UK news

Bank of England governor’s move to persuade markets that interest rates will not immediately rise has provoked skepticism. His first 100 days as Bank of England governor have been a noisy medley of speeches, impeccably tailored photo-calls and pzazz…

 


Powered by Guardian.co.ukThis article titled “Is Mark Carney’s forward guidance plan a step backwards?” was written by Heather Stewart, for theguardian.com on Monday 7th October 2013 14.00 UTC

If Mark Carney was going to live up to his billing as a “rock star central banker” – and his £874,000 a year pay package – he had to arrive in Threadneedle Street on a crashing crescendo. His first 100 days as Bank of England governor have been a noisy medley of speeches, impeccably tailored photo-calls and pzazz.

From the need for more women on banknotes to his love of Everton football club, Carney has had plenty to say on a range of subjects since his appointment on 1 July this year. However, it’s the Bank’s new policy tool of forward guidance that has provoked the most interest, and a good measure of scepticism, among seasoned Bank-watchers.

Honed by Carney in Canada and adopted by the US Federal Reserve and the ECB in different forms, forward guidance is a way of signalling to the public and financial markets how the Bank will respond to shifts in the economy. In this case, the monetary policy committee has pledged to keep interest rates at their record low of 0.5% at least until the unemployment rate falls to 7%.

“Forward guidance is an attempt to persuade the markets that interest rates are not immediately going to go up,” says John Van Reenen, director of the Centre for Economic Performance at the London School of Economics. “It’s one more tool in the toolbox.”

However, as implemented by Carney and his colleagues in the UK, guidance is hedged about with three separate “knockouts” – rates would rise if inflation, financial stability or the public’s inflation expectations got out of control. Moreover, the governor has stressed that the 7% unemployment rate is not a trigger for a rate rise, but a “staging post”, which will not necessarily prompt tighter policy.

During a somewhat fraught hearing with MPs on the cross-party Treasury select committee last month, in which Carney sought to clarify the policy, chairman Andrew Tyrie expostulated that it would be a hard one to explain “down the Dog and Duck”.

Financial markets have also been less than convinced. The yield, or effective interest rate, on British government bonds – partly a measure of investors’ expectations of future interest rates – has risen rather than fallen since the Bank’s announcement. That is partly because the latest data suggests the economic outlook is improving, but rapidly rising bond yields can be worrying because they tend to push up borrowing costs right across the economy. Carney, though, has insisted he is not concerned.

Meanwhile the pound has risen almost 4% against the dollar since Carney took the helm – again signalling markets expect rates to rise sooner than the Bank is indicating. Last week sterling hit a nine-month high, although it came off that peak as investors began to question if the UK’s recovery could continue at its current pace.

“I don’t think in practice forward guidance is very successful,” says Jamie Dannhauser of Lombard Street Research. He believes Carney has failed to convince the City he means business, because he has failed to back up forward guidance with action, such as the promise of a fresh round of quantitative easing – the Bank scheme that has pumped £375bn of freshly minted money into the economy.

“[Forward guidance] doesn’t work if you’re not willing to take on the markets if you don’t get your way,” says Dannhauser.

David Blanchflower, a former member of the MPC, is more blunt: “He looks already, within a hundred days, to have lost control. Bond yields are rising, the pound is rising like mad, and they’ve got no response.”

He argues that the hedged nature of the new policy is likely to reflect “horse-trading” between Carney and his fellow MPC members. Unlike in Canada, where what the central bank governor says goes, decision-making on the MPC is by vote. With a recovery now under way, its various members are known to have differing views on what are the most pressing risks to the economy.

Another former MPC member said: “Had I been on the MPC I would have let him do it [forward guidance], because I don’t think it does any particular harm; but I don’t think it does much good either.”

It’s not just the Bank’s approach to monetary policy that has changed on Carney’s watch. When outgoing deputy governor Paul Tucker, who missed out on the top job, leaves for the US later this month, it will mark the latest in a number of personnel changes that are starting to make Carney’s Bank look quite different from Lord (Mervyn) King’s.

Blue-blooded banker Charlotte Hogg joined as the Bank’s new chief operating officer, a post that didn’t exist under the old regime, on the same day as Carney. Meanwhile Tucker will be replaced by former Treasury and Foreign Office apparatchik Sir Jon Cunliffe. With long-serving deputy governor Charlie Bean due to leave early in 2014, Carney will be given another opportunity to bring in a new broom.

Insiders say the atmosphere in the Bank’s Threadneedle Street headquarters has already changed. Carney is often seen eating lunch in the canteen or showing visitors around. His approach is less hierarchical than that of King, who was derided as the “Sun King”, by former chancellor Alistair Darling – though Carney is said to be no keener on intellectual dissent than his predecessor.

He will need all the allies he can get both inside and outside the Bank, if he is to deal successfully with what many analysts see as the greatest threat facing the economy: the risk that an unsustainable bubble is starting to inflate in Britain’s boom-bust housing market.

Carney and his colleagues on the Bank’s Financial Policy Committee (FPC), the group tasked with preventing future crashes which partly overlaps with the MPC, have new powers to rein in mortgage lending if they believe a bubble is emerging, and the governor has said he won’t hesitate to use them.

But the FPC is untested and largely unknown to the public, and bubbles are notoriously hard to spot. Using the FPC’s influence to choke off the supply of high loan-to-value mortgages, for example, would be hugely controversial at a time when large numbers of would-be buyers have been frozen out of the market. Meanwhile, the government’s extension of the Help to Buy scheme, with details to be laid out on Tuesday, is likely to increase the demand for property, potentially pushing up prices.

Van Reenen warns that if property prices do take off, Carney could find himself in an unenviable position. “We have this terrible problem in this country that house prices have got completely out of kilter with incomes. I would be very reluctant to see interest rates start pushing up. Using other methods, such as being tougher on Help to Buy, and trying to do things through prudential regulation is better – but the fundamental thing is lack of houses, and Carney can’t do anything about that.”

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USA 

New governor tells MPs his pledge to keep interest rates at record lows for up to three years has reinforced recovery. Carney points out that he is the only serving central bank governor among the G7 countries to have increased rates while heading the Bank of Canada…

 


Powered by Guardian.co.ukThis article titled “Bank of England governor Mark Carney rattled as he defends forward guidance” was written by Heather Stewart, for theguardian.com on Thursday 12th September 2013 11.17 UTC

The Bank of England governor, Mark Carney, has launched a staunch defence of his pledge to keep interest rates at record lows for up to three years, claiming that it has “reinforced recovery”.

Carney faced tough questioning from the cross-party Treasury select committee of MPs about the likely consequences of the monetary policy committee’s new “forward guidance” strategy.

But he insisted: “Overall, my view is that the announcement has reinforced recovery. It’s made policy more effective, and more effective policy is stimulative at the margin.”

The new governor also stressed that despite the MPC’s expectation that rates will remain on hold for up to three years, he would be ready to push up borrowing costs if necessary.

“I’m not afraid to raise interest rates,” he said, pointing out that he is the only serving central bank governor among the G7 countries to have increased rates – in his previous post, in Canada.

City investors have pushed up long-term borrowing costs in financial markets sharply since the MPC announced its new pledge to leave borrowing costs unchanged at 0.5%, at least until unemployment falls to 7%.

But Carney, who was handpicked by George Osborne to kickstart recovery and took over in Threadneedle Street at the start of July, at times appeared rattled. He said the recent increase in long-term rates, which sent 10-year government bond yields through 3% last week for the first time in more than two years, was “benign”.

He also repeatedly refused to be drawn on whether the new approach represented a loosening of policy – equivalent to a reduction in interest rates – in itself.

Carney denied that the new framework, involving “knockouts” if inflation appears to be getting out of control, is too complex. But Andrew Tyrie, the committee’s Tory chairman, complained that Carney’s account of the Bank’s new approach would be difficult to explain “down the Dog and Duck”.

Asked about the plight of savers, whose savings are being eroded by inflation with interest rates at rock bottom, the governor said he had “great sympathy”, but the best thing the Bank could do to help was to generate a sustainable economic recovery.

“Our job is to make sure that that’s not another false dawn, and ensure that this economy reaches, as soon as possible, a speed of escape velocity, so that it can sustain higher interest rates.”

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During the press conference held to announce the BoE’s new forward guidance for interest rates, Carney made it clear the MPC plans to stay the course. Interest rates are to remain low, but what does that say about economic recovery, inflation and house prices?..

 


Powered by Guardian.co.ukThis article titled “Five things we learned from the Bank of England inflation report” was written by Phillip Inman, for theguardian.com on Wednesday 7th August 2013 14.37 UTC


1. Interest rates are going to stay low for a very long time

Current predictions say the Bank will only consider raising rates in 2016, but it could be 2017 or 2018 before the economy is considered strong enough to cope with higher rates. It will not consider raising rates until unemployment declines to 7% (from 7.8%), and its own forecast puts unemployment above 7% in 2016.

2. The current economic recovery is fragile

The UK might have seen a 0.9% jump in GDP in the first six months of the year, but the Bank of England is concerned that growth remains weak. The level of GDP is below where it was in 2008 and well below where it would be if the crash hadn’t happened. High unemployment shows there is slack in the economy that can be deployed without causing inflation.

3. Fears of a house price bubble are misplaced

Governor Mark Carney argued that the level of transactions are well below the peak (about a third lower) and house prices are still below the highest point in 2008, so a bubble is a long way off. And anyway, he said, the central bank now monitors the big lenders for dodgy or risky practices, so a repeat of the crazy lending in the first half of the last decade is unlikely.

4. Inflation is not a worry

This is not something the Bank of England has explicitly declared in its quarterly inflation report. It says monetary policy committee is still watching for any signs of inflation. However, there is little pressure from rising wages and it blames the current 2.9% rate (well above the 2% target) on the rising cost of train fares and regulated monopoly suppliers such as those related to water rates and gas prices.

5. More quantitative easing could be on the way

During the press conference held to announce the BoE’s new forward guidance for interest rates, Carney made it clear the MPC plans to “maintain the current highly stimulative stance of monetary policy” and could even extend it. The Bank is unlikely to cut rates further, but could boost QE. It has pumped £375bn into the financial system to promote lending to little avail (it might have been even worse without it, said Carney’s predecessor Lord King). Some analysts argue it should rise to £425bn.

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The UK economy grows at a faster pace by 0.6% q/q in the second quarter of 2013. Construction up 0.9%, services up 0.6%. George Osborne’s view. The chancellor meets the night shift. Spanish jobless rate finally falls…

 


Powered by Guardian.co.ukThis article titled “UK economic growth accelerates to 0.6%, as IMF issues eurocrisis warning – as it happened” was written by Graeme Wearden, for theguardian.com on Thursday 25th July 2013 14.04 UTC

5.50pm BST

Closing summary

Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Chancellor of the Exchequer George Osborne meeting staff at Tesco’s National Distribution Centre near Rugby. Photograph: Stefan Rousseau/PA

Time to clock-off for another day. Here's a quick reminder of the key points…

Britain's economic recovery has picked up pace. Growth in the second quarter of 2013 has been estimated at 0.6%, twice as rapid as in the first three months of this year.

The Office for National Statistics reported that every section of the economy grew. However, the UK economy remains 3.3% smaller than before the financial crisis struck in 2008.

• Highlights start at 9.30am.

• Key charts from 10.02am

City economists were encouraged by the data, with some predicting stronger growth later this year. Business leaders, though, warned that more needs to be done to guarantee the recovery (see 10.30am onwards)

Chancellor George Osborne said the figures showed Britain is moving in the right direction. See 9.49am for details, and 1.12pm for video

There are also a few photos of Osborne meeting nightshift workers at 8.50am

Elsewhere…..

ª The International Monetary Fund warned that more needs to be done to nurse the eurozone back to health and avoid the crisis in the region flaring up again. See 3.03pm onwards.

• Greek MPs have approved legislation that should mean it receives its next aid tranche soon. See 4.25pm

Spanish unemployment has fallen for the first time in two years. However, the jobless rate shows that more than one in four adults are still out of work, and analysts warned that seasonal factors and migration were behind the change. See 4.58pm.

Back tomorrow for more live-blogging action, probably more centred on the eurozone after today's focus on the UK.

Until then, thanks and goodnight…. GW

5.47pm BST

Britain's improved economic growth didn't generate much cheer in the City, where shares ended lower – the FTSE 100 dropped 32 points to 6587.

More details here: Shire hits new record after update but FTSE 100 fades as rally runs out of steam

4.57pm BST

4.56pm BST

This morning's drop in Spanish unemployment has been welcomed by politicians and firms, although ministers admit that the jobless rate remain far too high:

Spain's unemployment rate fell for the first time in two years and some of the country's biggest firms said on Thursday business was looking up, boosting the government's claim the economy is climbing out of recession.

The dip in the jobless figures – to 26.3% in the second quarter from 27.2% in the first – nonetheless highlighted how far the country still needs to travel on the road to full recovery. Economy minister Luis de Guindos called the figures "totally unacceptable".

More here: Spain's unemployment rate falls

While this analysis piece from Open Europe is also worth a read:

Let's have a look beyond the (rather encouraging) headline figures on Spanish unemployment

It points out that the drop in unemployment can be attributed to seasonal factors, an increase in people dropping out of the labour market, and migration out of the country.

Spanish job rate
Photograph: Open Europe

Updated at 5.12pm BST

4.49pm BST

Across to Cyprus, and Open Europe flags up that deposits in its banking sector appear to have fallen again last month.

Cypriot deposit leakage continued in June

Cyprus bank deposits
Photograph: Open Europe

It's a slightly confusing picture, due to the ongoing restructuring of the Cypriot banking sector, but as Open Europe explains:

Ultimately, money continues to leak out despite the capital controls or people continue to rapidly wind down their savings. Neither presents a pleasant prognosis for the future of the Cypriot economy.

As we have said before the real test will come when the capital controls are finally removed, although that does not seem to be on the horizon in the near future.

4.45pm BST

IMF: round-up

The BBC has a good take on this afternoon's warning from the International Monetary Fund (see 3.03pm onwards):

IMF calls for further action to solve eurozone crisis

The International Monetary Fund has called for more action to end the crisis in the eurozone.

The IMF wants greater progress made on repairing the balance sheets of banks, so that lending can be kick-started

While the Daily Telegraph flags up that the IMF also worried that the eurozone could be hit when the US Federal Reserve starts slowing its stimulus package:

IMF fears Fed tapering could 'reignite' euro debt crisis

The report warned that the onset of a new tightening cycle in the US had already led to major spill-over effects in the eurozone, pushing up bond yields across the board.
Early tapering by the Fed "could lead to additional, and unhelpfu, pro-cyclical increases in borrowing costs within the euro area. This could further complicate the conduct of monetary policy and potentially damage area-wide demand and growth. Financial market stresses could also quickly reignite," it said.

4.25pm BST

Greek MPs approve civil service job cuts amendment

A woman makes a transaction at an ATM of a Piraeus Bank branch as a man waits for his turn in Athens July 25, 2013.
A Piraeus Bank branch in Athens today. Photograph: YORGOS KARAHALIS/REUTERS

The Greek parliament has approved an amendment to its legislation bringing in job cuts across the public sector, which paves the way to unlocking its next aid tranche worth €2.5bn.

The move means Greece will hit its target of transferring 4,200 workers into its new labour pool, where they could be forced to accept a new job or be laid off.

Greece's lenders had been concerned about certain 'exemptions' which meant some workers were able to avoid being transferred to the pool. Finance ministry insiders had said that this only affected around 80 people, mainly those with university quailfications or disabilities.

Kathimerini reports;

The legislation passed on Thursday overrides a law passed last week that protects civil servants with postgraduate degrees and those with disabilities or other social needs from being forced into a labor reserve, where they have eight months to find other jobs in the public sector or face dismissal.

Eurogroup finance ministers are now expected to approve the bailout payment on Friday. Yesterday, it said Greece had met 21 of the 22 pre-conditions on the aid tranche. Today's vote should complete the set.

Updated at 5.14pm BST

3.29pm BST

The IMF also pointed to the eurozone youth jobless crisis in today's assessment of the region, saying that despite recent progress….

growth remains elusive and high unemployment persists, especially among youth.

And while politicians such as Francois Hollande are talking positively about Europe's prospects (see 1.06pm), the IMF fears any deterioration in conditions could be serious. The eurozone, it said, has little slack to cope with new problems:

Because policy space is limited, public debt ratios are very high (and still rising), and economic slack is already substantial, further negative shocks—domestic or external shocks—could severely impact growth.

3.03pm BST

IMF issues eurozone crisis warning

The eurozone crisis isn't over, and the European Central Bank needs to take fresh action now to prevent the situation deteriorating.

That's the key message from the International Monetary Fund this afternoon, as it publishes its latet assessment of the eurozone areas.

The IMF predicted that austerity programmes being implemented across the region could wipe betwen 1% and 1.25% off annual growth this year, and recommended countries should slow down.

Fiscal adjustment should be paced to avoid an excessive drag on growth.

The IMF also called for the ECB to inject more liquidity into the financial system, though massive cheap loans to the banking sector. This would repeat the Long-Term Refinancing Operations (LTRO) conducted at the end of 2011 and early 2012, credited with staving off a more severe credit crunch.

The IMF said "additional unconventional monetary support" could help reverse the current situation where it is harder and more expensive for firms in Southern Europe to borrow than the North.

It said:

Taking its current approach forward, the ECB should ensure term funding needs for weak but solvent banks through an additional LTRO of sufficient tenor.

The eurozone's stronger banks have actually been repaying their existing LTRO loans, which the ECB sees as an encouraging development….

The headquarters of the European Central Bank (ECB) on January 8, 2013 in Frankfurt am Main.
The headquarters of the European Central Bank in Frankfurt. Photograph: Hannelore Foerster/Getty Images

Updated at 3.12pm BST

2.33pm BST

Greek gloom

Today's winds of economic optimism haven't reached Greece today, with two economic surveys showing that the country where the eurozone crisis began is still suffering.

Greek household disposable income has dropped by an alarming 6.2% year-on-year,, continuing a trend which began three years ago.

Disposable income in Greece, to Q1 2013
Disposable income levels (blue) and consumption spending (red) in Greece since the start of 2006. Photograph: l/ELSTAT

And Greek bank deposits have begun falling again, as consumers and companies dip into their reserves to keep afloat.

Data released by the Greek central bank showed a 0.5% drop in deposit levels to €162.65bn. Savings levels had been rising since last summer as confidence rose in Greece following the trauma of 2012, but that trend could be reversing….

Updated at 2.51pm BST

2.05pm BST

Alexander: Don’t get too excited

Danny Alexander
Photograph: Sky News

Danny Alexander, chief secretary to the Treasury, has been touring the media studios discussing today's growth data.

And the decent growth didn't prevent Alexander from taking a pop at the previous government, when asked about the situation on Radio 4's World At One:

Here's the quotes:

These figures are encouraging.

It's good news, not just that there's been growth but in every sector we have seen improvement.

But I'd also say we shouldn't get over-excited because this country has got a long way to go to not just to clear the financial mess that we inherited from the previous government but to rebuild our competitiveness and to make sure that we do have the conditions in this country for businesses to thrive.

He then scampered to repeat the message on Sky News, where business leaders were warning that the Treasury is failing to encourage and stimulate investment.

Alexander said he wasn't aware of a report that the UK languishes in 159th place when countries are ranked by investment as a share of GDP, but would look into it.

We're a helpful lot at Guardian Towers, so politely suggest the chief secretary checks out The Economist, who covered it here: Let’s try to catch up with Mali

1.12pm BST

Video: George Osborne on today’s data

Here's a video clip of George Osborne discussing today's economic growth figures, and Britain's passage "from rescue to recovery".

The chancellor says he is encouraged that all sectors of the economy grew in the last quarter (details at 9.43am onwards), and repeated the need to rebalance Britain away from the financial sector.

The clip also includes footage of Osborne touring factories and M6 motorway improvement work last night.

Updated at 1.49pm BST

1.06pm BST

Hollande: Eurozone recession probably over


French President Francois Hollande speaks during the “Brdo Process” leaders’ meeting at Brdo Castle, in Brdo Pri Kranju north of Ljubljana, on July 25, 2013. Photograph: BERTRAND GUAY/AFP/Getty Images

The UK isn't the only place enjoying better economic data this week. Over in Europe, the president of France has declared that the eurozone recession is probably over.

Speaking in Slovenia, Francois Hollande said:

Indicators published in the last few days look as if we have reason to believe we have overcome the recession, but it is still fragile.

Hollande may have been thinking of yesterday's survey of private sector firms in the euro area, which showed growth for the first time in 18 months.

He also said there was "no reason to sound the alarm" over Slovenia's banks, whose bad loan problems have led to speculation that the country may require a bailout.

Hollande is in Slovenia for a meeting of Balkan leaders to discuss integration into the European Union, and unresolved issues from the conflict of the 1990s.


The presidents of Albania Bujar Nishani, Croatia Ivo Josipovic, France Francois Hollande, Slovenia Borut Pahor and Kosovo Atifete Jahjaga pose for a group photo prior to the meeting “Brdo Process” at Brdo Castle, in Brdo Pri Kranju today. Photograph: BERTRAND GUAY/AFP/Getty Images

12.40pm BST

11.58am BST

Larry Elliott: GDP growth is no great shakes

Our economics editor, Larry Elliott, argues that today's GDP data is "tinged with disappointment", as the UK has bounced back more Tiggerishly after previous slumps.

Larry writes:

Compared to its miserable performance over the past few years, 0.6% growth looks impressive. But in the longer term it is no great shakes. Historically, the economy has grown by around 2.25%-2.5% a year on average, so the second quarter was smack in line with that trend.

But after recessions, national output has tended to rise strongly as it makes up for the ground lost during the downturn. Given that the level of GDP is still 3.3% below its previous peak, quarterly growth rates of 1% would be more normal for this stage of the cycle. The year-on-year growth rate of 1.4% is also below par.

More here: George Osborne's 0.6% growth is good but unspectacular

Updated at 12.09pm BST

11.35am BST

Key event

The news that UK growth is accelerating will "shape the national conversation" about the economy, reckons Nick Robinson, the BBC's Politics editor.

But with real wages lagging well behind inflation, attention may shift from headline growth to living standards.

Robinson writes:

There'll be no more talk of dips – double let alone treble – as people speak of recovery and not recession.

That will have an impact on political psychology – giving Tory MPs another reason to smile on their sun loungers this summer and allowing George Osborne to believe that he has finally put that "omnishambles" Budget behind him.

However, Ed Balls and Labour will be quick to remind us that a recovery in one measure of national economic output is not the same as a recovery in living standards. Average real incomes fell by 3% last year and the independent Institute for Fiscal Studies believes they will fall again as wages are squeezed, benefits and tax credits cut and inflation increases.

The politics of 'growth versus austerity' will slowly transform into the politics of who will improve 'living standards for all'.

Duncan Weldon, the TUC's senior policy officer, makes a similar point:

The latest data shows that take-home pay is only up by around 1% year-on-year, while the retail prices index of inflation is running at 3.3%.

11.28am BST

11.25am BST

Britain is finally getting back on its feet, reckons Nida Ali, economic advisor to the EY ITEM Club, but issues such as youth unemployment must be addressed. 

The headline GDP figures were bang in line with expectations, driven by private sector expansion, signalling underlying momentum in the economy. This is very encouraging and qualifies as the right kind of growth that we have been lacking over the past couple of years.

Ali predicts that Britain will achieve growth of "more than 1% this year".

Although the consumer sector will probably play a major role in the recovery, we also expect momentum to build in business investment and exports, which should give way to stronger growth of over 2% in 2014. But with a number of weak areas in the economy, such as high youth unemployment, disappointing wage growth and low productivity, we still have a long way to go.

Updated at 11.29am BST

11.18am BST

Today's preliminary estimate of 0.6% growth is only the ONS's first stab at calculating GDP in the last quarter, as it's only based on data from April and May.

It may well be revised in the weeks ahead, as Ben Chu of the Independent flags up:

11.12am BST

BCC: UK firms are more upbeat

Plenty of optimism over at the British Chambers of Commerce, which represents UK companies.

John Longworth, the BCC's director general, reckons business confidence is rising, with many bosses planning to hire more staff later this year.

Firms are feeling upbeat and are capable of expanding. More and more are adopting a ‘have a go’ attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still.

But strong, sustained growth requires efforts from the government too, as businesses need an enterprise-friendly environment for the economic to go from good to great. New and existing exporters need more support to help them diversify into fast-growing markets, and access to finance for dynamic, growing businesses must be made more available.

10.58am BST

IoD: Headwinds and tailwinds

The Institute of Directors predicts that UK growth could pick up pace in the current quarter, but warns that inflation and the eurozone crisis could scupper the recovery.

Graeme Leach, the IoD's chief economist, commented:

The GDP figures are encouraging and will help to further build business and consumer confidence. For the first time since the financial crisis the economy looks and feels as if there is a tailwind behind it. We are optimistic that the current rate of quarterly growth can be maintained through the second half of 2013 and into 2014. Indeed, if one looks to the current broad money supply (the amount of cash and bank deposits) as a leading indicator of economic activity, quarterly growth might actually accelerate slightly over the next 6 months.

Second quarter GDP growth of 0.6% is in line with trend growth but not above it. Consequently there is little reason to expect an imminent change in monetary policy by the MPC. The figures won’t have changed views on the size of the output gap and the amount of spare capacity in the economy. The MPC will also be aware that despite the tailwind to growth from the money supply, significant headwinds remain. Key headwinds include the squeeze on household income from inflation running ahead of earnings, bank balance sheet reduction and the ever present threat of a return of the euro crisis.

10.52am BST

David Cameron tweets that today's data shows Britain is moving in the right direction:

Surely it's the hardworking people who are building the economy, prime minister?

10.47am BST

BNP Paribas: well balanced growth

David Tinsley of BNP Paribas says today's data shows "relatively well balanced growth" in the last three months:

Within services, distribution, hotels and restaurants rose a very solid 1.5%. That was the stand-out area of strength, most other sub-sectors averaged around 0.5/0.6%.

Overall this is a decent but not spectacular performance for the UK economy. The level of output remains 3.3% below its previous peak, which highlights there is still much work to do.

10.30am BST

Reaction (1)

Here's a round-up of the best comment and reaction from economists and City experts on Twitter:

Updated at 10.30am BST

10.23am BST

Balls: It’s still a slow recovery

Ed Balls, shadow chancellor, has responded to the news that Britain's recovery picked up speed last quarter:

After three wasted and damaging years of flatlining, this economic growth is both welcome and long overdue. But families on middle and low incomes are still not seeing any recovery in their living standards. While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages.

“This is also the slowest recovery for over 100 years. In America, where President Obama has acted to support rather than strangle the recovery, their economy has grown nearly three times faster than the UK since autumn 2010. Simply to catch up all the ground we have lost under David Cameron and George Osborne we would need growth of 1.3 per cent each quarter over the next two years.

Real risks remain. So instead of more complacency from the Chancellor, we need action to catch up all the lost ground and secure a strong and sustained recovery that everybody can benefit from.

10.10am BST

My colleague Heather Stewart writes:

Britain's recovery picked up pace in the second quarter, official figures have confirmed, with GDP expanding by 0.6%.

George Osborne, the chancellor, welcomed the fresh evidence that the economy has moved, as he has put it, "out of intensive care".

"Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend," he said, "but there is still a long way to go and I know things are still tough for families.

More here: UK GDP growth of 0.6% shows 'Britain is on the mend,' says George Osborne

10.07am BST

Chart: Service sector lead the way

As suspected, most of the growth in the last three months has come from the service sector:

UK GDP by sector
Photograph: ONS

This reflects the fact that services still makes up around three-quarters of the overall economy.

A recap on the individual growth rates:

• Services: +0.6%

• Production: +0.6%, including +0.4% for manufacturing

• Construction: +0.9%

• Agriculture: +1.1%

10.02am BST

Chart: GDP over the last decade

Chief statistician Joe Grice made the point earlier that UK GDP is still 3.3% below its alltime peak in 2008.

This chart shows why — a massive tumble in output when the financail crisis struck, followed by patchy growth from the start of 2010.

UK GDP
Photograph: ONS

9.49am BST

Osborne: We’re holding our nerve

Chancellor George Osborne, doubtless invigorated by his adventures last night (photos), has welcomed the GDP data.

Osborne said:

Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend – but there is still a long way to go and I know things are still tough for families.

So I will not let up in my determination to make sure we put right all that went wrong in our economy.

Unlike the unbalanced economy before the crisis, we are going to make sure that everyone benefits from this recovery.

9.46am BST

And on a year-on-year basis, UK GDP is 1.4% higher than after the second quarter of last year.

However, we need to be cautious — as Q2 2012 contained an extra bank holiday for the Queen’s Diamond Jubilee, hitting output.

9.43am BST

Firing on all cylinders

All four main industrial groupings within the UK economy – agriculture, production, construction and services – grew in the second quarter of 2013. That means the economy is firing on 'all cylinders', in City jargon.

9.39am BST

Download the report

You can see the the data yourself on the Office for National Statistics website, here: Gross Domestic Product Preliminary Estimate, Q2 2013

9.38am BST

Good news, but nothing special

Britain's growth of 0.6% over the last three months is in line with City forecasts. It's twice as strong as the 0.3% rise in GDP recorded in the first three months, and is likely to cheer the government.

Our economics editor, Larry Elliott, comments that it's "good but unspectacular". If it continued over a whole year then it would mean annual growth of just under 2.5% — which would have been unspectacular in ther years before the financial crisis struck.

9.35am BST

Key event

UK GDP. Q2 2013
Photograph: ONS

9.33am BST

Questions – why has the construction sector grown so well, 0.9%, in the last three months?

Joe Grice won't speculate, but agrees that it's a stronger performance for the industry after a difficult time.

9.31am BST

Joe Grice of the ONS explains that Britain's economy is still 3.3% below its pre-recession peak.

9.30am BST

UK GDP DATA RELEASED

BREAKING: Britain's economy grew by 0.6% in the second quarter of 2013. That's in line with estimates.

The service sector grew by 0.6%,

Manufacturing grew by 0.4%

Construction grew by 0.9%.

9.28am BST

Joe Grice, chief economist at the ONS
Photograph: BBC News 24

Tension is building as the Office for National Statistics prepares to announce its first estimate of GDP growth, in just a few moment time.

Joe Grice, the ONS's chief economist, is sat at the press conference in London ready to deliver the big news….

Updated at 2.35pm BST

9.13am BST

Just over 15 minutes to go until we get the first estimate of UK growth for the last three months….

A 0.6% rise in GDP (the consensus view in the City) would mean that the economy has expanded by 1.4% over the last year (unless previous data is revised). That's a lacklustre annual growth rate.

Kit Juckes of Societe Generale reckons it won't be enough to persuade the Bank of England to start tightening monetary policy:

Year-on year growth of 1.4% is only good when we comapre it to the recent past or to the Euro Zone. And bear in mnd, we saw quarters with 0.6 or 0.7% growth in both 2012 and 2011, but we also saw quarterly falls. This may be marginally better than stagnation but won't alter the prospect of super-easy money being in place for a super-long time.

8.50am BST

Photos: Osborne meets the night shift

Chancellor George Osborne prepared for this morning's GDP data by spending last night visiting some of Britain's army of night workers in and around Birmingham.

He visited a Warburton's bakery, met with construction workers toiling on the M6 motorway, and toured Tesco's National Distribution Centre near Rugby, apparently to learn about how the UK economy runs at night.

Chancellor of the Exchequer George Osborne meets staff at Warburtons Bakery in Wednesbury near Birmingham.
Upper crust? Osborne meets staff at Warburtons Bakery in Wednesbury near Birmingham. Photograph: Stefan Rousseau/PA
Chancellor of the Exchequer George Osborne meets workers  on a section of the M6 motorway near Birmingham where he saw a road management scheme being constructed whilst the road was closed
Photograph: Stefan Rousseau/PA
Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Tesco’s National Distribution Centre near Rugby. Photograph: Stefan Rousseau/PA

Updated at 8.52am BST

8.41am BST

Service sector leads the way?

Where is Britain's growth coming from? The UK government has made plenty of noise about creating the 'March of the Makers", but economists reckon that the dominant services sector is driving the recovery.

Marc Ostwald of Monument Securities predicts:

Retail spending is seen contributing just 0.1 ppt to today's report, and construction output has been sluggish, with Services presumably assumed to have done most of the 'heavy lifting'.

8.37am BST

Dr Gerard Lyons, economic adviser to Boris Johnson, the Mayor of London, cautions against getting too excited about today's UK GDP figures.

8.28am BST

Spanish jobless rate finally falls

There are signs of recovery in Spain, too, this morning.

Its unemployment rate has fallen for the first time since it entered recession almost two years ago, but remains alarmingly high. The jobless rate dropped to 26.3% in the second quarter of this year, from 27.2% in January-March.

The total number of people out of work dropped to 5.98m, from 6.20m, while the employment total increase by 149,000 to 16.8m.

The south of the country continues to suffer the greatest unemployment rates, as this image shows:

Updated at 8.34am BST

8.08am BST

UK growth figures awaited

Chancellor of the Exchequer George Osborne meets staff at Tesco's National Distribution Centre near Rugby.
Chancellor of the Exchequer, George Osborne, meeting staff at Tesco’s National Distribution Centre near Rugby on Wednesday. Photograph: Stefan Rousseau/PA

Good morning, and welcome to our coverage of the latest events across the eurozone, the financial markets and the global economy.

Are things looking up for the British economy? We'll find out this morning, when growth figures for the second quarter of 2013 are released.

City economists expect to see a rise in GDP, of perhaps 0.6%, which would be twice as strong as the growth in the first three months of this year, when Britain avoided falling back into recession.

That would be welcome news to a country that's suffered weak growth, or worse, over the last few years. A strong performance is certain to be hailed by the government as vindication for its economic strategy.

As the Guardian explains this morning:

The Treasury will try to maintain a cautious posture, but start to put the political squeeze on the shadow Treasury team by claiming its dire predictions of mass unemployment have been proved untrue.

The shadow chancellor, Ed Balls, in the US for talks with the Obama administration, has already prepared the ground for the change of economic gear by highlighting the continued squeeze on living standards.

The UK will be the first major economy to estimate growth for the April-June period. In GDP forecasting (as in sport), Britain typically beats most other countries so the data will be a handy – if perhaps inaccurate – guide to economic conditions:

A healthy rise in UK GDP could add to the optimism created yesterday by the latest survey of European firms, which suggested the eurozone may finally be leaving recession.

The GDP data is released by the Office for National Statistics at 9.30am BST sharp, followed by a press conference in London.

I'll be covering the news and reaction in the liveblog, along with other key developments in the UK, the eurozone, and beyond through the day.

Updated at 8.28am BST

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Strong export sales help UK manufacturing sector stabilize after slump earlier in year, Cips/Markit survey shows. The reading follows a 0.3% rise in GDP in the first quarter, which was largely attributed to the strength of the services industry…

 


Powered by Guardian.co.ukThis article titled “UK manufacturing shows signs of recovery – but firms remain cautious” was written by Phillip Inman, economics correspondent, for The Guardian on Wednesday 1st May 2013 10.23 UTC

A rebound in manufacturing appears to be under way after a disastrous start to the year, according to a survey of the sector in April.

Strong sales of consumer goods to North America, the Middle East, Latin America and Australia helped the sector stabilise after a slump in January and February.

Ministers will cheer a recovery in the sector, especially after the 0.3% rise in GDP in the first three months of the year, which was largely attributed to the strength of the services industry.

An improved outlook for manufacturing, which was a drag on output in the first quarter, could allow GDP to maintain a more consistent and positive path over the coming months.

The consumer goods industry led the way, with companies producing machine tools not far behind, as the sector showed a modest rise in production amid a widespread clearance of stock left over from the slump earlier in the year.

Much of the slump is attributed to bad weather at the beginning of the year, though renewed uncertainty in the eurozone and a persistent lack of bank lending for investment also played a part.

Althouth eurozone fears have eased, the situation remains febrile and persistenly tight bank lendingis making some analysts cautious about a possible upturn.

The Cips/Markit survey showed the sector continued to shrink last month but by only a small margin. At 49.8, the manufacturing purchasing manager's index (PMI) continued to be below the 50 figure that divides growth from contraction, though it fed expectations of a return to growth in May.

Lee Hopley, chief economist at EEF, the manufacturers' trade body, said the survey was a mildly encouraging start to the second quarter.

"While still not in positive territory overall, the data indicates a vital revival in export orders with demand from markets in the Americas and Middle East compensating for the continued weakness in Europe. This is a especially positive as the UK sorely needs an improvement in trade if we are to make faster progress on rebalancing growth."

Markit said the eurozone continued to drag on export sales, but a shift to markets further afield was making up some of the difference.

In contrast to the improving output figures, the sector shed jobs for the third straight month and most firms said they remained cautious about a possible sustained recovery.

Rob Dobson, an economist at Markit, said: "Following the poor start to the year, when manufacturing acted as a drag on the economy in the opening quarter, it is welcome to see the sector showing signs of stabilising in April. With forward-looking indicators such as new orders and the demand-to-inventory ratio also ticking higher, the sector should at least be less of a drag on broader GDP growth in the second quarter.

"Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise."

The figures followed a disappointing survey of Chinese manufacturing that showed a dip earlier this year turning into a more prolonged slowdown.

The official manufacturing PMI, composed for the statistics bureau by the China Federation of Logistics and Purchasing, fell from 50.9 in March to 50.6 last month.

A Capital Economics analyst, Mark Williams, said: "At face value that is not too big a drop. But April is normally one of the strongest months of the year, particularly for output. The fact that the output component fell at all – from March's 52.7 to 52.6 – is therefore a concern," he said. "If the usual pattern holds, output will weaken in coming months."

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UK GDP rises by 0.3% exceeding estimates by analysts and avoiding triple-dip disaster. George Osborne: Britain is recovering. But it’s a bumpy recovery. US jobless claims fall by 16,000 to seasonally adjusted 339,000, pointing to slow improvement…



Powered by Guardian.co.ukThis article titled “Poor Spanish and French jobs data but UK economy returns to growth- as it happened” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Thursday 25th April 2013 13.18 UTC

5.17pm BST

Stock markets in Europe continue rally

European markets have closed on a – mainly – positive note once again. Analysts said the continuing downbeat data from the eurozone – including poor jobless figures from Spain and France – made it ever more likely the European Central Bank would cut interest rates, perhaps as soon as next week.

Looking at the wider picture, there were some reasonable US weekly jobless figures which helped sentiment. And better than expected UK GDP figures encouraged investors in London, even though the data seemed to suggest there would be no action by the Bank of England to stimulate the economy at its meeting next week. So here is the closing snapshot:

• The FTSE 100 finished 10.83 points higher at 6442.59, a 0.17% increase

• Germany's Dax added 0.95% to 7832.86

• France's Cac closed 2.47% lower as the jobless total rose

• Italy's FTSE MIB ended up 0.52%

• Spain's Ibex dipped 0.29%

In the US, the Dow Jones Industrial Average is currently 0.48% higher.

And with that, it's time to close up for the evening. We'll be back tomorrow, so thanks for all your comments and see you then.

5.16pm BST

Italy's centre right party has been making positive noises after a meeting with new prime minister Enrico Letta.

According to Reuters, the party said Letta was open to its economic priorities and there wil be further talks to resolve outstanding issues.

And here's a poll showing the country's split:

5.05pm BST

French jobless figures hit new high

French unemployment figures are out and it's not good.

The number of jobless hit an all time high in March, rising by 1.2% to 3.225m. This is the 23rd monthly rise in a row, and means it has reached the worst level since records began in January 1996.

This is more bad news for president Francois Hollande, whose approval ratings are already at a low. They come despite the president's attempts to promote youth job schemes and allow flexible hiring and firing.

4.59pm BST

Cyprus sets date for vote on bailout package

Cyprus has set a date for the its parliament to vote on the island's EU-IMF sponsored rescue programme, reports Helena Smith. She writes:

Cypriot officials are now saying that the bailout package will be put to a make-or-break vote next week and "probably on Tuesday." The ballot has thrown fresh uncertainty around the rescue programme amid speculation that it may not muster the required majority in the 56-seat House.

Well-briefed insiders say the possibility of the island exiting the euro zone has grown dramatically in recent weeks with many among its business elite backing the idea "as the best way out of the crisis."

Meanwhile, the National Federation of Cypriots in the UK are increasingly speaking out against the unfair treatment that Cyprus has received at the hands of the EU and IMF.

"The troika has extracted its pound of flesh in Cyprus and has made the island pay dearly for the eurozone’s policy failures in Greece and elsewhere. Alternative solutions, including re-capitalisation of the two main Cypriot banks and their effective ‘nationalisation’ by the European Central Bank, were not given the time of day," Peter Droussiotis, who heads the federation, told an audience at the Palace of Westeminster last night.

 "Such measured solutions, which could have been further calibrated by a more managed contraction of the banking sector, over a transitional period, were set aside with the result that Cyprus’s economy has now suffered a devastating blow,” he said at a dinner attended by the island's foreign minister and leading British MPs.

4.32pm BST

Still with Germany, the country has raised its growth forecast for the current year from 0.4% to 0.5%, with 1.6% expected in 2014.

4.06pm BST

Merkel says ECB would raise rates if looking at Germany alone

There have been some (perhaps unguarded, perhaps not) comments from German chancellor Angela Merkel about European Central Bank interest rates.

As has become apparent in recent days, the markets have become increasingly convinced the ECB will cut rates at its meeting next week. Disappointing economic figures, not least from Germany itself, in the last few days have only reinforced that view.

But speaking at a savings banking conference Merkel said, in what observers said were unusually outspoken comments, that the ECB would have to raise rates if it were looking at Germany alone. In what could be seen as an acknowledgement that the one size fits all approach to completely divergent economies within the eurozone was flawed, she said (courtesy Reuters):

The ECB is in a difficult position. For Germany it would actually have to raise rates slightly at the moment, but for other countries it would have to do even more for more liquidity to be made available.

Meanwhile Investec poured a smidgeon of cold water on the hopes of a rate cut by the ECB next week. The broker's Victoria Clarke said:

The ECB meets in Bratislava next week with its next monetary policy announcement due at 12.45pm on Thursday and President Draghi’s press conference following at 1.30pm. We judge that the ECB is on the verge of reducing the main refinancing rate either in May or June, but on balance we suspect that move is more likely to come at the June meeting. Hence, whilst a very close call, we see the ECB maintaining the refi rate at 0.75%, the deposit rate at zero and the marginal lending rate at 1.5%.

Chancellor Angela Merkel at a savings bank conference. Photograph: Reuters/Fabrizio Bensch
Chancellor Angela Merkel at a savings bank conference – With the people, for the People. Photograph: Reuters/Fabrizio Bensch

Updated at 4.30pm BST

3.39pm BST

IMF official calls for Europe to boost growth

The IMF has said Europe must strengthen its growth prospects, otherwise it could fall into long term stagnation.

In a speech in London (apologies for being a bit UK-centric today) David Lipton said:

There is…a risk Europe could fall into stagnation, which would have very serious implications for households, companies, banks and other bedrock institutions.

So, to decisiveliy avoid that dangerous downside, policymakers must act now to strengthen the prospects for growth.

And the austerity versus growth debate goes on…

IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images
IMF members Christine Lagarde, Tharman Shanmugaratnam and David Lipton (left). Photograph: Stephen Jaffe/Getty Images

2.18pm BST

Video: Britain dodges the triple-dip recession

Here's a video clip of this morning's GDP announcement:

And leaving you with that, I am handing over to my colleague Nick Fletcher.

Updated at 3.55pm BST

2.13pm BST

Key event

There's encouraging economic data to report in the US as well — the number of people signing on for jobless benefit fall by 16,000 last week.

At 339,000, the initial jobless claims was the second-lowest reading since the financial crisis began.

2.11pm BST

Brian Reading of Lombard Street isn't getting carried away by today's GDP data:

Near stagnation for the rest of this year would validate the OBR’s 0.6% year-on-year growth forecast. A belly-dancer’s belly-wobbles don’t show whether she is gaining or losing weight. Too much attention is paid to first estimates.

2.07pm BST

It’s time for a late lunchtime round-up:

Britain has returned to growth and avoided a triple-dip recession, with its economy expanded by 0.3% in the first quarter of the year.

Chancellor George Osborne hailed today's GDP data as a sign that the UK is recovering (see his statement here). But Labour's Ed Balls argued that Britain still "urgently" needed a new fiscal plan (see 11.01am).

As my colleague Heather Stewart explains:

The key services sector expanded by 0.6% on the quarter, according to the ONS, while industrial production also grew, by 0.2% – though much of that was accounted for by North Sea output. The struggling construction sector declined by 2.5%.

• Heather's news story is here: UK avoids triple-dip recession with better-than-expected 0.3% GDP growth

Joe Grice, the chief economist of the ONS, told reporters that Britain was experiencing a bumpy and shallow recovery (see press conference highlights from 9.34am onwards)

• Business leaders have welcomed the news that the UK is growing (see 11.30am).

• But with the UK still 2.6% smaller than at its peak in 2008, there's no reason to rejoice (see Larry Elliott's analysis). Britain's recovery from the shock of the financial crisis remains slower than in the 1930s (see graph here).

• The news is likely to strengthen George Osborne's hand ahead of the arrival of International Monetary Fund officials next week (see here).

• In the City, the pound has rallied against the US dollar – up two cents this afternoon at .546.

UK GDP
UK GDP, on a quarterly basis, since the start of 2008

1.55pm BST

Stephen Lewis, chief economist at Monument Securities, argues that politicians should focus on making serious structural changes to the UK economy rather than scrapping over the pace of fiscal cutbacks.

In a research note Lewis also suggsts that Britain's economy is not faring too badly given the damage suffered by its financial sector when the crisis began:

It can hardly be doubted that the UK economy was among those suffering the most severe structural damage in the crisis, given its over-reliance on financial services. It would have been a reasonable expectation in 2009 that the UK would take longer than many other advanced economies to pull out of economic depression and that, while in depression, its GDP trajectory would be weaker than most other nations'. In the event, the UK's economy has lagged the performance of those with sounder structures, such as Germany and the USA.

On the other hand, it has been performing a good deal better than the economies of Spain and Italy, where the structural problems were less obvious in 2009. When viewed in this broad perspective, it makes little sense to argue that the UK is suffering peculiarly strong headwinds on account of the strategy Mr Osborne has chosen to follow. If it were, its GDP might be contracting at a 2-3% annual rate, which is the fate of several other European economies at the moment.

This is not to say that the UK's growth outlook might not be even stronger than it currently appears but action that addresses structural weaknesses is likely to be more effective than tweaking macroeconomic policies.

To fashion measures that strengthen the economy's structure is more of a challenge to politicians than to argue over macroeconomic settings. That may be one reason why comparatively little progress has been made towards structural reform.

1.26pm BST

Over on Comment is Free, Will Hutton is making the case for the government to push through structural reforms and create a new bad bank, rather than take comfort in today's data.

It's here: Don't be fooled by the GDP figures – Britain needs to change course

Here's a flavour:

Osborne has never looked economic reality squarely in the eye – that in 2008 Britain suffered a massive credit crunch, disabling its banking sector and exposing a vast legacy of private debt in an economy which had grossly over-invested in property, construction and financial services. Economies after such shocks and with such grievous imbalances need a prolonged period of convalescence. It is imperative, knowing that the private sector must retrench, that the public sector does all it can to compensate.

Over the past three years, Osborne has stubbornly done the opposite, blindly believing in the private sector's magical properties which the state can only impair. He has stood back, attempting to slash the deficit and generally disengaging. Events have forced him to moderate his position, with the beginnings of an industrial policy along with bank reform, but it has been too little, too late and with too little conviction. The pity is that today's news will reinforce his position, easing the political pressure for change.

1.11pm BST

Two years ago, George Osborne pledged to deliver "A Britain carried aloft by the march of the makers" in his March 2011 budget.

Today's GDP data, though, show that it's the services sector (+0.6%) which is delivering most of the growth rather than industry (+0.2% — mainly due to higher oil production), while manufacturing declined by 0.3%.

That doesn't suggest that the much-discussed rebalancing of the UK economy is completed.

Richard Barley of the Wall Street Journal warns:

The big picture is still one of an economy that is only creeping forwards: GDP is still 2.6% below 2008's peak and has risen just 0.4% over the past 18 months. With global economic data showing signs of a slowdown, it isn't clear the first quarter's expansion is sustainable.

Meanwhile, there is precious little sign of the rebalancing of the U.K. economy that policy makers like Bank of England Governor Mervyn King say is necessary: all of the growth in the first quarter was in the services sector, up 0.6%, while manufacturing contracted 0.3%. But the City still appears to be in the doldrums: business services and finance increased just 0.2% in the quarter.

12.44pm BST

Today's rise in GDP comes as economists warn that inflation in the UK could rise over the 3% mark again this summer.

Jeremy Cook, chief economist at World First, told BBC News that inflationary pressures mean it is vital that the UK economy keeps growing so workers can push for pay rises (inflation is currently 2.8%, while wages are rising at just 1%)

Cook explained:

If we start to see profits in manufacturing and construction, which were poor in this quarter, come alongside what the services sector is doing then members of those sectors can go to their companies, ask for wage increases, probably get them.

And therefore the cost of living for you and me become a little bit more favourable.

12.15pm BST

Osborne: it’s not an easy recovery

George Osborne, April 25th
Photograph: Sky News

Sky News just broadcast an interview with George Osborne in which the chancellor was cautiously upbeat about the UK economy following today's GDP data.

Osborne said:

It is not as easy a path out of recovery as anyone would have hoped a few years ago.

But added that Brritain has "won credibility around the world" for the way it has handled the crisis.

Osborne appeared relaxed about the prospect of next month's IMF visit. He argued that the pace of UK fiscal consolidation, or "the pace opf the cuts if you like" as he put it, is appropriate and consistent with the IMF's own guidance.

The chancellor added that manufacturing exports are growing slower than he'd like — which he partly blamed on the weakness on key markets in Europe.

12.07pm BST

The deputy prime minister, Nick Clegg, has taken a cautious view of today's GDP data:

Clegg said:

I don't want anyone to think that somehow we are out of the woods yet. We have still got a lot of work to do. The healing of the British economy is taking longer than we had anticipated and we will continue to work hard to make sure the country and the economy grow from strength to strength.

More here: Chancellor welcomes 0.3% economic growth, but Lib Dems are cautious

11.58am BST

Does the Osborne fightback start here?

Last week was pretty dire for George Osborne. It began with the International Monetary Fund suggesting his economic plan should be changed, and ended with MPs giving a scathing verdict on his new scheme to help first-time buyers (via a nasty rise in unemployment and Fitch downgrading Britain's AAA rating).

By the weekend, the chancellor appeared to be on the mat. But today's GDP data could be the moment that his fortunes change.

The IMF is due in London next week for a healthcheck on the UK economy — Osborne can now point to a growing economy — at a time when the eurozone remains stuck in recession.

It's even possible that the ONS will revise its historic data, and conclude that Britain did not contract between the fouth-quarter of 2011 and the second quarter of 2012. That would mean the dreaded double-dip never actually happened…

11.30am BST

GDP: the reaction

The general reaction to today's growth figures has been quite positive.

Graeme Leach, chief economist at the Institute of Directors, called it "good news just when we needed it".

John Cridland, CBI director general, argues that the UK now really needs "a recovery in manufacturing output, helped by a brighter global outlook":

And Rob Carnell of ING Bank called it "one in the eye" for the International Monetary Fund, after last week's criticism of the UK government from senior IMF staff.

There's a full, comprehensive round-up of reaction to today's GDP data, here: UK avoids triple-dip recession – full reaction

11.01am BST

Balls: Urgent action still needed

Ed Balls on UK GDP
Ed Balls on UK GDP Photograph: /BBC News

Ed Balls, shadow chancellor, has given a rather muted response to today's GDP data, repeating his call for the chancellor to adjust the pace of his fiscal plans.

Here's his full response:

These lacklustre figures show our economy is only just back to where it was six months ago and continue the picture of flatlining we have seen since the last spending review. David Cameron and George Osborne have now given us the slowest recovery for over 100 years.

This stagnation in our economy is the reason why people are worse off than when this government came to office. They took an economy that was starting to grow strongly, with falling unemployment and a falling deficit, and delivered stagnation, rising unemployment and £245 billion more borrowing than planned. The government’s economic policies have failed and Britain’s families and businesses continue to pay the price.

If we’re to have a strong and sustained recovery, and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long-term – as Labour and the IMF have warned. We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes.

The longer we continue to bump along the bottom the more long term damage will be done. Britain’s struggling families and businesses cannot afford another two years of this.”

Updated at 11.05am BST

10.54am BST

Slowest recovery since the Great Depression

This graph (from our Datablog) shows how the UK economy actually recovered faster after the Great Depression:

The Labour Party makes the same point, and tries to pin the blame on the prime minister.

10.42am BST

Alex Hern: UK is stagnating

In the New Statesman, Alex Hern is warning that "stagnation is still the name of the game" in the UK:

Our economic system is basically built around a paradigm of real economic growth in the two to three per cent range. We can handle short-term deviations from that norm, but the long-term trend must remain the same.

Growth much below that isn't growth at all; it's stagnation by another name. On top of that, real GDP growth isn't the only figure we heard today; we also know the growth per capita. And in a country with a rising population like ours, we need to be growing just for that to stand still.

As it is, GDP per capita fell by 0.3 per cent in the last quarter. The nation is getting richer, but its people are still getting poorer

More here: GDP grows by 0.3 per cent

And this graph from the ONS shows how GDP is stil below its 2008 peak:

UK GDP - main components, Q1 2013
Photograph: ONS

10.30am BST

Larry Elliott: It’s helpful for Osborne

Our economics editor Larry Elliott has analysed today's GDP data. He points out that while 0.3% growth is 'resonably solid' under the circumstances, but unspectacular by historic standards.

And it's enough to spare Osborne the 'disaster' of presiding over a triple-dip recession:

Larry writes:

The actual figure was reasonably solid. The service sector – which accounts for 75% of the economy – grew by 0.6% on the quarter, while a bounce back in North Sea oil output helped industrial production grow by 0.2%. Had it not been for the 2.5% quarterly drop in the still depressed construction sector, growth would have been around 0.5% in the first quarter, quite close to its long-term trend.

It is not all good news. Despite the growth in early 2013, the economy is still 2.6% below its peak in early 2008 when the recession began. And, as the Office for National Statistics noted, the economy is no bigger now than it was 18 months ago – a point Ed Balls will no doubt be making over the coming weeks and months.

But make no mistake, this number is helpful to Osborne, who was quick to say that there were encouraging signs that the economy is healing. Had Thursday's number been negative – even by just 0.1% – that claim would have been impossible to make.

More here: Unspectacular GDP data will take political heat off George Osborne

10.21am BST

Cable: it doesn’t feel like a recovery yet

Out in Brazil, business secretary Vince Cable has welcomed the news that Britain has avoided falling back into recession. But he also points to several weaknesses in the UK economy, including construction (which suffered that 2.5% contraction).

Here's Cable's full comment:

We've always said the road to recovery would be a marathon, not a sprint. 

Today's figures are modestly encouraging and taken alongside other indicators such as employment figures, suggest that things are going in the right direction.

However there is still a long way to go and some serious issues such as the systemic lack of bank lending to SMEs, the weakness in the construction sector and the need to press further on trade and exports, which I am doing now on my visit to Brazil.

These issues all need to be addressed before people feel like the economy is genuinely starting to recover.

10.17am BST

And here's what a bumpy, shallow recovery looks like (via the Guardian's Datablog)

UK GDP quarter-by-quarter
Photograph: Datablog

10.10am BST

ONS: Britain’s bumpy and shallow recovery

The ONS's chief economist Joe Grice said the 0.3 per cent growth registered from January to the end of March fitted the pattern in recent years.

"Today's figures seem to be not out of line with recent history of an upward trend, but one that is quite bumpy and shallow," he said.

The services sector growth of 0.6 per cent was "broadly based" and offset falls in manufacturing at the beginning of the year and a sharp fall in construction output.

But within the services sector, car sales were a major growth area after a spending surge in the first three months, said ONS statastician Rob Doody.

The services sector is now 0.7 per cent above its peak. However, manufacturing remains 10 per cent below the peak in 2008 and construction is 18 per cent below its peak, said Grice.

(via our economics correspondent, Phillip Inman)

10.06am BST

The full details of today's GDP data can be downloaded here:

Gross Domestic Product: Preliminary Estimate, Q1 2013 Release.

10.04am BST

My colleague Paul Owen is covering all the political news today, including the full reaction from Westminster to today's GDP data, here: Politics Live.

9.57am BST

Pound jumps, but FTSE doesn’t

The pound is rallying on the foreign exchange markets, up almost one-and-a-half cents against the US dollar at .514.

Shares are unmoved, though, as our market reporter Nick Fletcher reports:

The FTSE 100, down 15.85 points ahead of the GDP announcement, edged slightly higher before slipping back to the current 6414.56, down 17.20 points.

9.52am BST

Car sales and oil production fuel growth

Phillip Inman flags up that strong sales of motor vehicles, and a bounce-back in oil production, helped to push UK GDP up in Q1.

From the ONS press conference, he reports:

GDP was rescued by car sales, says the ONS, with the Motor trade element of the services sector showing the strongest growth…

A bounce back in North Sea production after a sharp decline in q4 2012 is also a big factor in the rise this quarter.

9.49am BST

Despite the welcome rise in UK GDP in the last three months, Britain's economy is still 2.6% smaller than its all-time peak in 2008 — shortly before the collapse of Lehman Brothers rocked the financial world and drove many countries into recession.

9.43am BST

Osborne: Britain is recovering

George Osborne has welcomed today's GDP data, arguing it shows that the government is making progress.

Here's the chancellor's statement in full:

Today’s figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress.

The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows.

We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future.

9.40am BST

ONS press conference
Photograph: Sky News

Joe Grice, the head of the ONS, is refusing to make any predictions for how the UK economy may fare in the months ahead.

9.37am BST

Service sector leads the way

Britain's dominant service sector has led the way, putting the UK back to growth and averting the triple-dip.The construction industry, though, continues to suffer an ongoing contraction.

Service sector grew by 0.6% in Q1

Construction sector shrank by 2.5%

Production industries: grew by 0.2%

9.34am BST

Key event

On a year-on-year basis, Britain's GDP is 0.6% larger than a year ago.

Joe Grice of the ONS is explaining that this adds to the picture of a slow, bumpy recovery over the last 12 and 18 months. He's talking about Britain's economy being on a plateau, but one on a slow, upwards trend.

Updated at 9.41am BST

9.31am BST

Triple dip avoided

This is good news for George Osborne, says our economics editor Larry Elliott:

It means the triple-dip fears have been averted – although Labour will say that the economy is back to where it was six months ago.

Updated at 9.32am BST

9.30am BST

UK GDP released – Britain avoids recession

UK GDP has grown by 0.3% in the first three months of this year.

That means Britain has avoided falling back into recession.

More to follow

9.25am BST

The GDP data will be announced at a press conferrence at 9.30am sharp in London. Our economics correspondent Phillip Inman is there.

The news is also released to the City at the same moment.

Updated at 9.25am BST

9.20am BST

Just 10 minutes to go until the Office for National Statistics releases its first estimate of UK GDP for the first quarter of 2013, and the predictions and caveats are flying:

A bit of excitement is OK, though

9.12am BST

Surveys of UK firms in recent weeks have suggested that conditions have improved a little in 2013. That's one reason that City economists, on balance, predict a small rise in GDP.

This graph shows 'composite PMI' (a measure of whether companies' output is growing) versus GDP.

GDP vs PMI, to April 2013
Photograph: ING

9.03am BST

Marc Ostwald of Monument Securities says it is 'at best facile' to fret too much about the triple dip right now, as this morning's data will probably be revised.

Ostwald also points out that the consensus forecast of +0.1% in the first quarter would mean Britain's GDP would have risen by +0.3% on a year-on-year basis.

That would actually be quite a good outcome, in light of a very long and arduous winter and its dampening effect on activity, not only in the UK, but across Europe, notwithstanding the other non-weather related headwinds blowing from the Eurozone.

Economist Andrew Lilico argues that it doesn't really matter whether today's data shows a small rise or a small fall.

And in the readers comments below, rafters points to the big picture:

Double dip, triple dip, quadruple dip, what does it matter?

We're just bumping along the bottom like an aircraft failing to take flight. All a short period of growth means is we'll shortly have another dip to add to the number.

8.51am BST

Spanish jobs data shows perils of austerity

Here's our Madrid correspondent Giles Tremlett's take on this morning's dire Spanish unemployment data (see 8.42am)

Is this where austerity gets you? Spain's unemployment rate reached 27 percent in the first quarter of this year, with more than six million unemployed for the first time ever.The figure of 6.2 million unemployed comes from the state statistics agency today. Spain's economy shrank 1.9 percent over the last year, though the speed of decline appeared to be slowing in the first quarter.

Mariano Rajoy's People's party (PP) government is due to introduce further cuts tomorrow. There are also rumours of further pension reform, with the retirement age for Spaniards apparently set to rise above 67. But a change of heart in Brussels will, according to reports in El Pais, see the deficit target softened considerably this year – raising it from 4.5 percent of GDP to six percent or above. Last year's deficit (excluding bank bailouts) was 7.1 percent.

Spain's jobless rate is also more than three times as high as the UK — where it hit 7.9% last week.

8.42am BST

George Osborne has often blamed the eurozone's debt crisis for causing some of Britain's economic ills, and the latest Spanish unemployment data (just released) certainly confirms the scale of the crisis in Europe.

The Spanish jobless rate hit 27.1% in the first quarter of 2013 – even worse than economists had expected. Spain is already deep in recession, and its GDP is expected to shrink by 1.6% this year.

Updated at 8.43am BST

8.34am BST

The bigger picture…

As many of you are pointing out in the comments below, the triple-dip question shouldn't distract from the fact that Britain's economy has been bumping along for a while.

On a quarterly basis GDP has risen, or fallen (see the chart at 7.34am) but the broad picture is of an economy stagnating for most of the last two years.

Also worth noting that we only get the preliminary estimate of GDP this morning – it will probably be revised.

8.25am BST

GDP predictions?

Any predictions for UK GDP today? If so, do post them in the comments below. (Full disclosure: I plumped for +0.2% in the office sweepstake).

8.14am BST

Calm in the City

The London stock market has opened, and shares and sterling have risen slightly in early trading.

FTSE 100: up 25 points at 6456, + 0.4%. That's a new three-week high.

The pound is also up nearly half a cent against the dollar, at .530.

The word in the City is that Britain will probably avoid a triple dip, but that the wider economic landscape remains troubled.

As Michael Hewson of CMC Markets put it:

The amount of growth to all intents and purposes is likely to be economically insignificant, but in a political context it is very important for the credibility of the government’s current policy, being the difference between a triple dip recession or not.

Updated at 8.14am BST

8.04am BST

What the economists are saying

We've rounded-up some of the City economist forecasts for GDP. here: Will Britain slide into a triple-dip recession?

Updated at 8.04am BST

7.59am BST

Bad weather could be key

Fears of a triple-dip recession have been fuelled by the grim winter weather which Britain suffered at the start of 2013. Heavy snowfall forced some factories to close, and also deterred many people from venturing onto the high street to spend.

As we wrote last month: Cold weather makes triple-dip recession more likely, economists fear

City analyst James Knightley reckons that the UK economy was flat in the first three months of 2013. A reading of 0% change to GDP would mean that the UK was not back in recession.

Knightley explains:

Today’s GDP numbers will tell us if the UK has returned to technical recession for the third time in 5 years.

Bad weather in January and March make this a close call.

7.34am BST

Has Britain suffered a triple-dip?

Good morning. Britain will learn today whether it has slumped into an unprecedented triple-dip recession when economic output data for the first quarter of 2013 is published.

The data, released at 9.30am by the Office for National Statistics, is eagerly awaited both in the City and in Westminster.

A negative GDP reading will plunge the UK economy into its third recession (defined as two consecutive quarters of negative growth), since the financial crisis began in 2008.

UK GDP since 2008
Photograph: Office for National Statistics

As well as a measure of the UK's economic strength, the latest GDP data is also a scorecard of George Osborne's performance.

The chancellor is already under pressure from the International Monetary Fund to relax the pace of his fiscal programme, and stinging from the loss of Britain's AAA rating with two credit rating agencies this year.

Many economists expect that Britain probably eked out a little growth at the start of this year. The City consensus is that UK GDP expanded by 0.1% between January and March. But some economists have predicted a negative reading, which would follow the 0.3% contraction in the last quarter of 2012.

Britain is also the first major country to report GDP data for the first quarter of 2013, so today's data could show how the global economy is faring.

Updated at 7.39am BST

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Whether economy has contracted for second quarter in row may be a trivial detail that distracts from bigger, more dismal picture. Forecasters are split over whether the UK economy managed to grow in the first quarter of this year or contracted again…

 


Powered by Guardian.co.ukThis article titled “Will Britain slide into a triple-dip recession?” was written by Katie Allen, for theguardian.com on Monday 22nd April 2013 11.52 UTC

The wait to find out if the UK slipped into a triple-dip recession is over this week, with official GDP data out on Thursday. Forecasters are split over whether the UK economy managed to eke out some growth in the first quarter of this year or contracted again.

The consensus forecast in a Reuters poll is for a tiny 0.1% quarter-on-quarter uptick. But predictions range from a 0.2% drop in GDP to growth of 0.3%.

The Office for National Statistics (ONS) said the economy slipped by 0.3% in the fourth quarter. Thursday will be statisticians' first take of three for the first quarter and economists caution that the numbers, as well as data for previous quarters, could well be revised either up or down.

But if the figures do show two successive quarters of contraction from the beginning of October to the end of March it will mark a triple-dip recession – unprecedented in living memory.

Still, many economists also warn that whether the UK officially slipped into a triple-dip or not is a trivial detail that distracts from the bigger picture of an economy facing headwinds from squeezed consumers, an austerity drive and struggling industry.

Here is a roundup of views ahead of Thursday's 9.30am figures.

Brian Hilliard, Société Générale

The first estimate of GDP is an output measure on two months' hard data for industrial production, construction output and services output available to the ONS together with forecasts for the third month. However, only one month's services data is published before the GDP release. That makes it rather difficult to make a sensible forecast, but here goes! Based on reasonable assumptions for March, Q1 growth in industrial production should be between 0% and 0.1% quarter-on-quarter. Construction output should fall by between 3% and 6% and services should rise by about 0.2% quarter-on-quarter. The weather will have been a dampening factor in construction output and unfortunately that weakness is likely to outweigh the growth in services. The result should be a fall in GDP of about 0.1% quarter-on-quarter. This will inevitably spawn "triple dip" headlines. The real story is modest underlying growth but not high enough to reduce the output gap.

Nick Bate, Bank of America Merrill Lynch

We think the preliminary estimate of Q1 GDP may show zero growth over the quarter. Indeed, we think the balance of risks may be skewed a little to the downside … Monthly data available suggests that output in both the industrial and services sectors may have risen a little over the quarter, but another notable fall in construction output may have knocked around 0.2 percentage points off GDP growth.

Vicky Redwood, Capital Economics

It is questionable whether it should be considered a "true" triple-dip … The 0.3% quarterly drop in real GDP in the fourth quarter (Q4) can probably be wholly accounted for by the reversal of the Olympics boost which supported output in the third quarter. Without the Olympics effect, output would probably have avoided a contraction. In any case, any triple dip might well be revised away in the future. The double dip between Q4 2011 and Q2 2012 was initially estimated to consist of three quarterly contractions in GDP of 0.2%, 0.2% and 0.7%. But the two 0.2% contractions are now estimated to be 0.1% drops. So it is already being called the double dip that almost didn't happen.

Nonetheless, we should not let the somewhat meaningless debate about the triple dip distract from the big picture – that this recovery is still depressingly dismal. To rub salt into the wound, the US Q1 GDP figures also released this week are set to show growth rising by 3.2% annualised (a quarterly rise of about 0.8%). This will leave the divergence between the two economies looking even more striking.

Howard Archer, IHS Global Insight

In reality, it makes very little difference whether the economy expanded modestly in the first quarter, contracted marginally or was flat. However, it would be good for psychological/confidence reasons if the economy could dodge contraction in the first quarter and, therefore, avoid nasty and potentially damaging headlines about "triple-dip recession".

We put the odds of GDP contraction in the first quarter (and hence a triple-dip recession) at around 30%. So we reckon there is a 70% chance that the economy was either flat or grew marginally.

We suspect that expansion in the dominant service sector was strong enough to allow the economy to eke out marginal GDP growth of 0.1 to 0.2% quarter-on-quarter in the first quarter. This would result in year-on-year GDP growth of 0.4% year-on-year. Admittedly, it looks like there was substantial contraction in construction output in the first quarter, but the sector only accounts for 6.8% of GDP, while the services sector accounts for 77%. Meanwhile, industrial production was likely essentially flat in the first quarter, given that there was a marked rebound in output in February from January's sharp drop.

Ruth Lea, economic adviser to Arbuthnot Banking Group

On the basis of ONS data so far available and survey material, GDP for 2013 Q1 could be a tad positive, thus avoiding a triple dip. But whether or not a triple dip is avoided, economic performance is weak. The latest labour market data showed an increase in unemployment, the February trade data deteriorated and bank lending to the business sector fell in February. The IMF downgraded its forecasts for the UK last week, with its chief economist, Olivier Blanchard, saying the chancellor should reconsider his "strict" austerity programme, and Fitch's downgraded Britain's triple-A rating to AA+.

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The UK Office for National Statistics reports 0.7% sales fall despite a near 1% rise in food sales. Sales volumes declined as department stores and homeware retailers suffered from March snow. The decline was smaller than the -0.8% forecast…

 


Powered by Guardian.co.ukThis article titled “Retail sales hit by March snow” was written by Phillip Inman, economics correspondent, for theguardian.com on Thursday 18th April 2013 10.15 UTC

Retail sales fell by more than expected in March after heavy snowfall deterred shoppers from venturing out to buy clothes and homeware.

According to official figures, sales volumes declined by 0.7% last month despite a near 1% rise in food sales as department stores and homeware retailers suffered from the cold weather.

James Knightley, UK economist at ING bank, said although sales were weaker than expected, they offered "a little more reassurance" that the UK would avoid falling into its third recession since the financial crisis began.

"Nonetheless, yesterday's employment numbers were not great and softer global figures still lead us to believe that the Bank of England will come in with more stimulus, potentially as soon as the May meeting when they produce new economic forecasts," he said.

First-quarter growth figures for the UK are released in a week, and economists remain split on whether they will show an unprecedented triple-dip downturn.

Chris Williamson, chief economist at Markit, the financial data provider, said higher retail sales figures at the end of last year to February showed the economy had regained some of its momentum, but, like Knightley, he warned the bounce could be short-lived.

"The upward trend in sales has followed a steady improvement in consumer confidence since late last year. Surveys of households show confidence had picked up further in March, linked in part to people being busier at work, which both improved job security and raised take-home pay. However, there is a worry that rising unemployment, weak pay growth and high inflation could reverse this trend in coming months," he said.

Woman picking up shopping bags
Retail sales have proved volatile in recent months, with a 0.7% decline in January. Photograph: Winston Davidian/Getty Images

Alan Clarke, UK economist at Scotia Bank, said the retail figures were disappointing and reflected a weakening economy that could still show a triple-dip recession.

"With wage inflation at around 1% and headline inflation at close to 3%, the maths don't add up to much in the way of consumer spending growth – rather the opposite – falling consumer spending by mid-year," he said. "Let's hope the Bank of England's new tactic of targeting business investment works."

Retail sales have proved volatile in recent months, with a 0.7% decline in January, when snow was again a factor, being followed by a 2.1% rise in February.

The Office for National Statistics said the March figures pushed sales over the year into a decline of 0.5%.

Knightley said: "The figure was always going to be weak, with the heavy snowfall in the month, which particularly hurt clothing retailers (with sales down 3.1% month on month), given they had started to stock their spring fashion ranges.

"The ONS reports that it was the coldest March since 1962 with department stores and household goods stores also particularly depressed (down 4% and 6.2% month on month respectively)."

High petrol prices also deterred motorists from filling up their tanks – the ONS figures showed a 1% decline in petrol sales.

The poor figures were rescued only by the consistent rise of food sales, which was repeated in March. Food sales rose 0.9%, the largest gain since July 2011.

Sales of goods over the internet gained momentum, with a 6% rise.

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Britain’s economy remains fragile but ‘improvements are beginning to be seen’ says OECD chief economist. According to OECD, the UK is expected to show annualised growth of 0.5% in the first quarter, and 1.4% in the second quarter of 2013…

 


Powered by Guardian.co.ukThis article titled “UK economy should avoid triple-dip recession, OECD forecasts” was written by Josephine Moulds and Phillip Inman, for The Guardian on Thursday 28th March 2013 20.17 UTC

Britain's economy is getting stronger and should avoid a triple-dip recession, according to the Organisation for Economic Co-operation and Development. The Paris-based thinktank sounded a positive note as official figures showed that the services sector, which contracted at the end of last year, returned to growth in January.

Barring changes in government policy, the UK is expected to have grown at an annual rate of 0.5% in the first quarter and to grow at 1.4% in the second.

Pier Carlo Padoan, the OECD's chief economist, said: "The situation [in the UK] is still fragile. I think the policy course, both in terms of monetary and fiscal policy, is going in the right direction and improvements are beginning to be seen."

Until recently, the OECD and the International Monetary Fund had been warning George Osborne that his austerity policies risked prolonging the longest economic depression in 100 years. Padoan had called on the chancellor to relax spending cuts and put forward growth policies, in a shift to a Plan B for the economy.

But the more upbeat outlook from the OECD was reinforced by a survey of the UK's services industry that showed an improvement during January, offsetting a weakening picture in the construction and manufacturing sectors. The Office for National Statistics said the services sector, accounting for three-quarters of economic activity, expanded by 0.3% on the previous month and was 0.8% ahead of the same month a year earlier.

Unfortunately for ministers hoping to see an improvement across the private sector, the strongest element of the services index in recent years has proved to be government spending. The financial services sector has almost recovered to its pre-recession peak, along with business services, leaving the distribution, hotels and restaurants, transport, storage and communication sectors well below their high-water mark.

Chris Williamson, chief economist of financial data provider Markit, said the services data combined with strong retail sales would persuade the Bank of England to stay its hand when it meets next week.

Capital Economics said an increase in quantitative easing from the current £375bn the Bank of England had pumped into the economy would probably need to wait until at least the autumn, when incoming governor Mark Carney would have established a new remit focused on growth.

The OECD said activity was picking up in many major economies, with the global outlook improving since its last update in November. It expected the US to rebound in the first three months of this year, while Japan had been boosted by a new growth strategy and stimulus package. But it said improvements in financial markets around the globe had not been fully reflected in real economic activity, in part because confidence remained low.

Padoan warned that the flood of cheap money into the system, via generous stimulus packages, had also led to some "excessive risk-taking". "We have now learned that imbalances build up in a way we tend to ignore," he said. "Let's watch prices of assets going up which are not warranted by fundamentals. Let's be very careful. At the same time, let's be careful of not putting a brake on the recovery that is slowly materialising. It's a delicate balancing act."

The OECD said a meaningful recovery in Europe would take longer than in the rest of the G7. It blamed this on a deteriorating jobs market, which had depressed consumer confidence. "Especially in Europe, the rise of long-term unemployment, with more of the unemployed moving off unemployment insurance on to less generous social benefits, is worsening poverty and inequality," it said.

The thinktank also highlighted the growing divergence between Germany, which it expects to pick up strongly in the first half of this year, and other economies, which are forecast to either contract or show minimal growth.

Germany is expected to grow by 2.3% on an annual basis in the first quarter, and then 2.6% in the second. By contrast, France is forecast to shrink by 0.6% on an annual basis in the first quarter, followed by 0.5% annualised growth in the second quarter.

Growth in emerging markets is still much faster than in the G7 and these countries will drive the global economy this year. The OECD said annualised growth in China was expected to continue to be well above 8% in the first half of 2013.

US economy perking up

The number of Americans filing new claims for unemployment benefits rose last week, but not enough to suggest the labour market recovery was taking a step back.

Other data showed the economy expanded at an annual rate of 0.4% in the fourth quarter, more than the government had estimated.

The reports reinforced the view that the US economy perked up in the first quarter, although it still appeared vulnerable to fiscal austerity measures that kicked in early in the year.

"The underlying growth trend is showing some encouraging signs, but the key risk is how much fiscal tightening we'll see this year," said Laura Rosner, economist at BNP Paribas in New York.

While jobless claims increased more than expected last week, they have trended lower this year and remain near five-year lows. Last week, initial claims for state unemployment benefits increased 16,000 to a seasonally adjusted 357,000, the labor department said.

The four-week moving average for new claims, a better measure of labour market trends, rose 2,250 to 343,000.

Still, for many economists a trend reading below the 350,000 level points to a firm pace of hiring in March. Reuters, Washington

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PMIs from the euro-zone’s largest economies point to widening gulf between France and Germany. Grim outlook for France’s economy. UK public finances better than expected. US jobless claims rise and existing homes sales inch higher…



Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: French economy worsens as Germany powers ahead” was written by Josephine Moulds, for guardian.co.uk on Thursday 21st February 2013 15.02 UTC

2.58pm GMT

And with that I’m afraid we’re going to close the blog early today. Thanks for all your comments.

2.57pm GMT

Markets hammered by French data

European markets have been hammered today, on the back of data showing the French economy continues to falter, and fears that the US could switch off its stimulus programme.

  • UK FTSE 100: down 1.64%, or 105 points, at 6290
  • France CAC 40: down 1.87%
  • Germany DAX: down 1.68%
  • Spain IBEX: down 1.72%
  • Italy FTSE MIB: down 2.81%

2.47pm GMT

UK public finances disappointing – IFS

Back to the UK’s public finance data again (see 9.40am and following), which the highly-respected Institute for Fiscal Studies says will be a disappointment for George Osborne

Rowena Crawford at the IFS said:

As the chancellor prepares for his budget next month, he will likely be disappointed by today’s public finance figures. January is an important month for receipts but, although growth in income tax receipts was strong, this was partially offset by very weak growth in corporation tax receipts. Together this leaves tax receipts running below the growth forecast for the year as a whole. Spending continues to run higher than forecast, due to strong growth in spending on both welfare benefits and on the delivery and administration of public services.

As a result borrowing is now on course to be almost £7bn higher this year than the OBR forecast in December. Therefore borrowing is more likely to be slightly higher rather than slightly lower than last year’s level, although much uncertainty remains and things could still change in the final two months of the year.

What matters more than the level of borrowing this year is the outlook for revenues and spending in the medium term. Some of the extra borrowing so far this year is due to Whitehall departments underspending by less than assumed. This may not persist and therefore might not concern the chancellor – in particular if the money is being spent well.

Potentially more concerning is the low growth in tax receipts and the high growth in spending on welfare benefits: were these to persist into future years then the large planned fiscal tightening might need to be increased.

Updated at 3.02pm GMT

2.42pm GMT

Dutch consumer morale hits a low

There are clouds gathering over the Netherlands, with reams of data out today showing it could struggle to hold onto its prized triple-A credit rating. An unholy trinity of releases showed:

  • Consumer confidence hit its lowest point since records began in 1986, at -44 points
  • Unemployment hit its highest level in around 16 years
  • House prices dropped at their sharpest rate over a year since 1995

Updated at 2.44pm GMT

2.12pm GMT

Growth in US factory activity slows slightly

And here comes US manufacturing PMI data, which looks pretty good. The pace of growth of the factory sector slowed in February, but remained near a nine-month peak thanks to strong domestic demand.

Markit’s manufacturing PMI came dropped back to 55.2 from 55.8, still comfortably above the 50 mark that separates growth from contraction.

But job creation in the sector hit a three-month low. Chris Williamson at Markit said:

While the survey therefore paints an encouraging picture of the manufacturing sector, helping to drive a return to growth for the economy as a whole in the first quarter of this year, firms still need to see greater confidence in the longer-term economic outlook for employment numbers to pick up again.

2.06pm GMT

Ireland looks to issue 10-year bond before summer

Back to Ireland, which is apparently looking to issue a 10-year bond in the first half of this year.

Reuters reports that Irish finance minister, Michael Noonan, who is on a visit to London, said Ireland wanted to prove it is ready to exit its bailout programme.

I think the issuance will be 10-year and that will be one of the serious tests of market conditions and of our ability to get back into the market. I would like that we would be back in the markets fully by 2014… and at present I think we are on track.

2.02pm GMT

Panic-driven austerity could lead to eurozone breakup, say economists

Panic-driven austerity in the eurozone produced the double-dip recession and could have even more dire consequences, write two economists on the VOX blog.

Paul De Grauwe of the London School of Economics and Yuemei Ji of the University of Leuven argue that fear and panic led to excessive, and possibly self-defeating, austerity in the south while failing to induce offsetting stimulus in the north.

The conclude that resistance to austerity measures could once again raise the spectre of countries wishing to leave the eurozone.

The intense austerity programs that have been dictated by financial markets create new risks for the eurozone. While the ECB 2012 decision to be a lender of last resort in the government bond markets eliminated the existential fears about the future of the eurozone, the new risks for the future of the eurozone now have shifted into the social and political sphere. As it becomes obvious that the austerity programmes produce unnecessary sufferings especially for the millions of people who have been thrown into unemployment and poverty, resistance against these programs is likely to increase. A resistance that may lead millions of people to wish to be liberated from what they perceive to be shackles imposed by the euro.

Updated at 2.39pm GMT

1.52pm GMT

US jobless rise more than expected

More US data reveals that jobless claims across the Atlantic rose more than expected last week, but remain at levels consistent with a steady improvement in the jobs market.

Initial claims for unemployment benefits rose 20,000 to a seasonally adjusted 362,000, compared with forecasts of 355,000.

Ryan Sweet, a senior economist at Moody’s Analytics, told Bloomberg:

Businesses just seem to be sitting tight with regard to layoffs, which is reason for optimism. If we get through these hurdles over the next couple months the job market should begin to improve more noticeably.

Updated at 1.55pm GMT

1.47pm GMT

US inflation unchanged

US inflation was unchanged in January, which should make it easier for the Federal Reserve to maintain its ambitious stimulus programme.

Official data showed that weak petrol and food prices helped suppress annual inflation, which came in at 1.6%, down from 1.7% in December.

1.24pm GMT

French minister fights back

The French minister who recieved a letter lambasting the “lazy” French (see 8.50am) has retaliated, reports the Telegraph. Arnaud Montebourg, minister for industrial renewal in France, told Maurice Taylor, chief executive of US tyremaker Titan:

Your comments, which are as extremist as they are insulting, display a perfect ignorance of our country, France.

He pointed out that since Titan is “20 times smaller” than “French technology leader” Michelin, which is “35 times more profitable”, Taylor “could have learned and gained enormously from a French base.”

Updated at 2.10pm GMT

12.06pm GMT

UK back in the currency wars, says economist

The pound regained some ground today against the dollar, after the better-than-expected public finances data. But it is expected to stay weak, as a result of signs the Bank of England could expand the quantitative easing programme.

Sterling was down 0.1% on the day at $1.5223, recovering for a two-and-a-half-year low it hit earlier in the day.

But, says Nick Beecroft of Saxo Bank, the UK is very much back in the currency wars.

When the UK economy hit the doldrums in the wake of the credit crunch in 2008, authorities were left with two main weapons to fight their way out of recession: low interest rates and a weaker sterling to help boost exports. Given that, historically, low rates have failed to boost consumer spending by alleviating households’ debt burden, UK policy makers will be tempted to manipulate their currency.

When asked about the perceived potential benefits of QE, central bankers of the US, UK and the Eurozone will wax lyrical about some combination of improved monetary transmission, improved sentiment through higher asset prices, cheaper government bond rates, leading to lower mortgage rates and project discount rates, and fear of inflation which promotes near term consumption, but the one benefit that dare not speak its name is currency debasement. We’ll never hear an explicit admission from any of those central banks, that a major corollary benefit of their QE programme is a decline in the value of their currency. That would be tantamount to a declaration of economic war – a trade war – such as the one which so damagingly extended and deepened the 1930’s Depression.

The trouble is that, with the political uncertainty about the future of the UK’s relationship with the EU hampering investments and British export performances since 2000 being the worst among the G20 nations, achieving economic growth will be difficult. The question is: how long will the Bank of England be able to keep its powder dry and refrain from currency devaluation.

Updated at 12.25pm GMT

11.38am GMT

UK factory orders better than expected

Back to the UK, where factory orders improved more than expected in February.

The CBI’s industrial trends survey rose to -14 from -20 in January, beating expectations of a reading of -15.

Of the 436 manufacturers, 15% responded that total order books were above normal and 29% said they were below, giving a balance of -14%

The export order book balance also rose to -20 from -29.

Anna Leach of the CBI said:

The rebound in manufacturing orders and expectations for output growth provide some further signs of improvement in the outlook for the UK economy. However, exports order books are likely to remain relatively weak until global conditions, especially in the eurozone, improve more markedly.

11.28am GMT

Irish finance minister sees compromise on EU bonus talks

Sticking with Ireland, Irish finance minister Michael Noonan says he expects a compromise to be secured on a proposal to cap bankers’ bonuses.

His view is of particular interest as Ireland currently holds the European Union’s rotating presidency.

Negotiations to introduce a cap on bankers’ bonuses in the European Union stalled on Tuesday after EU countries and the bloc’s parliament clashed over how far to go in curbing pay for the industry’s top earners.

Noonan said on Bloomberg TV:

We think there is a median where a settlement can be reached without upsetting the cost base in the city of London or without depriving people of rightfully earned bonuses. But is has to be done in a new formulation.

Updated at 11.32am GMT

11.16am GMT

Spain bond sale sees good demand

Over to the debt markets, where Spain has sold more bonds than targeted, thanks to strong demand.

Madrid sold €4.2bn of debt due in 2015, 2019 and 2023, compared with a target of €3bn-€4bn, and borrowing costs eased.

The bond due in 2019 had an average yield of 4.275%, almost 2.5 percentage points lower than yields paid at its last outing in July, at the height of worries about the eurozone.

The bond due in 2015 had an average yield of 2.54%, compared with 2.82% in February.

The bond due in 2023 sold at a yield of 5.2%, in its first auction since it was introduced.

But traders said the sale was helped by the amount of money central banks are pumping into markets. Lyn Graham-Taylor at Rabobank said:

This is a strong set of results and continues the theme of decent demand for Spanish debt. We still believe this to be largely driven by the large amount of central bank liquidity in the system rather than an improvement in the fundamentals of Spain and major progress towards fiscal union being made by the eurozone.

Ireland, meanwhile, sold €500m of three-month Treasury bills at a yield of 0.24% – close to the lowest levels it has reached since Ireland returned to the debt markets last year.

Updated at 11.31am GMT

10.36am GMT

UK public finances flattered by one-offs, says economist

Here’s David Tinsley of BNP Paribas on the UK public finances data. It seems the longer the economists have taken to digest the figures, the gloomier they are…

The UK public sector finances get more confused with reclassifications by the month. But looking through the smoke, things don’t look too jolly.

The figures are being flattered by one-offs, but the big picture is the consolidation effort stalled in 2012/13. Indeed, the underlying deficit actually rose a little. The best one can say is that it is against a backdrop where the economy showed zero growth, so at least the rise wasn’t larger. But there may be a storm brewing if the economy doesn’t show some growth soon.

Updated at 10.39am GMT

10.29am GMT

EU parliament president tells Italians how to vote

The president of the European parliament has told Italians not to vote for Silvio Berlusconi in this weekend’s elections, in what looks like an unwise move that could easily backfire.

Martin Schulz – once compared to a Nazi concentration camp guard by Berlusconi – urged Italian voters to ‘make the right choice’. He said:

Silvio Berlusconi has already sent Italy into a tailspin with irresponsible behaviour in government and personal escapades.

Much is at stake in the forthcoming elections, including making sure that the confidence built up by (prime minister) Mario Monti is not lost. I am very confident that Italian voters will make the right choice for their country.

The fear is that his comments will prompt a backlash in Italy.

Updated at 10.34am GMT

10.11am GMT

Here’s Chris Williamson on the public finances data, which he says makes it likely the UK will lose its triple-A rating.

The government’s borrowing target for the year of £108.5bn is still looking unrealistic. Borrowing for the year is now looking likely to come in around £5-10bn higher than the government was hoping, and could easily end up higher than the £120bn seen in 2011-12 if tax revenues continue to disappoint.

With borrowing rising and the economy stagnating over the past year, the UK’s AAA credit rating is looking increasingly at risk. The spring budget will need to address the concern that more stimulus is needed besides central bank action in order to get the economy on a sustainable recovery path. Without a credible plan from the government to break the vicious circle of a sluggish economy, low tax revenues and rising public sector borrowing, the credit rating agencies are likely to lose their patience.

Updated at 11.14am GMT

10.02am GMT

QE ‘profits’ reduce UK deficit less than hoped

It should be noted, the UK public finances data enjoyed a £3.8bn boost from ‘profits’ from the Bank of England’s holdings in the gilt market, as a result of the quantitative easing programme.

But the ONS estimates that this interest income will only reduce the deficit by £6.4bn, significantly less than the £11.5bn the government’s independent budget watchdog estimated in December.

Reuters writes that this is because the ONS would not allow the full amount transferred to count towards reducing the budget deficit.

Updated at 10.10am GMT

9.58am GMT

UK data cuts threat of AAA downgrade – economist

The UK could escape the embarrassing fate of losing its prized triple-A credit rating, writes James Knightley of ING, following better than expected public finances data (see below).

This may be perceived as lowering the threat of an imminent AAA rating downgrade from one of the major ratings agencies and so is going to be a short term positive for sterling.

But George Osborne still faces a difficult decision at next month’s budget, writes Capital Economics:

With borrowing still very high and fiscal progress appearing to have ground to a halt, the dilemma faced by the Chancellor at next month’s Budget over whether to tighten fiscal policy, or loosen and go for growth, remains acute.

9.51am GMT

But UK borrowing still higher than last tax year

But it is still not clear whether the UK chancellor will be able to say that deficit reduction is on track when he presents his budget in less than a month.

Borrowing since the start of the tax year in April 2012 came to £93.8bn, excluding a one-off boost from the transfer of Royal Mail pension assets.

That is 1.6% higher than at the same point in the 2011/12 tax year, and Osborne faces a tough task to meet his target to bring full-year borrowing down to £108.5bn, from around £120bn in 2011/12.

Marc Otswald of Monument Securities says, leaving aside the slightly larger than expected monthly surplus, there is nothing to comfort Osborne in the data. He points out some of the low lights of the ONS report (citing figures for the tax year to date, compared with the same period in the previous tax year):

- Income Tax receipts a little lower but that is no surprise given
a weak economy

- Corporation Tax still very weak £36.8bn vs. £40.5bn

- VAT receipts up: £85bn vs. £83.8bn, but that is in fact
less than the pace of inflation… so weak

- Outlays – horrible, net departmental outlays £476.9bn vs.
£466.3bn, with some offset from Interest payments due to fall
in Gilt yields – so much for getting the budget under control

9.40am GMT

UK public finances show big surplus in January

There was good news for George Osborne this morning, with Britain’s public finances showing a bigger than expected surplus in January.

The government’s preferred measure of public borrowing, which strips out some of the effects of its bank bailouts, showed a surplus of £11.4bn in January.

That is up from £6.4bn pounds in January 2012 and above analysts’ forecasts of a surplus of £8.15bn. January is typically a good month for tax receipts, as it marks the deadline for self-assessed tax returns to be paid.

9.21am GMT

Eurozone data could push ECB to cut rates

The ECB’s bond-buying programme may have improved sentiment but it has not lifted economic activity, says Howard Archer of IHS Global Insight.

The purchasing managers survey reinforce concern that while the eurozone economic environment has been helped by a marked reduction in sovereign debt tensions, lower bond yields and improved business confidence since late-2012 (largely due to the ECB unveiling its bond buying policy) this is still not really feeding through to lift economic activity.

He says the data could push the ECB to cut rates.

The relapse in manufacturing and services activity in February puts renewed pressure on the ECB to cut interest rates, especially given the recent strength of the euro. We suspect that the ECB will remain reluctant to trim interest rates for now, but it could buckle if the eurozone continues to falter.

9.18am GMT

Here’s Capital Economics on the eurozone data.

The fall in the composite eurozone PMI in February puts a dent in hopes that the region would emerge from recession in the first quarter. On past form, the index points to a quarterly fall in GDP of about 0.3%, after Q4’s 0.6% fall….

The fall in the French PMI is more worrying – at face value the index is now consistent with a 1% quarterly fall in GDP. In all, then, the latest PMI number supports our view that the improvement in the financial markets will not be enough on its own to kick start an economic recovery.

Updated at 9.38am GMT

9.16am GMT

Eurozone services data dash hopes of recovery

Ouch. Eurozone PMIs do not look good, with services dropping in February, dashing hopes that the region could emerge from a recession soon.

The flash services PMI – one of the earliest monthly indicators of economic activity in the region – dropped from 48.6 to 47.3 in February, a big miss from analyst expectations of a rise to 49.

Chris Williamson of Markit highlighted the growing divide between Germany and France.

Digging into the data shows increasing schisms within the eurozone. National divergences between France and Germany have widened so far this year to the worst seen since the survey began in 1998. Germany is on course to grow in the first quarter. In contrast, Frances’s downturn is likely to deepen, bringing the euro area’s second-largest member more in line with the periphery than with the now solitary-looking German ‘core’.

9.06am GMT

Grim outlook for Europe’s second largest economy

Here’s Markit’s graph showing just how bad it looks in France. The composite PMI, which usually preempts GDP data fairly accurately, is sliding dramatically.

This morning the French media suggested the EU Commission is expected to cut its already grim forecast for France’s economy and budget deficit this year, citing a report due out Friday.

Le Monde and Le Point reported that the commission’s economic experts have reduced their forecast for France’s economic growth this year to 0.1% from 0.4%.

The country’s deficit is now forecast at 3.6% of GDP, up from a prior estimate of 3.5%, which would miss the Maastricht treaty target of 3%.

France is the second largest economy in the eurozone and problems there signal problems right at the very heart of the currency bloc.

8.50am GMT

French work ethic attacked

One man will be unsurprised by the miserable data out of France (see 8.20am) and that is Maurice “Morry” Taylor Jr, the head of US tyre company Titan International, which yesterday launched a blistering attack on the French work ethic.

My colleague Kim Wilsher in Paris reports:

Taylor, a 1996 US Republican presidential candidate, revealed he was no loss to the international diplomatic service in his letter to the minister, who had suggested he might like to take over a Goodyear tyre factory in the economically struggling industrial heartland of northern France, near Amiens.

“Do you think we’re stupid?” Taylor wrote to Montebourg in the letter, which was made public on Wednesday. “I’ve visited this factory several times. The French workers are paid high wages but only work three hours. They have one hour for their lunch, they talk for three hours and they work for three hours. I said this directly to their union leaders; they replied that’s the way it is in France.

8.39am GMT

Markets hit by Fed split

Over to the markets, which are suffering after minutes released last night showed signs of a split over the US Federal Reserve’s stimulus programme.

  • UK FTSE 100: down 1.2%, or 80 points, at 6314
  • France CAC 40: down 1.2%
  • Germany DAX: down 1.2%
  • Spain IBEX: down 1.75%
  • Italy FTSE MIB: down 2%

8.35am GMT

German data points to economic rebound

German business activity, meanwhile, increased for a third straight month in February, adding to signs the region’s largest economy is rebounding after GDP declined in the fourth quarter.

The data points to a widening gulf between it and the region’s second largest economy, France, which continues to flounder.

The German composite PMI, which accounts for more than two thirds of the economy, stood at 52.7 in February. That was down from January’s 54.4, but still comfortably above the 50 mark that separates growth from contraction.

Tim Moore at Markit said:

Despite the slight loss of momentum since January, the survey suggests that Germany can still be relied upon as an engine for the eurozone.

Updated at 8.52am GMT

8.29am GMT

The six problems with Italy and how to solve them

While we wait for Germany’s PMIs, check out the Guardian’s spread on Italy in the paper this morning.

My colleague Lizzie Davies in Rome numbers the six things wrong with Italy and how to solve them, starting with the effects of austerity.

She goes on to highlight the plight of women in the country run for years by Silvio Berlusconi, a man better known for his bunga bunga parties than anything else. She writes:

Held back by ingrained cultural attitudes, inadequate public services and political under-representation, they may have better educational qualifications than their male counterparts but they are significantly less likely to be in paid work.

8.20am GMT

French services sector shrinks at fastest rate in four years

The French data is predictably bad. The French services sector shrank in February at its fastest rate in nearly four years, suggesting it is far from a turnaround.

The services PMI came in at 42.7 in February, compared with 43.6 last month. The manufacturing index ticked up to 43.6, but remains well below the 50 mark that separates growth from contraction.

The composite PMI, which accounts for roughly two-thirds of French economic output, dropped to 42.3 from 42.7 in January.

Chris Williamson at Markit said:

There is a fairly consistent picture showing that the French business sector is suffering its worst downturn since the height of the financial crisis.

Updated at 8.22am GMT

8.13am GMT

Today’s agenda

A quick look at today’s agenda, before we plunge into the French PMIs.

  • France PMIs for February: 7.58am
  • Merkel addresses the Bundestag on the EU budget: 8am
  • Rajoy speaks in State of Nation debate: 8am
  • Italian election candidates hold press conference: 8.10am
  • Germany PMIs for February: 8.28am
  • Eurozone PMIs for February: 8.58am
  • UK public sector borrowing for January: 9.30am
  • UK CBI trends for February: 11am
  • US inflation for January: 1.30pm
  • US weekly jobless claims: 1.30pm
  • US PMIs for February: 1.58pm

In the debt markets, the UK is selling a £2.25bn of a 10-year gilt; while Spain is selling €3bn-€4bn of bonds maturing in 2015, 2019 and 2023.

8.05am GMT

Good morning and welcome back to our rolling coverage of the eurozone crisis and other global economic events.

The state of the French economy will be in focus this morning, with eurozone PMIs set to show a widening gulf between France and Germany.

UK chancellor George Osborne will also be in the spotlight when the public sector borrowing figures are released. These could offer some relief after the miserable 4G auction proceeds, as January is traditionally a strong month for tax receipts.

Later in the day, we’ve got a Spanish 10-year bond auction, as Mariano Rajoy’s government continues to take advantage of lower rates. And there’s a key UK gilt auction, which could suffer from the news that Mervyn King voted for more QE at the Bank of England’s last meeting.

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