European markets edge higher
The lack of further trade tensions between the US and China, better than expected results from PepsiCo and a slightly calmer day on the UK political scene has seen markets end the day (mostly) in positive territory. But with Brexit tensions still apparent (including two Conservative vice chairs resigning), and UK growth figures suggesting an interest rate rise in August, the FTSE 100 has underperformed most of its European peers. David Madden, market analyst at CMC Markets UK, said:
Investors are still in buying mode as there has been no update regarding the trade dispute. [They] are using the relatively quiet period in terms of newsflow as an opportunity to buy into the market...
Traders...are also getting ready for the latest [US] earnings season, and it is drawing attention away from the trade spat.
The final scores showed:
- The FTSE 100 finished up 4.05 points or 0.05% at 7692.04
- Germany’s Dax added 0.53% to 12,609.85
- France’s Cac closed up 0.67% at 5434.36
- Italy’s FTSE MIB rose 0.11% to 22,057.30
- Spain’s Ibex ended down 0.38% at 9889.3
On Wall Street, the Dow Jones Industrial Average is currently up 140 points or 0.58%.
On that note, it’s time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
The pound is fairly steady at the moment, as the UK political chaos of the past few days eases and investors consider the prospect of a soft(er) Brexit. Oliver Jones at Capital Economics says:
After rising and then falling by more than 1% against the dollar since Friday, sterling has been more stable today, after a lull in the storm in the UK Conservative Party.
In the wake of the high-profile resignations of the past couple of days, the prospect of an immediate challenge to Theresa May’s leadership appears to have subsided. For the time being at least, it appears that not enough Conservative MPs are willing to back a vote of no confidence in her that could trigger a leadership contest. And Michael Gove has pledged not to resign from the Cabinet, contrary to speculation that he would follow David Davis’ and Boris Johnson’s lead.
Admittedly, not everyone appears convinced. According to betting markets, the probability of a general election in the UK this year remains at nearly 30% today, compared to closer to 15% last week. The implied probability that Boris Johnson becomes the next prime minister is higher than last week too. While this is still deemed fairly unlikely – an implied probability of just under 15% – such an eventuality would presumably significantly increase the chances of a much “harder” Brexit than the government is currently pursuing.
Despite the jitters in betting markets, though, there is still little evidence that investors in financial markets are braced for an early election, or a pivot towards a hard Brexit by some other means. Overall, sterling is roughly where it was before Friday’s Cabinet summit at Chequers – and that is taking into account the mildly disappointing UK economic data released today.
In contrast to the run-up to the EU referendum, there is no sign that investors are purchasing options to protect themselves against the possibility of a sharp fall in sterling in the near future either. And UK small-cap equities, which suffered disproportionately just after the vote to leave the EU, have risen since Friday.
Looking ahead, our central forecast is that sterling will rise from about $1.33 to $1.40 by the end of the year. This is based on the assumption that continued progress will be made towards a soft form of Brexit. (Indeed, since the EU is likely to reject the proposal approved by the Cabinet at Chequers, the government may end up negotiating an even closer relationship with the EU.) It also rests on our view that the Bank of England will tighten monetary policy faster than investors are anticipating.
Of course, a hard Brexit cannot be ruled out, especially given that the clock is ticking. But even a successful challenge to Theresa May’s leadership would not necessarily bring about this outcome, particularly given that it currently lacks parliamentary support.
More positive employment data from the US, with the latest job opening numbers (one of the key pieces of information considered by the Federal Reserve under former chair Janet Yellen):
Latest "JOLTS" numbers just posted from late May reflect some decline in total number of job openings in the U.S., but still robust at 6.6 million. More Americans were willing to leave their jobs, showing confidence about their prospects.
— Mark Hamrick (@hamrickisms) July 10, 2018
Markets continue to edge higher, with the absence of further trade war developments helping to give some support. Connor Campbell, financial analyst at Spreadex, said:
A fairly uneventful session allowed the Western indices to push higher, with the Dow Jones climbing to a fresh 3 week peak.
Rising 140 points, the Dow Jones crossed the 24900 mark for the first time since 19th May. The main driver of the index’s recent growth appears to be a lack of trade war escalation in the last week or so. And while that may sound odd given that Friday saw the tariff tit-for-tatting between the US and China, those measures were well-trailed, and since then there hasn’t been anything to cause another macro-wobble.
Over in the Eurozone the region’s indices benefited from the euro’s poor performance. The single currency has struggled in light of a trade war-hit pair of dismal ZEW economic sentiment readings, dropping 0.3% against the dollar and 0.4% against the pound. This in turn meant that the DAX and CAC could climb 0.6% and 0.5% respectively, taking the German index back above 12600.
As for the FTSE, the UK index couldn’t quite match the growth seen elsewhere, posting a disappointing 0.1% increase. That did, however, still keep the FTSE above 7700, and at an effective 3 and a half week high.
Wall Street opens higher
Over in the US, markets have got off to a positive start, helped by better than expected results from PepsiCo and a rise in oil shares as crude is supported by supply problems.
So the Dow Jones Industrial Average has climbed 108 points or 0.44% in early trading, while the S&P 500 opened 0.16% higher and the Nasdaq Composite added 0.19%.
UK economy forecast to grow by 0.4% in second quarter - NIESR
Following the official UK growth figures, the National Institute of Economic and Social Research has published its latest GDP forecasts, which suggest a pick-up in the second quarter.
The think tank said the 0.2% growth seen in the three months to May was in line with its own forecasts. It now expects the UK economy to grow by 0.4% in the three months to June, as the effects of the bad weather earlier in the year drop out of the equation.
For the third quarter it expects GDP growth to improve to 0.5%, as the manufacturing and construction sectors recover from a particularly weak start to the year and the service sector grows slightly faster. Amit Kara, head of UK macroeconomic forecasting, said:
The economy is showing clear signs of recovering from the unexpected slowdown in the first quarter. Taking the business surveys together, we believe that this recovery will be most noticeable in manufacturing and construction where output should start to increase once more. Overall though, we continue to expect the economy to grow broadly in line with its potential in the second and third quarters and not by enough to compensate for the slowdown in the first quarter.
There are a number of plausible explanations for the weakness in the first quarter and the subsequent recovery. Extreme weather in the UK in March appears to have impacted adversely on the construction sector and to some extent on the retail sector as well. Growth in the Euro Area, our largest trading partner, also slowed and some of the weakness there can be attributed to similar one-off factors, particularly in France and Germany. Although Brexit and protectionist agendas loom large, there is little clear evidence that these factors specifically dragged economic growth lower in the first quarter. The international picture is mixed. Activity in the Euro Area has recovered since the first quarter slowdown, but growth is likely to be subdued in the single currency block compared with the pace achieved in 2017. By contrast, economic growth in the US is expected to gain momentum as the full effects of the fiscal expansion take effect.
A quick recap
Britain’s economy has picked up pace, according to the first ever monthly GDP reading. GDP rose by 0.3% during May, the Office for National Statistics says, up from 0.2% in April as growth benefitted from warmer weather.
The ONS also reports that the economy stagnated in the February-April quarter, before picking up with 0.2% growth in March-May.
The data shows that Britain’s economy remains unbalanced. The services sector provided the bulk of the growth, while construction and manufacturing both shrank in the last three months.
The ONS said that retail spending and computer programming boosted growth.
Some economists believe this increases the chances of an August interest rat rise; others suspect that political instability might deter the Bank of England.
Separate figures have shown that Britain’s trade deficit widened, partly due to a big drop in car exports.
German investor morale has fallen to a six-year low, as the threat of a trade war hurts confidence.
Newsflash: 25 Poundworld stores are shutting, with the loss of 242 jobs.
Deloitte, which took control of the discount retailer after it went bust last month, is closing the stores because it hasn’t yet found a buyer for the chain.
The Press Association explains:
A memo to staff penned by the professional services firm, and seen by the Press Association, said: “As previously advised, the administrators have been preparing contingency plans in the event that we are not able to deliver a sale of the business as a whole.
“These plans have been continuing and it is with regret that the administrators have taken the decision to effect an organised wind down of 25 stores, starting today.”
That last day of trading for the affected stores will be July 15.
Poundworld has more than 300 stores across the UK. The 25 stores earmarked for closure are located in:
- Doncaster
- North Shields
- Wakefield
- Stretford
- Sutton Coalfield
- Ashton
- Blackburn
- Manchester Arndale
- Denton
- Derby West Field
- Nottingham Broadmarsh
- Grays
- Middlebrook
- Chester
- Newcastle Wallsend
- Bradford Ivegate
- Birmingham
- Crewe
- Halifax
- Liverpool Bell Vale
- Loughborough
- Ipswich
- Carmarthen
- Dumfries
- Hyde
Trade war fears drive German investor confidence to six-year low
Meanwhile in Germany, investor confidence has sagged to its lowest level in six years.
The ZEW index of German investor morale dropped to -24.7 in July from -16.1 in June. That’s the weakest reading since August 2012, when the eurozone crisis was raging.
German ZEW Investor Confidence Lowest Since Aug 2012
— Miles Eakers (@mileseakers) July 10, 2018
Chart shows ZEW historically against EURUSD pic.twitter.com/2LdOPWGSjg
Achim Wambach, president of ZEW (an economic think tank) blamed “great political uncertainty” for making German business leaders jittery.
In particular, fears over an escalation of the international trade war with the United States have dampened the economic outlook.
The positive news regarding industrial production, incoming orders and the labour market have been greatly overshadowed by the anticipated negative effects on foreign trade.”
Here’s our economics correspondent, Richard Partington, on today’s growth figures:
The start of the summer heatwave has helped the British economy recover ground after grinding to a halt earlier this year, despite a severe downturn for the manufacturing industry in the three months to May.
Presenting its first ever estimates for gross domestic product (GDP) on a monthly basis, the Office for National Statistics said warmer weather and the royal wedding in May helped Britain bounce back from zero growth in March, when the “beast from the east” caused the UK economy to flatline.
GDP increased by 0.3% in May, up from 0.2% in April, as shoppers returned to the high street and activity among computer programming companies and law firms increased.
Overall, the ONS said average growth for the three months to the end of May was 0.2%, meeting economists’ expectations.
More here:
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), isn’t too impressed by the pick-up in growth in May.
He says the UK economy remains “underwhelming”, and unbalanced -- and is also concerned that the trade gap has widened.
“The latest GDP data confirms that there was a modest rally in economic activity over recent months but coming after the marked slowdown in the first quarter there is further confirmation that UK growth remains underwhelming.
“The uptick in growth also masks a number of key concerns. The persistent imbalances in the UK economy remain, so while there was solid growth in the services sector, industrial production and construction sectors are adding little to overall growth. The widening in the UK’s trade deficit for the second successive month is also a concern and means that trade is likely to have been a drag on GDP in the second quarter of the year.
It’s probable that the UK is past peak-trading conditions for exporters, with slowing global growth and the prospect of a trade war weighing on demand for UK goods and services.
“While we still expect UK growth to have picked up in the second quarter as a whole, there remains little sign of a prolonged upswing in the UK’s growth trajectory. The current political and Brexit related uncertainty, as well as the failure to deal with longstanding issues such as weak productivity, are likely to weigh on economic activity over the near term.
UK trade deficit swelled as car exports fall
Bad news: Britain’s trade deficit with the rest of the world has widened.
The ONS reports that the total UK trade deficit widened by £5.0bn in the three months ot May 2008, to £8.3bn
It blamed falling goods exports and rising goods imports -- a combination that scuppers the government’s attempts to narrow the trade gap.
Car exports took a nasty fall during the quarter, helping to drag total exports down by £3.1bn. Imports jumped by £1.9bn during the quarter.
The ONS says that vehicle sales to the US, Oman and Australia all shrank -- which looks like a blow to attempts to build Global Britain after Brexit.
The UK trade figures for 3 months to May do not look good. Falling car imports and rising unspecified imports mean a £5bn widening of the total trade deficit to £8.3bn... pic.twitter.com/W8v8B7iNe8
— Richard Partington (@RJPartington) July 10, 2018
Worrying chart for manufacturing in ONS stats - export growth has fallen to zero in 3 months to May. Appears to show post-Brexit vote (pound devaluation) manufacturing export boom is well and truly over. pic.twitter.com/7kd81i1kpG
— Richard Partington (@RJPartington) July 10, 2018
The report also shows how dependent Britain is on trade with Europe:
The UK imported 55% of its goods from the EU and exported 51% of its goods to countries outside of the EU in the 12 months to May 2018.
Updated
Britain’s economy appears to have bounced back, following a “lacklustre” performance earlier this year.
So says Charles Hepworth, investment director at asset management firm GAM:
“The UK economy appeared to bounce back over the last three months compared to its lacklustre performance in the first quarter of 2018. GDP grew 0.2% in the three months to the end of May with the month of May alone delivering 0.3%. The ONS has now changed how it calculates GDP. Instead of the previous quarterly estimates, it will now deliver monthly estimates along with a rolling three month number in an effort to provide more accurate numbers that aren’t so prone to revisions.
“Services, accounting for 80% of the economy, predictably was where the growth was seen – retail performed strongly, with the Royal Wedding no doubt helping.
Professor Costas Milas of the University of Liverpool has calculated that the new monthly GDP data released today gives a rosier picture of UK growth since the EU referendum.
He tells me:
I have plotted together annual GDP growth (based on the latest release of quarterly GDP data) and inferred annual growth (based on today’s release of monthly GDP data from ONS code: ECY2 ).
The monthly data paint a much rosier picture from 2016Q3 onwards. To the extent that the MPC members decide to trust today’s monthly GDP data, it is more likely than not that they will hike in August, unless, of course, Boris Johnson and his Brexit colleagues have other ideas about the government’s fate!
Here’s a chart showing the details:
Updated
This chart from Morgan Stanley shows how services drove the UK’s economic growth in the last three months:
MS’s Jacob Nell says:
The UK’s first monthly GDP print showed growth picking up in May, driven in particular by a strong services sector, helped by a partial May rebound in construction and manufacturing.
Services strong, manufacturing and construction weak: While services grew strongly manufacturing and IP remained drags on growth on the 3M measure. However, manufacturing and construction bounced back partially in May.
May rebound keep August hike on track: This print is the last GDP data before the MPC’s August 2 decision. They look consistent with a solid 2Q rebound – consistent with the MPC’s 0.4%Q forecast – and keep our call for an August hike on track, we think.
Ben Brettell, Senior Economist at Hargreaves Lansdown, points out that Britain’s economy still looks unbalanced.
The Royal wedding and some great weather boosted the economy in May, with GDP rising 0.3% on April. The economy grew 0.2% in the quarter to May.....
While the news is undoubtedly positive, the usual concerns will no doubt surface around the bias towards the service sector, which drove the growth. Industrial production and construction both fell in the quarter, though the latter rebounded slightly in May.
Michael Thirkettle, chief executive of construction consulting and design agency McBains, is concerned that Britain’s building activity shrank in the last quarter (despite the recovery in May).
“Today’s figures make for further depressing reading and show that construction is well and truly mired in the deep waters of recession.
UK and international companies and investors that are looking to invest in the UK are still struggling to get a read on the post-Brexit destination, meaning a reluctance to commit to new projects.
In particular, the wages of scarce skilled tradespeople has been rising sharply in recent months and companies will face a further squeeze on labour with the supply of non-UK skilled workers being cut off when the UK leaves the EU – an effect, which coupled with material price increases, is squeezing margins substantially.”
Construction fell 1.7% in the 3-months to May but grew 2.9% in the month of May https://t.co/BGI9ujQnu9 pic.twitter.com/M83RI5cvIC
— ONS (@ONS) July 10, 2018
This is from Mike Jakeman of PwC:
Implications from ONS' new monthly GDP figures:
— Mike Jakeman (@mikejakeman) July 10, 2018
-May was a much better month than February
-June is likely to be better than March
-August rate hike remains possible if good weather/World Cup spending outweighs Brexit/trade concerns pic.twitter.com/BeokQrR8XB
The continued dominance of Britain’s services companies shows why the sector needs to be protected from Brexit disrupion, says Anthony Kurukgy, senior sales trader at Foenix Partners:
The latest growth figures were spearheaded by the service sector, despite contraction in both production and construction industries. Last week, Prime Minister May’s ‘softer’ Brexit stance highlighted the need to protect the very sector that carries significant importance to the UK economy.
Although somewhat lacklustre, today’s figures show that the PM’s call to protect the freedom of services at home and across the Channel should not be jeopardised.
Andy Bruce of Reuters shows how Britain’s economy was still reliant on service sector growth in the last three months:
Rebalancing? Nah.
— Andy Bruce (@BruceReuters) July 10, 2018
Britain back in the familiar groove of services-driven growth, which has strengthened a bit compared with early 2018.
Manufacturing output fell 1.2% 3M/3M in May -- the weakest 3 months since Dec 2012. pic.twitter.com/Vk3sALUK2W
On the other hand, Tom Stevenson, investment director for Personal Investing at Fidelity International, isn’t convinced UK interest rates will rise next month.
“The first of a new-style monthly GDP report shows a continuation of an old-style economic story.
Good weather and a Royal Wedding provided a boost to the services side of the economy in the three months to May but construction and manufacturing remain in the doldrums. The overall trend is yet to break out of the downward path it has traced since the beginning of 2017.
There is nothing in today’s release to suggest that the Bank of England will be rushing to raise rates in August.”
PwC: Growth could pave way for August rate hike
John Hawksworth, chief economist at PwC, has analysed today’s data and predicts that UK growth may have picked up to 0.4% in April-June.
He says:
“GDP growth in the three months to May was still relatively modest at 0.2% relative to the previous three months, but this is dragged down by the weak performance in March, when the bad weather caused GDP growth to fall to zero. Since then a revival in retail sales and other services sectors has led GDP growth to pick up steadily in April and May. Construction output also picked up strongly in May after a couple of weak months.
“As a result, we estimate that growth in the second quarter will end up at around 0.4%, given signs from business surveys of continued forward momentum in services and construction in June.
“This pick-up in growth could be enough to tip the majority of the MPC towards a rate rise in August, though this is not yet a done deal given continuing uncertainties over Brexit and rising global trade tensions.”
ONS: Retailing and programming boosted growth
The ONS’s head of national accounts, Rob Kent-Smith, says shopping and coding helped to drive growth in recent months.
Here’s his take on today’s growth figures;
“The first of our new rolling estimates of GDP shows a mixed picture of the UK economy with modest growth driven by the services sector, partly offset by falling construction and industrial output.
“Retailing, computer programming and legal services all performed strongly in the three months to May while housebuilding and manufacturing both contracted.
Services, in particular, grew robustly in May with retailers enjoying a double boost from the warm weather and the royal wedding. Construction also saw a return to growth after a weak couple of months.”
Services grew, but manufacturing took a hit
Britain’s factories and builders suffered a sharp contraction in the last three months, but the service sector grew.
UK manufacturing sector contracted by 1.2% in the three months to May, according to today’s report, thanks to “weak exports”.
Industrial production output (which includes energy and mining) dropped by 0.6% in the quarter.
Construction growth decreased by 1.7% in the quarter, as some projects were suspended due to snowy and ice weather in March.
But the services sector grew by 0.4% during the quarter - and enjoyed a strong May thanks to the better weather.
So that all added up to growth of 0.2% in March-May, and 0.3% in May alone, up from zero growth in February-April, and 0.2% in April.
Updated
Today’s growth report also shows that Britain’s economy flatlined in February-April, before bouncing back in May.
Perhaps the most interesting finding from the first ever UK monthly GDP statistics is not that the UK economy grew in the three months to May but that it flatlined between Feb and April https://t.co/zC6uHAOACX pic.twitter.com/UzWvYtzKGo
— Ed Conway (@EdConwaySky) July 10, 2018
This chart shows how the UK economy fared in the last few months:
UK growth rises to 0.3% in May
Newsflash: Britain’s economy grew by 0.3% in May, as the economy strengthened from the winter slowdown.
That’s up up 0.2% in April, and stagnation in March, according to new figures from the Office for National Statistics.
The ONS has also calculated that GDP only rose by 0.2% in the March-to-May quarter - matching the 0.2% growth recorded in the first quarter of 2018.
More to follow!
Financial news service RANsquawk are getting excited about today’s GDP figures...
REMINDER: ONS releases - for the first time ever - monthly GDP today! pic.twitter.com/K5oEelXQHZ
— RANsquawk (@RANsquawk) July 10, 2018
Citi: Expect 3M/3M to be weak, perhaps 0.1%-0.2%, reflecting weak growth in Match and April but this should be mitigated by solid prints in May and June, which would keep BoE hike in August on track
— RANsquawk (@RANsquawk) July 10, 2018
TD: May's (and April's) GDP prints should confirm a growth rebound in Q2, giving the BoE confidence to hike next month
— RANsquawk (@RANsquawk) July 10, 2018
RBC: We think growth in the 3 months to May should be in the region of 0.1%. That would still be consistent with Q2 GDP growth at 0.3% Q/Q, as predicted by the latest PMIs
— RANsquawk (@RANsquawk) July 10, 2018
Speaking of Brexit... Airbus has provided Theresa May with some valuable air support today.
The Franco-German aircraft maker has welcomed the PM’s Brexit strategy, and urged Angela Merkel, Emmanuel Macron, and the top brass in Brussels to cut the PM some slack.
Last night, CEO Tom Enders said the EU should take a “pragmatic and fair” approach to Brexit (last week, he accused the UK of having ‘no clue’ about Brexit...)
Tonight at a German Chamber of Commerce event in London, our CEO T. Enders said: “The Chequers statement appears to show that HM Government are going in the right direction.We are not shy to request that Brussels & our other home countries are similarly pragmatic & fair” #Brexit pic.twitter.com/Os9Rz108q9
— Airbus (@Airbus) July 9, 2018
The City is calm as investors await this morning’s snapshot of the UK economy.
The pound has inched up to $1.327 against the US dollar, and €1.13 against the euro.
Politics will have as much impact as economics on sterling right now, following yesterday’s dramatic resignation.
Investors are concerned about the Brexit negotiations, as Paul Donovan of UBS Wealth Management explains:
The resignation of UK Foreign Secretary Boris Johnson led to a small market reaction – unlike some other former UK ministers, international investors have heard of Johnson. The former foreign secretary’s notoriety owed perhaps more to a slapstick comedy style than to diplomatic skill. Sterling weakened a little [yesterday], then firmed.
Investors are unlikely to be concerned about the quality of the UK government changing after the loss of Davis and Johnson. The focus is the implications for the interminably tedious EU exit process. Prime Minister May seems relatively secure for now. If the EU were to demand major concessions over the exit, that may undermine May and the government.
In the media world, Sir Martin Sorrell has burst back following his shock departure from WPP earlier this year.
Sorrell’s new venture has bought Dutch firm MediaMonks for €300m (£266m). I imagine he’ll be particularly pleased to have pipped WPP to the prize.
WPP are less impressed, though, as my colleague Mark Sweney explains:
Sorrell pursued the deal despite receiving a legal letter from WPP alleging that he was being “unlawful” and in breach of his confidentiality agreement on the basis that he looked at buying the digital ad production firm when he was still chief executive. Sorrell denies the allegations.
More here:
Tesco has announced that Charles Wilson is stepping down as chief executive of its UK and Ireland business following treatment for throat cancer.
Wilson is the former boss of Booker and took on the role at Tesco when the supermarket chain bought the wholesaler for £3.7bn earlier this year.
Tesco said that Wilson had been diagnosed with throat cancer following an operation to remove his tonsils in April and had undergone daily radiotherapy during May and June.
Tesco told the City:
“The good news is that Charles has responded very well to the treatment and all the signs are that the treatment has been successful.”
The supermarket group added that given the nature of the illness and “the need for Charles to remain vigilant in his recuperation”, it was making changes within its senior leadership team.
Wilson will step down from the Tesco board but he will remain on the executive committee and will lead the Booker business, reporting to Tesco chief executive, Dave Lewis.
Jason Tarry, currently chief product officer, will become chief executive of Tesco’s UK and Ireland business. Andrew Yaxley Tesco’s chief executive of Ireland, will take over Tarry’s role.
All new roles will take effect from 16 July. Shares fell 1% after the changes were announced, making Tesco the biggest faller on the FTSE 100.
Updated
Today’s change to reporting GDP each month is meant to provide UK policymakers with a better of Britain’s economy.
James Scruton, the head of GDP data at the statistics body, said recently:
“While this might seem like a small change, monthly GDP will mean higher-quality and quicker estimates of our changing economy, ensuring policymakers have the important information they need to take vital decisions.”
Here’s our preview of the GDP changes:
Updated
Economist Simon French of Panmure Gordon also expects decent economic data today:
A raft of economic data out of the UK at 0930BST. Production, construction & trade alongside Mar-May GDP. Recent data point to a sufficient Q2 bounceback to allay fears of a sharp slowdown. Would still represent the weakest backdrop to an (August) interest rate hike in >20 years.
— Simon French (@shjfrench) July 10, 2018
The agenda: It's (monthly) GDP day
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
A blizzard of economic data is heading our way this morning, giving new insight into how the UK economy is faring.
In a first for Britain, the Office for National Statistics will release a monthly GDP estimate. This is expected to show the economy grew by a healthy 0.3% in May alone.
If so, that would show the economy is recovering from the winter slowdown (when growth was just 0.2% in January, February and March combined).
We’ll also get a new rolling three-month growth estimate - covering March, April and May. That may actually be lower than the May figure, due to the impact of the ‘Beast from the East’.
So, lots for the City to get excited by.
Jasper Lawler of London Capital Group says a decent growth report could make an August interest rate rise more likely.
UK GDP is expected to have increased at 0.3% month on month in May, with the 3-month average forecast to be 0.2%, reflecting the slower growth from the earlier months.
Stronger data is expected to lift the pound, particularly a solid figure from the monthly GDP release, which could help boost the case at the BoE for a rate rise, when policy makers meet in 3 weeks time.
James Smith of ING agrees (political tensions not-withstanding, of course):
Away from #Brexit, we get a new monthly UK #GDP figure today. Likely to show that the economy has regained a bit of poise in 2Q. Should keep the #BoE on track for an August hike - despite the latest turmoil (well, for now...) pic.twitter.com/cufXzcjJQU
— James Smith (@SmithEconomics) July 10, 2018
But that’s not all! The Office for National Statistics is also publishing Britain’s trade figures for May (likely to show a goods deficit of £12bn), and fresh industrial and manufacturing output data.
Also coming up today
Stock markets are looking calm as fears over a trade war recede (for the moment, anyway).
The pound may be volatile, though, following the resignations of David Davis and Boris Johnson. Theresa May is trying to hold her government together in the face of Brexiteer anger over her plan for leaving the EU.
Here’s the agenda:
- 9.30am BST: UK economic growth estimate for May published
- 9.30am BST: UK trade data for May
- 9.30am BST: UK industrial production figures for May
- 10am BST: ZEW survey of German economic sentiment in July
Updated
