Closing summary
Here’s a round up of the day’s events.
- Regular pay growth (excluding bonuses), was 1.9% in February, lower than the 2.3% rate of inflation in the same month. It was the first time since August 2014 that inflation has outpaced wage growth and signalling that a Brexit-related squeeze in UK living standards is underway (the fall in the value of the pound since the vote is pushing up inflation).
- Over the broader three-month period to the end of February, regular pay growth slipped to 2.2% from 2.4% in the three months to January. Pay growth including bonuses was unchanged at 2.3%.
- Unemployment remained at a 42-year low of 4.7%, and the employment rate also stayed at the highest level since records began in 1971, at 74.6%.
- Tesco reported that profits have once again broken through £1bn, after annual sales grew at its UK chain for the first time in seven years. Shares are down more than 5% however, making it the FTSE 100’s biggest faller.
- Sports Direct named Alex Balacki, a store manager in Barnstaple, as its first employee representative to attend board meetings, as the retailer attempts to clean-up its reputation.
- Over in Brussels, the IMF’s Christine Lagarde warned Donald Trump’s protectionist stance could result in a “self-inflicted wound” for the global economy.
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European markets were subdued. The FTSE 100 is currently down 10 points at 7,356. The pound is up 0.06% against the dollar at $1.2495.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
Over in Athens, Christine Lagarde’s comments have caused much ado, with some officials regarding the IMF chief’s insistence on debt relief “ a big plus” in ongoing negotiations with creditors.
Prime minister Alexis Tsipras’ leftist-led government has from the outset set debt relief as a goal, saying it must be part of an all-conclusive package that will ultimately define Greece’s post-bailout future.
The Greek finance minister Euclid Tsakalotos will make the case when he holds talks with Christine Lagarde and the US treasury secretary Steven Mnuchin at the Fund’s spring meetings in Washington next week. Tskalotos says he is confident of a solution “well before the summer.”
But Lagarde’s insistence that a lot still remains to be done also reflects mounting concerns that differences between Athens and creditors are far from being resolved. International auditors representing lender keeping the debt-stricken country afloat were meant to have resumed inspections in the Greek capital this week. Fears are rising that despite a “preliminary deal” thrashed out with euro group finance ministers last week, time is fast running out to complete the compliance review at the heart of Athens latest standoff with lenders in time in time for the euro group’s next meeting in May.
Let’s take a look at the markets.
The FTSE 100’s earlier gains have been erased and the index is now down 9 points or 0.1% at 7,357.
Here is how markets are doing elsewhere in Europe:
- Germany’s DAX: +0.03% at 12,143
- France’s CAC: +0.2% at 5,110
- Italy’s FTSE MIB: -0.5% at 20,016
- Spain’s IBEX: -0.3% at 10,383
- Europe’s STOXX 600: +0.2% at 382
Hammond: UK will have to fight for opportunities post Brexit
Back in the UK, the inaugural international FinTech conference has been taking place in London.
The sector - which includes things like contactless payments, banking apps and online crowd funding - employs more than 60,000 people in the UK and is worth nearly £7 billion to the UK economy according to the Treasury.
The government is hopeful that Britain will remain a frontrunner in FinTech after it has left the EU.
However, the chancellor Philip Hammond warned delegates that it won’t come easy:
We can’t remain the number one place for FinTech and the other technologies of the fourth industrial revolution by simply relying on our ingenuity, talent and openness, we have to go out and get the business.
We will have to strive and graft and fight to seize the opportunities - and make the most of them.
That means growing and strengthening the areas – like Fintech – in which we enjoy a competitive advantage… while we need to continue to attract the brightest and the best from around the world to these shores. We must also do better at nurturing and developing the home-grown talent to drive our economy forward in the future.
Our vision of an outward-looking, Global Britain will deliver the high-skilled, high-wage economy of the future that will power the higher living standards we all want to see for future generations.
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Lagarde has also commented on Greece, saying the Greek government was heading in the right direction on reforms but talks on the bailout and the IMF’s potential bailout were “only halfway through”.
She said the Washington-based Fund was still considering whether to join the Greek bailout, adding “we are not there yet”.
IMF's Lagarde: Trump's trade barriers would be self-inflicted wound
Christine Lagarde has used a speech in Brussels to criticise Donald Trump’s protectionist stance.
The managing director of the International Monetary Fund said that putting up trade barriers would amount to a “self-inflicted wound” for the global economy.
More recently, we worked together to ensure that the great recession did not become another Great Depression. Cooperation through a multilateral framework has benefited every country. Fostering more resilient growth therefore requires more international cooperation – not less.
Restricting trade would be a self-inflicted wound that disrupts supply chains, hurts global output, and inflates the prices of production materials and consumer goods. And low-income households are hurt the most as they consume the largest part of their incomes.
Read the full story here:
The graphic below shows how inflation outpaced regular pay growth (excluding bonuses) in February:
Frances O’Grady, general secretary of the TUC, has called on the Prime Minister to “act urgently” to avoid a new living standards crisis.
She said:
Pay packets are taking a hammering from rising inflation and falling wage growth. We now need urgent action to stop another living standards crisis. Working people will want to know when Theresa May is going to do something to help.
We need more investment in skills and infrastructure to build strong foundations for better paid jobs. And it’s time to scrap the pay restrictions hitting midwives, teachers and other public servants.
John Philpott, labour market expert and director of the Jobs Economist, says Britain’s unemployment rate could fall further.
A joint record employment rate of 74.6%, an unemployment rate at a 42-year low of 4.7% and almost zero (0.1%) growth in real average weekly earnings illustrates a remarkable structural change in the operation of the UK labour market compared with earlier decades.
This particular combination of jobs and pay suggests that the unemployment rate could fall much further, perhaps below 4%, without triggering troublesome pay inflation.
While the effect of Brexit uncertainty on the demand side of the economy might yet result in a temporary rise in unemployment later this year, full employment is now a more realistic prospect for the UK than at any time since the early 1970s.
Business lobby group the CBI has responded to the jobs and wages data. Rachel Smith, principal labour market economist, says:
It’s good to see more people in work, and with the level of vacancies the highest on record, access to the right skills remains a key challenge.
With inflation rising, real pay growth has fallen back for the third month in a row now. This remains a concern, so it’s vital that productivity increases if we are to see earnings head up.
Developing a modern industrial strategy, making the most of a skilled workforce that delivers across the UK, will be key to helping firms give productivity a meaningful boost.
Here is a summary of the main points in the ONS report on the labour market:
- Regular pay excluding bonuses grew by 2.2% in the three months to February 2017, compared with the three months to February 2016. This was lower than the 2.4% growth in the three months to January.
- Total pay including bonuses grew by 2.3% over the same period, unchanged from the previous three months.
- Britain’s unemployment rate remained at 4.7%. The jobless rate was last lower in June to August 1975.
- The number of unemployed people in Britain fell by 45,000 to 1.56m.
- There were 31.84 million people in work in the three months to February, 39,000 more than for September to November 2016.
- Britain’s employment rate was 74.6%, the joint highest since comparable records began in 1971.
Resolution Foundation: UK pay recovery has ended
The Resolution Foundation has analysed the ONS figures and says real pay is falling in sectors representing 40% of the workforce.
Stephen Clarke, economic analyst at the thinktank, says:
Britain’s brief pay recovery has come to an end. Forty per cent of the workforce are experiencing shrinking pay packets according to the latest figures, in sectors ranging from accommodation to finance and the public sector. Many more will join them in the coming months as inflation continues to rise, with pay across the economy as a whole set to have fallen in the first three months of 2017.
While the National Living Wage is protecting the lowest earners from this squeeze, boosting wages across the rest of the economy is the big living standards challenge of this parliament.
Taking the month of February alone (the ONS prefers to use a three-month rolling average), regular pay growth excluding bonuses was just 1.9%, well below the 2.3% inflation rate.
It was a different for those receiving a bonus however. Average total pay including bonuses increasing by 2.9%, significantly outpacing inflation. The bonus season tends to run from December to April according to the ONS.
The last time regular pay growth (over three months) was weaker than headline inflation was two and a half years ago, in June-August of 2014.
At that point wages were growing by just 0.9% while inflation was 1.5%.
The latest figures suggest the Brexit vote in June is now starting to weigh on UK living standards.
The sharp fall in the value of the pound since the referendum has made goods imported from abroad more expensive. That has started to be felt in higher shop prices, pushing inflation up. Meanwhile wage growth is weakening.
With inflation expected to rise to 3% by summer (from 2.3% now), and no sign of a meaningful pick up in wage growth, household finances are likely to come under increasing strain.
Updated
Breaking: real pay fell in February
Figures just out confirm the squeeze in living standards is on. Regular pay growth (which excludes bonuses), grew by 2.2% in the three months to February.
That was lower than the 2.3% rate of inflation in February, signalling a return to falling real pay.
Pay including bonuses was 2.3% over the three months according to the ONS data.
Meanwhile the unemployment rate held steady at 4.7%.
More soon.
Sports Direct workers' rep faces 'uphill struggle', union warns
Unite has warned that Alex Balacki - the first worker representative elected to attend Sports Direct board meetings - faces an “uphill struggle” to bring fairness to the retailer’s boardroom.
The union says it will be a challenge to make workers’ concerns heard and to resolve the deep-rooted problems across the business. Unite wants to see agency workers moved onto permanent contracts without delay and has invited Balacki to a meeting.
Luke Primarolo, who is leading the Sports Direct campaign for Unite said:
Unite wishes the newest member of the Sports Direct board well and would like to offer to meet as soon as possible so that we can brief him on the experiences of the workforce.
We urge that he makes one of his first acts to persuade the company that agency workers on insecure hire-and-fire contracts are offered permanent appointments.
We sincerely hope that the new board member will take up our invitation to meet. As a company appointee he faces an uphill struggle to convince the workforce that he will be their eyes and ears in the boardroom.
Tesco’s stock market fortunes have rapidly reversed this morning. It has switched from being the FTSE 100’s biggest riser to its biggest faller.
The supermarket chain is down 3.1% at 189.5p. Earlier it was providing a boost to the rest of the sector, but it is now taking down Sainsbury’s and Morrisons:
Connor Campbell, analyst at Spreadex, says that while investors are currently focusing on the UK jobs and wages report due at 9.30am, attention is likely to shift to the US:
The UK jobs report does have a challenger for market dominance this Wednesday: Trump. The President is set to conduct an interview on the Fox Business Network, one that promises to cover everything from healthcare and tax reform to his actions in Syria and the increasingly fractious relationships with Russia and North Korea.
All of this is catnip for investors, and may end up overshadowing the reaction to that British jobs data.
FTSE rises 0.5% in early trading
Traders across Europe are in a positive mood so far this morning.
Tesco is leading the FTSE 100 higher, with the index up 36 points or 0.5% at 7,401.
All major European markets are up:
- Germany’s DAX: +0.5% at 12,200
- France’s CAC: +0.5% at 5,129
- Italy’s FTSE MIB: +0.8% at 20,278
- Spain’s IBEX: +0.4% at 10,455
- Europe’s STOXX 600: +0.4% at 383
Sports Direct names worker representative to attend board meetings
Sports Direct has named the first worker representative to attend its board meetings as the retailer attempts to address widespread criticism over its treatment of staff and poor record on corporate governance.
Alex Balacki was the successfully elected candidate, and will attend all scheduled meetings of the board over the next 12 months, before a new representative is elected.
Balacki, 30, works for Sports Direct as a store manager in Barnstaple and started at the company 13 years ago as a casual sales assistant on Saturdays. He said:
I’m very proud to be chosen by my fellow members of staff to fulfil this important responsibility. I’d like to thank everybody who took part in the elections, including all of the other candidates. It’s now my role to ensure the people of Sports Direct are heard.
Mike Ashley, the founder and chief executive of Sports Direct, said:
I’d like to be the first to congratulate Alex, who will help us to continue to make a positive difference by ensuring that your voice is heard in the boardroom.
I have said many times that this is a company that was built by the great people who work here. I am therefore delighted that the people at Sports Direct have voted to choose the company’s first UK elected workers’ representative.
However, not everyone is convinced that this will amount to meaningful change at the company. Unite, Britain’s biggest union, last month described the move as little more than a “PR exercise”.
Tesco reaction: healthy recovery continues
Tesco’s results were better than City analysts expected, with a 30% jump in operating profit to £1.28bn in the year to the end of February.
Under chief executive Dave Lewis, the supermarket’s UK chain delivered its first full year of growth since 2009-10, with like-for-like sales (at stores open for more than a year), up 0.9%. Like other chains, Tesco has been losing shoppers to the discounters Aldi and Lidl.
Phil Dorrell, partner at the consultancy Retail Remedy, said it was a good result for Lewis, who is trying to push through a £3.7bn takeover of Booker, the cash-and-carry group behind the Londis and Budgens chains.
Dorrell said:
It’s a far cry from the £4bn Tesco earned 5 years ago but it is still a very healthy improvement on last years profit. The multi-pronged strategy adopted by Dave Lewis is working on all counts and just needs the Booker deal signed for a full house.
Tesco is a retailer with its finger on the pulse. A clear sense of direction and a team that is fuelling the engine will be giving the competition cause for concern.
Retail Vision’s John Ibbotson goes further, saying Tesco’s “fairytale recovery” continues:
Tesco’s fairy-tale recovery story continues. And at a time of cut-throat competition, it is all the more impressive. In his relatively short tenure, Dave Lewis has turned a thoroughly demoralised business into one with a clear sense of direction.
Dave Lewis has achieved this turnaround by returning the company to the basics of retail: pricing to match the UK discounters, new and simplified product ranges, better customer service and regained customer trust in Tesco. He has also improved the relationship with suppliers and that’s no small achievement.
European markets are expected to open higher this morning. Here is what traders are predicting at spread betting firm IG:
Our European opening calls:$FTSE 7372 +0.09%
— IGSquawk (@IGSquawk) April 12, 2017
$DAX 12169 +0.24%
$CAC 5109 +0.14%$IBEX 10430 +0.13%$MIB 20151 +0.21%
The agenda: Falling real pay and Tesco sales growth returns
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The Brexit-related squeeze in living standards is on, official figures on wage growth are expected to show at 9.30am.
Pay growth including bonuses is expected to come in at 2.2% in the three months to February. Regular pay growth, excluding bonuses is expected to be 2.1%.
Either way, that would be below February’s inflation rate of 2.3%, signalling a return to falling real pay for UK workers who are just about recovering living standards after the blow dealt by the financial crisis.
After the 2008 crash, inflation outpaced pay growth for six years.
Inflation is rising as the sharp fall in the value of the pound since the Brexit vote drives up the cost of imported goods and increasingly feeds through to shop prices.
The figures from the Office for National Statistics are also expected to show the unemployment rate held steady at 4.7%. We’ll bring you all the details and reaction.
In the corporate world, the big news this morning is from Tesco. The UK’s biggest supermarket chain has achieved its first year of sales growth in seven years, with profits back above £1bn.
Read our full story here:
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