Time for a recap on today’s eurozone growth figures, from my colleague Katie Allen:
The eurozone economy has grown twice as fast as the UK in recent months, according to official figures that underscore the divergence between Britain and its neighbouring currency bloc after the Brexit vote.
GDP in the 19 countries that use the euro expanded 0.6% in the second quarter of 2017, building on growth of 0.5% in the first quarter, according the EU statistics body Eurostat (pdf).
In the UK by contrast, the latest official figures released last week showed the economy grew by just 0.3% in the second quarter of 2017 following 0.2% expansion in the first three months of the year. The economy had shown resilience in the immediate aftermath of last year’s EU referendum, confounding forecasts of a downturn. But growth has slowed markedly since the turn of the year as a weaker pound has raised the cost of imports, pushed up inflation and squeezed consumers.
In the eurozone, growth has quickened and unemployment has fallen against the backdrop of ultra-low interest rates and other measures by the European Central Bank (ECB) to boost activity.
Eurostat said second-quarter GDP was up 2.1% compared with a year earlier, the fastest growth since 2011 and in line with forecasts by economists in a Reuters poll.
Bert Colijn, a senior eurozone economist at the bank ING, said the bloc had enjoyed a “surprisingly strong” first half to 2017.
Eurostat did not provide any detail about what had driven growth in Tuesday’s early estimate of GDP but Colijn said domestic demand continued to be an important factor.
He added: “Some countries have already released their first estimates of second-quarter GDP growth, showing that the expansion is broad-based within the eurozone. France, Spain, Austria and Belgium all recorded solid growth rates.”
“All in all, the eurozone economy has rounded out the first half of the year in a very healthy state and seems to be set up nicely for continued firm growth for the rest of 2017.”...
Here’s the full story:
And that’s all for today. Thanks for reading, and for all the comments. GW
US factories keep growing, but construction spending drops
Newsflash: America’s manufacturing sector has slowed a little, and the nation’s builders have been hit by falling spending too.
The ISM survey of the US factory sector dipped to 56.3 for July, down from 57.8 in June. That still shows growth, but at a slower rate.
U.S. factory gauge continues to signal solid expansion in July https://t.co/Cm8GpmLP8R pic.twitter.com/bMNfX4lBLR
— Bloomberg (@business) August 1, 2017
A separate report shows that US construction spending fell by 1.3% in June, dashing hopes of a small rise.
That’s due to a 5.4% tumble in public spending on building projects; a reminder that America hasn’t launched the massive infrastructure spending programme promised by Donald Trump.....
Today’s growth figures could signal that 2017 will be a vintage year for the eurozone, says IHS Markit’s Raj Badiani.
He says that the European Central Bank’s stimulus programme, which runs until at least the end of December, should support the economy.
But, he also suspects growth will slow next year, as Britain moves closer to the EU exit door. Plus, there’s always the chance of a political crisis blowing up on the continent.
Badiani writes:
Eurozone political uncertainties have been diluted by Macron’s convincing win in the French presidential election and the defeat of the populist Freedom party in the Dutch elections, although they have not disappeared. Further uncertainty comes from the German election in September (although Merkel’s Christian Democratic Union party is currently riding high in opinion polls), and a 2017 election is very possible in Italy following Matteo Renzi’s December defeat in a referendum on constitutional reform. Additionally, although a third general election has been avoided in Spain, the minority government seems certain to find life difficult.
We also suspect the Brexit vote could further damage Eurozone activity in 2017 and 2018, now that the United Kingdom has triggered Article 50 (on 29 March), and its exit negotiations with the EU are under way.
On balance, Eurozone GDP growth is seen improving from 1.7% in 2016 to 2.0% in 2017 before easing back to 1.9% in 2018. Growth should be helped by reduced political uncertainty, assuming no major shocks occur during 2017.
Dow Jones hits (another) record high
Boom! The US stock market rally has driven the Dow Jones industrial average to a new record high.
As the chimes of the opening trading bell fade away, the Dow jumped by 94 points to 21,985 points.
That’s just 15 points shy of the 22,000 milestone which Donald Trump was aiming for....
European markets rally
Today’s eurozone GDP figures have helped to keep shares buoyant in Europe today.
The main indices are all up today, with Britain’s FTSE 100, Germany’s DAX and the French CAC all up around 0.8%.
Wall Street is expected to rally today too, and the Dow Jones could hit a new all-time high over 22,000 points. The president of the US hopes we’re paying attention....
Stock Market could hit all-time high (again) 22,000 today. Was 18,000 only 6 months ago on Election Day. Mainstream media seldom mentions!
— Donald J. Trump (@realDonaldTrump) August 1, 2017
Although Britain is lagging behind the eurozone this year, it has still done better overall in the 10 years since the financial crisis.
Ben Chu of the Independent has the details:
...though important to note that, since 2008, UK GDP has grown almost twice as fast. Eurozone's stronger growth now likely partly cyclical pic.twitter.com/3nFlyHkjon
— Ben Chu (@BenChu_) August 1, 2017
That’s partly because the Bank of England was quicker to ease monetary policy, slash interest rates to record lows, and start a quantitative easing stimulus scheme.
This chart, from last week’s UK GDP report, shows how the UK and Germany have basically grown at the same rate since 2007, behind Canada, but much faster than France or Italy.
Updated
Robert Ward of the Economist Intelligence Unit says Europe’s brisk growth is overshadowing Britain right now....
#Eurozone GDP growth brisk at 0.6% in Q2. Overshadows UK's 0.3% in same quarter. Spain outperforms. EZ recovery putting down deeper roots.
— Robert Ward (@RobertAlanWard) August 1, 2017
Thanks to today’s robust data, the eurozone has now posted 17 quarters of growth in a row.
This expansion dates back to early 2013, during the debt crisis which gripped the continent for years.
The previous autumn, the European Central Bank had finally woken up to the challenge, and promised to buy the debt of countries such as Spain and Italy in ‘unlimited quantities’.
Although never acted on, that pledge helped to calm worries that the eurozone might break up, and paved the way for the recovery.
EUREKA! Eurozone #GDP Growth +2.1% YoY in Q2, fastest pace since Q1 2011. Eurozone economy has grown for 17 consecutive quarters! pic.twitter.com/51Y4Xay9He
— jeroen blokland (@jsblokland) August 1, 2017
Europe’s employment commissioner, Marianne Thyssen, tweets:
More good news: euro area GDP up with 2.1% compared to a year ago. Details ➡️ #Eurostat https://t.co/NHrqT9Mx2i
— Marianne Thyssen (@mariannethyssen) August 1, 2017
But Angel Talavera of Oxford Economics suggest the eurozone could have done even better....
We seem to be the only ones slightly disappointed by Eurozone GDP numbers. Strong growth but we thought it could even go a notch higher.
— Angel Talavera (@atalaveraEcon) August 1, 2017
We don’t yet know how Europe’s biggest economy, Germany, performed in the last quarter.
Economists expect solid growth, following Germany’s 0.6% expansion in the first three months of the year. It’s even possible that a strong performance from Germany could push up the eurozone growth rate to 0.7%.
Jack Allen of Capital Economics explains:
German Q2 GDP has not yet been published, and the euro-zone aggregate has been produced using an estimate for Germany.
Given that the monthly data in Germany point to a very sharp acceleration in growth there, to as much as 1%, the euro-zone aggregate may yet be revised up. And the timelier surveys point to continued strong growth at the start of Q3.
On an annual basis, the eurozone is now growing at the fastest pace since 2011.
That underlines how its economy has strengthened in the last year.
Eurozone GDP rose 0.6% q/q in Q2 after increasing 0.5% in Q1. The 2.1% y/y growth recorded in Q2 is the fastest in over 6 years pic.twitter.com/W9fYv1kaCP
— UlsterBank Economics (@UB_Economics) August 1, 2017
ING: Eurozone is surprisingly strong
Bert Colijn, senior economist at ING, says the eurozone is in a “very healthy state” right now, after growing by over 1% since the start of the year.
Colijn expects further growth in 2017, following a “surprisingly strong first half to 2017”.
Here’s his take on today’s GDP figures:
No breakdowns for Eurozone GDP have been released so far, but domestic demand continues to be an important driver of growth. Especially the recovery in investments has been strong over recent quarters and has likely continued to boost GDP growth in the second quarter.
The same holds good for consumption, albeit at a somewhat slower pace. On the back of an accelerating jobs recovery and the highest consumer confidence since 2001, consumption is likely to have contributed significantly to growth as well. The recent appreciation of the euro is therefore unlikely to slow the current expansion significantly for the moment, given the domestic strength of the economy.
Eurozone policymakers will be cheered by today’s growth figures, says Mehreen Khan of the FT:
The health of the eurozone economy has confounded critics this year after a series of electoral setbacks for eurosceptic parties in the Netherlands, Austria, and France has boosted business and consumer confidence.
The economy has now expanded for 17 consecutive quarters and unemployment – long a scourge of the bloc’s weakest economies- – is now at a nine-year low 0f 9.1%.
The eurozone economy picked up pace to grow 0.6 per cent in the second quarter https://t.co/axFmvVVQtE pic.twitter.com/otbmrhC3D1
— fastFT (@fastFT) August 1, 2017
This chart shows how the eurozone has outpaced Britain in the last six months, after lagging behind in 2016.
Eurozone growth picks up to 0.6%q/q in Q2, for its 3rd consecutive solid quarter of growth, at the same time as the UK economy has slowed. pic.twitter.com/TyBKA0ZLxj
— Rupert Seggins (@Rupert_Seggins) August 1, 2017
Eurozone grows by 0.6% as recovery strengthens
It’s official! The eurozone grew twice as fast as the UK in the second quarter of 2017, as its recovery gathers pace.
Eurozone GDP rose by 0.6% in the three months to June, new figures from Eurostat show. That’s a pretty decent growth rate, as the region puts its debt crisis behind it.
This is an acceleration on the first quarter, when eurozone rose by 0.5% (that’s been revised down from 0.6%).
On an annual basis, the eurozone GDP expanded by 2.3% during the quarter.
That’s underlines how the region has strengthened in recent months, driving unemployment down to a nine-year low.
In contrast, Britain’s economy only grew by 0.3% in April-to-June, and 0.2% in Q1, as subdued consumer spending and rising inflation hit growth.
Figures released last Friday showed that France grew up 0.5% in the last quarter, while Spain achieved 0.9% growth and Sweden stormed ahead with 1.7% growth.
More to follow....
Sterling hits 10-month high
The pound has hit a 10-month high against the US dollar, at $1.3235.
The pick-up in UK factory growth is boosting sterling.
Meanwhile, traders are shunning the dollar as the crisis at the White House continues to escalate with Anthony Scaramucci’s shock sacking last night.
Updated
UK manufacturing recovers: What the experts say
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, has welcomed the recovery in UK factory growth last month::
“Firms are facing uncertainty around the UK’s future trading relationship with the EU but figures suggest exports are rising with a year-on-year increase of 15 per cent. This is partly a result of the weaker pound but also because more manufacturers are looking at new international markets beyond Europe.
“The news that BMW is planning to build the new electronic Mini at its plant in Oxfordshire is a timely vote of confidence in our industry’s word-class expertise.
“Manufacturers are planning positively for the future with continued investment, product development and new business at home and away.”
Ms Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, reckons factories should contribute to growth this quarter.
“UK manufacturers appear to be riding high going into the second half of the year with the sector in the UK and Europe continuing to be buoyed by a recovering global economy, alongside efforts to bring new products to the market.
Above trend responses across the key components of the survey would signal that the drag on overall economic growth from the sector in the second quarter of this year is likely to be temporary.
UK factory growth rises as exports surge
Boom! UK manufacturing has bounced back from its slowdown in June, thanks to a surge in new exports, according to data firm Markit.
Markit’s UK factory PMI jumped to 55.1 in July, up from the three-month low of 54.2 in June.
This was driven by foreign demand for UK goods, which rose by the fastest rate since the all-time record in April 2010. This came from clients in North America, Europe, the Asia- Pacific region and the Middle-East.
Rob Dobson, Director at IHS Markit, says UK manufacturing has started the third quarter of 2017 on “a solid footing”.
The headline PMI signalled a growth acceleration for the first time in three months during July, as new order intakes were boosted by a near survey-record increase in new export business. Although the exchange rate remains a key driver of export growth, manufacturers also benefitted from stronger economic growth in key markets in the euro area, North America and Asia-Pacific regions.
“Continued expansion is also still filtering through to the labour market, with the latest round of manufacturing job creation among the best seen over the past three years.
However, there is a caveat! Markit’s data is more upbeat than the official data from the Office for National Statistics, which showed that manufacturing shrank in April to June.....
UK manufacturing growth up in July according to PMIs. 2nd best export orders fig in PMI's history. But big recent split with official stats. pic.twitter.com/GLi4YTgEm0
— Rupert Seggins (@Rupert_Seggins) August 1, 2017
Updated
Eurozone factories post 49th month of growth in a row
Newsflash: Growth across the eurozone’s factory sector slowed last month, but remains strong.
Markit’s overall healthcheck on manufacturers across the euro area came in at 56.6, down from the 74-month high of 57.4 hit in June.
This is the 49th month running in which the factory PMI has come in over 50 points, indicating that the sector has now grown for over four years running.
Encouragingly, the expansion seems to be widespread. Every individual country tracked by Markit reported factory growth, including Greece!
Output growth dipped to a six month low, new orders grew at their slowest in five months, and new export growth was a four-month low. But all these readings were close to the best since 2011.
As this chart shows, there are signs of a slowdown in some countries.
Chris Williamson, chief business economist at IHS Markit, says eurozone factories were “buzzing with activity” in July.
The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading. The survey indicates that manufacturing output was growing at an annual rate of approximately 4% at the start of the third quarter, sustaining the best growth spell that the region has seen for six years.
“Germany clearly remains a major driver of the upturn, with only neighbouring Austria and the Netherlands enjoying faster rates of expansion. But this is a broad-based revival nonetheless, with even Greece enjoying its first back-to-back monthly improvement in manufacturing conditions for three years.
“Employment growth meanwhile continued to run at one of the highest rates seen for at least 20 years, with the hiring boom underscoring the current ebullient mood within euro area factories.
“Despite the near-record rise in employment, companies continued to struggle to meet order book growth, with capacity constraints both at factories and their suppliers becoming increasingly widespread in recent months. While price pressures eased in July, inflationary pressures could pick up again if demand continues to outstrip supply.”
Updated
Germany’s factory sector seems to have cooled a little in July.
The German manufacturing PMI fell to 58.1 in July, down from 59.6 in June.
That’s still a very high reading, soaring over the 50-point mark that separates expansion from contraction. But it does show that output, new orders and job creation all softened.
Trevor Balchin, Director, Economics at IHS Markit says:
“The German manufacturing sector finally gave up some momentum in July, with the PMI easing to a five-month low of 58.1. This was still indicative of marked overall growth, however, with rates of expansion for output, new orders and jobs remaining historically sharp.
Supply chains in particular were kept under intense pressure at the start of the second half of 2017.
The French recovery is alive and well!
Firms took on staff at the fastest rate in 17 years, and optimism over future prospects hit a record high.
This pushed France’s manufacturing PMI up to 54.9 in July, from 54.8 in June.
Italy’s factories had a decent July, with new orders accelerating but output growth slowing a little.
They kept hiring workers too, according to Markit’s PMI, but with the slowest increase in nine months.
Italy Manufacturing PMI (Jul) comes in at 55.1, prev: 55.2
— Michael Hewson 🇬🇧 (@mhewson_CMC) August 1, 2017
Updated
Spain’s factory sector cooled a little last month, but is still growing:
Spain Manufacturing PMI (Jul) falls back to 54, from 54.7
— Michael Hewson 🇬🇧 (@mhewson_CMC) August 1, 2017
Dutch manufacturing hits six-year highs
Factories in the Netherlands helped drive the eurozone recovery in July.
The Dutch manufacturing PMI has climbed to 58.9 in July, up from June’s 58.6 and its highest reading since April 2011.
New orders, output and employment levels all surged, suggesting that the sector strengthened last month.
Over in the City, shares in Rolls-Royce have surged over 5% after reporting better-than-expected earnings.
Underlying profits at the engineering firm jumped to £287m for the last six months, up from £104m a year ago.
Strong sales of Rolls’ Trent engines helped it recover from the huge bribery scandal that rocked the firm.
Centrica hikes prices
Millions of British Gas customers have woken up to the bad news that their energy bills are going up.
It’s a big rise too! Centrica is hiking its electricity prices by 12.5% but left gas prices unchanged. This means the average dual fuel bill will rise by 7.3% to £1,120.
More than 3m customers will be hit – although Centrica will provide a £76 credit to more than 200,000 vulnerable customers to protect them from the increase.
Here’s the full story:
Centrica boss Iain Conn just faced the music on Sky News, arguing that the rise is driven by “underlying increases in costs”.
Sky’s Sarah-Jane Mee isn’t impressed, though, telling Conn that she’d hoped to read out some of the comments received over social media, but they’re not suitable for a family audience.
She adds:
“Greedy” is one of the words I can read out.....
British Gas is putting up electricity prices by 12.5% in September. @skysarahjane asked the chief exec of British Gas owner Centrica why pic.twitter.com/7JnHnhbkfG
— Sky News (@SkyNews) August 1, 2017
Updated
China factory growth accelerates as exports rise
China got manufacturing PMI day off to a solid start, by posting its best figures in four months.
The Caixin China manufacturing PMI for July jumped to 51.1, up from 50.4 in June.
Any reading over 50 shows growth, and this also beats City expectations.
China July Caixin Manufacturing PMI comes in at 51.1 (f'cast 50.4) vs 50.4 in June
— Mauro Ippolito 📈 (@MauroIppolito) August 1, 2017
Factory bosses reported that output and total new orders expanded at the fastest pace since February.
In another encouraging sign, new export sales rose at the second-fastest rate for nearly three years. That could bode well for global growth.
But.... Chinese manufacturers also shed jobs last month, at the fastest rate in 10 months. That meant that the backlog of unfinished work stacked up....
Dr Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, says the data is encouraging:
Operating conditions in the manufacturing sector improved further in July, suggesting the economy’s growth momentum will be sustained. That said, it’s unlikely that financial regulatory tightening will be relaxed.”
The agenda: Manufacturing reports and eurozone growth
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Is Europe’s recovery on firm foundations? We find out today, when the first estimate of eurozone GDP for the second quarter of 2017 is released.
Economists are expecting to see solid growth, with GDP perhaps expanding by 0.6% in April to June. If so, that would broadly match America’s performance, and be twice as fast as Britain.
We also discover how the world’s factories fared in July, as data firm Markit rolls out its monthly PMI surveys. They may show that eurozone manufacturing hit a six-year high last month, and that UK growth picked up too.
European stock markets are expected to open higher, with the FTSE 100 called up 0.5%.
Our European opening calls:$FTSE 7409 +0.51%
— IGSquawk (@IGSquawk) August 1, 2017
$DAX 12125 +0.05%
$CAC 5097 +0.07%$IBEX 10511 +0.08%$MIB 21484 -0.01%
There’s also a blizzard of corporate news; engineering group Rolls-Royce, oil giant BP, housebuilder Taylor Wimpey and energy group Centrica are all reporting results.
And over in Threadneedle Street, staff at the Bank of England are starting a three-day strike in a pay dispute.
The agenda
- 9am BST: Eurozone manufacturing PMI reports for July
- 9.30am BST: UK manufacturing PMI for July
- 10am BST: Eurozone growth figures for Q2 2017 (first estimate)
- 3pm BST: US manufacturing PMI for July
Updated
