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UK growth unexpectedly revised down to just 0.2% - business live UK growth unexpectedly revised down to just 0.2% as inflation bites - business live
(35 minutes later)
10.26am BST
10:26
Today’s growth report also shows that public sector workers are suffering the biggest impact from rising inflation (which hit 2.7% in April), as their wages are lagging behind the private sector.
The ONS says:
Compensation of employees, which includes wages and salaries and employers’ social contributions, showed positive growth of 0.6% seasonally adjusted in Quarter 1 2017.
Non-seasonally adjusted, growth was chiefly driven by strong positive growth in private sector wages and salaries, in turn driven by bonus payments typically made at Quarter 1 and a smaller fall in growth in private sector jobs than seen in previous Quarter 1s’. This was partially offset by a small fall in public sector wages and salaries.
10.19am BST
10:19
Here’s a handy chart showing how net trade (red) had a negative impact on growth in January-to-March:
Very poor #UK Q1 #GDP: net #exports dire despite £ fall, #consumption slows, #investment rise reflects valuables only #stocks prevent fall! pic.twitter.com/JaN9iiJSWw
10.06am BST
10:06
UK growth weakens: What the experts say
Britain’s economy is suffering from the squeeze on real wages, as inflation overtakes earnings, says Ms Lee Hopley, chief economist at EEF, the manufacturers’ organisation.
She explains:
“While the downward revision may have been unexpected, the reasons behind the weakness surely aren’t. Sluggish household spending growth, a consequence of the squeeze on real incomes starting to kick in, and some pull back on export growth after an impressive end to last year.
“We expect the consumer weakness to persist as wage growth falls further behind rising prices, but there should be some turnaround on the trade front, driven by a brighter outlook in the rest of the world. For those on the hunt for some good news in the data it was to be found in the investment numbers. Business investment picked up at the start of this year and some big revisions to investment at the end of last year mean the investment picture isn’t as dire as first thought. Still, we’ll need to see this rebound continue and strengthen if for longer-term productivity prospects to improve.”
Ian Stewart, chief economist at Deloitte, also blames the rising cost of living:
“Just as expected higher inflation is squeezing incomes and spending.
High inflation is hitting consumers, but a weak pound and a recovering global economy are helping businesses. UK growth is likely to tilt away from the consumer towards exports, manufacturing and investment this year. This should keep the UK economy growing at a similar rate to last year.”
Only one City economist expected Britain’s growth rate to be revised down to 0.2% today, says Reuters’ Ross Finlay.
#Brexit effect? UK Q1 GDP revised down to just 0.2% qoq. Only 1 of 42 economists in @ReutersPolls (median 0.3%) expected this. 1 said 0.4% pic.twitter.com/ys6179I0Cr
Suren Thiru, head of economics at the British Chamber of Commerce, is disappointed that Britain’s net trade was so weak last quarter, despite the weak pound:
Latest #ONS data confirms that trade was a major drag on UK GDP growth in Q1, little sterling impact here! pic.twitter.com/Enq48Urvy2
The FT’s Sarah O’Connor flags up that Britain’s productivity crisis is even worse than we thought (figures last week showed a fall of 0.5%, but today’s figures suggest an even darker picture).
This suggests productivity was even more dire in Q1 than we thought. We created a lot of jobs to produce that meagre 0.2% of extra GDP https://t.co/hOSQ0VoXdQ
But economist Rupert Seggins is encouraged that business investment rose (by 1.2%), despite the Brexit uncertainty.
UK economy still awaiting the uncertainty-driven investment apocalypse we were promised last year… pic.twitter.com/LgtbBlQTaA
Updated
at 10.16am BST
9.54am BST
09:54
UK economy stagnant on per-head basis
Britain’s economy didn’t grow at all in the last quarter, if you account for the increase in population.
Today’s new figures show that GDP on a per-capita basis was flat in Q1 2017, compared to the final three months of 2016.
So while the economy got a bit bigger, individuals didn’t actually feel the benefit.
9.51am BST9.51am BST
09:5109:51
The bad news is that net trade took a big bite out of Britain’s growth rate.The bad news is that net trade took a big bite out of Britain’s growth rate.
Net trade wiped 1.4 percentage points off the growth rate, dashing hopes that the weaker pound would be a massive boost to exporters.Net trade wiped 1.4 percentage points off the growth rate, dashing hopes that the weaker pound would be a massive boost to exporters.
The ONS says.The ONS says.
Within net trade, there has been a rise in total imports, which have contributed negatively to UK GDP, with a notable contribution from transport equipment, machinery and chemicals.Within net trade, there has been a rise in total imports, which have contributed negatively to UK GDP, with a notable contribution from transport equipment, machinery and chemicals.
And adjusting for inflation, household spending in the first quarter of 2017 rose by just 0.3%. That’s the smallest amount since the final three months of 2014 -- underlining how inflation is hurting.And adjusting for inflation, household spending in the first quarter of 2017 rose by just 0.3%. That’s the smallest amount since the final three months of 2014 -- underlining how inflation is hurting.
9.47am BST9.47am BST
09:4709:47
The good news is that businesses invested more in new plants and machinery at the start of this year.The good news is that businesses invested more in new plants and machinery at the start of this year.
Gross fixed capital formation (GFCF) increased by 1.2% compared with Quarter 4 2016, today’s GDP report shows.Gross fixed capital formation (GFCF) increased by 1.2% compared with Quarter 4 2016, today’s GDP report shows.
9.42am BST9.42am BST
09:4209:42
Why UK growth was revised downWhy UK growth was revised down
Today’s growth figures confirm that UK households were hit by the impact of higher inflation, due to the weak pound.Today’s growth figures confirm that UK households were hit by the impact of higher inflation, due to the weak pound.
The Office for National Statistics explains:The Office for National Statistics explains:
UK GDP growth slowed to 0.2% in Quarter 1 2017 as consumer facing industries such as retail and accommodation fell and household spending slowed. This was partly due to rising prices.UK GDP growth slowed to 0.2% in Quarter 1 2017 as consumer facing industries such as retail and accommodation fell and household spending slowed. This was partly due to rising prices.
Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly.Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly.
9.35am BST9.35am BST
09:3509:35
UK growth revised downUK growth revised down
NEWSFLASH: Britain’s economic growth in the first quarter of this year was even weake than we thought.NEWSFLASH: Britain’s economic growth in the first quarter of this year was even weake than we thought.
Growth has been revised down to just 0.2% for January to March, down from the first estimate of 0.3%.Growth has been revised down to just 0.2% for January to March, down from the first estimate of 0.3%.
That’s the weakest growth since the first three month of 2016, and shows that the economy is less robust then we thought.That’s the weakest growth since the first three month of 2016, and shows that the economy is less robust then we thought.
The ONS now believes that the UK service sector grew by just 0.2%, not the 0.3% first expected.The ONS now believes that the UK service sector grew by just 0.2%, not the 0.3% first expected.
Industrial output has been revised down too, from +0.3% to +0.1%.Industrial output has been revised down too, from +0.3% to +0.1%.
More details and reaction to follow!More details and reaction to follow!
9.30am BST9.30am BST
09:3009:30
As expected, Iraq is also backing a nine-month extension:As expected, Iraq is also backing a nine-month extension:
Iraqi minister says 9 month extension of cuts would be "best deal" which #OPEC will monitor pic.twitter.com/y13PO0xbIXIraqi minister says 9 month extension of cuts would be "best deal" which #OPEC will monitor pic.twitter.com/y13PO0xbIX
9.28am BST9.28am BST
09:2809:28
Saudi: 9-month deal is 'highly likely'Saudi: 9-month deal is 'highly likely'
Saudi Arabia’s oil minister says that a nine-month cuts extension is ‘highly likely’ to be agreed today.Saudi Arabia’s oil minister says that a nine-month cuts extension is ‘highly likely’ to be agreed today.
Khalid al-Falih adds that he doesn’t expect any deeper cuts, though. That implies that the current agreement to shave 1.8m barrels-per-day off global outlook would be extendedKhalid al-Falih adds that he doesn’t expect any deeper cuts, though. That implies that the current agreement to shave 1.8m barrels-per-day off global outlook would be extended
Saudi's Al-Falih: `Highly likely' we'll roll over same cuts for 9 months #OOTT #OPEC #OilSaudi's Al-Falih: `Highly likely' we'll roll over same cuts for 9 months #OOTT #OPEC #Oil
Saudi Energy Minister says #OPEC highly likely to roll over on same terms for nine monthsSaudi Energy Minister says #OPEC highly likely to roll over on same terms for nine months
Saudi min says shale will contribute to demand growth but won't do it on its own #OOTT #OPECSaudi min says shale will contribute to demand growth but won't do it on its own #OOTT #OPEC
UpdatedUpdated
at 9.29am BSTat 9.29am BST
9.24am BST9.24am BST
09:2409:24
Oil ministers speak as Opec meeting beginsOil ministers speak as Opec meeting begins
And we’re off! A flurry of comments are hitting the wires as Opec ministers speak to reports.And we’re off! A flurry of comments are hitting the wires as Opec ministers speak to reports.
Kuwait’s energy minister says he expects a nine-month extensions to the current output cut deal, but doesn’t expect any deeper cuts.Kuwait’s energy minister says he expects a nine-month extensions to the current output cut deal, but doesn’t expect any deeper cuts.
*Kuwait says no-one raised question of deeper cuts; deeper cuts unnecessary #OPEC #OOTT #Oil*Kuwait says no-one raised question of deeper cuts; deeper cuts unnecessary #OPEC #OOTT #Oil
9.12am BST9.12am BST
09:1209:12
Here’s a snap from inside the Opec meeting, via Algerian energy minister Noureddine Bouterfa.Here’s a snap from inside the Opec meeting, via Algerian energy minister Noureddine Bouterfa.
Mr Boutarfa attends the 172nd Meeting of the Opec Conferencepic.twitter.com/UnLIZFROrz https://t.co/ITZS9EZ1rhMr Boutarfa attends the 172nd Meeting of the Opec Conferencepic.twitter.com/UnLIZFROrz https://t.co/ITZS9EZ1rh
9.11am BST
09:11
No pushing at the back, please.
Getting ready for the Opec media...ahem... "gangbang" #OOTT pic.twitter.com/O4CF2kmdd9
Still waiting #OPEC #OOTT pic.twitter.com/Ik2KC4rK6E
9.05am BST
09:05
The journalists sent to Vienna to cover today’s meeting are getting hot under the collar, literally.
They’ve been queuing, more-or-less patiently, in a stairwell for around an hour - waiting to be allowed into the opening session.
Current scene in stairwell outside #OPEC press centre - been here over an hour pic.twitter.com/zllPs3JAO2
These Opec meetings can get quite frenzied, as reporters compete to hear from oil ministers. Last November’s gathering was particularly heated - several ornaments were broken amid media scrums, and one reporter briefly lost her shoe.
Updated
at 9.05am BST
8.54am BST
08:54
Some City analysts are sceptical about whether Opec can really influence the oil price, as many producers - such as America - aren’t part of the cartel.
Marc Ostwald of ADM Investor Services says the markets “fully” expect a nine-month extension to the current deal.
Many are wondering if the group has any rabbits to pull of its hat to mitigate the risk of a buy the rumour, sell the fact reaction.
It is not actually certain that the extension will be 9 months rather than six, even if the noises have been in that direction, or if any other Non-OPEC countries do sign up, they are at best likely to be very marginal producers such as Tajikistan, and per se more an optical addition than ‘game changers’
8.37am BST
08:37
Oil ministers are arriving at the Opec HQ now. There’s a live webcast from the hotel here.
8.07am BST
08:07
Three Opec delegates have told Reuters that a nine-month output extension is the “most likely scenario”. One says that a one-year extension (to June 2018) is an option.
Reuters’ Amanda Cooper has the details:
One #OPEC delegate says a 1-year extension to the oil supply deal is "still an option" #OOTT
Updated
at 9.06am BST
8.06am BST
08:06
Here’s the full agenda of the Opec meeting (timings are in CEST, so knock off an hour for BST).
8.00am BST
08:00
Some background. Last November, Opec and non-Opec members agreed to cut their combined output by around 1.8 million barrels per day through the first six months of this year.
That deal did drive the oil price over $50 per barrel, but any hopes (or fears) that prices would push higher have been dashed (or allayed).
As this chart shows, the oil price actually dipped back in recent weeks, before rallying on hopes that the deal will be extended today.
OPEC set to prolong cuts to help clear glut https://t.co/StVoACYbdo @JavierBlas2 #oil #OPEC pic.twitter.com/u2UrTxozoz
7.49am BST
07:49
Queues are forming outside Opec’s headquarters in the Austrian capital, ahead of today’s meeting:
Good morning from the OPEC Secretariat, where the fun is about to begin #opec #oott #oil #saudi #iran #iraq #venezuela #russia #nigeria #uae pic.twitter.com/dMOhGXLQsE
Outside #OPEC HQ #OOTT pic.twitter.com/SPH6YYuDfE
7.46am BST
07:46
Oil price rallies as Opec meeting begins
The oil price is jumping this morning, on predictions that Opec will extend its existing output cuts today.
Brent crude has gained almost 1% to $54.45 per barrel, and New York crude is up 0.75% at $51.75 per barrel.
That underlines how the markets expect the oil cartel to agree to pump less oil at today’s meeting.
Nigeria’s oil minister has bolstered hopes of a nine-month extension -- and possibly even longer:
#Nigeria oil minister @IbeKachikwu says that #OPEC largely in agreement for 9-month cut extension (and an option for an extra 3 month) #OOTT
Barclays analysts have argued that a mere six-month extension would be a blunder, as it would expire at the end of this year - when oil demand is weak.
Extending the deal into 2018 would mean that Opec members would ramp up output when demand is strengthening.
7.35am BST
07:35
The agenda: Opec meeting and UK GDP report
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
All eyes are on Vienna this morning as energy ministers from the Opec oil cartel meet.
On the agenda: whether or not to extend the oil production cuts deal which was agreed six months ago.
Oil analysts broadly expect an extension to be hammered out – as the alternative would spook the markets and send prices spiralling down. But the big issue is how long for.
Saudi Arabia (Opec’s biggest member) is pushing for a nine-month extension, and Iraq backed this plan earlier this week.
But there have been whispers that Opec might only extend oil output cuts by a mere six months, or could go the whole hog with a 12 month deal. So there’s all to play for in Vienna today.
Kathleen Brooks of City Index predicts that the Saudi’s will get their way:
The oil cartel meets today, and the market is expecting it to extend the period of production cuts by an extra nine months, through to March 2018. This has been widely signalled after Russia (a non-Opec member) and Saudi Arabia said that they would support an extension of the cuts last week.
There is a very small chance that some of the smaller, struggling members of Opec, including Venezuela and Nigeria, may resist the prospect of further cuts, overall we think that Saudi Arabia will ultimately get what it wants from this meeting.
Mike van Dulken of Accendo Markets says Opec should be wary of disappointing the markets:
OPEC talked up 9m cuts so much, anything less = disappointment. I hope they've been watching earnings season. Underpromise, overdeliver
Also coming up today:
We’re about to get fresh information on how the British economy performed in the first three months of this year.
The second estimate of UK GDP will reveal how business investment, net trade, personal spending and government spending changed over the quarter.
The City predict that consumer spending took a dive, as rising inflation hits shoppers.
Royal Bank of Canada say:
It is expected that a much more modest contribution from the consumer will be behind the lower growth figure, as real household disposable incomes have been hit by rising prices.
The Office for National Statistics is also expected to confirm that GDP only rose by a modest 0.3% in January-to-March, down from 0.7% in October-December.
9am BST: Opec opening session begins in Vienna
9.30am BST: Second estimate of UK GDP released
1.30pm BST: US trade balance for April
1.30pm BST: US weekly jobless figures
4pm BST: Opec press conference
We’ll be tracking all the main events through the day...
Updated
at 8.55am BST