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US economic growth slows sharply in fourth quarter – live US economic growth slows sharply in fourth quarter – live
(35 minutes later)
2.12pm GMT
14:12
Paul Ashworth, chief US economist at Capital Economics, is also sceptical that we could another Fed rate hike any time soon.
Although net external demand will remain a drag, inventories should be broadly neutral for growth in the first half of this year, while the drag on investment from the mining sector implosion should also fade. Assuming that consumption growth accelerates, as the fundamentals suggest, then GDP growth should rebound to between 2.5% and 3.0% in the first half of this year. Whether we will see evidence of a rebound soon enough to persuade the Fed to raise rates again in March, however, is debatable.”
2.07pm GMT
14:07
At least some of the weakness looks temporary, but there are also signs that the underlying pace of expansion is on the wane, said Chris Williamson, chief economist at economic pollsters Markit.
He said the slowdown adds more pressure on the Fed to consider the timing of future interest rate hikes.
Rising inventories meanwhile took almost half a percentage point off the pace of growth, and the mild weather also led to reduced demand for energy for heating, adding further to evidence that the slowdown may prove temporary and suggesting GDP could rebound in the first quarter.
“However, the recent increase in financial market uncertainty, and expectations of an upward trend in interest rates in 2016, may mean consumers and businesses will continue to show reluctance to spend. There are already signs that we should expect a further disappointment in the first quarter GDP number.
Markit’s flash PMIs pointed to a further slackening-off in the rate of economic growth at the start of the year. The official first quarter GDP data have also typically been weak in recent years, appearing to retain some seasonality, a pattern which may well be repeated in 2016.
The slowdown... suggests that policymakers may pare back their current expectations of a further four quarter-point hikes in 2016.”
Updated
at 2.09pm GMT
2.03pm GMT
14:03
The stock markets have taken the data in their stride. London’s leading share index is still hovering around the 6000 mark, up 1.1% while the Dax in Frankfurt is up 0.4% and the CAC in Frankfurt is 0.65% ahead.
The dollar is also holding up remarkably well, and is even extending gains against the yen, now up 2%, following the Bank of Japan’s move to negative interest rates. The euro has hit a session low against the dollar, falling below $1.09.
1.59pm GMT
13:59
You can download the US GDP release here. It’s worth noting that this is the flash estimate based on incomplete data, and could be revised in coming months.
Full release of US Q4 GDP from @BEA_News with full text and all tables. https://t.co/zpimcmZAju #GDP #USGDP #EconomicStatistics
1.57pm GMT
13:57
The US economy clearly lost momentum into the end of 2015, said ING economist Rob Carnell.
We are struggling to see how this story is reversed in the coming quarters, and will likely be trimming our growth, inflation and Fed rate forecasts accordingly.”
Here’s his analysis:
1) The trend in US growth has clearly slowed. Even allowing for the fact that this data is choppy, and considering the last two quarters as a moving average, growth is now barely 1.5%, and is probably consistent with a widening, not a closing output gap. If this feeds through into softer hiring trends, then we can forget further rate hikes from the Fed anytime soon.2) The slowdown in growth is mainly based on a slowdown in domestic demand. Consumer spending growth has slowed from 3.0%+ in early 2015 to only 2.0% now. Whilst many pundits have been asking where the low oil price effect has been on US consumers, the reality is that they have indeed been spending it. Now the windfall has passed, and spending is returning to its pre-oil trends.3) Investment is another key element of domestic demand that has declined, with business investment of -2.5%QoQ in 4Q15 a worrying new development – though admittedly following very strong 3Q15 growth. Structures investment is likely to remain soft until oil prices stage a rebound.4) The fall in inventories took 0.45pp from the overall growth total. This could have been a lot worse, but that may mean we will have a further inventory drawdown in coming quarters, weighing on overall growth.5) The drag from net exports was also about 0.5%, dominated by weaker exports – this is a combination of soft overseas demand and stronger USD. As such, the US export sector still looks vulnerable to currency appreciation, and is another reason for the Fed to tread very carefully with respect to rate decisions.
1.51pm GMT
13:51
The US economy expanded 2.4% in 2015, the same as in 2014, according to the figures from the Commerce Department.https://twitter.com/darioperkins/status/693065392328175616
.@kampconsulting Still think that the US Fed will raise rates anytime soon? US GDP growth of 0.7% in Q4'15 is outrageously weak.
US GDP: Drag from inventories (-0.5%pts) and net trade (-0.5%pts) rest a little soft but not disastrous. Capex likely hurt by mining sector
1.47pm GMT
13:47
However, lower oil prices have fed through to gasoline prices, around $2 per gallon, and this combined with rising wages should help underpin consumer spending in coming months. Economists believe the slowdown in consumer spending will be short-lived.
1.44pm GMT
13:44
Here’s more detail. The slump in oil prices has undermined investment by energy companies and demand for heating, and unusually mild weather meant shoppers didn’t splash out on winter clothes. Consumer spending rose 2.2%, down from 3% in the third quarter.
Updated
at 1.45pm GMT
1.31pm GMT1.31pm GMT
13:3113:31
US economic growth slows to 0.7%US economic growth slows to 0.7%
Breaking news: The American economy grew at an annual pace of 0.7% in the fourth quarter, down from 2% in the third quarter and in line with expectations. Breaking news: The American economy stepped sharply on the brakes at the end of last year. GDP rose at an annual rate of 0.7% in the fourth quarter, down from 2% in the third quarter and 3.9% in the second quarter – but in line with expectations.
Updated
at 1.55pm GMT
12.35pm GMT12.35pm GMT
12:3512:35
More reaction to today’s main news, the Bank of Japan’s surprise move to negative interest rates. Fung Siu, analyst for Japan at The Economist Intelligence Unit, said:More reaction to today’s main news, the Bank of Japan’s surprise move to negative interest rates. Fung Siu, analyst for Japan at The Economist Intelligence Unit, said:
The move to adopt a negative interest rate policy is symbolic and it has had the desired effect of prompting a sell-off in the yen, which has weakened to Yen121 compared with 118 the day before the move. A weaker yen will mean higher import price inflation, which in turn will help to push up overall consumer prices.The move to adopt a negative interest rate policy is symbolic and it has had the desired effect of prompting a sell-off in the yen, which has weakened to Yen121 compared with 118 the day before the move. A weaker yen will mean higher import price inflation, which in turn will help to push up overall consumer prices.
Despite the latest move, the Economist Intelligence Unit still thinks that the Bank of Japan will struggle to meet its 2% inflation target and that the pursuit of expanding the monetary base by Yen 80 trln a year through its quantitative easing programme will remain in place this year and possibly the next.”Despite the latest move, the Economist Intelligence Unit still thinks that the Bank of Japan will struggle to meet its 2% inflation target and that the pursuit of expanding the monetary base by Yen 80 trln a year through its quantitative easing programme will remain in place this year and possibly the next.”
12.27pm GMT12.27pm GMT
12:2712:27
The rally in crude oil? Shale will cap it, says Citi https://t.co/FtirasfRUR pic.twitter.com/KqPEzNRueGThe rally in crude oil? Shale will cap it, says Citi https://t.co/FtirasfRUR pic.twitter.com/KqPEzNRueG
12.24pm GMT12.24pm GMT
12:2412:24
Midday market summaryMidday market summary
Let’s have a quick look at the markets. Global stock markets bounced back today after the Bank of Japan surprised traders (in a pleasant way) with a move to negative interest rates.Let’s have a quick look at the markets. Global stock markets bounced back today after the Bank of Japan surprised traders (in a pleasant way) with a move to negative interest rates.
The FTSE 100 index in London is holding on to its gains, trading 1.2% higher at 6005.05, a gain of more than 70 points.The FTSE 100 index in London is holding on to its gains, trading 1.2% higher at 6005.05, a gain of more than 70 points.
The Dax in Frankfurt and the Cac in Paris have given up some of their earlier gains, however, and are now 0.5% and 0.8% ahead respectively (they were up more than 1% earlier). Economic data out this morning was mostly negative: growth in the French economy, the eurozone’s second-largest, slowed to 0.2% in the fourth quarter while Spain powered ahead with another 0.8% rise, and German retail sales were weak in December.The Dax in Frankfurt and the Cac in Paris have given up some of their earlier gains, however, and are now 0.5% and 0.8% ahead respectively (they were up more than 1% earlier). Economic data out this morning was mostly negative: growth in the French economy, the eurozone’s second-largest, slowed to 0.2% in the fourth quarter while Spain powered ahead with another 0.8% rise, and German retail sales were weak in December.
Just over an hour to go until the flash estimate for US fourth-quarter GDP is released.Just over an hour to go until the flash estimate for US fourth-quarter GDP is released.
Oil prices continue their recovery, with Brent crude up 0.65% at $34.11 a barrel.Oil prices continue their recovery, with Brent crude up 0.65% at $34.11 a barrel.
12.15pm GMT12.15pm GMT
12:1512:15
HSBC suspends online banking after cyber attackHSBC suspends online banking after cyber attack
HSBC has suspended its personal banking websites in the UK after a cyber attack. This is its second major outage this month.HSBC has suspended its personal banking websites in the UK after a cyber attack. This is its second major outage this month.
The bank, Europe’s largest lender, said in a statement that it had successfully defended its systems against the attack.The bank, Europe’s largest lender, said in a statement that it had successfully defended its systems against the attack.
HSBC internet banking came under a denial of service attack this morning, which affected personal banking websites in the UK.HSBC internet banking came under a denial of service attack this morning, which affected personal banking websites in the UK.
HSBC has successfully defended against the attack, and customer transactions were not affected.HSBC has successfully defended against the attack, and customer transactions were not affected.
We are working hard to restore services, and normal service is now being resumed.We are working hard to restore services, and normal service is now being resumed.
We apologise for any inconvenience this incident may have caused.”We apologise for any inconvenience this incident may have caused.”
A denial of service attack overwhelms a website with traffic, taking it offline, and is sometimes used as a smokescreen for other attacks.A denial of service attack overwhelms a website with traffic, taking it offline, and is sometimes used as a smokescreen for other attacks.
HSBC UK internet banking was attacked this morning. We successfully defended our systems. 1/2HSBC UK internet banking was attacked this morning. We successfully defended our systems. 1/2
We are working hard to restore services, and normal service is now being resumed. We apologise for any inconvenience. 2/2We are working hard to restore services, and normal service is now being resumed. We apologise for any inconvenience. 2/2
12.00pm GMT12.00pm GMT
12:0012:00
Eurozone inflation picks up but won't stop ECB easingEurozone inflation picks up but won't stop ECB easing
Inflation in the eurozone picked up this month, figures showed this morning – but this won’t stop the European Central Bank announcing more economic stimulus at its March meeting, economists said.Inflation in the eurozone picked up this month, figures showed this morning – but this won’t stop the European Central Bank announcing more economic stimulus at its March meeting, economists said.
Headline inflation rose to 0.4% from 0.2% while core inflation, which strips out volatile food and energy prices, rose to 1% from 0.9%, reversing a fall in December.Headline inflation rose to 0.4% from 0.2% while core inflation, which strips out volatile food and energy prices, rose to 1% from 0.9%, reversing a fall in December.
Nordea economist Jan von Gerich said:Nordea economist Jan von Gerich said:
Don’t be fooled by today’s rise in euro area inflation, it was affected by base effects that will likely be more than reversed in February.Don’t be fooled by today’s rise in euro area inflation, it was affected by base effects that will likely be more than reversed in February.
The recent bounce in oil prices is of limited consolation for the ECB, as inflation expectations have not seen a similar rise. More monetary stimulus will be in store in March.”The recent bounce in oil prices is of limited consolation for the ECB, as inflation expectations have not seen a similar rise. More monetary stimulus will be in store in March.”
Bundesbank president Jens Weimann warned on Thursday that inflation could turn negative in the months ahead. Inflation has hovered near zero for more than a year, well short of the ECB’s 2% target.Bundesbank president Jens Weimann warned on Thursday that inflation could turn negative in the months ahead. Inflation has hovered near zero for more than a year, well short of the ECB’s 2% target.
ECB chief Mario Draghi has dropped heavy hints that the central bank will unveil further stimulus measures in March. It has been buying €60b of assets a month and kept interest rates low.ECB chief Mario Draghi has dropped heavy hints that the central bank will unveil further stimulus measures in March. It has been buying €60b of assets a month and kept interest rates low.
The ECB next meets on 10 March and analysts expect it to cut its deposit rate to -0.4% from -0.3%, but they are divided over whether they expect the central bank to boost its monthly asset purchase programme.The ECB next meets on 10 March and analysts expect it to cut its deposit rate to -0.4% from -0.3%, but they are divided over whether they expect the central bank to boost its monthly asset purchase programme.
UpdatedUpdated
at 12.01pm GMTat 12.01pm GMT
11.44am GMT11.44am GMT
11:4411:44
Russia's central bank keeps interest rates unchangedRussia's central bank keeps interest rates unchanged
Russia’s central bank has left its key interest rate unchanged for a fourth month, as expected. The key rate stayed at 11%.Russia’s central bank has left its key interest rate unchanged for a fourth month, as expected. The key rate stayed at 11%.
The key rate decision has been made in recognition of the current economic situation, with elevated risks of continued recession provoked by falling oil prices.The key rate decision has been made in recognition of the current economic situation, with elevated risks of continued recession provoked by falling oil prices.
The high debt load of Russian companies and interest rate risks for banks and their borrowers have also been factored in.”The high debt load of Russian companies and interest rate risks for banks and their borrowers have also been factored in.”
The central bank highlighted increased risks of a pick-up in inflation, and did not rule out a rate hike. It expects annual inflation to fall from 12.9% now to below 7% next January, and reach its 4% target by late 2017. However, the risks have grown that inflation may deviate from the target in late 2017, the bank said, pointing to the weaker rouble, which hit record lows against the dollar last week.The central bank highlighted increased risks of a pick-up in inflation, and did not rule out a rate hike. It expects annual inflation to fall from 12.9% now to below 7% next January, and reach its 4% target by late 2017. However, the risks have grown that inflation may deviate from the target in late 2017, the bank said, pointing to the weaker rouble, which hit record lows against the dollar last week.
Should inflation risks amplify, the Bank of Russia cannot rule out a tightening of its monetary policy.”Should inflation risks amplify, the Bank of Russia cannot rule out a tightening of its monetary policy.”
The bank is now expecting “a more sizeable GDP contraction in 2016” than before. Russia is mired in recession, hit by the collapse in global oil prices and western sanctions over the Ukraine crisis. The central bank said:The bank is now expecting “a more sizeable GDP contraction in 2016” than before. Russia is mired in recession, hit by the collapse in global oil prices and western sanctions over the Ukraine crisis. The central bank said:
The additional adjustment may take several quarters. The GDP growth rate will enter positive territory in 2017, but will be low.”The additional adjustment may take several quarters. The GDP growth rate will enter positive territory in 2017, but will be low.”
11.33am GMT11.33am GMT
11:3311:33
Takeover talks between Sainsbury's and Argos owner stall – FTTakeover talks between Sainsbury's and Argos owner stall – FT
Meanwhile, takeover talks between Sainbury’s and Argos owner Home Retail Group have stalled over price, the Financial Times is reporting.Meanwhile, takeover talks between Sainbury’s and Argos owner Home Retail Group have stalled over price, the Financial Times is reporting.
The news sent shares in Home Retail down nearly 10% to 128.3p, making it the biggest faller on the FTSE 250 index. Sainsbury’s is (unsurprisingly) up, by 3.4% to 244.8p, making it the second-biggest gainer on the FTSE 100.The news sent shares in Home Retail down nearly 10% to 128.3p, making it the biggest faller on the FTSE 250 index. Sainsbury’s is (unsurprisingly) up, by 3.4% to 244.8p, making it the second-biggest gainer on the FTSE 100.
Here’s the FT story (£):Here’s the FT story (£):
Takeover talks between supermarket group J Sainsbury and Home Retail Group, owner of the Argos catalogue business, have stalled over a disagreement on price, according to people close to the matter.Takeover talks between supermarket group J Sainsbury and Home Retail Group, owner of the Argos catalogue business, have stalled over a disagreement on price, according to people close to the matter.
Both companies remain entrenched in their positions, the people said on Friday, with a wide gap between their valuation of shares in Home Retail — just days before the deadline for Sainsbury’s to table a formal offer, write Arash Massoudi and Mark Vandevelde.Both companies remain entrenched in their positions, the people said on Friday, with a wide gap between their valuation of shares in Home Retail — just days before the deadline for Sainsbury’s to table a formal offer, write Arash Massoudi and Mark Vandevelde.
One of the people added that the two sides are still in contact and that there may yet be a breakthrough before the 5pm cut-off point on Tuesday.One of the people added that the two sides are still in contact and that there may yet be a breakthrough before the 5pm cut-off point on Tuesday.
However, Sainsbury’s has indicated that it is unwilling to pay more than around 150p a share for Home Retail, which would value the retailer’s equity at £1.22bn.However, Sainsbury’s has indicated that it is unwilling to pay more than around 150p a share for Home Retail, which would value the retailer’s equity at £1.22bn.
Meanwhile, Home Retail is holding out for an offer of around 170p a share, one of the people said.Meanwhile, Home Retail is holding out for an offer of around 170p a share, one of the people said.
11.17am GMT11.17am GMT
11:1711:17
Tesco drops 24-hour trading at 76 storesTesco drops 24-hour trading at 76 stores
Tesco will scale back opening hours at some of its 24-hour stores – turning them into 18-hour stores.Tesco will scale back opening hours at some of its 24-hour stores – turning them into 18-hour stores.
It said 76 out of its 400 24-hour shops will now close at midnight and reopen at 6am. The move forms part of efforts by chief executive Dave Lewis to turn the supermarket around.It said 76 out of its 400 24-hour shops will now close at midnight and reopen at 6am. The move forms part of efforts by chief executive Dave Lewis to turn the supermarket around.
Tony Hoggett, Tesco’s retail director, said in a statement, according to Reuters:Tony Hoggett, Tesco’s retail director, said in a statement, according to Reuters:
With the growth of online grocery shopping, these stores saw very few customers during the night. We’ll continue ot make changes in store in way that will make shopping at Tesco a better experience for our customers, at the times they want to shop.”With the growth of online grocery shopping, these stores saw very few customers during the night. We’ll continue ot make changes in store in way that will make shopping at Tesco a better experience for our customers, at the times they want to shop.”
Tesco, Britain’s biggest retailer, did better than expected over Christmas, posting like-for-like sales growth of 1.3%, in a sign that Lewis’ efforts are starting to pay off. The company reduced prices, improved its ranges and stepped up its customer service.Tesco, Britain’s biggest retailer, did better than expected over Christmas, posting like-for-like sales growth of 1.3%, in a sign that Lewis’ efforts are starting to pay off. The company reduced prices, improved its ranges and stepped up its customer service.
UpdatedUpdated
at 11.23am GMTat 11.23am GMT
10.21am GMT10.21am GMT
10:2110:21
US stock markets are set to join in the global euphoria and open higher, with the Dow Jones expected to rise some 150 points to 16,220 at the bell.US stock markets are set to join in the global euphoria and open higher, with the Dow Jones expected to rise some 150 points to 16,220 at the bell.
10.20am GMT10.20am GMT
10:2010:20
Laith Khalaf, senior analyst at Hargreaves Lansdown, said:Laith Khalaf, senior analyst at Hargreaves Lansdown, said:
The Bank of Japan’s move shows how twitchy policy makers are getting about faltering global growth and the potential for deflationary pressures to get out of control.The Bank of Japan’s move shows how twitchy policy makers are getting about faltering global growth and the potential for deflationary pressures to get out of control.
The UK is not immune to this malaise, and indeed interest rate markets over here are now pricing in a higher probability of a cut in rates this year, than a rise.The UK is not immune to this malaise, and indeed interest rate markets over here are now pricing in a higher probability of a cut in rates this year, than a rise.
However there’s nothing like a bit of loose monetary policy to get stock markets excited, and true to form, global indices have reacted positively to the news from Japan.However there’s nothing like a bit of loose monetary policy to get stock markets excited, and true to form, global indices have reacted positively to the news from Japan.
Taking a step back it seems that if throwing 80 trillion yen at the problem each year has proved insufficient, the Bank of Japan may soon find itself unscrewing the kitchen sink.”Taking a step back it seems that if throwing 80 trillion yen at the problem each year has proved insufficient, the Bank of Japan may soon find itself unscrewing the kitchen sink.”
10.12am GMT10.12am GMT
10:1210:12
'FTSE says hello to 6000 again''FTSE says hello to 6000 again'
The Bank of Japan’s surprise move is just what stock markets needed after the recent turmoil. London’s leading share index has pushed 70 points higher, to 6002.34, a 1.2% gain. Germany’s Dax is 1.2% ahead and France’s CAC has risen 1.4%.The Bank of Japan’s surprise move is just what stock markets needed after the recent turmoil. London’s leading share index has pushed 70 points higher, to 6002.34, a 1.2% gain. Germany’s Dax is 1.2% ahead and France’s CAC has risen 1.4%.
“FTSE says hello to 6000 again” – but seems unable to push much higher, noted Chris Beauchamp, senior market analyst at at online trading firm IG.“FTSE says hello to 6000 again” – but seems unable to push much higher, noted Chris Beauchamp, senior market analyst at at online trading firm IG.
The Bank of Japan completed the trio of central bank meetings that over the past week or so have kept investors enthralled. The statements from the ECB, the Fed and the BoJ have not been quite like the great actions of old, when the merest utterance could send markets flying higher, but they have been enough to enable stock markets to add to gains as the recovery off the January lows goes on.The Bank of Japan completed the trio of central bank meetings that over the past week or so have kept investors enthralled. The statements from the ECB, the Fed and the BoJ have not been quite like the great actions of old, when the merest utterance could send markets flying higher, but they have been enough to enable stock markets to add to gains as the recovery off the January lows goes on.
Miners have been some of the chief beneficiaries of the rally over the past week, but if the sector begins to sag it will point to tough times ahead for the broader index.”Miners have been some of the chief beneficiaries of the rally over the past week, but if the sector begins to sag it will point to tough times ahead for the broader index.”
UpdatedUpdated
at 10.13am GMTat 10.13am GMT
10.06am GMT10.06am GMT
10:0610:06
Let’s return to the Bank of Japan for a minute.Let’s return to the Bank of Japan for a minute.
Sean Yokota, head of Asia strategy at SEB, the Nordic corporate bank, explained the BOJ’s move to negative interest rates, which he thinks will push the yen down towards 126 against the dollar.Sean Yokota, head of Asia strategy at SEB, the Nordic corporate bank, explained the BOJ’s move to negative interest rates, which he thinks will push the yen down towards 126 against the dollar.
The BoJ is adopting a multiple-tier system where the interest rate on financial institution’s current account are not all set at -0.1%. It will be divided into positive interest rate (for basic balance of reserves), zero interest rate and negative interest rate for ‘excess reserves’. On a weighted basis, the current account will likely have a rate closer to 0% instead of -0.1%. The BoJ moved to the tiered system because it is worried that negative rates on all of banks’ current account will eat into their earnings and tighten lending standards.The BoJ is adopting a multiple-tier system where the interest rate on financial institution’s current account are not all set at -0.1%. It will be divided into positive interest rate (for basic balance of reserves), zero interest rate and negative interest rate for ‘excess reserves’. On a weighted basis, the current account will likely have a rate closer to 0% instead of -0.1%. The BoJ moved to the tiered system because it is worried that negative rates on all of banks’ current account will eat into their earnings and tighten lending standards.
Yokota said annual spring wage negotiations will be key to the inflation outlook. Compared to 2.4% increase in 2015, 2016 is expected to be lower at 2.0%. However, dipping below 2.0%, lower than BoJ inflation target of 2%, would be a negative development and hurt inflation expectations, he said.Yokota said annual spring wage negotiations will be key to the inflation outlook. Compared to 2.4% increase in 2015, 2016 is expected to be lower at 2.0%. However, dipping below 2.0%, lower than BoJ inflation target of 2%, would be a negative development and hurt inflation expectations, he said.
Second, Prime Minister Shinzo Abe may delay the VAT hike from 8% to 10% scheduled for April 2017, which will be positive for the equity market and negative for the yen. Abe reiterated this week that he still plans to increase the VAT as scheduled. His party has also recently excluded certain food items from the tax hike to reduce the impact on the economy.”Second, Prime Minister Shinzo Abe may delay the VAT hike from 8% to 10% scheduled for April 2017, which will be positive for the equity market and negative for the yen. Abe reiterated this week that he still plans to increase the VAT as scheduled. His party has also recently excluded certain food items from the tax hike to reduce the impact on the economy.”
9.47am GMT
09:47
Economists at Société Générale also think the US GDP numbers will be weak.
In stark contrast to an impressive acceleration in job creation, real business activity likely slowed to a near crawl during the fall quarter. We expect Q4 GDP growth of 0.5% seasonally adjusted annualised rate (from 2% in Q3), in part due to a considerable deceleration in real consumer spending which we forecast to also have slowed to 1.5% quarter-on-quarter from 3% in Q3.
9.43am GMT
09:43
At lunchtime (13:30 GMT), we are getting US GDP numbers for the fourth quarter – the first estimate.
Weak, but how weak? And will it even remain positive? asks ING economist Rob Carnell.
Preliminary GDP estimates are difficult to forecast accurately, and are also prone to massive revisions subsequently. But there is a growing body of evidence pointing to this latest GDP outcome being even weaker than the fairly soft 2.0% (annualised) reading delivered for 3Q15. A negative figure, though unlikely, cannot be ruled out.
Business investment looks very weak after the latest negative durable goods orders and shipments for December, and could even be negative, he said. A further drag looks likely from inventories.
This leaves only residential construction spending, which remains strong, though is probably beginning to wane, and consumer spending, which has definitely slowed to about a 2.0% pace from 3.0% in 3Q15.
If you put all this together, you get a GDP figure of about 0.9%, the same as the consensus prior to the durable goods release. But the real consensus is likely lower now, and the risk is that the inventory figure is closer to zero than +US$50bn, and if so, then GDP will be closer to zero too – a negative number cannot be ruled out.
Even the consensus figure is going to make it an uphill struggle for the Fed to hike rates any time soon. And with markets pricing in only one rate hike from the Fed in 2016, it is our forecast of two hikes, not the market expectations, that seems in need of revision.”
Updated
at 9.48am GMT
9.33am GMT
09:33
Pantheon Macroeconomics said German retail sales were disappointing.
Assuming no major revisions next month, retail sales fell 0.1% quarter-on-quarter in Q4, down from a 0.9% surge in Q3. These data then confirm our suspicion that consumers’ spending slowed towards the end of last year, but overall 2015 was a spectacular year for the German consumer, with record growth rates. Fundamentals look solid for strong growth in 2016 too, but momentum likely will slow in the short run.”
9.24am GMT
09:24
In other economic news this morning, German retail sales unexpectedly dropped 0.2% on the month in December. Sales rose 1.5% year-on-year in December, down from a 2.4% rate in November and the lowest pace of growth for seven months.
A weak end to a strong year – retail sales rose 2.7% in 2015, the highest annual increase since 1994.
Dec 0.2% m/m dip in #German #retail sales dilutes hopes that #consumer spending was a major contributor to GDP growth in Q4 2015 (1)
(2) But #German #retail #sales data are not most reliable measure of #consumer spending & fundamentals look largely decent for 2016
9.19am GMT
09:19
Russia has poured cold water on the idea of a deal between oil-producing nations...
No confirmed meeting with OPEC, Non-OPEC nations - Russia's Novak - Now Oil should crash + expensive US dollar will help to erase gains.
Brent crude is still up 1.8% at $34.51 a barrel though.
9.01am GMT
09:01
Are we heading for a crash? Economists can’t agree if gyrating financial markets mean we face a global meltdown. We asked leading analysts to debate the question … you can read the piece here.
8.54am GMT
08:54
Julien Manceaux, economist at Capital Economics, has looked at the French GDP numbers in more detail. The eurozone’s second-largest economy grew just 0.2% in the fourth quarter as consumer spending declined, partly due to the terrorist attacks in Paris but also the warm weather. The economy expanded just 1.1% in 2015 as a whole.
If these figures are confirmed next month, it would mean that last year’s hopes to see 2015 showing a stronger recovery of 1.5% will never materialise. Worse, this is now all we can hope for in 2016. Indeed, 2015 had all the reasons to be better: some structural reforms, tax cuts for households and companies, a weaker euro and low energy prices should have made of 2015 the year of the recovery. But confidence never returned enough to ensure that, leaving business investments and job creations too low.
Looking ahead, we expect the labour market to gradually stabilise and reinforce confidence in coming months, mostly because of new measures announced to the government. This means that the recovery is likely to continue to unfold in coming months, albeit at a slower pace than expected. If better labour market figures do not materialise soon, the risk is to see domestic demand faltering when temporary factors like low energy prices will see their effects abate.
The IMF recently forecast a tiny recovery for France in 2016 (1.3%). It may look pessimistic now, but if 2016 unfolds as 2015, it may become reality. However, there are still reasons to hope for a more dynamic recovery: if private consumption rebounds once more thanks to a more stable job market and that investments increase faster (because of the end of the downward housing cycle and important tax rebates for SME investments), we still believe that GDP growth could reach 1.6% in 2016. However, the risks already look oriented to the downside.”
8.45am GMT
08:45
Here’s a handy explainer on how negative interest rates work, following the Bank of Japan’s surprise move overnight. In 2014 the European Central Bank imposed negative interest rates of -0.1% on eurozone banks – to encourage them to lend to small firms rather than to hoard cash.
8.39am GMT
08:39
Connor Campbell, financial analyst at Spreadex, has looked at the markets:
After a shaky end to Thursday the markets have surged into life this Friday morning following the decision by the Bank of Japan to implement negative interest rates.
The move follows the latest failing of ‘Abenomics’ to significantly boost Japan’s inflation, and has helped (temporarily) ease some of the macro-tensions that have plagued the start to 2016. This has led to a rather robust rebound from the European markets; the FTSE, also aided by a steady $35 per barrel level for Brent Crude, jumped 80 points after the bell, leaving the UK index just about back above the 6000 mark.”
8.39am GMT
08:39
Oil is continuing its recovery, with Brent crude now up half a dollar, or 1.5%, at $34.40 a barrel. It is heading for its fourth day of gains, spurred by hopes of a deal among oil producers to rein in the supply glut.
Michael Hewson, chief market analyst at CMC Markets UK, said:
While the move higher has been helped in no small part by vague chatter of some form of output deal between Russia and Opec, without agreement from Iran which seems unlikely, there is about as much chance of that happening as Aston Villa winning the Premier League this year. The main reason oil prices appear to have found a base is a weaker US dollar, as well as some position covering heading into month end, which is helping support prices.”
Updated
at 8.58am GMT