European markets edge higher
It was not a convincing performance, but European stock markets managed to end the day in positive territory. There was the usual nervousness - Brexit, US interest rates - with the added bonus of some caution ahead of the final US presidential debate later and the European Central Bank’s interest rate and QE decision on Thursday.
UK jobs figures came in strong enough to suggest that the Bank of England may hold off on cutting interest rates next month, while supportive comments from chancellor Philip Hammond about the Bank’s independence and the future of finance companies in the City post-Brexit also gave some support to shares.
A jump in the oil price following a surprise drop in US crude stocks helped sentiment too. So the final scores showed:
- The FTSE 100 finished 21.86 points or 0.31% higher at 7021.92, having earlier fallen as low as 6975
- Germany’s Dax rose 0.13% to 10,645.68
- France’s Cac climbed 0.25% to 4520.30
- Italy’s FTSE MIB added 0.46% to 17,044.34
- Spain’s Ibex ended up 0.96% at 8950.1
- But in Greece, the Athens market dipped 0.14% to 593.02
On Wall Street, the Dow Jones Industrial Average is currently up 76 points or 0.42%.
Meanwhile Brent crude is up 2.3% at $52.89, but the pound has edged 0.18% lower against the dollar to $1.2274.
On that note it’s time to close for the evening. Thanks for all your comments and we’ll be back tomorrow.
Back with UK unemployment, and IHS Markit thinks unemployment could continue to rise:
UK unemployment shows signs of rising as hiring cools, households grow gloomier about their finances. More at https://t.co/0SkYz4SFJB pic.twitter.com/XEWXy1oWCB
— Chris Williamson (@WilliamsonChris) October 19, 2016
Bank of England report on QE
And now for the big autumn blockbuster: QE: The Story So Far.
The Bank of England has just issued a 73 page working paper, which MPC member Andy Haldane will be discussing later at Cass Business School, on the effects of quantitative easing. Interesting of course, in the light of prime minister Theresa May’s criticism of the effects of monetary policy in her Tory party conference speech. Here’s the blurb from the Bank:
In the past decade or so, a number of central banks have purchased assets financed by the creation of central bank reserves as a tool for loosening monetary policy – a policy often known as ‘quantitative easing’ or ‘QE’.
The first half of the paper reviews the international evidence on the impact on financial markets and economic activity of this policy. It finds that these central bank balance sheet expansions had a discernible and significant impact on financial markets and the economy.
The second half of the paper provides new empirical analysis on the macroeconomic impact of central bank balance sheet expansions, across time and countries.
It finds three key results. First, it is only when central bank balance sheet expansions are used as a monetary policy tool that they have a significant macro-economic impact. Second, there is evidence for the US that the effectiveness of QE may vary over time, depending on the state of the economy and liquidity of the financial system. And third, QE can have strong spill-over effects cross-border, acting mainly via financial channels. For example, the impact of US QE on UK economic activity may be as large as the impact on US economic activity.
The full report can be found here”
Staff working paper 624: QE: the story so far
Updated
The rise in the oil price - to its highest since July 2015 - is giving a lift to the FTSE 100 as trading heads towards the close. Joshua Mahony, market analyst at IG, said:
The FTSE appears to be following oil prices higher this afternoon, with initial selling giving way to gains into the close. Fears that earnings forecasts were too high have been shown, thus far, to be unproven, with the result that equities have been able to rally once again. This afternoon’s sharp drawdown in crude inventories will be welcomed by oil bulls, with a reduction of 5.2 million barrels confounding market expectations of a second consecutive weekly rise. Lower inventories do not always translate into lower production, yet a smaller amount of oil sloshing about is surely likely to improve the supply and demand dynamic, hence the outperformance of WTI over Brent.
The FTSE 100 is currently up around 25 points at 7025, after earlier falling as low as 6975.
Updated
Oil price rises on fall in US crude stocks
Oil prices are on the rise after new US figures showed a surprise drop in crude stockpiles last week, compared to expectations of an increase.
The Energy Information Administration said US crude stocks fell by 5.2m barrels, when analysts had been forecasting a 2.7m rise.
The news of increased demand has seen Brent crude climb 2.6% to $53.05 a barrel, while West Texas Intermediate has jumped 3.2% to $51.93.
Earlier crude received some support from renewed hopes that producers would take measures to reduce output, but some were sceptical. Jasper Lawler at CMC Markets said:
Saudi Arabian Energy Minister Khalid Al-Falih saying many nations are willing to joint the OPEC production cut was taken with a pinch of salt.
Updated
Philip Hammond’s comments are giving some support to the UK markets, according to Kathleen Brooks, research director at City Index:
Hammond’s testimony to the Treasury Committee has, so far, helped to support the pound and UK stocks this afternoon, although they haven’t ignited a major wave of buying of UK assets either. The markets seem comfortable, rather than ecstatic, about his comments including confirmation that the Bank of England will remain independent, and that no conclusion has yet been reached on the exact Brexit deal that will be sought by the UK government. He admitted that there are different opinions in the cabinet over how to approach Brexit, however Hammond and May are reportedly close, so his view could suggest that May’s own view is less severe than she put across at her Party conference.
Although the pound has fallen back from its intra-daily highs versus the dollar at 1.2332, Hammond’s comments seem to support the pound/dollar around the 1.23 level. We believe that, on balance, his comments that nothing is set in stone regarding Brexit, is more market-friendly than the “hard” Brexit rhetoric that has come from Number 10 in recent weeks.
Although Hammond is not giving anything away at this stage of his testimony, it gives the markets a glimmer of hope that the UK may not target a “hard” brexit. His opening comments did mention that the current government will bring down net migration to the UK, however, he hasn’t linked this to throwing out access to the EU single market or customs union. This is significant, as it is a softer approach from what the market had perceived from PM Theresa May’s comments at the Tory Party conference at the start of this month.
Hammond said the government will not pursue the policies outlined by former Chancellor George Osborne in April, which included a further cut to corporation tax, however this was to be expected. Regarding the economic impact from Brexit, the Chancellor said that he would examine the fiscal and economic impact of all Brexit options. From a “Remainer’s” perspective, this seems like a more sensible approach to leaving the European Union, compared to some of the extreme approaches that appeared to disregard the economic impact in favour of reducing immigration.
Although Hammond is giving nothing away, his comments may sooth some economic concerns regarding the Brexit process. Overall, his comments so far seem to be supportive of the current recovery in the pound and FTSE 100. But whether or not these gains can be sustained, could depend on this evening’s final US Presidential debate. A win for Clinton could sew up the race for her, which could be a short-term positive for the buck, but may limit further sterling gains.
Wall Street opens mixed
Away from the UK, and US stock markets have struggled for direction in early trading, ahead of the final presidential debate later.
The Dow Jones Industrial Average is currently up 24 points or 0.12% while the S&P 500 opened a couple of points higher. But Nasdaq dipped at the open after chip maker Intel issued a disappointing update.
Earlier US housing starts fell to a one and a half year low in September, down 9% to a seasonally adjusted annual rate of 1.05m units. Analysts had expected a rise form 1.15m to 1.18m units.
On trade deals outside the EU, Hammond says it would not be appropriate to enter into substantive trade talks with a third country until Article 50 is triggered.
On Brexit, Hammond is asked by chair Andrew Tyrie if we are leaving the customs union.
Hammond says there are discussions taking place, and no conclusions have been reached on the precise arrangements.
But this will be a negotiation between two sovereign entities, he says we should not be constrained by existing structures.
In that case we must be leaving the customs union?
We haven’t made an decision, repeats Hammond.
Hammond is being quizzed on monetary policy, and says it is the responsibility of the Bank of England’s monetary policy committee and there are no plans to change this.
This follows prime minister Theresa May’s comments at the Tory party conference which were taken as an attack on the Bank.
As a reminder, chancellor Philip Hammond is about to give evidence to the Treasury select committee.
My colleague Andrew Sparrow will be following events in detail in the politics live blog:
And there is a live feed from Parliament TV here.
Over in the markets, the pound continues to hold steady against both the dollar and the euro, as the latest data suggests the Bank of England is unlikely to cut interest rates in November:
Nice to see the UK Pound £ nudge both US $1.23 and Euro 1.12 this afternoon....
— Shaun Richards (@notayesmansecon) October 19, 2016
We flagged up earlier (10.28am) that half the new jobs gained by women in the last year were part-time.
Women also bore the brunt of layoffs in June-August; some 23,000 joined the unemployment total, pushing the female unemployment total up to 765,000.
And many of those in work are finding life tough, according to Carole Easton, Young Women’s Trust Chief Executive.
She says:
“Today’s statistics show that the employment rate for young women has increased from 60.5 per cent to 62.4 per cent. While the small increase is welcome, those that do have jobs often find them insecure and low-paid.
“The Young Women’s Trust annual survey found that more than a quarter of young people in work are worried about not having enough paid hours and 39 per cent of young women struggle to make their cash last until the end of the month. More than one in five young people have been paid less than the minimum wage. Almost four in ten young people in work are worried about their job security.
“The majority of young people we spoke to told us they are worried about their future. This is why Young Women’s Trust is calling for a reduction in the use of zero hours contracts and for young people to be paid the National Living Wage.”
Our economics editor Larry Elliott fears Britain is heading for its second wage squeeze in a decade:
During and after the recession of 2008-09, workers sacrificed pay in order to hold on to their jobs, even when sharply higher oil prices meant wages were not keeping pace with inflation.
Another squeeze on living standards is now in prospect courtesy of the recovery in the cost of crude and the fall in the value of the pound.
Here’s Larry’s analysis on today’s labour market report.
Unemployment: the political reaction
Here’s the official government response, from employment Minister Damian Hinds:
“Once again it’s great news for Britain as the employment rate remains at a record high, with more than 31.8 million men and women in work.
But there’s more to do, particularly when it comes to supporting young people into employment.
We want to build a solid base for the future; that’s why today I have announced the rollout of our Jobcentre Plus Support for Schools scheme in England, which will give tens of thousands of young people help in taking their first steps into the world of work.” [ends]
This scheme will give 12-18 year olds advice on writing a CV and preparing for interviews. ITV has more details:
Jobcentre staff to offer pupils ‘soft skill’ training
The opposition Labour party, though, are concerned that the unemployment total rose by 10,000, and that wages may be squeezed.
Debbie Abrahams MP, Shadow Secretary of State for Work and Pensions, says:
“When taken with the wide regional and gender differences in employment rates, and inflation rising, there is a real risk to the living standards of British people under this failing Tory Government.
Josh Hardie, deputy director general of the CBI, says that the UK labour market looks “resilient”, with the unemployment rate at an 11-year low of 4.9%.
He also agrees that wages aren’t growing fast enough, and wants Theresa May’s government to help.
“Pay growth is still lacklustre though, emphasising the need for new partnerships between business and the Government that brings a laser-like focus to improving productivity.
This is the only route to sustainable, long-term improvements in pay growth.”
Another handy chart from the Resolution Foundation:
UK maintains record employment but threat of fresh pay squeeze grows stronger - @MattWhittakerRF on @ONS stats today https://t.co/dZ3wSPjcet pic.twitter.com/YNfbpDpwjY
— ResolutionFoundation (@resfoundation) October 19, 2016
Martin Beck, senior economic advisor to the EY ITEM Club, also fears a pay squeeze is looming:
Pay still appears to be unresponsive to what is a fairly tight labour market, meaning rising inflation will take its toll on living standards.
While the unions worry about pay and inflation, small business leaders are fretting about how they’ll keep their firms growing in the current uncertain climate.
Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), hopes that chancellor Philip Hammond will lend a hand in next month’s Autumn Statement:
“As more people enter the Labour market and look for work, it will be more important than ever for the Government to support small businesses to keep creating jobs.
“Small businesses are resilient but face significant challenges from faltering levels of confidence and higher costs from policy changes like the National Living Wage. As the Autumn Statement approaches, it is crucial the Government doesn’t place extra burdens on business, prioritises long-term investment, enterprise policy and innovation, and reaffirms the commitment to permanently increase business rate relief.
Sam Hill of RBC Capital Markets also fears a wage squeeze next year, echoing the TUC’s concerns.
He believes earnings are unlikely to keep pace with inflation, especially if the economy slows sharply:
Against the expectation of a material slowdown in economic growth in 2017, it seems unlikely that wage growth will break above the “two-point-something” range it has roughly resided in since early 2015.
After yesterday’s news of a faster-than-expected jump in CPI inflation to 1.0% y/y, and the high probability of further upward pricing pressure to come, the main theme of this week’s economic data is the emerging trend of a squeeze on living standards
One important theme for the UK economy in 2017 is likely to be the headwinds faced by the household sector in trying to maintain their recent robust rates of real-terms consumption growth.
Workers face pay squeeze unless wages rise
The TUC are worried that workers are heading for a wage squeeze, if pay doesn’t pick up to match rising prices.
Today’s figures show that average earnings grew by 2.3% in the June-to-August quarter (see here), but that doesn’t include the impact of inflation.
In real terms, regular pay for employees in Great Britain increased by 1.7%, because inflation was 0.6% in August.
This chart from the ONS shows how real wage growth peaked in summer 2015, but has fallen back since:
We learned yesterday that inflation jumped to 1% in September, and many economists believe it will soon rise over 2%.
TUC general secretary Frances O’Grady fears that pay packets are going to be eroded by the rising cost of living.
Pay growth remains weak by historical standards, and inflation is getting higher. The worry is that families are heading towards another fall in living standards.
“Working people must not be left to pay the price of Brexit through lower wages and higher inflation. The Chancellor must use the Autumn Statement to protect growth and create well-paid work by investing in the construction of roads, railways and homes. And he must protect the living standards of the lowest paid workers by increasing the minimum wage.”
Matt Whittaker, Chief Economist at the Resolution Foundation, also fears a pay squeeze:
“Today’s figures show that in contrast to the volatility for Sterling, the Brexit vote hasn’t had any immediate impact on the UK labour market, which remains strong and resilient on jobs but disappointing on productivity and pay.
“However, yesterday’s jump in inflation sounds a warning that unless we see significant step up in pay settlements soon we risk being on course for a fresh pay squeeze next year, having barely recovered from the last one.”
This chart, from Resolution, shows how real wages were squeezed for several years after the financial crisis:
[Confession: Real wages haven’t actually fallen, as my headline briefly claimed. Apologies for the confusion]
Updated
David Cheetham, market analyst at XTB.com, points out that today’s data covers the period before the government announced it would trigger the process of leaving the EU in March 2017.
Therefore recent issues surrounding a “hard” Brexit will not be fairly reflected and any optimism should be carefully checked, with the re-emergence of concerns in recent weeks due to the plummeting value of sterling occurring in a period after which this morning’s release focuses on.
Updated
The Department for Work and Pensions tweets:
New independent stats show the employment rate is the highest since records began in 1971 pic.twitter.com/OEpakuP2X0
— DWP Press Office (@dwppressoffice) October 19, 2016
New independent stats show the number of women in work has risen in every region and nation of the UK since 2010 pic.twitter.com/0V9ykTyx9G
— DWP Press Office (@dwppressoffice) October 19, 2016
Updated
PwC: Brexit vote could hit jobs market next year
There’s no sign of a major Brexit effect on the labour market, says John Hawksworth, chief economist at PwC.
But, the impact of the EU referendum may show up over the next year.
Hawksworth says:
“Today’s labour market data suggests some moderation in jobs growth since the EU referendum, but the unemployment rate remains broadly flat so there is no sign yet of major detrimental effects from the Brexit vote.
“Specifically, total employment rose by over 100,000 in the three months to August compared to the previous three months, which is a healthy increase but somewhat slower than the average rate of quarterly jobs growth seen over the past year as a whole. The number of people unemployed also rose by 10,000 over this period, but this reflected growth in the active labour force, so the unemployment rate remained steady at 4.9%. The more timely but less comprehensive unemployment claimant count measure also showed no material change between August and September.
“But it will take time for companies to adjust their hiring plans to the Brexit vote, so we could see some further slowdown in jobs growth over the next year.
Here’s the breakdown between full-time and part-time jobs:
The number of part-time workers has risen by 198,000 over the last year, to 8.58 million people.
Professor Geraint Johnes, Director of Research at The Work Foundation, says this may be a concern.
“There are continued employment gains with people still joining the labour market out of inactivity - though unemployment is slightly up. Most of the employment gains are in part-time employment.
This may reflect in part the rise of the gig economy, and is certainly worth monitoring over future months owing to the impact on job security.
Concern swelled over the summer over conditions at companies such as Uber and Deliveroo - whose workers went on strike in protest at new pay plans.
Dr John Philpott, director of The Jobs Economist, isn’t worried that unemployment rose by 10,000 in the three months to August, to 1.66 million.
“The small rise of 10,000 in UK unemployment in the three months to August is disappointing news but should not be viewed as a ‘canary in the coalmine’ for any future adverse effect of the Brexit vote. Brexit may yet lead to a weaker jobs market but these latest figure are generally still very strong
Unemployment: the key charts
This chart shows how Britain’s jobless rate is at its lowest for a decade, at just 4.9%.
The claimant count rose by 700 people -- but remains historically low. It’s usually a good signal if companies are cutting jobs.
Around 560,000 new jobs were created in the last year -- many in the construction sector:
But the public sector continues to shrink. It’s been falling steadily since March 2010,
There were 5.33 million people employed in the public sector in June 2016, which is the lowest since comparable records began in 1999
And the number of workers from other EU countries rose by 238,000 over the 12 months to June, to 2.23 million.
But the number of non-UK nationals from outside the EU working in the UK were little changed at 1.21 million.
Updated
Instant reaction to the jobs report
Sky News’s Ed Conway reckons it’s a decent report:
Another set of strong labour market stats. And wage growth also up a touch to 2.3% https://t.co/3VHSemOj77
— Ed Conway (@EdConwaySky) October 19, 2016
But economist Sean Richards is concerned that the unemployment total rose by 10,000 during the quarter.
So UK employment remains good with wage growth okay but any rise in unemployment is disappointing
— Shaun Richards (@notayesmansecon) October 19, 2016
Rupert Seggins believes the labour market remains robust, despite sharp regional differences:
So far so good - UK job market continues to tick along post-referendum. Number of unemployed people per vacancy still below pre-2008 average pic.twitter.com/94cewAyaKb
— Rupert Seggins (@Rupert_Seggins) October 19, 2016
The UK employment rate is at a joint record high, but this hides considerable disparities among its regions. S.East 78%, N. Ireland at 70.1% pic.twitter.com/MCFLdPhrIf
— Rupert Seggins (@Rupert_Seggins) October 19, 2016
Sterling hits eight-day high
The jobs data has driven the pound up by 0.3%, hitting $1.233 for the first time in over a week.
Naeem Aslam of Think Markets says:
The UK’s economic data released today has confirmed that the labour market is not showing any sign of weakness – at least not for now. This has supported the currency which is trading sharply higher.
Updated
Unemployment: the key points
Here are the key points from today’s jobs report (which is online here)
-
There were 31.81 million people in work, 106,000 more than for March to May 2016 and 560,000 more than for a year earlier.
-
There were 23.23 million people working full-time, 362,000 more than for a year earlier. There were 8.58 million people working part-time, 198,000 more than for a year earlier.
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The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.5%, the joint highest since comparable records began in 1971.
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There were 1.66 million unemployed people (people not in work but seeking and available to work), 10,000 more than for March to May 2016 but 118,000 fewer than for a year earlier.
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There were 891,000 unemployed men, 12,000 fewer than for March to May 2016 and 81,000 fewer than for a year earlier.
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There were 765,000 unemployed women, 23,000 more than for March to May 2016 but 37,000 fewer than for a year earlier.
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The unemployment rate was 4.9%, unchanged compared with March to May 2016 but down from 5.4% for a year earlier. The unemployment rate is the proportion of the labour force (those in work plus those unemployed) that were unemployed.
-
There were 8.81 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), 65,000 fewer than for March to May 2016 and 231,000 fewer than for a year earlier.
-
The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 21.5%, the joint lowest since comparable records began in 1971.
Wages rise by 2.3%
Regular pay grew by 2.3% in the June-August quarter, up from 2.2% a month ago. That’s better than economists had expected.
If you include bonuses, pay also rose by 2.3% - down from 2.4%.
Employment rate at 45-year high
Britain’s employment rate is now 74.5% -- the joint highest in over 40 years.
Employment rate (for people 16-64yrs) 74.5% for Jun-Aug 2016, joint highest since records began in 1971 https://t.co/YnuEHGfLh0 pic.twitter.com/0msXeDo8Wv
— ONS (@ONS) October 19, 2016
And at 4.9%, the jobless rate is at a near 11-year low.
#Unemployment rate (for people aged 16+) 4.9% for Jun-Aug 2016, down from 5.4% a yr earlier https://t.co/3ImHCRYDiC pic.twitter.com/Vrh1znkpGA
— ONS (@ONS) October 19, 2016
UK UNEMPLOYMENT RATE STICKS AT 4.9%
Breaking: Britain’s unemployment rate has come in at 4.9% in the three months to August.
That’s unchanged from last month, suggesting that June’s Brexit vote hasn’t yet hit the labour market.
The number of people finding new jobs has swelled by 106,000 in the quarter. That’s slower than in previous quarters (when around 170,000 new jobs were created) but better than expected.
And the number of people signing on for unemployment benefits has risen in September, but only by 700 citizens. That’s less than the City feared.
More to follow....
Updated
Analyst: Probably too early to see Brexit effects
Nearly time for the UK unemployment report!
Kit Juckes, currency expert at Societe Generale, predicts that unemployment and wage data will probably be pretty steady.
There still is a visible relationship between wage growth and unemployment but it takes a big fall in the latter to get a small rise in the former these days.
More likely, is that while the effect of Brexit in the labour market comes (much) later, we get no real clues from these figures.
Updated
Economists are warning that China’s economy is slowing, even though Beijing met forecasts by posting growth of 6.7% this morning (as flagged in the opening post).
China expert Marcus Wright flags up that the building sector is cooling:
With #China's GDP growth having been so reliant on the property market, cooler activity suggests slower growth. @graemewearden pic.twitter.com/ad3c5Hz7ih
— Marcus Wright (@MarcusEconomics) October 19, 2016
Robin Bew of the Economist Intelligence Unit also points out that China’s housing boom is driving growth, for now...
#China Q3 GDP growth 6.7%, in line with our forecast. Booming housing lifting demand. Reining that in will slow economy sharply by 2018
— Robin Bew (@RobinBew) October 19, 2016
The pound is bobbing just below $1.23 this morning, as the City await the jobs report.
And the FTSE 100 has shed 7 points, dragged down by Travis Perkins after it announced its branch closure plan.
Conner Campbell of SpreadEx says traders are keen to see if UK wage growth has picked up.
The headline unemployment rate is expected to remain unchanged at 4.9% for the fourth month in a row – more pressing will be the wage growth and jobless claims data.
The former (when bonuses are included) is expected to sit steady at 2.3%, a figure that could soon be overtaken by inflation given the jump seen yesterday; the latter, meanwhile, is set to climb to 3.4k new claimants across September, the highest addition since May.
Laird’s share prices looks like the north face of the Eiger this morning, after that profits warning:
Apple supplier Laird plunges most on record...cuts outlook for profit as the hoped pick-up in mobile phones production fails pic.twitter.com/enLHX0q8ur
— Caroline Hyde (@CarolineHydeTV) October 19, 2016
Upmarket estate agent Foxtons continues to suffer from the slowdown in London property since the EU referendum.
It reported that sales revenue in the last quarter slumped by a third to £12.2m, from £18.5m last year, and blamed:
“a continuation of reduced activity in the London property sales market”.
Foxtons has previously blamed the EU referendum for dampening demand for houses in London.
But, it’s still optimistic about the “long term fundamentals of the London property market”, and has opened seven new branches in the capital this year. So, no escape from those garish minis....
Smartphone supplier Laird posts shock profits warning
More gloom. Shares in UK electronics firm Laird have almost halved in value, after it hit the City with a profits warning.
It is blaming problems at its ‘performance materials’ division, whose products protect electronic components from heat and electromagnetic interference. Its two biggest customers are Apple and Samsung.
CEO Tony Quinlan, chief executive, said:
“We are very disappointed by these adverse developments in the mobile devices market for our Performance Materials division.
It now expects to post profits of £50m this year, down from £73.1m last year, and well shy of the £70m which City analysts had pencilled in.
According to Laird, it has suffered from a “slower production ramp” – which I think means its customers haven’t been buying as many components as it expected.
Pricing and margin pressures are also very tough, it adds.
That may be sign that the smartphone market is cooling. Samsung’s decision to scrap its Galaxy Note 7 may also be hurting Laird.
Former CEO David Lockwood quit unexpectedly in August, prompting some brokers to warn that Laird wouldn’t hit its financial forecasts for this year. They’ve been proved right.
Updated
Travis Perkins cuts 600 jobs
Britain’s biggest building supplies group, Travis Perkins, has sent a shiver through the sector by announcing plans to shut stores and cut up to 600 jobs.
The company is closing 10 distribution and fabrication centres, and 30 branches across its business, having suffered a fall in sales of plumbing and heating products.
It warned that the UK outlook was ‘uncertain’, and said it suffered from volatile demand in July and softer market conditions in August and September.
As well as running builders’ merchants, Travis Perkins also owns the Wickes DIY chain.
John Carter, chief executive, warned that:
It is still too early to predict customer demand in 2017 with certainty and we will continue to monitor our lead indicators closely. Given this uncertainty we will be closing over 30 branches and making further efficiency driven changes in the supply chain, resulting in an exceptional charge of £40-50 million this year.
Shares have dropped by 5.5% in early trading, to the bottom of the FTSE 100 leaderboard.
The agenda: UK unemployment and Chinese growth figures
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Has the Brexit vote cooled Britain’s labour market, or are firms still shrugging off June’s historic referendum?
We find out this morning, when the latest unemployment figures are released, covering the period immediately after this summer’s vote.
Economists predict that the UK jobless rate remained at just 4.9% in the June-August quarter, with another 70,000 people finding work.
But they also expect wage growth to remain subdued at 2.1%, or 2.3% if you chuck in bonuses too. With inflation hitting 1% yesterday, people’s real wages could soon be squeezed.
And they also fear that the number of people claiming unemployment benefit rose by 3,200 in September, following a 2,400 jump in August.
The figures will be eagerly awaited by those who welcome Brexit, and those who fear the consequences of leaving the EU. Until now, firms have stood up to the uncertainty quite well. But the prospect of leaving the single market in 2017 may have a cooling effect soon.
Especially as Theresa May has been warned that quitting the EU customs union could wipe out 4.5% of GDP, and bog down Britain’s ports.
Wednesday's Guardian front page:
— Nick Sutton (@suttonnick) October 18, 2016
Exclusive - May given dire warning over customs union#tomorrowspaperstoday #bbcpapers pic.twitter.com/GjMC7TEsem
Also on the agenda:
Chinese growth figures, released early today, have shown that its GDP expanded by 6.7% in the last quarter.
That’s bang-in-line with estimates (not for the first time), and should reassure investors that China hasn’t suffered a hard landing (yet anyway).
Construction helped to drive growth, with real estate investment jumping by 7.1% over the last year and infrastructure spending up by 19.4%. The services sector grew by 7.6%.
However, China’s National Bureau of Statistics warned that the transition to a consumer-driven economy is challenging, saying:
“We must be aware that economic development is still in a critical period of transformation, with old growth drivers to be replaced by new ones,.
With unstable and uncertain domestic and external factors, the foundation for continued economic growth is not solid enough.”
So we’ll see how analysts react to that.
Also...consumer goods group Reckitt Benckiser, building materials group Travis Perkins, electronics group Laird, and confectionary maker Hotel Chocolat are all reporting financial results.
And at 6pm, Bank of England chief economist Andy Haldane is giving a speech at the Cass Busines School.
It will cover a new staff paper, also being released at 4pm today, called “QE – the story so far”.
That will be worth checking, given the prime minister’s recent criticism of quantitative easing.
We may not get the text of Haldane’s speech, though....
Updated
