Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (until 2.45) and Nick Fletcher

UK missing deficit target, as households grow gloomier about Brexit – as it happened

October’s public finances will give a final healthcheck on the UK economy before Wednesday’s autumn statement
October’s public finances will give a final healthcheck on the UK economy before Wednesday’s autumn statement Photograph: AlbertoP/PP/Barcroft Images

European shares climb as US markets hit new peaks

Taking their cue from overnight records set on Wall Street, and boosted by further gains as US markets opened higher once more, European investors pushed shares higher once more. Despite dips in the oil price on renewed doubts about Opec agreeing output cuts next week, the prospect of a Trump boost to spending continued to support markets.

In Europe, French and German markets were lifted once again by recent political developments - Francois Fillon’s victory in the French presidential primary and Angela Merkel standing for a fourth term as German chancellor.

As for the UK, the pound weakened ahead of Wednesday’s Autumn Statement, but shares simply shrugged this off. Chris Beauchamp, chief market analyst at IG,said:

Ahead of tomorrow’s Autumn Statement sterling remains weak, dropping back from yesterday’s highs above $1.25. It is clear that the chancellor faces a difficult set of choices, with little wiggle room. Given the still murky path ahead for the UK economy, it is hard to see how Mr Hammond can do more than tinker around the edges. Markets will be watching closely for signs of concern about the economic outlook, which could see the pound weaken further against the dollar and the euro.

The final scores showed:

  • The FTSE 100 finished up 41.76 points or 0.62% at 6819.72
  • Germany’s Dax rose 0.27% to 10,713.85
  • France’s Cac closed up 0.41% at 4548.35
  • Italy’s FTSE MIB was 1.37% better at 16,519.89
  • Spain’s Ibex ended up 0.43% at 8651.5
  • In Greece, the Athens market added 2.5% to 631.21

On Wall Street, the Dow Jones Industrial Average is currently up 0.12% at 18980, having earlier surged past 19,000 to 19014.

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Here’s an interesting chart showing the moves in various commodities following Donald Trump’s US election victory:

Despite the better than expected eurozone consumer confidence figures, there is a chance the mood may not last, says economist Bert Colijn at ING Bank:

Eurozone consumers have good reason to cheer in November. The oil price fell sharply at the start of the month and Eurozone stock prices have gained on the Trump victory.

The unemployment rate has been flat over the summer months, but the employment outlook has been improving recently as companies are indicating to be hiring at a faster pace in both services and industry. This seems to have humoured the Eurozone consumer, who had been cautious through the summer months awaiting a negative Brexit response that has turned out to be mild so far.

The question is whether this momentum can continue to build in the coming months though. While some of the tailwind for the consumer is likely to be maintained, there are also factors that could bring the consumer down to earth. As inflation is likely to continue to increase in the coming months, real wages will probably take a hit before nominal wage growth edges up again.

And after a mild response to Brexit and the Trump election, will the Eurozone consumer respond more negatively to political uncertainty within the Eurozone? As a ‘no’ in the Italian referendum is ahead in the polls for the moment, it could well be that we will soon find out.

The improved eurozone consumer confidence figures bode well for future growth in the region, says Howard Archer, chief European and UK economist at IHG Markit:

An encouraging boost to Eurozone growth prospects as consumer confidence rose for a third month running in November - and markedly - to reach an 11-month high. Furthermore, consumer confidence is now at a very decent level compared to long-term norms. Consumers across the Eurozone hare currently benefiting from pretty decent fundamentals overall, notably including higher employment and still very low inflation.

This buoys hopes that the Eurozone is on course for improved GDP growth in the fourth quarter after expansion was limited to 0.3% quarter-on-quarter in both the third and second quarters. We currently expect fourth-quarter GDP growth of 0.4% quarter-on-quarter and believe that 0.5% expansion is a genuine possibility. However, we have significant concerns over the Eurozone growth outlook for 2017 amid an uncertain political outlook.

While there are no details available, it seems reasonable suspect that the marked rise in Eurozone consumer confidence in November was due to improved perceptions on the economic situation and outlook. It is also likely that job concerns eased across the Eurozone after recently worsening. This was certainly true of both the Netherlands and Belgium, which have released their November surveys. Significantly, latest data showed that Eurozone unemployment dropped at an increased rate in September after labour markets had shown signs of faltering.

Any improvement in Eurozone consumer confidence – particularly a marked increase – is to be welcomed as the consumer clearly is vital to Eurozone growth prospects.

Eurozone consumer confidence beats forecasts

Back with the eurozone, and consumer confidence rose by more than expected in November, despite the continuing uncertainties of Brexit.

The initial estimate for the eurozone rose by 1.9 points to -6.1 points, better than the forecast -7.8 points.

In the European Union as a while, confidence edged up by 0.7 points to -5.8. Dennis de Jong, managing director at UFX.com, said:

EU consumer confidence hasn’t been in positive territory for nearly two decades so today’s negative reading is no surprise, but [ECB president] Mario Draghi will be pleased to see the above expectations data is at least moving in the right direction.

Draghi deserves credit for maintaining a relatively stable eurozone economy at one of the most uncertain geopolitical times in memory.

With the cloud of Brexit hanging over the future direction of the eurozone, in addition to volatile elections and referendums on the horizon that could add further uncertainty, holding firm is likely just what the doctor ordered.

US consumer confidence
US consumer confidence Photograph: European Commission

Updated

Some upbeat US economic news, with new home sales rising to their highest level in more than nine and a half years in October.

The National Association of Realtors said sales rose 2% to an annual rate of 5.6m, with September’s figure revised up from 5.47m to 5.49m.

Analysts had expected a figure of 5.43m in October.

Meanwhile the Richmond Federal Reserve composite manufacturing index came in at +4 in November, compared to -4 in October.

Wall Street hits new highs as Dow reaches 19,000

The surge in US markets - based on the recent strength of the oil price and hopes that Donald Trumps infrastructure plans will boost the economy - is continuing.

The Dow Jones Industrial Average has breached 19,000 for the first time, touching 19007, before slipping back to 18,991, up 0.18%.

Both the Nasdaq Composite - up 0.37% - and the S&P 500 - 0.23% better - opened at new peaks.

Updated

Over in the eurozone, and some good news from Portugal:

Oil slips back on new Opec deal doubts

The oil price has been rising in recent days on growing expectation that Opec might agree to limit output at its meeting next week, following an outline plan drawn up in Algiers in September.

But as is always the case, it does not take much to dent the mood. Reuters is reporting that Iran, Iraq and Indonesia have doubts about the proposed output cut.

So Brent crude, previously as high as $49.96m a barrel today is now down 0.59% at $48.61. And West Texas Intermediate is now down 0.56% at $47.97.

A quick recap of the main points

1) Britain is on track to blow past its budget forecasts for this year, despite cutting its borrowing in October by 25%.

The UK has now borrowed £48.6bn since April 2016, down from £54.2bn a year ago, but already close to the £55bn target for this current financial year (to March 2017).

Economists believe it could overshoot the target by £10bn or more, underlining the weak state of the public finances.

The better news is that October’s deficit fell to £4.8bn, from £6.4bn a year ago, thanks to a rise in corporation tax receipts.

2) UK families are more pessimistic about the long-term impact of leaving the EU. A new survey showed that confidence fell across all ages and income groups in the last three months.

3) British factories have reported a pick-up in orders, after a summer slowdown. However, many are also planning to hike prices to cover the slump in the pound.

4) The pound’s decline since June has wiped out $1.5trn of UK wealth, according to Credit Suisse’s regular report:

Back in the City, the FTSE 100 is on track to close at its highest level since 10 November - the day after the US election.

There’s a general rally in the markets today, as investors react to last night’s record close on Wall Street.

Mining companies are still leading the charge, after Goldman Sachs announced that it is now bullish about commodity prices. That helped send the copper price up to a one-week high.

Chris Beauchamp of IG says traders are jumping on board the rally before New York’s stock market closes on Thursday for Thanksgiving:

The week before Thanksgiving is never a good time to be short, since those of a bearish disposition tend to suffer a fate akin to a roasted turkey. Goldman Sachs’ decision to turn into commodity bulls has bolstered the London mining community, aside from precious metals miners, with the investment bank remaining downbeat on the outlook for gold.

And the party could continue today, with the US markets expected to rise at the open (in about one hour’s time).

UK households grow more pessimistic on long-term Brexit impact

British households have become more gloomy about the long-term economic consequences of leaving the European Union.

Data firm Markit reports that 49.3% of people surveyed think Britain’s economic outlook over the next decade has worsened due to the Brexit vote, while 31% of survey respondents think prospects have improved.

That means Markit’s index of long-term pessimism index has dropped to -18.4%, compared to -11.1% in August and just -3.5% in July.

However, people are a little more optimistic about short-term economic prospects; 12.4% of people expect the economy to fare better over the next six months, up from 11.8% in August.

Markit also found that younger people are more pessimistic about the Brexit vote, while older people - who had initially been upbeat about the situation - are now less optimistic.

.

And those with the lowest incomes have also become more anxious, having originally been the most optimistic about the impact of Brexit:

.

Chris Williamson, chief business economist at IHS Markit, says people are concluding that Brexit will have a higher economic cost than they first thought:

“On average, people have become considerably more pessimistic about the impact of the decision to leave the EU on the economy over the next decade.

“Only those working in manufacturing have become more upbeat about the economy’s prospects, presumably seeing some benefit of the weaker pound in relation to boosting export performance. However, even here the number of people seeing Brexit to have boosted the economy’s prospects over the next ten years only narrowly exceeds those expecting to see a negative impact.

More details here.

Updated

UK factory order books improve, but price rises loom

We have another gobbet of goodish news ahead of tomorrow’s autumn statement.

British factory order books have improved to their best level since June’s EU referendum, according to the CBI’s monthly survey.

23% of manufacturers reported that their total order books are above normal, while 26% said they were below normal, giving a balance of -3%.

This was above average, and back to the levels seen through the summer. It suggests the sector is stable, despite the uncertainty around Brexit.

But the survey also shows that firms expect to hike prices in the next few months, following the slump in the pound’s value since the Brexit vote. Food and drink manufacturers are particularly affected.

Rain Newton-Smith, CBI Chief Economist, says:

“It’s good to see manufacturers’ overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas.

“But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food and drink sector. On the flip side though, export orders remain above average.

Bloomberg say today’s public finances are a “boost” to Philip Hammond ahead of tomorrow’s autumn statement.

But... it won’t spare the chancellor from announcing weaker growth and higher borrowing forecasts:

Updated

Here’s our news story about today’s public finances:

This chart highlights how Britain has made little progress in cutting the deficit this financial year:

Today’s figures show that the pace of deficit reduction is “frustratingly slow”, says Martin Beck, senior economic advisor to the EY ITEM Club.

He agrees that the UK government has fallen behind its deficit reduction plan, despite cutting borrowing by £1.6bn in October to £4.8bn.

Beck says:

“The stronger October outturn and some favourable revisions to prior months meant that borrowing was £5.6bn lower than a year earlier over the first seven months of fiscal year 2016-17. But this still leaves the Government behind schedule in terms of achieving the OBR’s full year forecast. If this trend continues over the remaining five months of the year then borrowing would overshoot by around £11bn.

In reality the situation is probably a little less bleak, as forestalling associated with the pre-announced increase in dividend tax should cause a sharp rise in self-assessment income tax receipts in the first couple of months of 2017. But even allowing for this, Public Sector Net Borrowing (PSNB) looks set to come in some way above the OBR’s full-year forecast of £55.5bn.

Resolution Group’s Duncan Weldon has crunched the tax receipt data, and found that growth has tailed off a little:

(Apologies, I initially posted the wrong tax receipt numbers in the 10.04am entry, so you might need to refresh)

Britain’s total national debt has risen by £50bn over the last 12 months, and now stands at a decidedly lofty £1,641.6 billion pounds.

But..... debt as a percentage of GDP has actually been falling for the last five months, as Britain’s economy has been growing slightly faster than the debt pile.

The means the national debt is 83.8% of national output, down from 84.3% in October 2015.

.

UK corporatation tax receipts jump

Coins and bank notes.

Britain’s public finances benefitted from a pick up in tax revenues last month, says the ONS.

Central government receipts in October 2016 were £59.1bn, up £3.8bn (or 6.8%), compared with October 2015, says the ONS.

October is traditionally a strong month for tax receipts, and last month saw a 9% spike in corporation tax receipts, which hit the highest level for any October since 2010, Bloomberg says.

But income tax receipts dipped a little.

Here’s the details of October’s tax receipts:

  • Corporation Tax increased by £1.7bn, or 23.6%, to £9.0bn
  • Interest & dividends receipts increased by £1.0bn, or 33.9%, to £3.9bn
  • Social (National Insurance) contributions increased by £0.6bn, or 6.4%, to £9.6bn
  • VAT receipts increased by £300m, or 2.8%, to £11.5bn
  • Income Tax-related payments decreased by £300m, or 2.4%, to £11.4bn

Updated

Economist Sam Tombs of Pantheon tweets that Britain is on track to borrow around £68bn this financial year -- much more than the £55bn which was predicted in March’s budget.

Surely Philip Hammond will admit tomorrow that this year’s deficit target will be missed?

Here’s some instant reaction to October’s public finances:

UK public finances better than expected (but still weak).

Here we go! Britain borrowed less than feared last month, but is still on track to breach this year’s deficit target.

Britain borrowed £4.796bn in October, the ONS says. That’s down from £6.4bn in October 2015.

That is rather better than the £6bn which the City expected [this excludes the impact of the taxpayers’ stakes in the banking sector].

It means that Britain has now borrowed £48.6bn since April 2016 - down from £54.2bn in April-October 2015.

So the deficit has dropped by £5.6bn so far this year, which means Britain is probably missing the government’s target of a £55bn deficit for this financial year.

This chart shows how much Britain has borrowed this year (the final orange line), and the final target for borrowing this financial year (the blue blob).

.

More to follow!

Updated

The weakness of the French economy continues to hurt Kingfisher.

The DIY chain has reported a 3.6% slide in like-for-like sales during the last quarter in France, where it runs the Castorama and Brico Dépôt chains.

That took the shine off a 5.8% jump in comparable sales in the UK, led by its Screwfix arm.

Kingfisher CEO Véronique Laury is trying to turn things around with a new efficiency plan. But the City isn’t impressed, sending Kingfisher’s shares down 2%.

George Salmon, Equity Analyst at Hargreaves Lansdown, fears that Laury will struggle:

Previous Kingfisher bosses have tried and failed with similar plans, and just now trading conditions look challenging.

UK builders merchants have reported tougher conditions, and the French economic outlook is uncertain.”

Champagne bottle.

Britain’s vote to leave the EU destroyed $1.5trillion of wealth and cut the number of dollar millionaires in the UK by 15%.

That’s according to Credit Suisse’s latest wealth report, which highlights the impact of the 16% tumble in the value of the pound since June

Michael O’Sullivan, chief investment officer in Credit Suisse’s wealth management arm, explains:

“The impact of the Brexit vote is widely thought of in terms of GDP but the impact on household wealth bears watching.

“Since the Brexit vote, UK household wealth has fallen by $1.5tn. Wealth per adult has already dropped by $33,000 to $289,000 since the end of June. In fact, in US dollar terms, 406,000 people in the UK are no longer millionaires.”

The report also found that the richest % of people across the globe still own more wealth than the rest of the world put together - prompting development charity Oxfam to push the government to help the poorest in society.

Here’s the full story:

Kit Juckes of French bank Societe Generale also expects that today’s public finances will show there’s been little progress in eliminating the deficit this year.

We look for a deficit excluding public sector banks of £6bn, a small fall from a year ago and a cumulative fall of just £2.3bn for the first seven months of the fiscal year compared to 2015/2016.

This pace of improvement in the trend in public finances is disappointing relative to the resilience of the economy this year and limits the scope for any fiscal largesse going forwards.

Stock markets rally in early trading

A trader points at ETX Capital in central London.

European stock markets have jumped at the start of trading, after the US market hit fresh record highs last night.

In London the FTSE 100 index has risen by 50 points to 6828, up 0.75%. Mining stocks are leading, with Anglo American gaining 4.9% and BHP Billiton up 3.8%.

Germany’s DAX and France’s CAC indices are both up around 0.6%, as investors catch up with a strong rally on Wall Street on Monday that drove all four indices to record levels.

The prospect of a new splurge of US government spending is pushing shares higher, says FXTM Chief Market Strategist Hussein Sayed.

There are clearly no signs of profit taking yet, with Donald Trump’s reflationary economic plans of cutting taxes, infrastructure spending and less regulations remain to be the number one reason fueling stocks’ gains.

So much for those analysts who predicted a market crash if Trump became president.

Even the news that Trump is now moonlighting as Nigel Farage’s career advisor hasn’t ended the rally.....

Updated

The agenda: UK public finances in focus

Will today’s public finances include good news for Britain’s Chancellor of the Exchequer Philip Hammond?
Will today’s public finances include good news for Britain’s Chancellor of the Exchequer Philip Hammond? Photograph: Toby Melville/Reuters

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

With Britain’s autumn statement due tomorrow, investors will be particularly interested in today’s main event -- the UK public finances for October.

Economists predict that Britain had to borrow around £6bn to balance the books last month, down from £6.4bn in October 2015.

Any reduction in the nation’s deficit is welcome, but this fall wouldn’t bring the public finances back into line, given disappointing figures earlier in the financial year.

Since April, Britain has already borrowed £45.5bn -- just £2.3bn less than a year earlier.

That means there’s very little chance of hitting the old target of £55bn for the 2016-17 financial year, as this chart shows:

UK public finances
Orange bar = borrowing this year. Blue blob = the 2016-7 target Photograph: ONS

September’s public finances were a particular shocker, as Howard Archer of IHS Global Insight reminds us:

The public finances worsened appreciably in September compared to a year earlier.

Specifically, Public Sector Net Borrowing excluding banks (PSNBex) amounted to £10.6 billion in September, which was up from a shortfall of £9.3 billion in September 2015.

While the economy has shown overall resilience following June’s Brexit vote, tax receipts have taken some hit. Indeed, corporation tax fell year-on-year in September.

Chancellor Philip Hammond is already expected to tell MPs tomorrow that UK growth forecasts have been revised down, meaning Britain will borrow tens of billions of pounds more than expected over the next few years.

Fiona Cincotta of City Index believes this bad news could easily drive up Britain’s borrowing costs in the financial markets.

In order to shore up the economy the government is expected to increase its borrowing, with upward revisions to net borrowing figures ranging from £8 billion to an extra £18 billion for 2017-18, taking the total to somewhere in the region of £63.5 billion - £73.5 billion. Should this amount be added to gilt issuance it would represent a significant increase which we would then expect to increase the UK’s rate at which it borrows.

Therefore, any significantly large increase in future borrowing tomorrow from Hammond in his Autumn Statement, is likely to send the yields higher.

[yields rise when prices fall, and show the effective interest rate on a bond]

Also coming up....

The economics calendar is a little sparse, but we do get a new measure of eurozone consumer confidence and US home sales (both at 3pm GMT)

Economists will be digesting the news that Donald Trump will pull America out of the Trans-Pacific Partnership on his first day as president.

That won’t calm fears that we’re heading into choppy waters of trade wars and protectionism.

And in the City, food group Compass, retail chain Kingfisher, online electrical retailer AO World, pub chain Mitchells & Butler and bank note maker De La Rue are all reporting results.

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
The New Fleetwood Mac Documentary Sounds Like It Could Be Great, But One Thing Disappoints Me
I fear there will be little love for Peter Green.
Cinemablend
Cinemablend
“April Fools, Right?”: Fans Tore Apart Amy Schumer After She Posted Polemical New Selfie
“Thirsty? My eyes are thirsty for bleach after seeing that. Yikes,” wrote one user.
Bored Panda
Bored Panda
Tiger Woods Accused Of Paying Female 'Supplier' Extra For Alleged Hook-Ups
A viral TikTok video has sparked speculation involving Tiger Woods, highlighting the challenges of unverified celebrity gossip in the digital age.
International Business Times UK
International Business Times UK
Anya Taylor-Joy Would Like To Clear Up Those Rumors (She Started) About Puking While Recording Princess Peach
Here's what really happened.
Cinemablend
Cinemablend
IShowSpeed quits YouTube, fans left speechless by the real reason
Internet sensation IShowSpeed sparked concern with a YouTube exit announcement. Fans feared losing their favorite streamer. However, the news was a playful April Fools' Day prank. IShowSpeed confirmed he is not leaving the platform. Viewers expressed relief and anticipation for more content. The incident highlighted the fun of online humor.
The Times of India
The Times of India
Disney Park Guests Watch In Horror As Rapunzel Attacked By Crows Days After Viral Olaf Malfunction
Another day, another Disney disaster.
Bored Panda
Bored Panda
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play