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UK real wages rise, as German economy slows - business live UK real wages rise, as German economy slows - business live
(35 minutes later)
The Institute of Directors fears that companies are now struggling to find properly skilled and qualified workers.
Seamus Nevin, the IoD’s head of policy research says:
“Yet again we’ve seen great employment figures as the number of people in work increased and the number of people without work decreased. All of this suggests, however, that access to staff may be peaking as the labour market tightens.
“Employers are finding it increasingly difficult to recruit the people they need. Given access to skills is currently one of the highest concerns for IoD members, today’s figures also highlight the imperative for government to reform the Tier 2 visa cap to allow employers to recruit the overseas workers they need to grow in the short term.”
Disappointingly, UK productivity is falling again.
Productivity (broadly, how much we each produced) shrank by 0.5% in the first three months of 2018, the ONS says.
That’s because Britain’s growth rate slowed in the last quarter (to a measly 0.1%), even though companies created more jobs - meaning the amount of hours worked in the economy rose by 0.6%.
Ergo, we were less productive:
John Hawksworth, chief economist at PwC, says the UK economy is a mixed picture -- job creation remains strong, but productivity is a mess.
“The great British job-creating machine kicked back into life in the first quarter of 2018, taking the employment rate to a new record high. Unemployment edged down further and regular pay growth continued to edge up as the labour market has tightened. Real pay growth, excluding bonuses, is now firmly back into positive territory.
“All of this good news stands in marked contrast to the subdued GDP growth of just 0.1% estimated for the first quarter. This estimate could be revised up later but, taken at face value, it suggests that productivity growth turned significantly negative again after a couple of quarters when it seemed to be perking up.
Geraint Johnes, professor of economics at Lancaster University Management School, is disappointed that total pay growth (including bonuses) slowed to 2.6% from 2.8% a month ago.
Professor Johnes, who is also research director at the Work Foundation, says this shows some weakness in the labour market:
This is a disappointing result, in that it represents a fall from the 2.8% figure achieved in February, and it means that we have to wait still longer for real wages to recover.
The single month measure shows a year-on-year growth of just 2.3%. This continued flatness in wages provides justification for the Bank of England’s decision not to raise interest rates – despite the buoyancy of the employment figures, the recovery in the labour market is quite simply not there, and rising wages clearly present no threat in terms of inflation.”
This chart, from Fidelity International, shows how Britain is emerging from its second pay squeeze in a decade:
Tom Stevenson, investment director for personal investing at Fidelity, say:
“British workers are feeling marginally better off after wages grew in real terms for the second month on a trot.”
Economists are welcoming the news that basic pay in Britain is accelerating.
It could even spur the Bank of England into raising interest rates by August - although, after policymakers left rates on hold last week, who knows for sure?
Decent set of UK labour market data this morning. Further tick up in private sector regular pay growth in Q1 lends some support to the #MPC raising rates in August
Just released: The latest @ONS figures show some positive news for the labour market...real wages have grown for a second consecutive month. Wages increased by 2.9% in the first three months of 2018. Inflation for the same period was 2.7%. Is the incomes squeeze coming to an end? pic.twitter.com/Zo5wYPO5xL
ING: "Rising UK wage growth points to summer rate hike" pic.twitter.com/xQiqCGmQJB
The percentage of people in Britain classed as ‘economically inactive’ has fallen to just 21%, its lowest level since records began 45 years ago.The percentage of people in Britain classed as ‘economically inactive’ has fallen to just 21%, its lowest level since records began 45 years ago.
That means that more people are either in work, or looking for a job.That means that more people are either in work, or looking for a job.
The ONS says:The ONS says:
There were 8.66 million people aged from 16 to 64 years who were economically inactive (not working and not seeking or available to work), 115,000 fewer than for October to December 2017 and 171,000 fewer than for a year earlier.There were 8.66 million people aged from 16 to 64 years who were economically inactive (not working and not seeking or available to work), 115,000 fewer than for October to December 2017 and 171,000 fewer than for a year earlier.
The proportion of people aged 16 to 64 who were neither working nor looking for work (known as the economic inactivity rate) was 21.0%, for January to March 2018, the lowest since records began in 1971 https://t.co/XapK1PPbys pic.twitter.com/tnipknzmCN
Today’s jobs report also shows that Britain’s cost of living squeeze is easing.Today’s jobs report also shows that Britain’s cost of living squeeze is easing.
Basic pay (excluding bonuses) rose by 2.9% in the first quarter of 2018, up from 2.8% a month ago.Basic pay (excluding bonuses) rose by 2.9% in the first quarter of 2018, up from 2.8% a month ago.
That means that wages are rising faster than inflation (which fell to 2.5% in March).That means that wages are rising faster than inflation (which fell to 2.5% in March).
So real basic pay (adjusted for inflation) is now growing at around 0.4%, after shrinking over recent months.So real basic pay (adjusted for inflation) is now growing at around 0.4%, after shrinking over recent months.
However, total pay (including bonuses) only grew by 2.6% during the quarter (again, down from 2.8%).However, total pay (including bonuses) only grew by 2.6% during the quarter (again, down from 2.8%).
Earnings for employees, including bonuses, increased by 2.6% on the year in cash terms, but were unchanged after taking inflation into account https://t.co/CkVT7gH5Yr pic.twitter.com/xx1yDm2x4PEarnings for employees, including bonuses, increased by 2.6% on the year in cash terms, but were unchanged after taking inflation into account https://t.co/CkVT7gH5Yr pic.twitter.com/xx1yDm2x4P
But before anyone celebrates, lets not forget that Britons are basically poorer than before the financial crisis.But before anyone celebrates, lets not forget that Britons are basically poorer than before the financial crisis.
The Office for National Statistics says:The Office for National Statistics says:
average regular pay (excluding bonuses) for employees in Great Britain was £460 per week before tax and other deductions from pay, £13 lower than the pre-downturn peak of £473 per week recorded for March 2008average regular pay (excluding bonuses) for employees in Great Britain was £460 per week before tax and other deductions from pay, £13 lower than the pre-downturn peak of £473 per week recorded for March 2008
average total pay (including bonuses) for employees in Great Britain was £489 per week before tax and other deductions from pay, £33 lower than the pre-downturn peak of £522 per week recorded for February 2008average total pay (including bonuses) for employees in Great Britain was £489 per week before tax and other deductions from pay, £33 lower than the pre-downturn peak of £522 per week recorded for February 2008
Newsflash: Britain’s jobless rate remained at 4.2% in the first three months of 2018.Newsflash: Britain’s jobless rate remained at 4.2% in the first three months of 2018.
The latest Labour Force statistics, just released, show that unemployment is at its joint lowest level since 1975.The latest Labour Force statistics, just released, show that unemployment is at its joint lowest level since 1975.
The report also shows that the employment rate is at a record high (the data goes back to Ted Heath’s reign as prime minister):The report also shows that the employment rate is at a record high (the data goes back to Ted Heath’s reign as prime minister):
The Office for National Statistics says:The Office for National Statistics says:
There were 32.34 million people in work, 197,000 more than for October to December 2017 and 396,000 more than for a year earlier.There were 32.34 million people in work, 197,000 more than for October to December 2017 and 396,000 more than for a year earlier.
The employment rate (the proportion of people aged from 16 to 64 years who were in work) was 75.6%, higher than for a year earlier (74.8%) and the highest since comparable records began in 1971.The employment rate (the proportion of people aged from 16 to 64 years who were in work) was 75.6%, higher than for a year earlier (74.8%) and the highest since comparable records began in 1971.
There were 1.42 million unemployed people (people not in work but seeking and available to work), 46,000 fewer than for October to December 2017 and 116,000 fewer than for a year earlier.There were 1.42 million unemployed people (people not in work but seeking and available to work), 46,000 fewer than for October to December 2017 and 116,000 fewer than for a year earlier.
Between October to December 2017 and January to March 2018, employment increased and unemployment fell https://t.co/g2HtPpSCC7 pic.twitter.com/fwDosa4lRcBetween October to December 2017 and January to March 2018, employment increased and unemployment fell https://t.co/g2HtPpSCC7 pic.twitter.com/fwDosa4lRc
More to follow!More to follow!
Bulgaria and Poland have both posted solid growth figures:Bulgaria and Poland have both posted solid growth figures:
#Bulgaria #GDP Growth Rate QoQ Prel at 0.8% https://t.co/Nbq37nP9v7 pic.twitter.com/GohvAeuqUa#Bulgaria #GDP Growth Rate QoQ Prel at 0.8% https://t.co/Nbq37nP9v7 pic.twitter.com/GohvAeuqUa
#Poland #GDP Growth Rate year-on-year Prel at 5.1% https://t.co/GYIeKFLNXQ pic.twitter.com/CYYjRebXab#Poland #GDP Growth Rate year-on-year Prel at 5.1% https://t.co/GYIeKFLNXQ pic.twitter.com/CYYjRebXab
The German Federal Ministry for Economics Affairs says the country’s economy remains strong, despite growth slowing in recent months.The German Federal Ministry for Economics Affairs says the country’s economy remains strong, despite growth slowing in recent months.
In a statement, it says:In a statement, it says:
“Private consumption remains strong. Companies are upbeat on their trade prospects in the light of overall favourable conditions.”“Private consumption remains strong. Companies are upbeat on their trade prospects in the light of overall favourable conditions.”
The ministry also suggests that the drop in government spending may be due to the five-month hiatus of negotiations to form Angela Merkel’s new coalition.The ministry also suggests that the drop in government spending may be due to the five-month hiatus of negotiations to form Angela Merkel’s new coalition.
Just: The Netherlands economy has slowed, but not as sharply as Germany.Just: The Netherlands economy has slowed, but not as sharply as Germany.
Dutch GDP rose by 0.5% in the first three months of this year, down from 0.7% in October-December 2017.Dutch GDP rose by 0.5% in the first three months of this year, down from 0.7% in October-December 2017.
Dutch first quarter growth also in the 'not spectacular but fine' category, at 0.5% q/q. Like in Germany (where Q1 growth was just 0.3%) the slowdown (from 0.7% in Q4) seems partly driven by temporary factors so likely to pick up a bit in Q2. pic.twitter.com/z7oSYTsRGVDutch first quarter growth also in the 'not spectacular but fine' category, at 0.5% q/q. Like in Germany (where Q1 growth was just 0.3%) the slowdown (from 0.7% in Q4) seems partly driven by temporary factors so likely to pick up a bit in Q2. pic.twitter.com/z7oSYTsRGV
Finland has outperformed Germany, by posting 1.1% growth in the last quarter.Finland has outperformed Germany, by posting 1.1% growth in the last quarter.
This suggests the eurozone’s most northerly neighbour is shaking off its recent stagnation, despite the slowdown in other countries.This suggests the eurozone’s most northerly neighbour is shaking off its recent stagnation, despite the slowdown in other countries.
Shares in some of Germany’s biggest companies have dipped in early trading.Shares in some of Germany’s biggest companies have dipped in early trading.
The DAX index has dropped by 0.3%, or 38 points, to 12,939 in Frankfurt, following this morning’s disappointing growth figures.The DAX index has dropped by 0.3%, or 38 points, to 12,939 in Frankfurt, following this morning’s disappointing growth figures.
Pharmaceutical giant Merck is the biggest faller (-2.8%), followed by industrial conglomerate Thyssenkrupp (-2.4%, despite reporting higher profits this morning).Pharmaceutical giant Merck is the biggest faller (-2.8%), followed by industrial conglomerate Thyssenkrupp (-2.4%, despite reporting higher profits this morning).
At just 0.3%, this is Germany’s weakest quarterly growth since the third quarter of 2016.At just 0.3%, this is Germany’s weakest quarterly growth since the third quarter of 2016.
ING economist Carsten Brzeski says Germany had a ‘stumbling start’ into 2018, for a variety of reasons:ING economist Carsten Brzeski says Germany had a ‘stumbling start’ into 2018, for a variety of reasons:
Trade and government consumption were a drag on growth. Also, don’t forget that a couple of one-off factors like the cold winter weather, early Easter vacation and strikes probably distorted first quarter data.Trade and government consumption were a drag on growth. Also, don’t forget that a couple of one-off factors like the cold winter weather, early Easter vacation and strikes probably distorted first quarter data.
Brzeski says we shouldn’t panic - he thinks that Germany’s economy still has underlying strength, including its manufacturing base:Brzeski says we shouldn’t panic - he thinks that Germany’s economy still has underlying strength, including its manufacturing base:
Despite some minor leveling off, capacity utilisation is still close to record highs, assured production in the industry is close to all-time highs and the high stock of orders and historically low inventories all bode extremely well for industrial production in the coming months.Despite some minor leveling off, capacity utilisation is still close to record highs, assured production in the industry is close to all-time highs and the high stock of orders and historically low inventories all bode extremely well for industrial production in the coming months.
So this growth slowdown is “no more than a black eye”, Brzeski concludes.So this growth slowdown is “no more than a black eye”, Brzeski concludes.
The news that Germany’s growth rate halved in the last quarter is causing a stir.The news that Germany’s growth rate halved in the last quarter is causing a stir.
Economist Ulrik Bie blames the drop in exports by German firms:Economist Ulrik Bie blames the drop in exports by German firms:
German GDP grew by 0.3% q/q in 1Q/2018 with the annual growth rate declining to 2.3%. This was weaker than expected. Positive growth impulse from investments - construction and machinery, with a small increase in household consumption. Negative contribution from net export pic.twitter.com/VDiD6q70LlGerman GDP grew by 0.3% q/q in 1Q/2018 with the annual growth rate declining to 2.3%. This was weaker than expected. Positive growth impulse from investments - construction and machinery, with a small increase in household consumption. Negative contribution from net export pic.twitter.com/VDiD6q70Ll
Tom Barfield of the AFP newswire says it will raise fears about the health of the European economy:Tom Barfield of the AFP newswire says it will raise fears about the health of the European economy:
Fears of a #eurozone slowdown will be back today as German #GDP growth braked to 0.3 percent in the first quarter, halving the 0.6 percent that rounded off last year - @destatis figures via @afpFears of a #eurozone slowdown will be back today as German #GDP growth braked to 0.3 percent in the first quarter, halving the 0.6 percent that rounded off last year - @destatis figures via @afp
Pantheon Macroeconomics’ Claus Vistesen believes the eurozone will tick along at a more steady rate this year:Pantheon Macroeconomics’ Claus Vistesen believes the eurozone will tick along at a more steady rate this year:
Slightly downside surprise in German GDP. Everything, imho, suggests that y/y growth in the EZ as a whole is slowing towards just under 2%; consistent with q/q growth of 0.4-to-0.5% for the rest of the year.Slightly downside surprise in German GDP. Everything, imho, suggests that y/y growth in the EZ as a whole is slowing towards just under 2%; consistent with q/q growth of 0.4-to-0.5% for the rest of the year.
Oliver Rakau of Oxford Economics warns that Germany has lost momentum, and may struggle to bounce back in the coming months.Oliver Rakau of Oxford Economics warns that Germany has lost momentum, and may struggle to bounce back in the coming months.
The German economy lost a lot of momentum in Q1. GDP grew by 0.3%, in line with our view but only half the 0.6% from Q4 2017. Part of the weakness will be reversed as transitory factors fade, but we think there is more to it. Q2 will see only a bounce to 0.6% and 2018 record 2.2%The German economy lost a lot of momentum in Q1. GDP grew by 0.3%, in line with our view but only half the 0.6% from Q4 2017. Part of the weakness will be reversed as transitory factors fade, but we think there is more to it. Q2 will see only a bounce to 0.6% and 2018 record 2.2%
Newsflash: Germany has suffered a growth slowdown after being hit by weak trade.Newsflash: Germany has suffered a growth slowdown after being hit by weak trade.
The eurozone’s largest economy expanded by just 0.3% in the first three months of this year, official figures show.The eurozone’s largest economy expanded by just 0.3% in the first three months of this year, official figures show.
That’s a sharp slowdown compared to Germany’s 0.6% in the final quarter of 2017. It is also below the 0.4% which economists had expected.That’s a sharp slowdown compared to Germany’s 0.6% in the final quarter of 2017. It is also below the 0.4% which economists had expected.
The Federal Statistics Office says:The Federal Statistics Office says:
The German economy continued to grow at the beginning of the year, though at a slower pace.The German economy continued to grow at the beginning of the year, though at a slower pace.
The slowdown was triggered by “less dynamic” foreign trade, as “both exports and imports decreased compared with the previous quarter”.The slowdown was triggered by “less dynamic” foreign trade, as “both exports and imports decreased compared with the previous quarter”.
Government spending also fell, for the firs time in five years, dragging growth back.Government spending also fell, for the firs time in five years, dragging growth back.
But capital investment did rise during the quarter, suggesting companies are still investing in equipment and factories. Domestic consumption also made a positive contribution.But capital investment did rise during the quarter, suggesting companies are still investing in equipment and factories. Domestic consumption also made a positive contribution.
#GrossDomesticProduct up 0.3% in the 1st quarter of 2018 https://t.co/PpLlRWE0Pj #GDP pic.twitter.com/tWFPL8kifp#GrossDomesticProduct up 0.3% in the 1st quarter of 2018 https://t.co/PpLlRWE0Pj #GDP pic.twitter.com/tWFPL8kifp
Although Germany is obviously still growing, these figures do indicate that the eurozone economy has lost some steam in recent months.Although Germany is obviously still growing, these figures do indicate that the eurozone economy has lost some steam in recent months.
They also suggests that fears of a trade war, triggered by Donald Trump’s tariffs on steel and aluminium, are causing worrying ripples in the global economy.They also suggests that fears of a trade war, triggered by Donald Trump’s tariffs on steel and aluminium, are causing worrying ripples in the global economy.
Reaction to follow....Reaction to follow....
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today we get a new healthcheck on Europe’s economy, with a fresh estimate of eurozone GDP for the first three months of this year, plus growth figures from Germany and the Netherlands.Today we get a new healthcheck on Europe’s economy, with a fresh estimate of eurozone GDP for the first three months of this year, plus growth figures from Germany and the Netherlands.
Last month’s ‘flash’ data showed the eurozone economy grew by 0.4% - investors will be concerned if this is revised downwards today.Last month’s ‘flash’ data showed the eurozone economy grew by 0.4% - investors will be concerned if this is revised downwards today.
Britain’s labour market is also in focus. The latest unemployment figures are expected to show the jobless rate remains at just 4.2%, its lowest level in over 40 years.Britain’s labour market is also in focus. The latest unemployment figures are expected to show the jobless rate remains at just 4.2%, its lowest level in over 40 years.
But will there be any progress on wages? Economists predict that basic pay growth rose to 2.9% in the first three months of this year - up from 2.8%.But will there be any progress on wages? Economists predict that basic pay growth rose to 2.9% in the first three months of this year - up from 2.8%.
A strong reading might give the pound a lift, and reignite speculation that interest rates might rise in August.A strong reading might give the pound a lift, and reignite speculation that interest rates might rise in August.
Jasper Lawler of London Capital Group says:Jasper Lawler of London Capital Group says:
Given that inflation in March was 2.5%, wages growth of 2.9% or higher would be an encouraging sign that domestic inflation will slowly start to pick up, potentially reviving the possibility of a Bank of England rate rise later in the year and pushing sterling back towards $1.37.Given that inflation in March was 2.5%, wages growth of 2.9% or higher would be an encouraging sign that domestic inflation will slowly start to pick up, potentially reviving the possibility of a Bank of England rate rise later in the year and pushing sterling back towards $1.37.
Traders will also be tracking events in Italy, where talks to form a new government are still continuing.Traders will also be tracking events in Italy, where talks to form a new government are still continuing.
The agenda:The agenda:
7am BST: First estimate of German GDP in Q1 20187am BST: First estimate of German GDP in Q1 2018
8.30am BST: First estimate of Netherlands GDP in Q1 20188.30am BST: First estimate of Netherlands GDP in Q1 2018
9.30am BST: UK unemployment and wage growth figures for January-March 20189.30am BST: UK unemployment and wage growth figures for January-March 2018
10am BST: Updated estimate of eurozone GDP in Q1 201810am BST: Updated estimate of eurozone GDP in Q1 2018
10am BST: ZEW survey10am BST: ZEW survey