics of the chancellor argue that Britain is enjoying another of those consumer-driven recoveries that have caused such trouble in the past.

So we’ll be scrutinising today’s data for evidence of whether the economy is really rebalancing, or not.

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The pound rallies against the U.S. dollar and the euro after U.K. Retail sales rise by 2.6% m/m in December, smashing the forecasts of 0.5% increase and much stronger that the 0.1% reading in November. U.S. consumer confidence drops…

 


Powered by Guardian.co.ukThis article titled “Retail sales grow at fastest rate for nine years – business live” was written by Jennifer Rankin and Nick Fletcher, for theguardian.com on Friday 17th January 2014 15.14 UTC

More US data has just come out, with an unexpected drop in consumer confidence.

Worries about employment and income growth sent the Thomson Reuter/University of Michigan’s consumer sentiment index down from 82.5 in December to 80.4 so far this month. This compares to forecasts of an increase to 83.5. Rob Carnell at ING said:

There is no compelling explanation for this, unless perhaps respondents have been influenced by weakness in some other surveys – payrolls for example – though most observers believe that these are anomalous and weather affected.

With the labour market probably in far better shape than the latest labour report suggested, the stock market remaining robust, house prices rising strongly and gasoline prices relatively low, there is no good reason for the dip, which may turn out to be nothing more than noise. At any rate, 80.4 is not a bad level, and consistent with spending growth remaining at the sort of levels seen in recent quarters.

Updated

A lacklustre opening for US markets this morning, following industrial data and housing starts broadly in line with expectations.

There is plenty else for investors to chew on. Morgan Stanley reported a 72% decline in income for Q4, partly related to legal costs related to the credit crunch. General Electric, another corporate bellwether, posted a 4.8% rise in revenue.

  • The Dow Jones Industrial average dipped slightly, falling 0.1% to 16,397.16 points.
  • The S&P500 lost a similar amount leaving it at 1843.50 points.
  • The Nasdaq composite fell 0.34% to 4203.428.

On that note I am handing over to Nick Fletcher. Thanks for following and all the comments so far. JR

From the US production lines, to an underwear factory in Manchester. Kinky Knickers, the label championed by retail guru Mary Portas, has seen parent firm Headen and Quarmby fall into administration, threatening 33 jobs.

It is another blow to the self-styled Queen of Shops, who is battling to rescue the British high street. Read the full story from the Guardian’s retail correspondent Sarah Butler here.

Joseph Brusuelas, an economist at Bloomberg, has some interesting first-takes on those US numbers.

Here are more details on the US industrial production data from the US Federal Reserve Board.

  • Manufacturing output rose 0.4% in December, compared to 0.6% in November
  • Mining output was up 0.8% compared to 1.9% in Nov.
  • Utilities output was down 1.4% compared to a 3% rise in Nov.
  • Industrial output excluding cars and parts was up 0.2% compared to 0.9% in Nov.

Via Reuters

Breaking news: US industrial production rose 0.3% in December, in line with economists’ forecasts.

Should the Bank of England beware of the “nasty scissor movement?” Not a an outlandish stationery cult, but what happens when growth is caught between a decline in real wages and stagnant business investment.

Ben Broadbent, external member of the Monetary Policy Committee, has been looking at whether this view holds water, in a speech at the London School of Economics today.

The full text is on the Bank of England website, but here is a flavour of his argument:

….concerns about the absence of growth have been replaced with worries about its composition: too much consumer-led spending, too little investment and trade. In particular, it is argued, the recovery will run out of steam without a rise in investment because of an ongoing contraction in real wages. The suggestion is that proceeds of growth are being diverted to unspent corporate profits. Growth is therefore caught in a nasty scissor movement between a decline in real wages, which limits the room for further growth in household spending, and perpetually stagnant business investment. As a result it is destined to subside. My aim today is to ask whether this view holds up to scrutiny.

I will make three points. The first is that real pay is weak not because firms are taking (and hoarding) the lion’s share of the proceeds of growth – in fact, the opposite is true: wages have grown faster than profits during this recovery – but because the prices we pay for consumption have risen much faster than those firms receive for their output.

The second point is about the typical sequencing of economic expansions. Business investment tends to lag, not lead, the cycle in output (the opposite is true for housing investment). One of the reasons firms’ capital spending has stagnated is that the recovery has so far been too weak to allow their profits to recover. But history, and a variety of indicators, suggests it is likely to accelerate through this year. Indeed, allowing for measurement error, it may already have started to do so.

The final and more general point is to caution against inferring too much about future growth from its current composition. Of course there’s a risk the recovery could falter. But, if it does, it will probably be because of more fundamental problems – a failure of productivity to respond to stronger demand, for example, or continuing stagnation in the euro area – not any imbalance in expenditure or income per se. These are outcomes, not determinants, of the economic cycle. As we shall see, they are poor predictors of future growth.

Shell’s profit warning wiped £6.5bn from the FTSE100 index this morning. But this could be small change compared to the trillions of overvalued assets oil and gas companies are sitting on – the so-called “carbon bubble”. Several commentators, including readers of this blog, argue that the “carbon bubble” and risks to the environment of runaway climate change, put a different perspective on today’s statement from Shell.

It is worth revisiting a warning from Lord (Nicholas) Stern, the author of the landmark 2006 report on climate change. Last May, Stern said the world risks a major economic crisis, because oil and gas companies are sitting on huge fossil fuel reserves that will have to remain underground, if the world has any hope of avoiding the threshold for ‘dangerous’ climate change. Essentially, major energy companies are seriously overvalued…

Smart investors can already see that most fossil fuel reserves are essentially unburnable because of the need to reduce emissions in line with [a climate change] global agreement. They can see that investing in companies that rely solely or heavily on constantly replenishing reserves of fossil fuels is becoming a very risky decision.

… much of the embedded risk from these potentially toxic carbon assets is not openly recognised through current reporting requirements. The financial crisis has shown what happens when risks accumulate unnoticed. So it is important that companies and regulators work together to openly declare and quantify these valuation risks associated
with carbon, allowing investors and shareholders to consider how best to manage them.

Updated

Breaking: US housing starts fell by 9.8% in December, the US Commerce Department has said. The figure is the largest percentage drop since April, but not quite the steep drop economists had been predicting.

Groundbreaking for single-family homes, the largest segment of the market fell by 7%.

Just in… the owner of the New York stock exchange and Euronext is taking over the running of Libor, the interest rate benchmark at the centre of a rigging scandal involving many major banks.

Intercontinental Exchange will take over running Libor from 1 February, having received the formal ok from the Financial Conduct Authority.

In his 2012 review, Martin Wheatley, now chief executive of the FCA, had recommended handing Libor to an independent organisation chosen via competitive tender. The British Bankers’ Association was stripped of its responsibility for Libor in the wake of the scandal.

The London Stock Exchange has removed itself from the dwindling club of companies with all male boards.

The LSE announced this morning that it had appointed two women to its board - one day after it was exposed by BoardWatch as being one of three FTSE100 companies with all make boards.

Sherry Coutu, who serves on Cambridge University finance board, and Joanna Shields, chairman of Tech City UK, become non-executive directors with immediate effect, the LSE said this morning.

This means the only companies in the FTSE100 left with all-male boards are Chilean copper mining company Antofagasta and commodities trader Glencore Xstrata.

Capital Economics has issued a cautionary note on this morning’s bumper retail sales figures.

 December’s strength does not translate into a strong Q4. Because of weakness in previous months, over the fourth quarter as a whole, retail sales were a mere 0.3% higher than in Q3. So spending on the high street will provide only a modest boost to economic growth in the final three months of the year.

 Nonetheless, with non-retail spending strong, December’s sales data provided further hope that Q4 should sustain the strong rate of GDP growth seen in Q2 and Q3. But it also points to a recovery that continues to display a distinct lack of balance.

In other words, whatever happened to ‘the march of the makers’?

Tough times in Spain continue, with another sign that households and small companies are struggling to repay debts. Spanish banks’ bad loans as a percentage of total lending hit a record high of 13.08% in November, up from 12.99 % the previous month, according to Bank of Spain figures.

Here are the figures from the Bank of Spain:

And here is Reuters’ take on the data:

The [bad loans] ratio has been steadily climbing as households and small companies struggle with debts and as banks, fighting to improve their own capital quality ahead of Europe-wide stress tests, rein in lending. Bad debts rose month on month by €1.5 billion ($2.04 bn) to €192.5 bn euros in November. Total credit, meanwhile, rose slightly by €2.6 bn to €1.47 trillion euros, the data showed.

Updated

The Guardian’s politics live blog is covering Ed Miliband’s speech on breaking up the banks. Check out the sentiment tracker, where you can have your say on the speech minute by minute.

Back to Shell, which has seen its share price recover from this morning’s sell off. Shares are down 2.1%, an improvement on an earlier 4% fall.

Ishaq Siddiqi at ETX Capital, blames the management, but thinks that Shell is not alone in its problems

Worrying news from the oil major which is clearly suffering from management’s inability to get on top concerns regarding capital discipline. Shell warned of disappointing results from its upstream, downstream and corporate business divisions; higher exploration costs and softer oil prices are blamed for the poor numbers – this is unlikely to change this year leaving markets worried about the group’s outlook.

Shell is not an isolated case however, as weak industry conditions for downstream oil is likely to hit sector peers too. For Shell itself, management must now implement more aggressive targets for group strategy in order to turn a page and improve capital efficiency which would go some way in improving operational performance.

Louise Rouse at ShareAction wants Shell’s shareholders to challenge the company on its costly Arctic drilling plans.

A quick recap – last year Shell filed formal plans to drill in the Arctic above Alaska, raising environmental concerns about the potentially devastating impacts of a spill.

ShareAction is not convinced about the economics of the plans.

 There are huge question marks over the economic viability of Shell’s Arctic plans given the high costs involved. The fact that Shell’s profits are tumbling, in part because of high exploration costs, highlights further the need for investors to make sure that the sums add up in the case of the Arctic.

Oil companies’ approach to capital expenditure is almost Shakespearean – ‘there is money, spend it, spend it, spend more’. With flat share prices and falling profits shareholders should challenge this lack of capital discipline.

Updated

A snapshot of consumer behaviour in charts…

Consumers hit the shops in force in December, splashing out in the run-up to Christmas. Pundits are less convinced the spending splurge will continue in 2014. Here is a round-up of reaction on the UK’s retail sales data and what it means for the economy.

Alan Clarke, director of fixed income strategy, said the growth in sales was not the result of slashing prices.

Its a boom!! UK retail sales surged by 2.6% m/m in December – massively higher than expected. The breakdown showed strength in non-store, no surprise given we know the internet side of spending is booming. That saw a near 5% jump on the month. Meanwhile department stores flew. They had seen a 3.3% drop the prior month, so some payback was likely, but this was massive.

I would have expected to see a corresponding slashing in prices to have induced such strength but it didn’t show up – the deflator was fairly stable.

Jeremy Cook, chief economist at World First, thinks these figures could be “a last hurrah for retail” as consumers show more restraint in 2014.

Well, that was unexpected. Pre-Christmas discounting, combined with strong consumer confidence and a strengthening jobs market has driven sales through the tills at a rate that hasn’t been seen since May 2008.

This stands against the anecdotal evidence we’ve been getting from the high street, in what seemed to have been a very lacklustre Christmas trading period. Companies have issued profit warnings and retailers have been eager to warn shareholders that as long as wage growth remains subdued, in both nominal and real terms, that a positive outlook could be guaranteed. I’ll be eager to see just how much discounting is to blame for this number; revenue and profit are very different beasts.

Sterling has driven higher on the number with yields on UK debt moving upwards as well, as the market factors in further pressure on the Bank of England’s forward guidance plan. We still believe that the UK consumer will remain pressurised through 2014 and this number could easily be a ‘last hurrah’ for retail as move forward into 2014.

James Knightley at ING Bank thinks the chances for an interest-rate rise have gone up.

UK retail sales jumped a massive 2.6%MoM in December, way beyond any expectation in the market, leaving sales 5.3% higher than a year ago. Given that this figure is measured in volumes rather than values it adds weight to the view that GDP growth will be very strong in 4Q13 (close to 1%QoQ) with 1Q14 GDP likely to be robust too thanks to base effects….
Overall, a very strong set of numbers that suggest the UK economy is gaining speed with spare capacity really starting to be eaten into. As such, the chances of an interest rate hike this year are rising, but we suspect the [Bank of England] will start with macroprudential tools to cool certain hot spots first.

Howard Archer, chief UK and Europe economist at IHS, thinks consumers could “take a breather” after splashing out at Christmas.

December’s strong retail sales performance provides a major boost to hopes that GDP growth in the fourth quarter of 2013 remained up around the 0.8% quarter-on-quarter rate achieved in both the third and second quarters.

Even so, it should be noted that because of lacklustre overall sales in November and October, retail sales volumes growth in the fourth quarter of 2013 was limited to 0.4%, which was down substantially from growth of 1.6% quarter-on-quarter in the third quarter.

Looking ahead, there is some uncertainty as to how robust consumer spending will be in the early months of 2014. It is very possible that consumers could take a breather after finally splashing out for Christmas and in the sales, given that inflation is currently still running at double the rate of earnings growth. It is also notable that consumer confidence edged back for a third month running in December, although these small dips were from a near six-year high in September.

The good news for growth prospects is that the squeeze on purchasing power now seems to be progressively if gradually easing with consumer price inflation falling to a four-year low of 2.0% in December. Average earnings growth is also showing signs of edging up although it was still only up by 1.1% year-on-year in October itself and by 0.9% year-on-year in the three months to October.

In addition, markedly rising employment is supportive to consumer spending, as is the improving housing market.

Here is a flavour of the insta-reaction on Twitter to those surprising retail sales figures.

Here are the highlights from the Office for National Statistics data on retail sales.

  • The UK retail industry grew by 5.3% in December 2013 compared with December 2012. Retail sales were up 2.6% in December, compared to the previous month, far outstripping economists’ calls for growth of just 0.3% or 0.4%.
  • Department stores – the likes of John Lewis and House of Fraser – did especially well in December, with a month-on-month increase of 8.7%.
  • Internet sales increased by 11.8% in December 2013 compared with December 2012 and by 1.8% compared with November 2013.
  •  But it wasn’t just big bricks and clicks. Small stores (<100 employees) saw the amount of spending go up by 8.1% compared with 2.6% in large stores.
  • Growth was in non-food stores, helping to offset declines in sales in food stores and petrol stations.

Just in…UK retail sales rose 2.6% in December compared to November, the fastest growth in 9 years and smashing expectations.

A smidgen of good news for Portugal, which is hoping to leave its €78bn euro bailout programme later this year. Ratings agency Standard & Poors has removed Portugal from its “Creditwatch” list. Being on Creditwatch is the precursor to an imminent downgrade, so this is a an improvement, albeit a very small one.

Portugal’s BB credit rating and negative outlook was reaffirmed, leaving it stuck just two notches above “junk” status.

S&P said the move reflects its expectation that Portugal will achieve its 5.5% of GDP budget deficit target in 2013 and approach its 4.0% target in 2014.

We base this expectation partly on indications that the economy has been showing signs of stabilisation since mid-2013.

Stronger-than-expected export performance, and an expected bottoming out of private consumption, amid a modest decline in unemployment should support Portugal’s fiscal performance in 2014.

S&P said a key risk was the possibility the Constitutional Court may reject more austerity measures, although the ratings agency expects the government to muddle through find alternatives, as it has in the past.

The negative outlook reflects our opinion that there is at least a one-in-three possibility that we could lower our ratings on Portugal during 2014.

Even Super Mario has his work cut out.

Nintendo has issued a profits warning, after its Wii U console failed to capture the public imagination. The Japanese games maker expects to sell just 2.8m consoles in the 12 months to the end of March, down from previous expectations of 9m. It also halved the number of games that it expects to sell for the Wii U, from 38m to 19m.

Nintendo blamed disappointing sales of its consoles over Christmas:

Software sales with a relatively high margins were significantly lower than our original forecasts, mainly due to the fact that hardware sales did not reach their expected level.

Charles Arthur, the Guardian’s technology editor, has the story here.

Updated

Labour’s shadow business secretary Chuka Umunna has been defending the party’s bank reform plans on BBC Radio 4′s Today programme.

He suggested that a short-term fall in the share price of Lloyds and RBS, both partly state-owned, was a price worth paying to create a more stable economy.

 I’m not denying in the short term that you may see a hit on the share price of these banks – it’s probably happening as we speak now. But the reason we are doing this is so that we can grow our small businesses, which not only create in and of themselves more middle-income jobs – so we actually get people earning more – but also are very important feeders in the supply chain for our larger businesses.
“If we solve that problem – because our economy is too low-wage and too low-skill – and we get more people earning more money, then we will see higher income tax receipts coming into the Exchequer, our businesses will do better because people will be spending more, so we will see higher corporation tax receipts, and therefore we will actually have a better economy.

Overall, the banking crisis caused by the banks cost our country about £1.2 to £1.3 trillion in the wake of 2008/09. In that context, actually, we believe that the costs involved of the reform that we are proposing will in the longer term be in the public interest.
“The reason we are doing this is essentially because we’ve got the biggest cost-of-living crisis in a generation.”

Mr Umunna declined to estimate the level of the cap which Labour would place on banks’ market share.

The quotes are from the Press Association.

Things could have been worse for Shell, suggests Bloomberg correspondent Jonathan Ferro.

Shell has seen 3.9% wiped off its share price since markets opened a few minutes ago.

This hasn’t done much for the FTSE 100, although it hasn’t harmed it either. The overall index is up 0.1%.

Shell is the largest company on the FTSE 100, worth around 7.5% – number courtesy of Mike van Dulken, head of research at Accendo Markets.

On European markets, it’s a pretty unexciting start to the day: Germany’s DAX is up 0.1%, France’s CAC 40 up 0.2% and Spain’s IBEX up 0.1%. Italy’s FTSE MIB is flat.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and the business world.

To start the day, we have a surprise profits warning from the world’s second largest oil company, Royal Dutch Shell. The company has said that its fourth quarter 2013 results are likely to be “significantly lower” than recent levels of profitability.

Earnings for the fourth quarter of 2013 are expected to be $2.9 billion (£1.8bn), compared to analysts’ expectations of $4bn.

Shell is blaming “weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes”.

‘Not good enough’ is the message from Ben van Beurden, Shell’s chief executive who took over two weeks ago.

Our 2013 performance was not what I expect from Shell. Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen
our operational performance and project delivery.

Although analysts are expecting UK markets to open up, Shell is the largest company on the FTSE 100, so could weigh the rest down.

Elsewhere, we have Labour leader Ed Miliband’s speech calling for the UK’s five largest banks to sell off branches – covered in the Guardian here and here.

At 9.30 we are expecting UK retail sales figures. Although shoppers might have been spending big on tablet computers and Christmas jumpers, market watchers are braced for some disappointing numbers. The consensus is for a rise of 0.3% for Q4 2013, which would be a significant drop on the rest of the year.

From the US, we are also expecting industrial and manufacturing production data for December.

I’ll be tracking that and the rest of the economic and financial news throughout the day…

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Financial policy committee ‘concerned about potential risks to financial stability’ from possible housing bubble. Bank of England policy makers agree to “closely monitor housing market indicators covering house price affordability and sustainability”…

 


Powered by Guardian.co.ukThis article titled “Bank of England committee flags up housing market concerns” was written by Jill Treanor, for theguardian.com on Tuesday 3rd December 2013 12.58 UTC

The Bank of England is continuing to closely monitor the affordability of mortgages and the lending policies of banks after taking steps last week to cool the housing market.

The record of the November meeting of the financial policy committee, set up inside Threadneedle Street to spot bubbles in the financial system, shows that concerns about the housing market had risen since their last meeting in June.

“Committee members had become more concerned about the potential risks to financial stability that might arise from developments in the UK housing market,” the record said.

After the meeting the Bank announced last week that the flagship Funding for Lending Scheme (FLS), which supplies cheaper money to banks and building societies, would end a year early for mortgages to focus on small businesses.

The record of the meeting shows that Bank of England governor Mark Carney informed the committee – made of Bank of officials and external members – that he and the Treasury had agreed to amend the FLS to focus on business lending.

“The governor informed the committee that HM Treasury and the Bank agreed that an amendment to the FLS to remove the incentive for new lending to households would be sensible … committee members welcomed this,” the record states.

The FPC, a key element of the coalition’s regulatory changes to avert another financial crisis, also discussed other options to dampen the mortgage market by forcing banks to hold more capital. This could be done “to specific types of mortgage lending, just to new lending or to the entire portfolio of loans”.

It could also take action if it was concerned about the affordability of mortgages by limiting the loan-to-value or loan-to-income ratios for mortgages.

“The committee agreed that it would closely monitor housing market indicators covering house price affordability and sustainability, indicators of indebtedness, underwriting stands, exposures of lenders to highly indebted households and the reliance of lenders on short-term wholesale funding,” the record said.

It also noted that borrowers might start to switch to fixed rate mortgages which, while helping households when interest rates rise, could cause problems for banks.

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Upbeat mood in Britain contrasts with pessimistic eurozone surveys. Fears of recession in France grow. Eurozone composite PMI remains in expansion territory above the 50 mark at 51.5, but declines from October’s level of 51.9…

 


Powered by Guardian.co.ukThis article titled “UK manufacturing expands at fastest rate since 1995″ was written by Heather Stewart, for theguardian.com on Thursday 21st November 2013 13.32 UTC

Britain’s manufacturing sector is expanding at its fastest pace for 18 years as new orders pour in, according to a new survey, rekindling hopes for a rebalancing of the economy.

The Confederation of British Industry’s monthly industrial trends survey shows manufacturing orders and output both at their highest level since 1995.

The CBI said that 36% of firms reported their order books were above normal, with 25% saying they were below normal. The resulting balance of +11% was the strongest since March 1995. Similarly, the positive balance for firms’ level of output, at +29%, was the strongest since January 1995.

Stephen Gifford, the CBI’s director of economics, said: “This new evidence shows encouraging signs of a broadening and deepening recovery in the manufacturing sector. Manufacturers finally seem to be feeling the benefit of growing confidence and spending within the UK and globally.”

The coalition will be encouraged to see signs of a revival in British industry, after fears that the economic recovery has so far been too reliant on consumer spending and an upturn in the housing market.

The chancellor of the exchequer, George Osborne, has said he would like to see a “march of the makers”, helping to double exports by the end of the decade, so that Britain can “pay its way in the world”.

Business surveys have been pointing to a revival in manufacturing for some time, but it has only recently begun to be reflected in official figures, which showed a 0.9% increase in output from the sector in the third quarter of 2013, driven primarily by the success of carmakers. However, output from manufacturing remains more than 8% below its peak before the financial crisis.

News of the upbeat mood among manufacturers in the UK contrasts with more pessimistic surveys from the eurozone where the so-called “flash PMIs” suggest that the economic recovery is petering out in several countries, including France.

While the composite PMI for the eurozone remains above the 50 mark at 51.5, this is a decline from October’s level of 51.9, suggesting that while the eurozone economy as a whole has not slipped back into recession, the pace of growth appears to have slowed.

Chris Williamson, of data provider Markit, which compiles the survey, said: “The fall in the PMI for a second successive month suggests that the European Central Bank was correct to cut interest rates to a record low at its last meeting, and the further loss of growth momentum will raise calls for policy makers to do more to prevent the eurozone from slipping back into another recession.”

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Minutes of latest monetary policy committee meeting signal interest rates could rise sooner than 2016. Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring…

 


Powered by Guardian.co.ukThis article titled “Growing evidence of ‘robust recovery’ in UK economy, says Bank of England” was written by Heather Stewart, for theguardian.com on Wednesday 23rd October 2013 10.34 UTC

Bank of England policymakers have been surprised at how rapidly growth has picked up and unemployment has fallen since the spring, raising the prospect of an earlier-than-expected rise in interest rates.

The Bank’s nine-member monetary policy committee voted unanimously to leave policy unchanged earlier this month; but minutes of their meeting showed that a strong increase in employment, and upbeat readings from business surveys, had prompted them to upgrade their expectations for growth.

Discussing the upbeat jobs data released this month, the minutes said: “It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.”

They described the latest news as pointing to a “robust recovery in activity” in the UK – though they also warn about the lack of the kind of rebalancing in the economy, towards trade and away from consumer spending, that the coalition was hoping for. “There is a risk that the recovery in the United Kingdom might be less well balanced between exports and domestic consumption than was ultimately needed.”

One of the Bank’s first decisions after its governor, Mark Carney, joined in July was to issue “forward guidance”, promising to keep interest rates unchanged until the unemployment rate falls to 7%, barring a surge in inflation.

When the policy was unveiled in August, Carney said he expected unemployment to remain above 7% at least until 2016; but a slew of data, including a fall in the unemployment rate to 7.7% in the three months to July, had raised doubts in markets about whether the Bank would wait so long before deciding to act. Wednesday’s minutes suggest the MPC may be coming round to the idea that the 7% threshold could be reached sooner, though the committee stressed that “it was too early to draw a strong inference about future prospects from the latest data”.

Simon Wells, UK economist at HSBC, said: “We expect the MPC to bring forward the timing of unemployment hitting the 7% threshold by around two quarters when it revises its forecasts in November.”

Discussions among MPC members also highlighted the growing strength of Britain’s housing market, which they expect to boost the economy. “Overall, indicators pointed to continued house price rises. This would increase the collateral available to both households and small businesses, which could provide some further support to activity,” the minutes say.

In the latest indication of a revival in the property market, the British Bankers Association announced on Wednesday that the number of mortgages approved by UK banks to fund house purchases reached 42,990 in September, its highest level in almost four years and well above the previous six-month average of 42,990.

The BBA data, which covers the run-up to the launch of Help to Buy mortgage guarantee scheme, shows that activity in the housing market continued to gain momentum over the summer, with house purchase loans showing the biggest increase month-on-month.

The BBA said its members approved new loans worth a total of £10.5bn in September, up from £9.9bn in August and above the six-month average of £9bn. Of this, £6.7bn was for house purchases and £3.5bn for remortgages. The remainder was other secured borrowing.

The BBA statistics director, David Dooks, said: “September’s figures build on the growing picture of improved consumer confidence, with stronger gross mortgage lending, rising house purchase approvals and increased consumer credit.”

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