That’s it for today folks. Thank you for reading the blog and please join us again on Monday. Have a lovely weekend.
UK growth halved in Q1, think tank says
UK growth halved in the first quarter to 0.3% according to the National Institute of Economic and Social Research.
The think tank said that a poor performance from Britain’s manufacturing sector was acting as a drag on the economy, which grew by 0.6% in the final quarter of 2015.
If 0.3% growth proves to be correct, it would be the UK’s weakest rate of growth since the fourth quarter of 2012.
We will have to wait until 27 April for the first official estimate of first quarter growth, published by the Office for National Statistics.
NIESR’s estimate takes into account the weaker than expected UK manufacturing and industrial production figures published earlier on Friday.
James Warren, research fellow at NIESR, said:
The subdued growth in the first quarter of 2016 has been primarily driven by weakness in production industries, especially manufacturing.
The volume of industrial production is currently 10.7% below its pre-recession peak of the first quarter of 2008, while GDP has now surpassed its pre-recession peak by 7%.
The European Council has confirmed that it will delay its June summit for five days so that it does not clash with the UK’s Brexit referendum.
The council will now meet on 28-29 June, and not 23-24 June as originally planned. The UK will vote on whether or not to remain in the EU on 23 June.
US markets open higher
- Dow Jones: +0.4% at 17,605.86
- S&P 500: +0.4% at 2,050.78
- Nasdaq: +0.7% at 4,884.44
As in Europe, US investor sentiment is being helped by rising oil prices and Janet Yellen’s upbeat comments about the US economy.
Updated
Oil jumps 5%
Brent crude oil is now up 4.9% or $1.95 at $41.38 a barrel.
Investors appear to be hopeful that the world’s top producers will agree to freeze output, and traders were encouraged by Janet Yellen’s comments last night.
The Fed’s chair said the US was on a solid course, and suggested the economy would be able to withstand gradual rate rises this year.
European markets have been boosted by the rising oil price and more positive sentiment. All major indices have built on earlier gains.
Copper prices are heading for their biggest weekly loss in three months because of concerns over lack of global demand and plenty of supply in China.
Three-month copper on the London Metal Exchange was trading at $4,635 a tonne, putting it on course for a 3.9% fall this week.
It would be the biggest drop since the week ending 8 January, erasing all of copper’s gains so far this year.
Carsten Menke, analyst at Julius Baer:
Risk-off (sentiment) has weighed on cyclical commodity markets. Copper supplies are set to remain ample as producers are focusing on cutting costs rather than production.
Updated
Back to Japan...
Currency strategists at UBS believe April’s Bank of Japan meeting will be “make or break” for the yen.
UBS has been surprised by the strength of the yen against the dollar, partly because they didn’t think Japan’s policymakers would tolerate yen strength.
The bank’s currency strategists say in a research note than unless the central bank unleashes significant stimulus at its April meeting, they will have to cut their dollar/yen forecasts.
They write:
Our Japanese economists do indeed expect further aggressive easing in April in the form of expanded quantitative easing and further rate cuts, without which we would need to trim our forecast of USD/JPY rising to 122 by year-end.
The yen is currently trading at 108.6 against the dollar.
EU to delay summit until after Brexit referendum
According to Reuters, EU leaders are planning to reschedule their regular June summit for after the referendum, to give them time to react to a potential Brexit.
David Cameron’s 23 June referendum currently clashes with the first day of the mid-year European Council meeting.
Donald Tusk, president of the European Council, is proposing to delay the meeting to 28-29 June and is waiting for governments to confirm, Reuters reports.
Larry Elliott, the Guardian’s economics editor, has given his verdict on the UK manufacturing and trade data:
UK economy is using low interest rates as life support. It can’t end well
A couple of graphs to illustrate Friday’s UK data...
Commenting on the UK trade figures, the British Chambers of Commerce said it was concerning that exports fell in the last three months while imports rose.
David Kern, the BCC’s chief economist:
These figures reinforce our view that much more is needed to boost our export performance. This must include a greater emphasis on helping firms to break into new and growing markets.
Let’s not forget George Osborne’s pledge in 2012 to double UK exports to £1 trillion by 2020. Back then he was full of hope that Britain would revive its waning fortunes in selling goods abroad.
This target now looks wildly out of reach. The Office for Budget Responsibility (the Treasury’s independent forecaster) last month lowered its forecasts for UK exports, predicting they would be £643bn in 2020 - “36% lower than the government’s aspiration”.
The pound has fallen back below $1.41 following the weak manufacturing data and wider than expected trade gap.
UK trade deficit wider than expected
Separate data on the UK’s exports and imports showed the trade deficit was wider than expected in February as imports from the EU rose to a record high of £20bn.
The goods trade deficit stood at £11.96bn in February. That was smaller than the gap of £12.16bn in January but bigger than forecasts for a deficit of £10.2bn in a Reuters poll of economists. The UK’s deficit on trade in goods and services together was estimated at £4.8bn in February, a narrowing of £0.4 billion from the revised deficit for January.
The ONS said that the goods trade deficit with the rest of the EU hit a record high of £8.6bn in February on the back of record imports from the region. Imports (from the EU) of aircraft, cars, chemicals, electrical machinery, food, live animals, jewellery and oil all increased.
Updated
The FTSE 100 is still rising, up 0.6% or 40 points at 6,176...
“Miserable”. That is what Alan Clarke, economist at Scotiabank, thinks of the industrial production data.
Manufacturing was the big drag on industrial production (which also includes mining and utilities), and iron and steel production was the biggest drag on manufacturing (down 37.7% over the year to Feb).
Clarke said that while the data was horrible, it was not the end of the world for the economy.
While the data did not make pleasant reading, crunching these numbers still leaves us on track for 0.5% q/q GDP growth during Q1 barring a disaster in the services sector.
Manufacturing should have a better time once the effects of the weaker pound feed through, as long as pre-brexit vote uncertainty doesn’t get in the way.
The UK manufacturing data is a big disappointment and will raise fears that the UK recovery is wavering.
The 1.8% annual fall in manufacturing output is the biggest since July 2013.
The broader measure of industrial production was also worse than expected, falling 0.3% on a monthly basis. Economists were expecting it to rise by 0.1%
On an annual basis industrial production was down 0.5%, and not flat as expected.
UK manuf drop of 1.1% much worse than 0.2% drop fcast by econs in Rtrs poll. Crude steel output lowest since Dec'08 https://t.co/LkzTLpucRh
— Katie Allen (@KatieAllenGdn) April 8, 2016
UK manufacturing output falls sharply
Bad news for UK manufacturing, with output down 1.1% in February - much more sharply than the 0.2% drop forecast by economists.
That means manufacturing output was down 1.8% on annual basis in February.
At a time when Britain’s steel industry is in crisis, the Office for National Statistics said UK crude steel production was the lowest since December 2008 in February.
Japan's finance minister addresses yen surge
Japan’s finance minister Taro Aso said on Friday that he was watching currency moves with “tension” after the yen hit a 17-month high of 107.6 against the dollar.
He said the government was prepared to take steps as needed to counter “one-sided” moves in the currency market.
His comments helped to take the edge of the yen’s gain, and Japanese markets rose, but the yen has risen 12% against the dollar this year despite negative interest rates.
Policymakers were hoping that negative rates would encourage investment and keep the yen low - in turn boosting exports.
But the yen has surged on the back of a weaker dollar and because of its status as a save haven investment at a time of global uncertainty.
Oil prices rise
Brent crude oil is up 2% this morning at $40.22 a barrel.
Investors are holding their nerve in what has been a jittery, volatile week. Comments from Fed chair Janet Yellen in the US last night were fairly upbeat about the US economy, helping sentiment.
She said the world’s largest economy was on a solid course, and on track to justify more interest rate hikes.
FTSE opens higher
Europe’s main stock markets are all up in early trading, with investors no doubt relieved that the German trade data surprised on the upside.
The FTSE is up 0.8% or 51 points at 6,187.81.
Carsten Brzeski, economist at ING, is not overly impressed by Germany’s stronger than expected export performance in February.
This is what he had to say about the news that exports in Europe’s largest economy rose by 1.3% over the month - the biggest increase since September.
Some relief but no reason to cheer. February trade data just showed that the German export sector still struggles to gain momentum.
German exports have lost parts of their magic and strength. In the past always a reliable growth engine, net exports on average did not contribute anything to quarterly GDP growth over the last two years. In 2015, net exports even were a drag on growth.
Brzeski is not hopeful that German exports will be the silver bullet for the flailing eurozone economy any time soon, partly because the euro has appreciated in recent months, making German goods more expensive abroad.
Looking ahead, it does not look as if exports would quickly return as a powerful growth engine. The tailwinds of the weak currency are fading away. Since late-November, the euro has appreciated by more than 6 ½% vis-à-vis the US dollar.
With strong consumption, a booming construction sector but stagnating industry and exports as well as a reprimand from international institutions to finally step up reform efforts, the eurozone’s largest economy is losing some of its luster.
Updated
Boost for #German Q1 #GDP #growth hopes as exports rise 1.3% seas. adj in Feb after 0.6% dip in Jan. Imports up 0.4% m/m in Feb (1)
— Howard Archer (@HowardArcherUK) April 8, 2016
German exports bounced in Feb. Jumped by 1.3% MoM, strongest increase since Sep widening trade surplus to €19.8bn. pic.twitter.com/IRiFeIXdQk
— Holger Zschaepitz (@Schuldensuehner) April 8, 2016
German exports rise at fastest pace since September (+1.3 pct) after months of lacklustre performance tied to emerging markets slowdown
— Noah Barkin (@noahbarkin) April 8, 2016
German exports rebound
Good morning and welcome to our rolling coverage of the world economy, the financial markets and business.
Some brighter news for the eurozone this morning, following a week of largely disappointing data and a growing sense from the European Central Bank that 2016 is going to be another tough year.
German exports increased more than expected in February, by 1.3% compared with January. It followed two months of falling exports, as demand for German goods waned, and was the biggest monthly rise in five months. Economists polled by Reuters had forecast a smaller rise of 0.5%.
Signs that foreign demand for German goods is picking up might provide a little cheer to eurozone policymakers left scratching their heads over what to do next to breathe life into the currency-bloc’s economy.
German imports increased by 0.4% in February, while economists had forecast a 0.3% fall.
