This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2019/apr/03/trade-war-optimism-markets-china-us-service-sector-business-live

The article has changed 7 times. There is an RSS feed of changes available.

Version 5 Version 6
UK economy risks 'deepening downturn' as Brexit hits service sector - business live UK economy risks 'deepening downturn' as Brexit hits service sector - as it happened
(over 1 year later)
And finally, European stock markets have closed higher.
Germany’s share traders had a solid day, with industrial companies surging following stronger-than-expected Chinese service sector data.
London didn’t appear worried by the slowdown in the UK service sector, though, with traders watching events in Westminster instead.
Brexit: May faces second ministerial resignation over no-deal refusal - live news
The pound remains higher tonight, up almost half a cent at $1.317, which held back shares in UK-listed exporters.
Here’s the scores on the doors:
FTSE 100: up 27 points or 0.37% at 7,418
German DAX: up 199 points of 1.7% at 11,954
French CAC: up 45 points of 0.85% at 5.468
Goodnight! GW
Andy Bruce of Reuters has spotted that this morning’s UK PMI data has weakened to levels usually associated with interest rate cuts...
WELCOME TO CUTSVILLE, INTERESTRATELAND! Weakest 3-months for the IHS Markit/CIPS UK services #PMI since the Double Dip scare of late 2012. I doubt this will come as a surprise to the Bank of England. https://t.co/myaAbt1XYm pic.twitter.com/aKRk8brT6P
Back in the UK, the group representing London’s financial industry says the contraction in Britain’s service sector highlights the urgent need to resolve Brexit.
Catherine McGuinness, Policy Chair at the City of London Corporation, says:
“The slump in the services sector is an extremely worrying development, demonstrating the real strain that continued uncertainty is putting on the economy. Businesses up and down the country are cutting back on investment amid the Brexit limbo that has gripped the country since 2016.
“This is a timely reminder that a thriving services sector is crucial to a healthy UK economy. It accounts for 80% of the UK economy and it is high time that this is recognised by politicians. We therefore welcome today’s talks between the Government and Opposition and hope that they can put their differences aside to find a pragmatic solution that puts people and business first, commits to protecting the services sector and provides much needed certainty.”
Just in: America’s service sector slowed in March, but still outpaced China and the eurozone.
The ISM’s monthly PMI index of US services companies has dipped to 56.1, down from February’s rollicking 59.7.
That’s a bigger fall than expected, but still leaves the sector firmly in expansion territory.
Services firms did report a drop in new export orders - as did UK companies this morning.
The ISM Non-Manufacturing PMI index slumped to 56.1 in March from 59.7 in February, below expectations of 58. The reading pointed to the weakest expansion in the services sector since August of 2017, amid a slowdown in production and new orders. Trading Economics.
Newsflash: American companies only created 129,000 new jobs last month, fewer than expected, and the weakest since September 2017.
That’s according to the monthly ADP report, tracking private sector job creation.
Wall Street had expected 170,000 new private sector jobs to be created, so this is a bit disappointing.
It doesn’t bode well for the big economic news of the week -- Friday’s Non-Farm Payroll report, showing how many new jobs were created across the US last month.
Economists had forecast the NFP will increase by 175,000 in March, after the shock of just 20,000 extra jobs being created in February. But if the ADP report is weak, so might the broader NFP....
ADP Shows Weakest Job Gains Since Sept 2017 As Manufacturing, Construction Shrink. Awaiting NFP on Friday. pic.twitter.com/3Gk5n8ZduB
The US stock market is expected to follow Europe and Asia’s lead by rallying, when New York opens in an hour’s time:
US Opening Calls:#DOW 26290 +0.42%#SPX 2881 +0.48%#NASDAQ 7549 +0.64%#IGOpeningCall
Back in the markets, shares are still up across Europe today on hopes of a breakthrough in the US-China trade talks in Washington later today.
In London, the FTSE 250 index of medium-sized companies is up 0.8%, shaking off the alarm bells ringing in the UK economy today.
Germany’s DAX is still up 1.3%, led by industrial firms, after stronger than expected data from China overnight.
That follows the overnight rally in Asia, which saw the Nikkei gain 1% and the Shanghai Composite rise by 1.2%.
The FTSE 100, which contains larger, multinational firms, is only up 0.2% - held back by the stronger pound.
Neil Mackinnon, global macro economist at VTB Capital, explains that Beijing’s stimulus measures seem to be feeding into the real economy.
“News reports that both the US and China are close to a resolution of the trade dispute buoyed Asian equity markets this morning. In addition, the latest Chinese PMI data shows that the service sector is running at its fastest pace in 14 months.
Recent monetary and fiscal policy easing is starting to filter into the economy.
Here’s my colleague Richard Partington on the growing risk that Britain’s economy starts shrinking this year:
The British economy is at risk of sliding into a deepening downturn after stalling in the first quarter, following the weakest performance in the private sector in almost seven years as Brexit approaches.
In the latest sign the gridlock over leaving the EU is extracting a high price from the economy, the survey from IHS Markit and the Chartered Institute of Procurement and Supply showed that overall business activity stalled in March.
The country’s dominant services sector, which contributes about four-fifths of GDP, slipped into contraction as consumers and clients put spending decisions on hold in response to the intense political uncertainty.
The IHS Markit/Cips service sector purchasing managers’ index (PMI) slid to 48.9 in March from 51.3 in February, below the 50 mark separating growth from contraction for the first time since July 2016 – immediately after the EU referendum.
The survey of firms in the sector, which includes finance, shops and restaurants, will raise alarm bells at the Bank of England and the Treasury, which keep a close eye on the PMI indicators for early warning signs from the economy....
More here:
UK economy at risk of shrinking as Brexit chaos hurts service sector
Economists at Danske Bank point out that the slowdown in the eurozone hasn’t made life easier for UK firms.
🇬🇧PMI composite signals the #UK stagnated in Q1. Lots of anecdotal evidence #Brexit uncertainty has hit demand in recent months - weakness in rest of Europe does not help either. $EURGBP pic.twitter.com/5koPXdhfBw
Italy’s service sector outperformed the UK last month - quite an achievement, given its economy is in recession.
🇮🇹 Italy Services business activity increased quickly in March, as new order growth rose to the fastest in six months, but new export sales declined further. More: https://t.co/5Asjc8M5Nr pic.twitter.com/PggP8ILQPx
The AFP newswire blames “Brexit turmoil and flat economic growth” for the news that Britain’s “vital services sector” has shrunk for the first month in almost three years.The AFP newswire blames “Brexit turmoil and flat economic growth” for the news that Britain’s “vital services sector” has shrunk for the first month in almost three years.
The March 2019 reading shocked economists because market expectations had been for a drop in the index - which is regarded as a crucial barometer of UK business activity - to 50.9 [not the 48.9 recorded]The March 2019 reading shocked economists because market expectations had been for a drop in the index - which is regarded as a crucial barometer of UK business activity - to 50.9 [not the 48.9 recorded]
“The latest UK services PMI makes it clear that the economy is being hit hard by all the uncertainty in surrounding Brexit,” noted ING economist James Smith.“The latest UK services PMI makes it clear that the economy is being hit hard by all the uncertainty in surrounding Brexit,” noted ING economist James Smith.
He added: “Of course, it’s important to remember that PMIs don’t always precisely reflect the extent of a slowdown, merely that an increasing number of firms are reporting worsening conditions.He added: “Of course, it’s important to remember that PMIs don’t always precisely reflect the extent of a slowdown, merely that an increasing number of firms are reporting worsening conditions.
“That said, this latest reading implies that the first quarter as a whole could see near-stagnant growth.”“That said, this latest reading implies that the first quarter as a whole could see near-stagnant growth.”
Alpesh Paleja, the CBI’s principal economist, agrees that Britain’s services companies are now struggling:
Both the PMIs and @CBItweets growth indicator are consistent with activity slowing to a halt in Q1. The anecdote from both is the same: Brexit uncertainty holding back pipelines of work, corporate sending decisions and household confidence. https://t.co/ki6paCY11K
The UK’s service sector slump comes just as rival firms across the Channel are picking up.
Germany’s services economy, for example, grew at its fastest rate in six months. Its latest PMI index came in at a punchy 55.4 this morning, much stronger than the UK’s 48.9 [reminder: 50 points = stagnation].
This week’s PMI reports show that the services sector is underperforming the rest of the economy.
While the UK service sector contracted unexpectedly in March (with a PMI of just 48.9), manufacturing expanded much faster thanks to stockpiling (its PMI jumped to 55.1).
Construction suffered a small contraction, with a PMI of 49.7 last month.
Mix it all together....and you see that the UK’s private sector flatlined in March, in the worst quarter in over six years.
Worryingly, UK services companies have now reported falling new orders for three months running.
That hasn’t happened since 2009 -- when the world economy had plunged into recession.
Markit says export demand was “particularly subdued”, which suggests the recent slowdown in the global economy is also hurting the UK.
#UK #services #PMI shows new business contracted for 3rd month in a row in March; 1st time for this since Q1 2009. Businesses reported to be deferring or cancelling spending amid intense #Brexit uncertainties, #consumers limiting discretionary spending. Export demand fell
Some service sector companies will be doing well out of Brexit uncertainty -- such as lawyers, whose billable hours must have spiked as clients seek advice.
But many others are hunkering down, explains Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking,
“Although there are still sub-sectors that are doing well in the current circumstances – such as some parts of professional services that thrive amid uncertainty – many others are opting to conserve cash, limit investment and keep a tight eye on costs until the fog lifts.
“Only when firms do get some greater clarity and can begin to plan properly again will we see how much of the current challenges are caused by underlying trends, such as slowing global growth, and how much is down to a temporary stall in confidence.”
Simon Harvey of Monex Europe says the services reports shows that Brexit anxiety is hurting UK businesses:
Services sector hindered by lack of investment due to Brexit and a tight labour market. Discounting the July 2016 result, this was the joint lowest services PMI of the decade. @graemewearden this doesn't make for good reading as Brexit continues to drag.
Lee Hardman of MUFG bank points out that the 2016 EU referendum result also spooked businesses, but activity did hold up OK.
Sharp drop in UK services #PMI will heighten concerns #Brexit uncertainty is beginning to weigh more heavily on growth. Markit noted it was consistent with stagnating growth in Q1. One caveat is that sentiment also fell sharply around the referendum but activity did not. #GBP pic.twitter.com/SSIGEXEdvc
Reuters reports that:
Britain’s economy looks likely to shrink over the coming months after Brexit worries caused the dominant services sector to contract for the first time in nearly three years.
UK headed for downturn as Brexit worries hammer services sector: PMI https://t.co/jyt0O0mNYc pic.twitter.com/fBqiXt6Zhv
The PMI report also shows that some UK firms have been forced to slash prices to boost sales.
Good news for consumers, but a worrying sign for economic growth....
Stalling UK economic growth has been accompanied by the weakest rise in selling prices for goods and services since July 2016, according to the #PMI surveys. March saw an increased number of firms offering discounts to stimulate demand. Suggests #CPI will fall in coming months pic.twitter.com/7i7yg2P8vn
Duncan Brock of the Chartered Institute of Procurement & Supply is very alarmed by the contraction in the UK service sector last month:
He blames the Brexit deadlock:
New orders fell for the third consecutive month and a drop in overall business activity for the first time in two and a half years has left the services sector facing a bleak near-term outlook.
“Worried consumers fearful of rising living costs stayed away from discretionary spending and corporate clients held back on major decisions, preferring to defer big ticket projects until the Brexit deadlock is lifted.
Unless the economy rebounds, Brock adds, Britain’s service sector firms could face “a fight for survival”.
This chart explains why IHS Markit fears Britain’s economy could soon be shrinking.
Aside from the brief dip seen after the EU referendum, today’s service sector PMI is the joint- weakest seen over the past decade.
It equals the previous low point recorded in December 2012.