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Pound falls as UK trade deficit swells and industrial output falls unexpectedly - business live Pound falls as UK trade deficit swells and industrial output falls unexpectedly - business live
(35 minutes later)
2.02pm BST
14:02
My colleague Dominic Rushe has the full details on the US jobs report in the context of Donald Trumps big jobs promises. He writes:
The US economy added 222,000 new jobs in June, reversing a worrying slowdown in growth for president Donald Trump who campaigned on a promise of massive job creation.
Economists had been expecting the US to add around 178,000 over them month but the latest numbers from the bureau of labor statistics comfortably beat those estimates as healthcare and food services showed big monthly gains.
The unemployment rate moved up marginally to 4.4% but remains at lows unseen since 2001.
This month’s numbers came as economists have worried that the US economy is struggling to create large numbers of new jobs despite president Donald Trump’s pledge to create “JOBS! JOBS! JOBS!”
US employers added just 138,000 jobs in May, the third month of relatively soft growth in the jobs market, and March and April’s figures were revised down by 66,000.
His full story:
And here’s the full data from the US labor department:
Payroll employment rises by 222,000 in June; unemployment rate changes little at 4.4% https://t.co/NsuHovcqn0 #JobsReport #BLSdata
1.58pm BST
13:58
Assessing what that non-farm payrolls update means for US interest rates, James Knightley, chief international economist at ING says the report is “good enough” to keep the Federal Reserve on a gradual policy tightening path.
Strong jobs growth should eventually translate into higher wages, but it is taking time to do so. The Fed remains confident it will come, suggesting gradual hikes will continue, but the market continues to have doubts.
...In any case, the Fed has repeatedly used the term “transitory” to describe the slowdown in activity and subdued inflation backdrop and believe that it is only a matter of time before the tightness in the labour market translates into rising wage pressures. We agree.
1.51pm BST
13:51
Some market reaction now to that news of stronger-than-expected growth in jobs but weaker-than-forecast wage growth in the US last month.
US stock futures have extended gains but the dollar has lost ground as traders focus on the wage growth undershoot - something that will temper expectations of further rate rises from the US Federal Reserve this year.
Disappointing US #wage growth is the key takeaway. Doesn't help the #Fed's quest to convince markets dip in inflation is "transitory" #NFP pic.twitter.com/py4BmuR2d0
Impressive 222K jobs number, but disappointing wage growth not budging from 2.5% 12-month change is more important.
Elsewhere, there are some interesting patterns in where the new jobs are coming from in President Donald Trump’s America. (Of course, his pledges to revive manufacturing were always going to take time to show in the jobs numbers but it shows the challenge ahead)
Job growth is strong but sectoral shifts are clear:59.1K jobs added in health care and social assistance1K jobs added in manufacturing.
1.34pm BST
13:34
More details now on that US jobs report:
More jobs were added than expected but wage growth missed forecasts. The report from the Labor Department shows average earnings rose by 0.2% month-on-month in June, and were up 2.5% over the last year. Forecasts were for average hourly earnings to increase 0.3% in June and for the year-on-year growth rate to stand at 2.7%.
The Labor Department said the unemployment rate was 4.4%. Economists had forecast it would hold at a 16-year low of 4.3%.
1.31pm BST1.31pm BST
13:3113:31
US jobs report beats forecasts with payrolls up 222,000 in JuneUS jobs report beats forecasts with payrolls up 222,000 in June
BREAKING: The US economy added 222,000 jobs in June, according to the latest non-farm payrolls report.BREAKING: The US economy added 222,000 jobs in June, according to the latest non-farm payrolls report.
That was higher than the 179,000 forecast by economists in a Reuters poll.That was higher than the 179,000 forecast by economists in a Reuters poll.
May’s gain was revised to 152,000 from the 138,000 figure previously reported.May’s gain was revised to 152,000 from the 138,000 figure previously reported.
More to follow...More to follow...
1.05pm BST1.05pm BST
13:0513:05
Newsflash: The NIESR thinktank has estimated that Britain’s economy only grew by 0.3% in the second quarter of this year.Newsflash: The NIESR thinktank has estimated that Britain’s economy only grew by 0.3% in the second quarter of this year.
That would be an improvement on the 0.2% growth recorded in January-March, but below the 0.6% trend growth rate.That would be an improvement on the 0.2% growth recorded in January-March, but below the 0.6% trend growth rate.
Rebecca Piggott, Research Fellow at NIESR, says:Rebecca Piggott, Research Fellow at NIESR, says:
Growth in services has offset a contraction in industrial output, yet remains subdued when compared with last year.Growth in services has offset a contraction in industrial output, yet remains subdued when compared with last year.
The saving ratio reached an historic low of 1.7 per cent in the first quarter of this year, implying that, so far, households have reduced their saving to cushion the effect of falling real incomes on consumption as inflation rises”.The saving ratio reached an historic low of 1.7 per cent in the first quarter of this year, implying that, so far, households have reduced their saving to cushion the effect of falling real incomes on consumption as inflation rises”.
Our monthly estimates of GDP suggest that output grew by 0.3% in 2017Q2https://t.co/7Mrev3gkzd#NIESRGDP pic.twitter.com/vYbIFpOZ4dOur monthly estimates of GDP suggest that output grew by 0.3% in 2017Q2https://t.co/7Mrev3gkzd#NIESRGDP pic.twitter.com/vYbIFpOZ4d
12.34pm BST12.34pm BST
12:3412:34
Philip Coggan of the Economist points out that the drop in the pound after the EU referendum hasn’t helped the trade gap:Philip Coggan of the Economist points out that the drop in the pound after the EU referendum hasn’t helped the trade gap:
Ave UK trade deficit in Jan-May 2016 (pre-referendum) £2,801m; ave in Jan-May 2017 £2,806m. Living standards squeezed but no boost to tradeAve UK trade deficit in Jan-May 2016 (pre-referendum) £2,801m; ave in Jan-May 2017 £2,806m. Living standards squeezed but no boost to trade
12.03pm BST12.03pm BST
12:0312:03
The key chartsThe key charts
If you’re just tuning in, here are some charts that show today’s data.If you’re just tuning in, here are some charts that show today’s data.
First, the widening of the UK trade gap to £3.1bn, from £2bn, as a jump in imports drove the ‘trade in goods’ deficit to over £11bn:First, the widening of the UK trade gap to £3.1bn, from £2bn, as a jump in imports drove the ‘trade in goods’ deficit to over £11bn:
Second, the disappointing 0.1% drop in UK industrial output in May.Second, the disappointing 0.1% drop in UK industrial output in May.
11.20am BST11.20am BST
11:2011:20
Sustained selling pressure has just pushed the pound down through $1.29, a drop of 0.7 of a cent today.Sustained selling pressure has just pushed the pound down through $1.29, a drop of 0.7 of a cent today.
Bloomberg explains:Bloomberg explains:
The pound fell for the first time in three days versus the dollar after data showed U.K. factories and construction companies’ output unexpectedly declined in May, adding to a spate of recent data that pointed to an economic slowdown.The pound fell for the first time in three days versus the dollar after data showed U.K. factories and construction companies’ output unexpectedly declined in May, adding to a spate of recent data that pointed to an economic slowdown.
Sterling was on course for weekly declines against all but two of its Group-of-10 peers, as manufacturing, industrial and construction output all dropped and undercut analysts’ forecasts.Sterling was on course for weekly declines against all but two of its Group-of-10 peers, as manufacturing, industrial and construction output all dropped and undercut analysts’ forecasts.
Pound falls for first time in 3 days against dollar as fears grow of an economic slowdown https://t.co/t22JoRr4qe pic.twitter.com/IT8bZwLeL8Pound falls for first time in 3 days against dollar as fears grow of an economic slowdown https://t.co/t22JoRr4qe pic.twitter.com/IT8bZwLeL8
UpdatedUpdated
at 11.27am BSTat 11.27am BST
11.14am BST11.14am BST
11:1411:14
This morning’s data paint a rather bleak picture for the UK economy and underline the challenges lying ahead, says Kay Daniel Neufeld of the CEBR.This morning’s data paint a rather bleak picture for the UK economy and underline the challenges lying ahead, says Kay Daniel Neufeld of the CEBR.
He fears that growth is going to be subdued this year, and next:He fears that growth is going to be subdued this year, and next:
So far, the depreciation in Sterling has not led to a significant reduction in the trade deficit – at Cebr we have repeatedly stressed that the UK’s high-value added exports are less price sensitive and that any rebalancing in the make-up of exports will take time to manifest itself.So far, the depreciation in Sterling has not led to a significant reduction in the trade deficit – at Cebr we have repeatedly stressed that the UK’s high-value added exports are less price sensitive and that any rebalancing in the make-up of exports will take time to manifest itself.
In the meantime the lack of clarity about future trading relationship with the EU – further exacerbated by the result of the general election – weighs on activity in the manufacturing sector.In the meantime the lack of clarity about future trading relationship with the EU – further exacerbated by the result of the general election – weighs on activity in the manufacturing sector.
As a result, Cebr expects GDP growth of only 1.3% in 2017 and 1.2% in 2018.As a result, Cebr expects GDP growth of only 1.3% in 2017 and 1.2% in 2018.
10.53am BST
10:53
Britain’s export performance remains “underwhelming”, says Sam Tombs of Pantheon Economics.
He blames manufacturers for hiking their prices since the pound fell, rather than trying to grow their market share.
The main problem remains that exporters have hiked their prices, blunting the boost to competitiveness from the weak pound. Foreign-currency prices for U.K. goods exports in May were just 5% lower than in Q4 2015.
Exports are earning healthy profits, but few are willing to invest and ramp up production due to Brexit risk. Markit’s survey of export orders also has weakened over the last few months, casting further doubt over the likelihood of a sustained trade boost going forwards.
This chart shows how exports have been lagging behind imports for more than a year
10.31am BST
10:31
Today’s data suggest that Britain’s economy has only grown by 0.3% in the second quarter of the year, says Howard Archer, Chief Economic Advisor to the EY ITEM Club.
That would only be slightly better than the 0.2% growth posted in Q1 - the weakest of any G7 nation.
Archer says:
“Based on today’s data and the business survey results for June, we now think that industrial production is likely to have contracted by 0.5% in Q2, with construction output down 1.8%.
And though an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3% with the risks to that projection skewed to the downside.
Updated
at 10.31am BST
10.25am BST
10:25
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10.21am BST
10:21
Sterling has also hit a nine day low against the euro.
The pound has dropped by almost half a eurocent to €1.1311.
That means one euro is now worth 88.4p.
10.15am BST
10:15
UK data disappoints: snap reaction
Today’s trade data provides little evidence that Britain’s economy is rebalancing away from consumer spending and towards exports.
My colleague Katie Allen points out that the weak pound doesn’t seem to be providing much support.
Imports rising faster than exports in UK. Remains to be seen if weak pound can boost exports enough to offset consumer slowdown pic.twitter.com/opT6YU0xPx
Mike Bird of the Wall Street Journal highlights that the goods deficit has been widening for a long time:
Aaaaaaany minute... now! No... now! Now! pic.twitter.com/wpsRo4dstU
Claus Vistesen of Pantheon Economics wins the prize for pithy analysis:
Grim U.K. data!
Fast FT show that UK industrial production has been disappointing for several months:
The pound has dropped after UK industrial production missed forecasts for the 4th month in a row https://t.co/tuMJRoUXIX pic.twitter.com/0IFGpegEJe
UK industrial production fell by 0.1%, missing a 0.4% expansion estimate - this is the 4th consecutive month of failing to hit forecasts. pic.twitter.com/WtFvDg4CEB
Updated
at 10.16am BST
10.09am BST
10:09
ONS senior statistician Kate Davies sums up today’s flurry of disappointing UK data:
“Activity in the production sector was broadly unchanged in May, though the underlying position is weaker with both total output and manufacturing falling in the three months to May compared with the previous three months.
Construction output also fell on a three-monthly basis, though this is after several years of growth.
“Meanwhile the total trade deficit widened by £2 billion in the most recent three months, primarily due to high imports especially from outside the European Union.”
10.08am BST
10:08
Actually, it’s a triple-dose of bad news -- UK construction output fell by 1.2% in May.
It also shrank by 1.2% in the March-to-May quarter, compared to the previous three months. That’s the biggest drop since September 2012.
The ONS blames “falls in both repair and maintenance, and all new work.”
New construction work, most notably from infrastructure, fell 4.0% in May (ONS). Surprising given all the talk of infrastructure spending.
Updated
at 10.39am BST
10.01am BST
10:01
The 0.2% drop in UK manufacturing output in May was triggered by a drop in car production.
The ONS says:
Transport equipment provided the largest downward contribution, falling by 2.3%; within this, motor vehicles, trailers and semi trailers fell by 4.4%, the largest fall since February 2016, when it fell by 5.8%.
9.53am BST
09:53
Pound takes a tumble
That double-dose of disappointing UK economic data has hit the pound.
Sterling has slumped to $1.2917, down half a cent, as traders digest the news that Britain’s trade deficit has widened and industrial output fell in May.
Updated
at 9.53am BST
9.49am BST
09:49
UK trade deficit widens
More bad news! Britain’s trade deficit has widened, due to a surge of imports.
The total trade deficit jumped by £1bn in May, to £3.1bn - a worse reading than the City expected.
Here are the key points from the Office for National Statistics:
Between the 3 months to February 2017 and the 3 months to May 2017, the total UK trade (goods and services) deficit widened from £6.9 billion to £8.9 billion.
The widening of the trade deficit in the 3 months to May 2017 reflects a higher rise in imports than the rise in exports of goods, in particular transport equipment (cars, aircraft and ships), oil and electrical machinery from non-EU countries; a decrease in exports of services also contributed.
Between the 3 months to February 2017 and the 3 months to May 2017, the total UK trade (goods and services) excluding erratics deficit widened from £8.6 billion to £9.3 billion.
The total UK trade (goods and services) deficit widened by £1.0 billion between April and May 2017 to £3.1 billion, following a narrowing in April 2017; this reflects an increase in imports of goods on the month following a decrease in April 2017.
£2.0bn rise in total trade deficit, to £8.9bn, in Mar-May compared with Dec-Feb, with goods imports up https://t.co/TkORTiM7gq