UK unemployment and employment statistics

Britain’s jobless rate has dropped to levels not seen since 2008, but wage growth has slowed a little. UK unemployment rate falls to 5.4%. Basic pay growth dips to 2.8%. Germany trims economic growth forecast, blaming weakness in China…


Powered by article titled “UK unemployment rate hits seven-year low of 5.4% – live” was written by Graeme Wearden (earlier) and Julia Kollewe (now), for on Wednesday 14th October 2015 12.26 UTC

The bank earnings season is in full flow on Wall Street. Bank of America made a quarterly net profit of $4.1bn in the third quarter, compared with a loss of $470m a year ago (which was caused by massive mortgage-related costs). The second-biggest US bank beat analysts’ forecasts, despite falling revenues. Chief executive Brian Moynihan has been reducing costs, by slashing jobs and restructuring the business.

The bank, which has paid more than $70bn in legal expenses since the height of the financial crisis in 2008, said its legal costs fell for the third quarter in a row, to $231m from $6bn a year earlier. Revenues, however fell by 2.4% to $20.9bn, with the bank pointing to turbulent markets.

Moynihan said:

The key drivers of our business – deposit taking and lending to both our consumer and corporate clients – moved in the right direction this quarter and our trading results on behalf of clients remained fairly stable in challenging capital markets conditions.”

Goldman Sachs is due to report its quarterly results on Thursday at lunchtime, followed by Citigroup.


Germany trims growth forecast

Germany has trimmed its growth forecast for this year, blaming weakness in China and other major emerging economies. Economy minister Sigmar Gabriel said Berlin now expects the German economy to grow by 1.7%, down from the 1.8% predicted in April. Next year’s forecast was left unchanged at 1.8%.

Gabriel said the emissions-rigging scandal at Volkswagen, which has led to fears that the “Made in Germany” brand could be damaged, “has no enduring effect” on current economic forecasts.

He also said that money being pumped into education to help cope with the influx of refugees into Germany could work “a bit like a stimulus programme” starting next year.

Gold hits 3 1/2 month high, stock markets and dollar down

Let’s take a look at the markets. Gold prices have hit 3 1/2 month highs as concerns over weak inflation and growth in China reinforced expectations that the long-awaited US interest rate hike is still some way off.

The Fed surprised markets when it left rates unchanged at its September meeting, citing concerns about the global economy, but Fed chief Jane Yellen subsequently said the central bank was on track to increase borrowing costs later this year. However, there are signs of divisions within the Fed: Daniel Tarullo, a member of the Fed’s board of governors, told CNBC on Tuesday that it would not be “appropriate” to raise rates this year.

Spot gold rose to $1,176.20 an ounce earlier, its highest level since the end of June.

Stock markets have slipped for a second day and the dollar slid to its lowest level in nearly a month after fresh signs of a slowdown in the Chinese economy.

The FTSE 100 index is down 0.6% at 6306.45, a fall of more than 35 points. Germany’s Dax has also lost 0.6% while France’s CAC has slipped 0.3%.

German utility E.ON has clinched a $1.6bn deal to sell its Norwegian oil and gas business to Russian billionaire Mikhail Fridman. Norway’s oil and energy minister said the deal will be handled like another other – despite EU sanctions against Russia, which were imposed over the Ukraine crisis. Norway is not a member of the European Union.

Tord Lien said in a statement sent to Reuters:

An application for such an approval will be handled the usual way. The restrictive measures apply to activities in Russia. That international firms wish to invest on the Norwegian continental shelf is good.”

Mikhail Fridman, chairman of Alfa Group.

Mikhail Fridman, chairman of Alfa Group. Photograph: Sergei Karpukhin / Reuters/REUTERS

Shares in E.ON turned positive on the news and are now trading up 2.6%.

Fridman’s LetterOne fund had emerged as the frontrunner to buy the German company’s Norwegian North Sea assets after the billionaire, who is of Ukrainian descent, was forced to sell his British North Sea assets due to the western sanctions.


The Institute for Public Policy Research has looked at the regional disparities in the UK labour market. The think tank’s new chief economist, Catherine Colebrook, said:

The latest data suggests the economy is continuing to create jobs, with the employment rate at a new high, and unemployment at its lowest level since 2008.

However, a closer look at the data suggests weaknesses remain: there are big regional disparities, with the employment rate in the North East a full 10 percentage points lower than that in the South West.

And inactivity across the UK remains high, at just over a fifth of the working-age population. The government will have to tackle these weaknesses if it is to succeed in creating two million more jobs over the next five years.”

Here’s Heather Stewart on today’s jobs report:

Summary: jobless down, employment at record high

Here are the main points from today’s labour market report, covering June to August 2015 (you can scroll back to 9.30am for full coverage)

  • There were 31.12 million people in work, 140,000 more than for March to May 2015 and 359,000 more than for a year earlier.
  • There were 22.77 million people working full-time, 291,000 more than for a year earlier. There were 8.35 million people working part-time, 68,000 more than for a year earlier.
  • The employment rate (the proportion of people aged from 16 to 64 who were in work) was 73.6%, the highest since comparable records began in 1971.
  • There were 1.77 million unemployed people (people not in work but seeking and available to work), 79,000 fewer than for March to May 2015 and 198,000 fewer than for a year earlier.
  • There were 970,000 unemployed men, 125,000 fewer than for a year earlier. There were 803,000 unemployed women, 73,000 fewer than for a year earlier.
UK labour market
  • The unemployment rate fell to 5.4%, lower than for March to May 2015 (5.6%) and for a year earlier (6.0%). It has not been lower since March to May 2008. The unemployment rate is the proportion of the labour force (those in work plus those unemployed) who were unemployed.
  • There were 9.01 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), little changed compared with March to May 2015 but down slightly (13,000) compared with a year earlier.
  • The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 22.1%, little changed compared with March to May 2015 and with a year earlier.
  • Comparing June to August 2015 with a year earlier, pay for employees in Great Britain increased by 3.0% including bonuses and by 2.8% excluding bonuses.

The full report is online here (as a pdf).


The CBI, which represents Britain’s businesses, has welcomed today’s labour market report – and implicitly criticised George Osborne’s new National Living Wage:

Matthew Fell, CBI interim chief policy director, says:

“We’re encouraged by businesses creating more jobs, leading to rising employment. It’s also good to see falling unemployment, particularly among those out of work for more than one year dropping by 44,000.

“While we want to see higher pay growth, this must go hand in hand with increases in productivity. It’s crucial that the Low Pay Commission retains autonomy over future National Living Wage rises to avoid unnecessary political interference and help boost jobs.”

Last month, outgoing CBI chief John Cridland warned that raising the minimum wage to £9 an hour by 2020 was “a gamble” that could cost jobs.

Resolution Foundation: Pre-crisis pay packets still far away

Workers in Britain’s financial sector are closest to seeing their real pay hit pre-crisis levels, according to the Resolution Foundation.

The thinktank also flags up that construction workers’ wage packets are lagging far behind.

This chart shows how real wages (pay rises minus inflation) began to fall when the financial crisis struck.

UK wage data

UK wage data Photograph: The Resolution Foundation

Matthew Whittaker, chief economist at the Resolution Foundation, explains:

“It’s encouraging to see unemployment falling again, after a pause earlier this year. But there is significant variation in the extent to which this jobs revival has been shared across the country. Many parts of the UK remain a long way short of their pre-recession levels.”

“Private sector employees are enjoying a mini pay surge that is helping to narrow the substantial wage gap that opened up after 2008. However, maintaining this momentum will prove much harder once inflation starts heading back towards its target rate next year.

Whittaker also fears that the public sector pay cap will lead to problems:

“As recovery builds, attention will turn to who is benefiting from it. The strong recent performance of wages in the low-paying retail sector is encouraging, but the picture is much less promising in manufacturing and construction. Meanwhile, ongoing pay constraint in the public sector is likely to translate into increasing recruitment and retention difficulties in the coming months.”

German bank Berenberg have produced a chart showing how real wage growth (adjusted for inflation) has picked up as the jobless rate has fallen:

UK wages

UK wages Photograph: Berenberg

Kallum Pickering, Berenberg’s senior UK economist, explains:

Falling unemployment is boosting wages! The risk that low inflation might hamper growth in wages now looks misplaced, with wage data continuing to show stable progress (see chart 1) despite weak headline inflation. The pace of real wage growth is now broadly consistent with the pre-crisis average, though unemployment is still around 0.3pp higher.

Our view is that the labour market still has some more progress to make before the unemployment rate finally settles. This further improvement however, is unlikely to bring about further real wage gains. Further slack erosion in the labour market will be consistent with higher nominal wages but, it will take place as inflation recovers.

Today’s labour market report also shows how Britain and the US benefitted from massive monetary stimulus programmes after the financial crisis struck:

UK unemployment stats

Many public sector workers are missing out on the recent increase in wages, because chancellor George Osborne has enforced a 1% pay rise freeze that could last until 2019.

Perhaps someone should remind the Department of Work and Pensions….


Britain’s economic productivity is still below its potential, warns Ian Brinkley, chief economic adviser at Lancaster University’s The Work Foundation.

Brinkley says:

“The employment growth pause that we saw in the first half of 2015 is over – job growth resumed over the three months to August compared with the previous three months, driven by more young people and older workers in employment.

Looking ahead, we can expect productivity to grow faster and employment to grow more slowly than they have in recent years as the labour market starts to return to normal. But a full recovery in productivity could be long and slow. Even with the recent boost we are still 15 per cent below where we would have been had the pre-recession productivity trend continued, and manufacturing productivity still gives serious cause for concern.”

Around four-fifths of the 359,000 jobs created last year are full time:

Part time/full time work

The fall in the jobless rate indicates there’s little slack in the UK labour market, which could mean borrowing costs rise in early 2016.

Dean Turner, Economist at UBS Wealth Management, explains:

Rising wage pressures will likely prompt the Bank of England to hike interest rates soon, most likely in the first quarter of next year.

However, tighter monetary policy is unlikely to derail the UK from its current growth trajectory, as nascent signs productivity growth should keep inflation pressures in check, the consequence being that the path of rate increases will be gradual.”

Wages have been rising this year because companies are managing to increase their productivity, argues economist Howard Archer of IHS Global Insight.

He says:

One factor that seems to be limiting employment growth compared to earlier in 2015 is that UK productivity is now seeing genuine improvement – with earnings growth stronger, UK companies are likely stepping up their efforts to lift productivity by getting more out of their existing workers.

Public sector keeps shrinking

Britain’s public sector workforce has shrunk again to just 17.2% of the working population, the lowest since records began in 1999.

UK unemployment

Today’s labour market report shows that there were 5.36 million people employed in the public sector for June 2015. This was:

  • down 16,000 from March 2015
  • down 59,000 from a year earlier
  • the lowest figure since comparable records began in 1999

In contrast, there were 25.74 million people employed in the private sector for June 2015. This was 58,000 more than for March 2015 and 472,000 more than for a year earlier.

Here’s where jobs were created, or destroyed, in the last year:

UK unemployment

After several years of suffering falling real wages, British pay packets have now been outpacing inflation for the last year or so.

Chancellor George Osborne likes the look of today’s figures:

My colleague Andrew Sparrow is covering all the drama around the fiscal charter vote in his Politics Live blog:

The number of people claiming jobless benefits appears to have bottomed out just below 800,000, with the claimant count rising by 4,600 last month.

Claimant count

Claimant count Photograph: ONS

Basic pay growth slows

Wage growth continues to outpace inflation, but not by as much as expected.

Basic pay, excluding bonuses, rose by 2.8% annually in the three months to August. That’s a slight fall compared to the 2.9% recorded a month earlier. Economists had expected a rise to 3%.

Total earnings, including bonuses, did increased by 3%.

UK wage growth

UK wage growth Photograph: ONS

UK inflation actually fell by -0.1% last month, so this means real wages are rising by around 3%.


Britain’s employment rate has risen to 73.6%, the highest since comparable records began in 1971.

UK employment rate

UK jobless rate falls to 5.4%

Here we go! Britain’s jobless rate has hit a new seven year low, falling to 5.4% in the three month to August.

The Office for National Statistics reports that the number of people out of work fell by 79,000 in the last quarter, taking the jobless total down to 1.774 million.

But the claimant count – the number of people claiming unemployment benefit – has risen by 4,600 in September. That takes the total to 796,000. That has dashed predictions of a small fall in the claimant count.

More to follow….



UK government urged to reintroduce compulsory work experience

Pupils wearing school uniform in a secondary comprehensive school , Wales UK<br />CYA7MC Pupils wearing school uniform in a secondary comprehensive school , Wales UK

Ahead of today’s unemployment report (at 9.30am BST), the British Chambers of Commerce has urged the government to reintroduce compulsory work experience for school children.

BCC director general John Longworth believes it was a mistake to stop forcing schools to offer work experience for under 16-year-olds three years ago. It would help bring down Britain’s ‘stubbornly high’ youth unemployment rate, and help young people make the jump to the workplace.

Longworth says:

“Business and school leaders are clear – we won’t bridge the gap between the world of education and the world of work unless young people spend time in workplaces while still at school.

“It was careless of Government to end compulsory work experience in 2012, but it is not too late to correct the mistake and work with companies and schools to ensure that every school pupil has the chance to feel the energy, dynamism, buzz and challenge of the workplace for themselves.

Work experience is a touchy subject in the UK; those with good contacts typically get a head start at bagging the best placements. Still, even a week painting fences at a duck sanctuary can lead (eventually) to a desk in the newsroom….


Tony Cross of Trustnet Direct agrees that today’s weak China inflation figures, and fresh deflation at the factory gate, are a worry for traders:

Downbeat data from China – this time in the shape of weaker than expected inflation – is adding another layer of concern as to how the world’s second largest economy is managing the slowdown, and as a result the base metal mining stocks once again are wearing more than their fair share of the losses.

Here’s the picture across Europe:

European markets, October 14 2015

Domino’s Pizza, cheese and tomato pizza

Pizza chain Domino’s is bucking this morning’s selloff.

Domino’s shares have jumped by 13% to a record high of £10.14, after it raised its profit forecasts and revealed that UK like-for-like sales are up by a remarkable 14.9% in the 13 weeks to September 27.

CEO David Wild credited “the success of our strategic and marketing initiatives”; the company is strong on social media, has a successful smartphone app, and has sponsored several popular TV shows from The Simpsons to Hollyoaks.


Germany’s DAX and France’s CAC are both down around 1%, adding to losses earlier this week.

Bloomberg TV’s Carolyn Hyde flags up that more than 100 billion euros has been knocked off Europe’s largest companies value this week already:


Stock markets across Europe are in the red at the start of trading, and China is getting the blame.

The FTSE 100 has dropped by 55 points, or 0.85%, in early trading to 6288.

Mining stocks are all down, with Glencore dropping 2.5% and Anglo American shedding 2.3%.

Burberry is also leading the fallers, down 2%. The fashion firm is expected to report slowing sales on Thursday, due to sliding demand for its trench coats and natty checks in China.

Mike van Dulken, head of research at Accendo Markets, says today’s Chinese inflation figures are a worry for investors:

While Chinese consumer inflation (CPI) slowed further, Producer Prices made it a record 43rd straight month of deflation.

While inflation gives the People’s Bank of China room to ease monetary policy further to support the slowing economy, hopes of more stimulus are clearing failing to appease market concerns especially with Q3 GDP data only days away

Chinese policymakers may get another nudge to stimulate their economy next Monday, when GDP figures for the third quarter are released.

Growth is expected to slow to an annual rate of 6.8%, from 7.0% in the second quarter of this year. That would be the first sub-7% reading since the financial crisis.

August and September were turbulent times for China, with wild swings in the stock market. That could also hit the growth rate, if worried firms started cutting investment.

European markets are expected to fall this morning, following the weak Chinese inflation data overnight:

Chinese deflation fears as producer prices slide again

New fears over China’s economy are rippling through the markets this morning, after two piece of economic data showed that demand is weakening.

The producer prices index – which measures what Chinese firms charge for their goods – slumped by 5.9% year-on-year in September. That matches August’s decline, which was the biggest drop since the financial crisis in 2009.

It’s also the 43th month running in which producer prices have fallen.

It suggests that companies are being forced to slash prices in an attempt to stimulate sales, as Beijing tries to rebalance its economy without a ‘hard landing’.

Consumer price inflation also fell, with the CPI index dropping from 2% in August to 1.6% in September, partly due to slowing food prices

And that hit markets in Asia, with traders worrying that the Chinese economy is in urgent need of fresh stimulus.

As Chris Green, an Auckland-based strategist at First NZ Capital Ltd, told Bloomberg:

“In terms of global growth, the risk is skewed towards the downside.”

Angus Nicholson of IG reckons Beijing will act soon, saying:

Today’s Chinese CPI essentially guaranteed further cuts to the interest rate and the reserve requirement ratio (RRR) before the year is out.

But right now, all the Asian markets are in the red – with Japan’s Nikkei closing down almost 2%.

Asian stock markets

Asian stock markets today. Photograph: Thomson Reuters


Introduction: UK unemployment report in focus

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

Coming up this morning…

The latest UK unemployment report, due at 9.30am BST, will show whether or not Britain’s labour market recovery lost pace over the summer.

The jobless rate is expected to remain at 5.5%, while the number of people claiming unemployment benefit is tipped to fall by around two thousand.

The latest UK earnings figures will also be closely scrutinised. Last month, we saw that wages were rising at their fastest rate in six years, at 2.9% year-on-year. Some in the City predict they will have risen again to around 3.1%.

Michael Hewson of CMC Markets explains:

Today’s average earnings data could present Bank of England policymakers with a problem in the short term if they continue to trend higher as they have been doing for the past few months.

Expectations for the three months to August are for an increase in wages to 3.1% from 2.9%, giving a further boost to hard pressed consumers who up until a year ago had undergone a five year fiscal squeeze in the other direction. The main concern would be if wages start to push higher in a wage/price spiral but that doesn’t seem likely at this point in time

We also get a healthcheck on the eurozone at 10am BST, when the eurozone industrial production figures for August are released. Economists expect a fall in output, as we’ve already seen weak data from Germany for that month.

And over in Greece, European commissioner Pierre Moscovici is visiting prime minister Alexis Tsipras to discuss the Greek bailout programme this afternoon.

We’ll be tracking all the main events through the day….

Updated © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.


BoE has slashed its forecast for wage growth this year, warned that geopolitical risks are rising, and said contingency plans for financial upheaval over Scottish independence are ready. Here are key points from the Bank’s Quarterly Inflation Report…


Powered by article titled “Business Liveblog: Bank of England cuts wage growth forecast, and reveals Scottish contingency plans” was written by Graeme Wearden, for on Wednesday 13th August 2014 12.51 UTC

US retail sales miss forecasts, with no growth in July

Over in America, a disappointing set of retail sales figures have just raises concerns over the strength of its recovery.

Retail sales were flat in July, the worst performance in six months, having only risen by 0.2% in June.

Car sales fell, and demand for electronics and home appliances was weak — not a great sign of consumer confidence.

Core retail sales, which strips out cars, gasoline, food services and building materials, rose by just 0.1% in July, and June’s figure was revised down from 0.6% to 0.5%.

Ahha! On page 29 of the BoE’s Inflation report is a bar chart, showing how most new jobs created in the last six months have been in ‘low skill’ professions.

This may help explain the low growth in average earnings in recent months, if more new hirers are taking lower paid positions.

Hat-tip to Jeremy Warner of the Telegraph for flagging it up:

Labour: Weak wage growth shows economy isn’t fixed

Chris Leslie MP, Labour’s Shadow Chief Secretary to the Treasury, has seized on the news that the Bank of England has slashed its forecast for wage growth this year, to just 1.25%.

He says:

“The inflation report shows why this is no time for complacent and out-of-touch claims from Ministers that the economy is fixed and people are better off.

“While the economy is finally growing again and unemployment is falling, working people are still seeing their living standards squeezed. Pay growth is at a record low and lagging behind inflation and the Bank of England has halved its forecasts for wage growth this year.”

As covered earlier this morning, the latest unemployment data showed earnings growth faltering,

Total wages (including bonuses) have shrunk for the first time since 2009. And stripping out bonuses, average earnings rose by the lowest since records began in 2001, up just 0.6%.

Michael Izza, chief executive of ICAEW (which represents accountants) says the Bank of England’s new, lower wage growth forecasts are a concern:

The numbers of self-employed and part-time workers, together with those on zero-hours contracts are contributing to a flexible labour market that is keeping wages down. In addition, auto-enrolment means that employers are having to fund pensions from somewhere, and wages are suffering as a result.

David Kern, chief economist at the British Chambers of Commerce, says the Bank of England is giving out “mixed messages” on the outlook for interest rates.

The higher growth forecast for 2014 and the lower estimate for the amount of slack in the economy may be seen as a signal to bring forward interest rate rises.

However, Governor Carney’s comments will reassure businesses that the MPC will not rush any increases in rates. He also acknowledged that the rising supply of labour in the economy may provide new sources of economic capacity.

An early UK interest rate rise looks a little less likely, reckons Neil Lovatt, director of financial products at Scottish Friendly.

He says:

“To read between the lines, the message today is that rates are still destined to rise, but when that will be is still up for debate. The fickle nature of the UK economy seems to keep everyone guessing.”

“Any rate rises will be small, but even very small rises in interest rates will have a significant effect on what is still a fragile economy. That said, savers thinking that the ‘good old days’ of high interest rates will return are going to be sorely disappointed and the sooner we adapt to this environment the better.”

Those new BoE forecasts

Berenberg Bank have kindly wrapped up the changes to the Bank of England’s forecasts:

  • Growth up. The BoE raised its growth forecasts to 3.5% in 2014 and 3.0% in 2015, both up by 0.1ppts from their previous forecast. Although they cut their 2016 forecast to 2.6% from 2.8%
  • Inflation up in 2014 but down in 2015 and 2016. The BoE now forecasts 1.9%, 1.7% and 1.8% inflation for 2014, 2015 and 2016, compared to 1.8%, 1.8% and 1.9% in their previous forecast.
  • Unemployment down. To 5.9%, 5.6% and 5.4% in 2014, 2015 and 2016, from 6.3%, 6.0% and 5.9% in the previous forecasts.
  • Pay growth cut in the near term but raised later in the forecast. Specifically, the BoE now forecasts wage growth of 1.25%, 3.25% and 4% in 2014, 2015 and 2016 from 2.5%, 3.5% and 3.75%.
  • Slack now estimated at 1% of GDP, compared to 1-1.5% in the second quarter.

So, good news on growth and unemployment, but bad news on pay.

As Berenberg’s UK economist, Rob Wood, puts it, there’s “something for everyone”.

This fan chart shows the new growth forecasts:

One more key point — the Bank of England flagged up that geopolitical dangers (think Ukraine or the Middle East) are a growing threat to Britain’s recovery.

Carney said:

“Markets have been remarkably resilient to some of these geopolitical events and we’re only beginning to see the first advance signs of the middle through some of our major export markets such as Germany and the movements of some of the confidence indicators.”

(thanks to Reuters for the quote)

Bank of England’s quarterly inflation report – the key points

Quick recap.

1) The Bank of England has slashed its forecasts for wage growth, conceding that the recovery has still not fed through to people’s pockets.

The BoE now expects earnings to rise by just 1.25% this year, down from 2.5% previously. It admitted that there appears to be more slack in the economy than it realised, although it is also being eaten up at a faster rate.

Governor Mark Carney said the UK was experiencing “strong output growth”, but this has not been matched by a material pickup in productivity, or wages.

2) The prospects of an early rise in UK interest rates appear to have faded.

The pound tumbled on the news, shedding one cent against the US dollar to $1.6714 as investors calculated that an early rate rise is less likely than before.

The Bank also hammered home that interest rate rises will be gradual and limited, when the time comes to end Britain’s long period of record-low borrowing costs.

3) “Contingency plans” have been drawn up in case Scotland votes for independence.

Carney said:

”Uncertainty about the currency arrangements could raise financial stability issues….We have contingency plans.”

4) During an occasionally barbed press conference, Carney denied that the Bank was increasingly clueless about the UK economy.

He argued that rising geopolitical risks mean there is naturally more uncertainty about the situation, and denied that his precious forward guidance policy has been a muddle.

5) Europe remains a big worry. The BoE says that:

Eurozone growth continued to disappoint, net lending has been falling and inflation has stayed low.

And deputy governor Minouche Shafik warned that the UK can’t rely on the eurozone to drive its recovery.

Eurozone industrial production hits recovery hopes

Incidentally, we had further confirmation this morning that the eurozone is struggling — a poor set of industrial production numbers.

My colleague Jo Moulds reports:

Factory output in the eurozone contracted unexpectedly in June, further damaging hopes of a strong recovery.

Industrial production dropped 0.3% on the month following a 1.1% drop in May, hit by the ongoing conflicts in the Ukraine, Iraq and Gaza.

Production was flat compared to the same time last year. Economists had been targetting a 0.1% rise on the year. The annual reading was the lowest since August 2013.

Bank of England: we can’t rely on the Eurozone for our recovery

Britain can’t rely on the eurozone economy to drive our recovery, warns the Bank of England’s new deputy governor, Minouche Shafik.

Asked about the impact of the European Central Bank’s new stimulus measures (including hundreds of billions of cheap loans for banks), Shafik urged caution, saying the new impact of this LTRO programme will become clear over time.

The eurozone still faces low growth and low inflation, Shafik says, and we need to see whether the ECB’s measures lead to stronger credit growth and a stronger recovery.

The UK can’t rely on a eurozone recovery to lift our recovery. It would be good if the eurozone could drive us forwards, as it’s such an important export market, that’s not very likely, she concludes.

And that was the end of the press conference. Summary and reaction to follow…


Asked about the rise in self-employed workers (as covered earlier in the blog) deputy governor Ben Broadbent plays down the suggestion that it’s a risk. This isn’t necessarily a bad thing for productivity, he claims.

The Bank of England is tweeting some of the key points from today’s briefing, including a rather dashing (and slightly menacing?) photo of the governor:

Carney treats a question about his ‘muddled’ forward guidance policy with some distain.

Asa Bennett of the Huffington Post points out that the initial pledge (no rate rise until unemployment has fallen below 7%), has evolved into a broader measure based on slack, wage growth, and the like. Was it a muddle, or a learning process?

Not an unfair question, frankly, if a little mischievous.

But Carney doesn’t look pleased, claiming that Bennett is the muddled one, and that his guidance has been entirely consistent across many inflation reports and MPC minutes.

It’s consistent, it’s boring, but what’s what you get, he smiles.

The audience aren’t smiling, though:

Mark Carney: Bank of England has contingency plans for Scottish independence

Mark Carney has revealed that the Bank of England has drawn up contingency plans in case Scotland votes for independence next month.

Asked for his views on the prospect of ‘sterlingisation’ (that Scotland would use the pound without a formal currency union), Carney reveals that that BoE is preparing for all eventualities, as “uncertainty” over Scotland’s currency arrangements could hit financial stability.

He concedes that

He says:

We have contingency plans…. but it’s never a good idea to talk about them in public apart from to say that you have them.

Carney says that in terms of the Bank’s responsibilities for financial stability, we have “a wide range of tools and plans”. And the BoE isn’t the only body with responsibilities here — some are shared with the Treasury.


Back on the markets…. Carney says he is “encouraged” that the financial markets are more responsive to the latest data.

James Macintosh of the Financial Times takes up Larry’s point, that the Bank is looking increasingly clueless (on a spectrum between certainty and cluelessness).

Mark Carney replies; if we can agree that the range is between perfect certainty and perfect uncertainty, it’s fair that there is more uncertainty, mainly around the issue of productivity.

Here’s a link to the inflation report (sorry for the delay #hectic)

Ah, the Scotland question — is it time for Alex Salmond to produce a Plan B on an independent Scotland’s currency?

Mark Carney takes a cautious line; the Bank will implement whatever policymakers decide, but it has “noted” the statements from the three main UK political parties that they would not enter a formal currency union with iScotland.

He also points out that the Bank has a responsibility for financial stability across the UK, and will keep discharging those duties until circumstances change.


Could the Bank of England raise interest rates by as little as 0.125%, or would that be the equivalent of ‘boiling the frog’, asks Szu Ping Chan of the Telegraph.

Carney chuckles at the analogy, but doesn’t suggest such a small rise is on the agenda.

Ed Conway of Sky invites Mark Carney to comment on the financial markets’ expectations for UK interest rate rises (harking back to his Mansion House speech in June, when he suggested they were too dovish).

Carney plays the ball deftly, saying that the overall shape of market expectations are consistent with an adjustment that is both gradual and limited.

Deputy governor Ben Broadbent chips in, saying that it’s a “false dichotomy” to suggest the Bank should either be completely certain about everything, or completely clueless.

Larry Elliott, the Guardian’s economics editor, isn’t impressed by today’s report:

Doesn’t today report show that the Bank “really hasn’t got a clue, the MPC is divided, and that anyone taking out a mortgage or an overdraft would be ill-advised, as anything you say must be taken with a very large pinch of salt?”, Larry politely suggests.

Governor Carney defends his record, suggesting rather archly that Larry should try speaking to a lot of firms around the country*. The firms I speak to insist that business have understood the Bank’s ‘forward guidance’, he adds.

Interest rates will go up as the economy improves, they will go up to a limited extent, ands gradually, Carney says. But there are geopolitical dangers, and we may need to react to them.

* – Like in Rochdale, perhaps, Governor?

How much spare capacity is left to be absorbed in the UK economy?

Carney says there is “tremendous uncertainty” about the degree of slack, among policymakers on the Bank’s monetary policy committee (the overall view is that there’s 1% of capacity to mop up).

That’s not hugely reassuring, given the importance that the Bank now puts on the issue when setting monetary policy.


Alex Brummer of the Daily Mail wants more details about the Bank’s worries about geopolitics.

Carney replies that there is a “slight downturn skew” to today’s growth forecasts.

Bank of England press conference – Q&A session begins

Onto questions — Ben Chu of the Independent asks why the Bank has lowered its forecasts for productivity growth.

Mark Carney explains that firms have been taking on workers rather than investing in new equipment, as labour is cheaper than capital.

That process should end once cheap labour has been mopped up, meaning workers demand higher wages, and encouraging firms to invest in new equipment that will boost productivity. That process is taking longer than thought.

Pound hits 10-week low against the US dollar

The pound has hit its lowest level against the US dollar since last May, as the markets digest the inflation report (and the jobless data).

Sterling is down by 0.45% today, at $1.6732.


On interest rates, Mark Carney again reiterated that borrowing costs will rise in a “small, slow” manner, when the appropriate moment comes.

The economy is returning to a semblance of normality, Carney concludes.

Carney says that the amount of spare capacity in the economy has fallen somewhat in the last quarter, but the Bank also reckons there was more slack in the UK than before.


Bank of England slashes forecast for wage growth.

Over at the Bank of England, governor Mark Carney is unveiling the Quarterly Inflation Report.

He is declaring that the Uk recovery is “on track”…. “Robust growth” has taken output above the pre-crisis peak, and the Bank has revised its near-term forecast for growth up.

But the Bank has also slashed its forecast for wage growth in the UK.

  • It now expects wages to rise by just 1.25% in 2014, down from 2.5% previously.
  • It sees growth picking up to 3.25% in 2015, down from 3.5% before.
  • And in 2016, it reckons wages will rise by 4%, up from 3.75% previously.

Carney is also warning that Britain faces rising geopolitical risks, while the eurozone economy remains weak.

And the persistent strength of sterling is also a worry.

You can watch the press conference live here (right-click to open in a new tab).


So much for the year of the pay rise

Today’s report have cast a shadow over hopes that 2014 will be “the year of the pay rise.”, says the Resolution Foundation.

Adam Corlett, their economic analyst, comments:

“Once again a strong employment performance is to be welcomed but concerns remain over wages. There is still good reason to expect that real pay will start increasing during 2014 but today’s disappointing performance pushes the wages recovery further down the road.

It’s now almost impossible for average real pay in 2014 as a whole to exceed last year’s unless we see an unprecedented surge in wages during the rest of the year.

The number of people receiving the Jobseekers Allowance could soon fall below the one million mark:

The Press Assocation reports:

The claimant count fell for the 21st month in a row in June, by 33,600 to 1.01 million, according to today’s data from the Office for National Statistics.

If the trend continues, the number of Jobseeker’s Allowance claimants will fall below a million next month for the first time since September 2008.

See the report yourself

Nearly forgot… you can see the full labour market report here (as a pdf).

Iain Duncan Smith: Long-term plan is working

Work and Pensions Secretary Iain Duncan Smith has claimed that his changes to the welfare system have helped heal the labour market.

Here’s his official response to the jobless figures:

“In the past, many people in our society were written off and trapped in unemployment and welfare dependency. But through our welfare reforms, we are helping people to break that cycle and get back into work.

“The Government’s long-term economic plan to build a stronger economy and a fairer society is working – with employment going up, record drops in youth unemployment and hundreds of thousands of people replacing their signing-on book with a wage packet.

“This is transformative, not only for these individuals and their families, but for society as a whole. That is why we have set full employment as one of our key targets – bringing security and hope to families who have lost their jobs and others who never had jobs, we put people at the heart of the plan.

“The best way to help even more people into work is to go on delivering a plan that’s creating growth and jobs.”

However….critics, such as our own Polly Toynbee, are less impressed with Duncan Smith’s performance, given the stuttering start to his universal credit project:

Iain Duncan Smith’s delusional world of welfare reform

Today’s slump in real wages are a blow to hopes that the cost of living squeeze was easing — readers may remember that four months ago there was chatter that the squeeze was over, after pay rises (briefly) burst above inflation.

Could Britain’s falling real wages be partly due to changes in the composition of the labour market, with more people taking lower-paid jobs?

Newsnight’s economics correspondent, Duncan Weldon, reckons so:

Britain’s youth unemployment total has fallen:

The ONS reports that there were 767,000 unemployed people aged from 16 to 24 in April-June 2014; 102,000 fewer than for January to March 2014 and 206,000 fewer than for a year earlier.

These were the largest quarterly and annual falls in youth unemployment since comparable records began in 1992.


The recovery in the labour market has partly been driven by Britain’s army of self-employed people, which swelled by almost 10% over the last year.

The ONS reports that, since April-June 2013,

  • The number of employees increased by 447,000 to reach 25.77 million.
  • The number of self-employed people increased by 408,000 to reach 4.59 million.

UK unemployment, the key charts:

These two charts show what a bizarre jobs recovery the UK is experencing.

On the one hand, the employment rate is close to its highest level on record, as jobless falls and more people find work (820,000 in the last year).

But yet, real wages are shrinking – with the gap between earnings and inflation widening alarmingly (whether you include volatile bonuses or not)

One reason for caution — pay packets were boosted a year ago, because many bonuses were held back until after the UK top tax rate fell to 45%, in April 2013.

The ONS points out that “some employers who usually paid bonuses in March paid them in April last year.”

But if you strip out bonuses, pay is still up a measly 0.6% year-on-year, the lowest on record.


This chart from Bloomberg confirms that UK wages have suffered their first fall since the depths of the financial crisis:

Here are the key points on today’s unemployment data, from the ONS:

  • For April to June 2014, there were 30.60 million people in work, 167,000 more than for January to March 2014 and 820,000 more than a year earlier.
  • For April to June 2014, there were 2.08 million unemployed people, 132,000 fewer than for January to March 2014 and 437,000 fewer than a year earlier.
  • For April to June 2014, there were 8.86 million economically inactive people (those out of work but not seeking or available to work) aged from 16 to 64. This was 15,000 more than for January to March 2014 but 130,000 fewer than a year earlier.
  • For April to June 2014, pay including bonuses for employees in Great Britain was 0.2% lower than a year earlier, but pay excluding bonuses was 0.6% higher.

UK unemployment rate drops to 6.4%, but wages fall

Breaking News: Wage growth in the UK has hit its lowest level on record, and actually contracted if bonuses are included.

The Office for National Statistics reports that average earnings, excluding bonuses, rose by a mere 0.6% in the three months to June.

That means pay packets lagged well behind inflation — which hit 1.9% in June.

Including bonuses, total pay packets actually contracted by 0.2% during the quarter, the first fall since 2009.

In brighter news, the overall unemployment rate fell to 6.4% in April-June, which is the lowest since the end of 2008. And the claimant count fell by 33,000, showing that the labour market continues to recover.

But that recovery still isn’t reaching people’s pockets.

More details and reaction to follow


Nearly time for the UK unemployment data to hit the wires….

Reminder — economists expect another rise in employment, and a drop in the number of people claiming benefits.

But a crucial issue is whether earnings are picking up, after years of low pay rises.

As my colleague Katie Allen reports, many employees have been hit hard:

Angela Chicken was still in hospital with her newborn son when she was made redundant. She had been earning £11 an hour as a graphic designer. Ten years on, the 52-year-old single mother makes around £8 an hour working part-time at her local Sure Start children’s centre in Southampton.

With the cost of living rising faster than her pay, Chicken’s wages have fallen even further in real terms, a pattern likely to be reflected across the country in the latest official labour market figures today. After bills and housing costs, Chicken is left with £108 a week to feed herself and her son, buy clothes and anything else they need. They eat well, she said, but there is little left for treats or outings.

“We don’t really have enough money to go on holiday … I don’t get haircuts, I very rarely buy any clothes,” she said. “What I have had to do is pull myself back over the last 10 years to a position that isn’t as good as it was because I got knocked off my perch.”

More here:

In low-wage economy employers paying well make sound investment


Most of Europe’s stock markets have risen this morning, despite the worrying economic news from Asia overnight (details).

Germany’s DAX is leading the way, up 77 points or 0.86% at 9147.

Insurance group Swiss Re has cheered investors by posting a 3.5% jump in profits.

In London the FTSE 100 is flat (dragged back by a few companies going ‘ex-dividend’).

The Bank of England may admit this morning that it was too optimistic about wage growth, reckons Bloomberg’s Emma Charlton:

We also have confirmation that the eurozone has slipped worryingly close to deflation last month.

Fresh data this morning showed that Spain’s consumer prices index fell by 0.3% year-on-year in July, the biggest drop in almost five years. Month-on-month they slipped by 0.9%.

In France, prices were up by a meagre 0.5% last month compared with July 2013, and also fell on a monthly basis, down 0.3%.

Japan’s GDP shrinks by 6.8%; Chinese new lending slumps

Global economy watchers have two big pieces of economic data from Asia to digest today.

1) Japan has suffered its biggest contraction since the 2011 tsunami, in a blow to efforts to revitalise its economy.

Japanese GDP fell at an annualised rate of 6.8% between April and June (meaning it shrank by 1.7% during the quarter). The slump is being blamed on the recent hike in Japan’s sales tax, from 5% to 8%, which encouraged firms and households to bring forward their spending to January-March.

The government remains relaxed, saying the economy is recovering. But critics of prime minister Abe’s stimulus plan suggest he may have to postpone plans to raise the sales tax again in December.

2) The news from China isn’t too rosy either. The broadest measure of new credit has dropped to the lowest since the global financial crisis, suggesting many banks are cutting back on new lending.

Economists are concerned, as Chinese banks also face the impact of the property market downturn. Beijing may need to unleash further stimulus measures to avoid growth weakening. fastFT has a round-up of analyst comments.


Analysts at ING will be combing the inflation report for signs that the Bank of England’s monetary policy committee was divided last week, when it voted to leave interest rates unchanged.

They say:

The Bank will release new forecasts and update its forward guidance which will leave the door open for a rates rise this year. Any hints of dissent at the August meeting will boost the case for a November hike.

Inflation report: what to watch for

The Bank of England inflation report will be scrutinised for hints over interest rate rises, the latest assessment of ‘slack’ in the economy, wage growth (or lack thereof), and the outlook for growth (could possibly be revised up) and inflation (might be revised down).

Mark Carney can also expect a few questions about the UK housing market.

Here’s Angela Monaghan’s preview:

Bank of England inflation report – what to watch for

City analyst Michael Hewson of CMC Markets predicts that today’s data will show another welcome drop in the jobless rate, but an unwelcome drop in wage growth.

He writes:

The latest ILO unemployment numbers for June are expected to see a drop from 6.5% to 6.4%, while jobless claims in July are expected to show another drop of 30k, slightly lower than the 36.3k drop seen in June.

Wages growth continues to be the economic head scratcher and is the Bank of England’s biggest problem when it comes to deciding when to raise rates. If we continue to see the gap with inflation widen out then it becomes increasingly difficult to see how the Bank could even contemplate a rate rise this year.

Expectations are for flat wage growth for the 3 months to June, down from the 0.3% rise in May.

* – The wages figures are skewed by the cut in Britain’s top rate of income tax back in April 2013. That prompted some firms to hold back bonus payments until then, making comparisons trickier.

UK unemployment and Bank of England inflation report in focus

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

We’re tracking two big events in the UK this morning. First, the latest unemployment figures, due at 9.30am BST. They are expected to show another drop in the number of people out of work.

But that labour market recovery has come at a price — low wage growth, and today’s figures are likely to show pay rises lagging behind inflation again.

That would mean real wages are still falling; taking the shine off Britain’s economy recovery.

That data will set the scene for the Bank of England’s latest quarterly Inflation Report, released at 10.30am.

This is the Bank’s latest health-check on the UK economy, including forecasts for growth and inflation.

But the big issue is whether the BoE has moved closer to hiking interest rates — Governor Mark Carney will probably be quizzed on this during the press conference.

The key issue is whether the Bank thinks most of the spare capacity, or ‘slack’, in the economy has now been mopped up. Carney will probably reiterate that the Bank is watching wage growth closely – showing whether employers are having to pay more for talent, and whether households could cope with higher borrowing costs.

As Ian Williams of Peel Hunt explains:

Formal changes to the forecasts are likely to be minimal; the overall assessment of the degree of slack, especially regarding the labour market, will be the focus of investor interest.

Elsewhere, European stock markets are expected to rise modestly, despite ongoing geopolitical tensions [the Russian aid convoy chugging towards the Ukraine border could be the next flashpoint].

And in the euro area, investors are digesting yesterday’s slump in German investor confidence, and fretting about how bad tomorrow’s growth figures for the April-June quarter could be.

I’ll be tracking the key events though the day….

Updated © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Bank of England issues new forecasts on growth and inflation, and the latest UK jobless data gets released. BOE Governor Mark Carney cools talk of early rate rise. UK jobless rate hits fresh five-year lows, but wages growth misses forecasts…


Powered by article titled “Pound falls after Bank of England quarterly inflation report; jobless rate drops to 6.8% – live” was written by Graeme Wearden, Sean Farrell and Ian Sample, for on Wednesday 14th May 2014 13.07 UTC

Some newswire snaps from German chancellor Angela Merkel:


Over in parliament, chancellor George Osborne is testifying to MPs about the Scottish independence vote.

The chancellor is reiterating that he would not support a currency union with an independent Scotland, which allowed it to use the pound.

Our politics liveblogger Andrew Sparrow is tracking the session here. Here’s a flavour:

Ian Davidson, the Labour MP who chairs the committee, goes next.

Q: Do you accept you have painted yourself into a corner. You would be destroyed if you did a U-turn after September.

Osborne says there is no way the government would agree to a currency union. He wants people to know that.

He is not the one asking people to make this decision, he says.


John Cridland, CBI Director-General, likes what he heard from Mark Carney today:

“The Inflation Report provides positive signs that the UK recovery is advancing, with broad-based growth and business investment picking up. But it is evident that growth is still not back to normal, and there are a number of political risks on the horizon.

“Housing remains a concern and it is reassuring that the FPC has the mandate and a range of tools available to keep the housing market in check.

“It was good to hear the Governor confirm that a decision to increase interest rates would be based on the sustained strength of the wider economy, and there is still some way to go to reduce slack and boost productivity and wages.”

Bank of England dampens predictions of early rate rise – what the economists say

Samuel Tombs of Capital Economics reckons today’s report may cool expectations of a rate rise in the first quarter of 2015:

Under the assumption that interest rates rise in line with market expectations in the first half of 2015, the Bank expects CPI inflation to remain below the 2% target in two years’ time. This suggests that the markets might be wrong to anticipate an interest rate rise to come as early as Q1 2015. And while the forecasts for GDP growth were raised again (the forecast for 2015 has been raised from 2.7% to 2.9%), the Governor emphasised that the economy has “only just begun to head back towards normal”.

Meanwhile, the Committee’s collective judgment is that the amount of spare capacity in the economy has only reduced slightly since February’s Inflation Report and that it “remains in the region of 1% to 1.5% of GDP”. Finally, the Governor stated that monetary policy was not the right tool to use to cool the housing market and that the FPC would act first, if necessary. Accordingly, we continue to think that interest rates will remain on hold until the second half of next year, later than the markets and most economists expect.

Mike Franklin, chief investment strategist at Beaufort Securities, explains why Carney fears the UK labour market isn’t as strong as data suggests:

“Carney is concerned that there should be enough slack in the economy to cope with keeping interest rates low while he is also reliant on employment data which can be distorted by the inclusion of types of employment contract currently prevalent which do not necessarily result in strong gains in disposable income as economic activity picks up.”

Alex Edwards, head of the corporate desk at UKForex, says traders expecting an early rate hike were disappointed:

Growth and inflation forecast have not changed much from last time around. He referred to productivity still being low, and that there was still considerable slack in the labour market.

Carney went on to say that interest rates would only rise after the economy is back to “normal” and did not, as some commentators were expecting, directly signal when the first rate hike would occur.

Martin Beck, senior economic adviser to the EY ITEM Club, agrees that rates won’t rise until “well into 2015″:

The MPC’s latest Inflation Report struck a dovish tone, suggesting that those expecting an interest rate rise this year are likely to be disappointed.

“Despite the strength of the recovery and, in particular, the robustness of the labour market, the MPC stuck to its previous estimate that ‘slack’ in the economy amounts to 1- 1&frac12;% of GDP. Indeed, it expects that this slack will be used up more slowly over the next few years than in the recent past, with GDP growth cooling and productivity growth picking up.


The City got the message from Mark Carney — the pound has lost half a cent against the US dollar, to $1.677.

Here’s Larry Elliott and Angela Monaghan on the Bank of England’s attempts to squash talk of an imminent interest rate rise:

Policymakers at Threadneedle Street used the Bank’s latest quarterly inflation report to signal that it remained in no rush to raise rates, with the first rise expected around the time of the general election in the second quarter of 2015. Bank rate has been on hold at the all-time low of 0.5% since March 2009 and the governor Mark Carney said on Wednesday any rate rises would be “gradual and limited”.

The report said it was not yet clear whether the recovery was on a sustainable footing. The forecasts showed members of the rate-setting monetary policy committee still believe there is 1-1.5% of spare capacity in the economy to be used up, following the UK’s below-par performance at the onset of the crisis in 2008.

“At home, the main downside risk is that the pickup in growth proves to be unsustainable, either because productivity and real incomes continue to disappoint, or because business investment does not recover as expected.

Full Story: Bank of England plays down interest rate rise speculation

Bank of England quarterly inflation report – a summary

So, what did we learn from the Bank of England from today’s quarterly inflation report, and press conference?

Here’s a video clip of Mark Carney at today’s Quarterly Inflation report, discussing the UK economy and future interest rate rises:

Even David Smith, the Sunday Times economics editor, was left scratching his head somewhat after Mark Carney’s performance:

Pfizer/AstraZeneca hearing – science minister talks of ‘robust commitments’

Sean Farrell: Universities and science minister David Willetts was keen to say the government was taking a strong line with Pfizer.

“We want to see more R&D in the UK. That is what lies behind our life sciences strategy and… science more widely. It is one of the issues on which we press Pfizer in our discussions.”

Pressed on if he agreed with his boss, Vince Cable, that Pfizer’s commitment to have 20% of the combined group’s research in the UK was a starting point that could be improved on, Willetts eventually said: “Vince put it very well as always.”

Willetts said the argument that the government was powerless to influence Astra’s shareholders or to enforce Pfizer’s assurances, was “an excessively bleak view”.

“In my experience and in the conversations we are having there are various ways in which governments can make it clear both what we are doing for life sciences and what we expect life sciences companies to do, and they often respond to that.”

Willetts was reluctant to go into detail about what the role of the cabinet secretary, Jeremy Haywood, in talks with Pfizer. “He co-ordinates across government. It’s right we should have the cabinet office coordinating.”

Willetts refused to go into detail about negotiations with Pfizer. “You can’t reveal everything that is in your hand. You have to have some kind of scope.”

Lord Sainsbury’s attack on Pfizer’s as an asset stripper was “perhaps one of his more lurid utterances on science and commercial policy. It’s a bit pessimistic both about what governments can do” and the strength of UK science.

“We will want robust commitments they will stick to. We have a range of powers,” Willetts said.

Ian Sample, our science correspondent:

The panel pushed David Willetts to explain what government was doing to ensure any merger between these two large companies would not badly damage the UK science base. Willetts says he has taken scientists’ concerns to Pfizer and listened to their assurances. Their commitments are one type of guarantee he says. The second is that the UK has the right skills and financial incentives to make the UK a good place to do RnD. Ultimately though, WIlletts’ says, the decision lies with AZ’s shareholders.

Graham Stringer, a conservative MP, is deeply unimpressed by what he calls a “passive” stance. He is shocked that Britain could let a hostile takeover happen that could damage the UK science base without government intervening.

And that was the end of the press conference, after Carney ran amok with his sporting analogies by praising Spencer Dale, Charlie Bean and Paul Fisher – who are all leaving the Monetary Policy Committee (or in Bean’s case, the Bank altogether).

They notched up plenty of appearances in the national cause, Carney said — handily ignoring the fact that he, apparently, sent Fisher for an early bath.

Mark Carney: London can’t drive UK recovery on its own

Carney insists that the London economy is not as strong as people think, and can’t be expected to drive the recovery on its own.

He was asked how the Bank would prioritise between setting monetary policy for the capital, and the rest of the UK.

He insisted that the bank makes policy for the country as a whole – it will not set monetary policy for a region.

He then tries to puncture the belief that London was roaring away.

The economy in London appears stronger than it actually is – unemployment rate is higher than the national average, Carney says.

And as strong as the London economy looks, it cannot sustain an expansion in the UK, he added.

In answer to a question from the Telegraph’s Jeremy Warner about inequality, Carney says that the Bank of England does recognise that conventional monetary policy, and unconventional monetary policy, does have consequences on distribution.

But targeting specific asset prices is very much not the bank’s policy – it won’t set monetary policy to target house prices, or the stock market, or other financial assets.

Not the most explicable press conference in the BoE’s 300+ year history, with a series of long answers for Carney about slack, spare capacity, future interest rate paths….

Carney reiterates that the Monetary Policy Committee’s role is to “lean in against the headwinds” pushing on the UK economy and keep interest rates at historically low levels for an extended period of time.

What has the governor learned in his (almost) first year in the job?

Carney says it’s a privilege to serve in a country, and an institution, that is helping to lead the healing of the global economy and the fixing of the financial system.

How concerned is the Bank about borrowers who will struggle to repay their mortgages when rates rise?

It’s certainly an issue, Mark Carney says — which is factored into the Bank’s consumption forecasts.

And that’s also why the mortgage affordability tests are so important — to avoid more people being brought into the “unfortunate” group who will find borrowing costs unaffordable.

Back on the strong pound – Carney says the key is to differentiate between the impact that sterling’s strength has on inflation (pushing it down, by making imports cheaper), and on the real economy (hurting exports).

Sterling’s strength could have an impact on Britain’s ability to get net exports rising, he adds.

Sean Farrell: Pascal Soriot, AstraZeneca’s chief executive, talked about the company’s commitment to the UK, its unusually close links with academia and the potential disruption of a takeover by Pfizer.

Cambridge, as part of the “golden triangle” with London and Oxford, is the best place to conduct science in Europe and the only European competition for US centres Boston and San Francisco.

“We are not moving to Cambridge and spending all this money to … say we are reducing the science headcount in Cambridge. We plan moving forward to maintain or grow this in vestment in Cambridge.”

Soriot said it wasn’t just science that would be based in Cambridge – head office, his office, human resources etc would be there permanently. Distinguishes between that and Pfizer’s plan. “This is really going to be our decision-making core.”

Pressed on what is more important, getting the right price or saving lives by producing drugs, Soriot said the two went hand in hand. Astra shareholders would own shares in the new company and it would not be good for them if Astra’s potential was not fulfilled.

He dismissed Pfizer’s pledge to “ring fence” important drugs after a takeover. “A company is made of people. If they leave there is no ring fencing”. It would take months to find replacements if scientists left the company because they didn’t like the merger. “There is a risk some project will be delayed… If you make enormous savings in R&D… it is really hard to be sure we can protect these projects.”

Soriot said Astra was unusually collaborative when it worked with universities and didn’t behave like a secretive pharmaceuticals company. Relationships and way of working could be under threat if Pfizer bought the company.

Back to the UK housing market.

Carney reiterates that the Bank’s FPC will not target house prices, and it certainly won’t be building any of new houses itself (supply being a key factor).

The governor adds that he has very high confidence that the FPC’s macroprudential tools (such as forcing lenders to insist on larger deposits) will be effective in handling risk.

Carney says the Bank will “look through” the recent rise in sterling, but cautions that “persistent” sterling strength could make it harder to deliver a balanced recovery.

Larry Elliott, our economics editor, take up Carney’s comment that getting the UK economy back to normality is only the equivalent of getting through the World Cup qualifying rounds (see 10.45am)

Larry’s watched the UK economy, and the England football team, for long enough to know that hopes can turn to tears pretty quickly.

So often the squad looks promising, but within a month, the team usually comes back with its tail between its legs, Larry says. Is Carney heading the same way by being too optimistic about the inflation outlook?

Carney reckons not, and points out that the UK economy has only just clawed its way back the levels that France and Italy have achieved.

The Bank of England has very modest assumptions on productivity, he adds — pointing out that Britain hasn’t yet closed any of the gap with other major counties*

There’s also a “very benign global inflation outlook”, he adds.

* – the same has been said about the England team over the decades

Carney reiterates that interest rate rises, when they come, will be “limited and gradual”.

And he doesn’t accept that they are likely to peak at 2%.

The BOE isn’t prepared to give more details about its assessment of the output cap.

Deputy governor Charlie Bean says people shouldn’t get too “hung up” about it — assessing slack is very complicated; there could be a lot more spare capacity, or a lot less, than the central forecast.

Carney is asked about worries that the UK housing market is running too hot.

That’s a question for the Financial Policy Committee, he says – monetary policy isn’t the best way to tackle an incipient housing bubble.

In the Pfizer/AstraZeneca grilling, it was conservative MP Stephen Metcalfe who got to the heart of the matter, reckons Ian Sample:

The takeover bid, at £50 a share, or around £63bn, will cost Pfizer around four times the annual sales of AstraZeneca. How will Pfizer pay for that? “Surely you are going to need more salesmen than scientists?” Metcalfe asks.

Read restated his company’s commitment that should it succeed in its takeover of AstraZeneca, a fifth of the combined company’s global RnD workforce – largely scientists and technicians – will be based in Britain. The key question is how large that workforce will be. Will it be smaller, or radically different in its specialites? That is what will affect the UK’s science base.

Read said he suspects the research budget of the merged company would be smaller than the sum of the two budgets. The savings come because Pfizer and AstraZeneca have overlapping projects and expertise, so they can make cuts there. Pfizer has a US cancer research base on the US west coast, and that will surely have some overlap with AstraZeneca’s own cancer work.

Onto questions, and Mark Carney is refusing to be pinned down on when interest rates may rise.

We will adjust rates when the economy has got back to normal, he adds.

The Guardian’s science correspondent Ian Sample has been watching the Pfizer/AstraZeneca hearing. Here’s his take:

Ian Read made much of his commitment to keep 20% of research and development jobs in the UK. As he understands it, the pledge to keep that proportion of jobs in the UK is written into the takeover bid, and must be honoured for five years. If the company reneges on the deal, they can be referred to the High Court which has unlimited powers to intervene, he says.

The panel pointed out that senior figures in Sweden had warned that Pfizer went back on promises made ahead of their acquisition of the biotech company, Pharmacia, in 2003. But Read dismisses these. “We honoured all the commitments we made in Sweden,” he said.

And Carney sums up with a sporting analogy – a favourite theme of his predecessor, Mervyn King.

The UK economy is only now at a point where it is returning to normal, he says.

Securing the recovery is like getting through the qualifying rounds of the World Cup. It’s a start, but it’s not the overall goal — the prize is a strong, sustainable recovery.

Carney adds that the Bank won’t start unwinding its QE programme until interest rates are at a level when they could be cut, materially.

On interest rates, Carney says we have edged close to the point when bank rate would gradually need to rise.

That’s hardly a signal that a rise is close

Ands the decision on when to raise borrowing costs will depend on the amount of slack left in the economy, the prospect of it being mopped up, and the inflation outlook.

Mark Carney says the UK unemployment remains “significantly” above the Bank’s current estimate for the equilibrium rate.

He says there is still slack in the economy, which is likely to be used up more slowly than in the past.

Here’s the Reuters snaps:






Bank of England: UK economy is heading back to normal

Breaking: The Bank of England says that the UK economic recovery is continuing, as it releases its latest quarterly inflation report.

Mark Carney, governor, is explaining that the overall outlook is little changed since February. That means “the UK economy continues to grow strongly”, adding:

In short, the economy has started to head back to normal.

He is explaining that the Bank believes the UK is moving towards a recovery sustained by business investment, rather than consumer spending.

More to follow….

More details on the rise in UK self-employment:

Pfizer/AstraZeneca hearing

Sean Farrell: MPs’ questions to Pfizer homed in on its pledges to invest in the UK science base and to keep a large research and development operation in Britain.

Chief executive Ian Read said he couldn’t give an estimate for the number of scientists the combined company would employ. But he admitted: “I would suspect there would be less scientists from a natural automatic combination of the two.”

He said it was possible that Pfizer would find potential drugs at AstraZeneca that are more valuable than Pfizer’s own, “in which case we will stop our projects”.

Read said the five-year period for Pfizer’s R&D commitment was because Pfizer had not kept a check on progress of its products. If you give scientists five years from discovery to proof of concept they have a clear target. Even after five years, “if the work is there and we think it should be invested in, we invest in it.”

Read is asked about criticism in Sweden of Pfizer’s behaviour after it bought Pharmacia. Sweden’s finance minister has said Pfizer didn’t keep its commitments.

Read said there were about 50 scientists left at Pharmacia after others had been spun out to another company. Pharmacia had already planned a reduction in headcount. Pfizer promised to build a factory if a Pharmacia product came to market but the product didn’t come to market and so the factory wasn’t built. “We felt we honoured all the commitments we made in Sweden.

Read told the committee Pfizer’s commitments would be legally binding because it would put them in its offer document. The Takeover Panel could then refer Pfizer to the High Court if it reneged on the pledges. He said Pfizer would give the committee its legal advice.

Ultimately, he said, it was a matter of honour.

“You want the legal advice, fine. The promise and commitment is from Pfizer. It’s from our board of directors [and] from me as CEO.”

Asked what circumstances would prompt Pfizer to opt out of the commitments, Read said if the UK government completely changed its patent box rules or radically changed the tax system that could make Pfizer reconsider.

AstraZeneca chief Pascal Soriot, meanwhile, is telling MPs that his priority is to deliver great science, based around the new Cambridge R&D site:

Back in the Thatcher Room, Pfizer boss Ian Read has admitted that a merger with Astra would probably mean fewer scientists employed to research and develop new drugs.

He’s also been fending off fresh accusations that Pfizer can’t be trusted:

The unemployment data is also another chance for the prime minister to plug his #longtermeconomicplan

Minister for Employment Esther McVey says today’s fall in the jobless rate shows the UK recovery is gathering pace:

“As the recovery takes hold, more people are able to get a job or set up their own business and become the employers of tomorrow.

“Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be.

“We will continue to support those in and out of work who want to get on and fulfil their ambitions for a more secure future.”

Britain’s army of self-employed workers continues to grow too – indeed, over the last 12 months it’s expanded faster than the number of people who’ve been taken on by others.

The ONS reports that

  • the number of employees increased by 351,000 to reach 25.63 million,
  • the number of self-employed people increased by 375,000 to reach 4.55 million,

New self-employed workers are more likely to be working part-time too:


Public sector pay continues to lag the private sector in Britain.

The Office for National Statistics reports that in the three months to March:

  • For the private sector, total pay [including bonuses] rose by 1.8%, while regular pay rose by 1.6%.
  • For the public sector, total pay rose by 0.7%, while regular pay rose by 1.1%.
  • For the public sector excluding financial services, both total pay and regular pay rose by 1.5%.

So overall, total pay was 1.7% higher than a year earlier, with pay excluding bonuses 1.3% higher.

And this chart shows how total pay has inched above the inflation rate, but pay excluding bonuses has not:

Here’s the key points on today’s UK unemployment data:

  • The number of people in work hit a new record high of 30.430 million in the three months to March, up by 283,000
  • The number of people out of work fell by 133,000, to 2.209 million
  • The jobless rate fell to 6.8%, from 6.9%.
  • The claimant count (those receiving unemployment benefit) fell by 25,100 in April.
  • Average weekly earnings rose by 1.7% annually in the three months to March…
  • … but excluding bonuses average earnings only rose by 1.3% during the quarter, and by a mere 1.0% in March


Newsnight’s Duncan Weldon flags up that wage growth was stronger in the building and manufacturing data, and in parts of the service sector.

But there’s disappointing news on wages — average earnings (excluding bonuses) only rose by 1.3% in the first three months to March.

That’s below the inflation rate, meaning real wages still fell through the quarter. It looks like earnings stalled in March, when they only rose by 1.0% annually.

Including bonuses, earnings rose by 1.7% in the quarter — economists had expected a healthies reading of 2.1%.

UK unemployment rate falls to five-year low of 6.8%

BREAKING: The UK unemployment rate has fallen to 6.8% in the three months to March, the lowest level in more than five years.

Nearly time for the UK unemployment data….

GSK: Chinese bribery allegations are deeply concerning

GlaxoSmithKline has announced that it is “deeply concerned” about the allegations that its staff broke bribery laws in China.

This follows the news this morning that a British executive is accused of pressing his sales team to bribe doctors, hospital officials and health institutions.

Here’s the official statement:

“We have today met with the MPS [Ministry of Public Security] who updated us on their investigation into GSK China Ltd.

“We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK.

“We understand the MPS have issued the case to the Changsha People’s Procurator in Hunan Province. The Procurator is now reviewing the case.

“We will continue to fully co-operate with the authorities in this matter.

“We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens.”

Today’s AstraZeneca-Pfizer hearing is underway, in the Thatcher Room. Here’s a live stream.

Mikael Dolsten, Pfizer’s President of Worldwide Research and Development, is arguing that creating a science powerhouse would deliver better results for patients, and get drugs to market faster.


Here’s the Reuters story that helped drag down the euro against the pound today:


The number of UK houses selling for more than £1m is now comfortably over the previous pre-crisis peak, flags up Sky News’s Ed Conway:

A reason for the Bank of England to act? Perhaps, but Mark Carney could also point out that most of them are in London, where property prices have been rampant– that doesn’t mean the whole UK economy can sustain higher borrowing costs…

Pound hits 16-month high against the euro

The pound has just hit its highest level against the euro in 16 months, trading as high as €1.2297 (meaning one euro = 81.3p)

The move was partly driven by a Reuters report, claiming European Central Bank staff are preparing a “package of measures” for next month’s meeting.

This includes interest rate cuts – including imposing negative interest rates on bank deposits at the ECB. There could also be a new programme to buy packages of small business loans (to stimulate the flow of credit in the euro area).

A June rate cut is “more or less a done deal”, said one of the five sources who spoke to Reuters on condition of anonymity.

A second source echoed that sentiment, and added: “This will be the first major central bank to move to a negative deposit rate. That would move the exchange rate.”

No respite from the gloom at Sony – it posted a 138 billion yen (£800m) loss for the last quarter this morning, as cost of quitting the personal computer business piles up.

And the Japanese manufacturing giant also forecast a 50 billion yen loss for the current financial year – dashing hopes of a return to profitability after a string of recent profit warnings.

FastFT has a nice take here (including this chart).

Back to the Bank of England — and Kit Juckes of SocGen flags up that interest rates could potentially rise before Christmas.

AstraZeneca has fired yet another salvo in the battle against Pfizer this morning, releasing details of a new clinical study collaboration to drive some of its cancer drugs to market.

Dr. Bahija Jallal of AZ’s MedImmune arm, said the partnership with US bio-tech firm Incyte will help get its drugs to market — something it insists it can do without Pfizer’s interference.

Immuno-oncology is one of the most exciting areas in our industry and we are progressing our strong pipeline as rapidly as possible. Our partnership with Incyte is further evidence of our belief that combination therapies have the potential to be one of the most effective ways of treating cancer.”

Today’s parliamentary hearing on the Astra-Pfizer takeover starts at 9.15am.

Labour’s shadow business secretary, Chuka Umunna, will be holding talks with AZ too.

The BoE could also lower its inflation forecast again (giving it more leeway to put off a rate rise), as Emma Charlton of Bloomberg flags up:

Bank of England governor Carney will also be probed about how much spare capacity remains in the UK economy, when the quarterly inflation report is published at 10.30am

The Bank’s assessment of “slack” is the key factor on when borrowing costs may rise.

Brian Hilliard of Société Générale explains:

The MPC should make only minor changes to its growth (upward) and inflation (downward) forecasts. More important will be any update provided on the size of the output gap. Carney knows that any significant reduction would trigger a change in rate expectations.

He is not yet ready to tighten policy so only a small change in the gap is likely.

Many City economists reckon that Britain’s unemployment fell to a fresh five-year low of 6.8% in the first three months of this year (we find out at 9.30am).

And there’s optimism that wages rose faster than inflation, after years of falling real incomes put the squeeze on millions of households and individuals.

Here’s Katie Allen’s preview.

The Labour party has pre-empted today’s unemployment data, and new growth forecasts, by warning that the top 1% of earners have overwhelmingly benefited from the pick-up in the economy.

Politics editor Patrick Wintour has the story:

Over the past year, the share of national post-tax income of the top 1% of taxpayers – just 300,000 people – has risen from 8.2% in 2012-13 to 9.8 % in 2013-14. Over the same period, the bottom 90% – a total of 27 million taxpayers – have seen their share of post-tax income fall from 71.3% to 70.4%, according to estimates contained in the latest Income Tax Liabilities Statistics published by HMRC. They cover the year when GDP growth returned and the top rate of income tax on earnings above £150,000 was reduced from 50% to 45%.

Labour will use the figures to argue that there has been no recovery for middle Britain. Chris Leslie, shadow chief secretary to the Treasury, said: “David Cameron and George Osborne are trying to claim the cost-of-living crisis is over, but these official figures expose what’s really happening under the Tories. While the top 1% of taxpayers have seen their share of income after tax go up, the bottom 90% on middle and lower incomes have seen theirs fall.

Labour reveals tax data showing UK economic growth ‘only helps top 1%’

Bank of England inflation report, UK unemployment and Astra-Pfizer hearing (part 2)

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

How strong is the UK economy, and when are interest rates going to rise?

We’ll get fresh answers to both these questions this morning when the Bank of England releases its latest quarterly inflation report, and the new unemployment figures are published.

The Bank’s latest forecasts on growth and inflation, due at 10.30am BST, will provide fresh fodder for the debate on when the first rate rise could come. With the economy apparently strengthening month-by-month, pressure to raise rates before next May’s general election is gathering.

Governor Mark Carney will also field a few questions about Britain’s housing market, given the double-digit rise in prices over the last year, when he faces the economics press pack at the Bank.

Before that, the Office for National Statistics will publish its new unemployment stats at 9.30am. It may show that the jobless rate fell again in the three months to March, from last month’s five-year low of 6.9%.

Meanwhile over in Westminster, the bosses of Pfizer and AstraZeneca are up before MPs for a second day’s grilling.

This time, the Science and Technology committee will be asking the questions — surely they’ll examine Astra chief Pascal Soriot’s warning yesterday that a takeover could delay life-saving drugs from the market.

US takeover could cost lives, claims AstraZeneca boss

While in the eurozone, we’re getting more detailed inflation data for April – which could help show whether the European Central Bank will take fresh measures to stimulate the euro economy.

We’ll be tracking all the key events through the day, as usual. © Guardian News & Media Limited 2010

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