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UK economy kept growing in February thanks to Brexit stockpiling - business live UK economy 'stronger than expected' in February thanks to Brexit stockpiling - business live
(32 minutes later)
Theresa May doesn’t have much firepower as she faces EU leaders in Brussels tonight, to plead for another Brexit extension.
Today’s GDP report, though, may strengthen her hand, argues Professor Costas Milas of Liverpool University.
He tells us:
Stockpiling or not, today’s GDP reading suggests the economy grew at an annual rate of approximately 1.56% on a three-month rolling basis (between December 2018 and February 2019) which is slightly higher than the 1.49% forecast made by the Bank of England for 2019 Q1. The further good news is that ONS has revised upwards growth rates for 2018.
This suggests a ‘carry over’ effect which should tempt the Bank of England revise upwards its 1.2% forecast for 2019 as a whole. Mrs May should make the most of it. Indeed, she can legitimately warn her critics from Brussels: “Back my efforts to secure extra time to sort out the Brexit mess or today’s relatively healthy economic performance will become a thing of the past in case snap elections and/or a disorderly Brexit gets in our way”.
The news that Britain’s economy expanded by 0.2% in February has been cautiously welcomed by economists.
Ian Stewart, chief economist at Deloitte, says the UK is showing a steely streak:
“The UK is proving more resilient than expected in the face of a global slowdown and Brexit headwinds. The pace of growth could be choppy, but the UK is likely to grow at about the same pace as the euro area this year.”
Pablo Shah, senior economist at the CEBR thinktank, warns that Brexit could still drag the economy down in 2019.
“Today’s figures provide a glimmer of hope that the UK economy has gained some momentum at the start 2019, despite the effects of a slowing global economy and crippling uncertainty. Cebr forecasts that the UK economy will grow by 1.2% over 2019, assuming that a modified version of the withdrawal agreement is passed in the coming weeks.
However, risks to this forecast are stacked to the downside, with a resolution this year to the current parliamentary gridlock by no means a given.”
Seamus Nevin, chief economist at Make UK, the manufacturers’ organisation, agrees that UK companies needs some relief from Brexit uncertainty:
“While the positive performance of manufacturing will come as a relief after months of concern survey anecdotal evidence suggests that the results may, once again, be due to no-deal Brexit contingency planning, stockpiling and declining export demand for UK goods rather than a sign the economic fundamentals are sound.
This, along with the increasing global economic slowdown again reinforces why British businesses need certainty on what form of Brexit the country is headed for. Business are trying to standstill until the Brexit fog clears but in doing so they are actually going backwards.”
*UNITED KINGDOM FEB 2019 GDP ESTIMATE MM DECREASE TO 0.2 % VS. PREV 0.5 % -BBG. ... Despite the uncertain outlook, pretty reasonable data. Anyway, the U.K. stockpiles for an event, called Brexit...So don't get too overexcited ! @graemewearden #Brexit $GBP
As monthly GDP figure are rather volatile, you get a better picture of the UK economy by looking at the rolling three-month data.
It shows that growth peaked last summer (thanks to good weather, some World Cup excitement), before slowing in the second half of 2018. 2019 hasn’t been too impressive so far either:
The ONS’s head of GDP, Rob Kent-Smith, says:The ONS’s head of GDP, Rob Kent-Smith, says:
“GDP growth remained modest in the latest three months. Services again drove the economy, with a continued strong performance in IT.“GDP growth remained modest in the latest three months. Services again drove the economy, with a continued strong performance in IT.
“Manufacturing also continued to recover after weakness at the end of last year with the often-erratic pharmaceutical industry, chemicals and alcohol performing well in recent months.”“Manufacturing also continued to recover after weakness at the end of last year with the often-erratic pharmaceutical industry, chemicals and alcohol performing well in recent months.”
Britain’s services companies, which makes up around three-quarters of the economy, didn’t sparkle in February.Britain’s services companies, which makes up around three-quarters of the economy, didn’t sparkle in February.
Service sector GDP only rose by 0.1% during the month, down from 0.3% in January.Service sector GDP only rose by 0.1% during the month, down from 0.3% in January.
Building firms did better, though, with output rising by 0.4% (better than expected).Building firms did better, though, with output rising by 0.4% (better than expected).
But as you can see, industrial companies were the busiest:But as you can see, industrial companies were the busiest:
This chart from today’s GDP report shows how UK manufacturing output has accelerated this year, as the threat of supply chain disruption has intensified.This chart from today’s GDP report shows how UK manufacturing output has accelerated this year, as the threat of supply chain disruption has intensified.
Brexit stockpiling by nervous companies appears to have driven UK growth last month.Brexit stockpiling by nervous companies appears to have driven UK growth last month.
Industrial production jumped by 0.6% during February, driven by a 0.9% surge in manufacturing, today’s GDP report says.Industrial production jumped by 0.6% during February, driven by a 0.9% surge in manufacturing, today’s GDP report says.
The Office for National Statistics says it has seen “some qualitative evidence” that manufacturers have been boosting production ahead of Britain’s exit from the EU, saying:The Office for National Statistics says it has seen “some qualitative evidence” that manufacturers have been boosting production ahead of Britain’s exit from the EU, saying:
Following a period of contraction, output in production and manufacturing has risen for the second month in a row, the latter driven by domestic demand. Manufacturing is now at its highest level since April 2008....Following a period of contraction, output in production and manufacturing has risen for the second month in a row, the latter driven by domestic demand. Manufacturing is now at its highest level since April 2008....
This was driven by pharmaceuticals, food products (including beverages) and chemicals, although it was partially offset by a fall in motor vehicle production.This was driven by pharmaceuticals, food products (including beverages) and chemicals, although it was partially offset by a fall in motor vehicle production.
On an annual basis, the UK economy expanded by 2.0% in the last quarter -- the best results since late 2017.On an annual basis, the UK economy expanded by 2.0% in the last quarter -- the best results since late 2017.
Newsflash: Britain’s economy grew by 0.2% in February, better than many City economists had expected.Newsflash: Britain’s economy grew by 0.2% in February, better than many City economists had expected.
Over the last quarter, GDP grew by 0.3%.Over the last quarter, GDP grew by 0.3%.
More to follow....More to follow....
In the markets, Britain’s FTSE 100 index of top shares is becalmed this morning as traders wait for February’s growth report, and any Brexit developments.In the markets, Britain’s FTSE 100 index of top shares is becalmed this morning as traders wait for February’s growth report, and any Brexit developments.
Other European markets are a little higher.Other European markets are a little higher.
Stand By Your Desks! UK GDP for February is due in 10 minutes and having gone -0.4% and then 0.5% it is erratic. One possible hint is that production numbers for Italy and France earlier have been strongish, will the UK be the same?Stand By Your Desks! UK GDP for February is due in 10 minutes and having gone -0.4% and then 0.5% it is erratic. One possible hint is that production numbers for Italy and France earlier have been strongish, will the UK be the same?
In a welcome boost, France and Italy have both reported a jump in factory production this morning - up 0.5% and 0.8% in February respectively.In a welcome boost, France and Italy have both reported a jump in factory production this morning - up 0.5% and 0.8% in February respectively.
Good news for Eurozone industrial production, which rises +0.4% MoM in France, much more than expected -0.5% and jumps +0.8% in Italy, well above the expected -0.5%, hinting 1Q 2019 could be better than analysts' forecasts @graemeweardenGood news for Eurozone industrial production, which rises +0.4% MoM in France, much more than expected -0.5% and jumps +0.8% in Italy, well above the expected -0.5%, hinting 1Q 2019 could be better than analysts' forecasts @graemewearden
Industry bosses will be hoping that this recovery isn’t derailed by Brexit, or an escalating trade war with America.Industry bosses will be hoping that this recovery isn’t derailed by Brexit, or an escalating trade war with America.
Marc Ostwald of ADM Investor Services says Britain’s service sector will determine whether the UK economy was strong or weak in February.Marc Ostwald of ADM Investor Services says Britain’s service sector will determine whether the UK economy was strong or weak in February.
Today’s rather moot (given Brexit risks) run of data is projected to show monthly GDP stalling (flat month on month) after unexpectedly jumping 0.5% m/m in January, leaving the 3 month/3 month measure unchanged at 0.2% q/q, and as ever much will depend on the Index of Services which will likely slow from 0.3% in January.Today’s rather moot (given Brexit risks) run of data is projected to show monthly GDP stalling (flat month on month) after unexpectedly jumping 0.5% m/m in January, leaving the 3 month/3 month measure unchanged at 0.2% q/q, and as ever much will depend on the Index of Services which will likely slow from 0.3% in January.
Industrial Production and Manufacturing Output will also likely slow to 0.1% m/m and 0.2% m/m respectively after unexpected strength in January, though base effects from last year’s ‘beast from the East’ implies y/y rates improving modestly, but remaining negative at -0.8% and -0.6%.Industrial Production and Manufacturing Output will also likely slow to 0.1% m/m and 0.2% m/m respectively after unexpected strength in January, though base effects from last year’s ‘beast from the East’ implies y/y rates improving modestly, but remaining negative at -0.8% and -0.6%.
The ever volatile Construction Output will also likely stall m/m after a surprising 2.8% m/m in January.The ever volatile Construction Output will also likely stall m/m after a surprising 2.8% m/m in January.
Transport group Stagecoach has suffered the indignity of being disqualified from the race to control three UK rail franchises.Transport group Stagecoach has suffered the indignity of being disqualified from the race to control three UK rail franchises.
The Department for Transport brandished the red card after concluding that the firm’s bids to run trains on the East Midlands, South Eastern and West Coast franchises were “non-compliant”.The Department for Transport brandished the red card after concluding that the firm’s bids to run trains on the East Midlands, South Eastern and West Coast franchises were “non-compliant”.
Stagecoach’s error? Not providing sufficient funding for the Railways Pension Scheme, despite the DfT insisting this was a crucial part of the franchise terms.Stagecoach’s error? Not providing sufficient funding for the Railways Pension Scheme, despite the DfT insisting this was a crucial part of the franchise terms.
Shares in UK pharmaceuticals firm Indivior are plunging this morning, after the firm was charged with fraudulently boosting demand for its opioid drug.Shares in UK pharmaceuticals firm Indivior are plunging this morning, after the firm was charged with fraudulently boosting demand for its opioid drug.
A US grand jury says Indivior illegally, and wrongly, told healthcare providers that its Suboxone Film, which contains the opioid buprenorphine, was better and safer than similar drugs.A US grand jury says Indivior illegally, and wrongly, told healthcare providers that its Suboxone Film, which contains the opioid buprenorphine, was better and safer than similar drugs.
The indictment says:The indictment says:
“Indivior illegally obtained billions of dollars in revenue from Suboxone Film prescriptions by deceiving health care providers and health care benefit programs into believing that Suboxone Film is safer and less susceptible to diversion and abuse than other, similar drugs.”“Indivior illegally obtained billions of dollars in revenue from Suboxone Film prescriptions by deceiving health care providers and health care benefit programs into believing that Suboxone Film is safer and less susceptible to diversion and abuse than other, similar drugs.”
Indivior now faces twenty-eight felony counts - one count of conspiracy to commit mail, wire and health care fraud; one count of health care fraud; four counts of mail fraud; and twenty-two counts of wire fraud.Indivior now faces twenty-eight felony counts - one count of conspiracy to commit mail, wire and health care fraud; one count of health care fraud; four counts of mail fraud; and twenty-two counts of wire fraud.
Shares in the firm, which was spun out of consumer good giant Reckitt Benckiser in 2014, have halved in early trading, from 105p to just 49p.Shares in the firm, which was spun out of consumer good giant Reckitt Benckiser in 2014, have halved in early trading, from 105p to just 49p.
Currently, more than 130 Americans die every day after overdosing on opioids. The grand jury accuses Indivior of pushing patients towards doctors who prescribed opioids at high rates.Currently, more than 130 Americans die every day after overdosing on opioids. The grand jury accuses Indivior of pushing patients towards doctors who prescribed opioids at high rates.
https://www.theguardian.com/us-news/2019/apr/09/opioid-addiction-indivior-indictmenthttps://www.theguardian.com/us-news/2019/apr/09/opioid-addiction-indivior-indictment
Indivior insists that the allegations are “wholly unsupported by either the facts or the law”, and that it is committed to helping solve the US opioid crisis.Indivior insists that the allegations are “wholly unsupported by either the facts or the law”, and that it is committed to helping solve the US opioid crisis.
“Indivior has never deliberately diverted its product. The government claims that the company aided the careless and clinically unwarranted prescribing by doctors of SUBOXONE® products to too many people or in too high doses.“Indivior has never deliberately diverted its product. The government claims that the company aided the careless and clinically unwarranted prescribing by doctors of SUBOXONE® products to too many people or in too high doses.
To the contrary, we have engaged in an extensive education campaign to teach doctors about recommended SUBOXONE® dosing limits and patient caps and have developed a process to identify concerning prescribers, going beyond what the law requires.To the contrary, we have engaged in an extensive education campaign to teach doctors about recommended SUBOXONE® dosing limits and patient caps and have developed a process to identify concerning prescribers, going beyond what the law requires.
Indivior also flags up that the allegations relate to the time before it was demerged from Reckitt Benckiser -- whose shares are down 3.5% this morning, the biggest FTSE 100 faller.Indivior also flags up that the allegations relate to the time before it was demerged from Reckitt Benckiser -- whose shares are down 3.5% this morning, the biggest FTSE 100 faller.
Tesco chief Dave Lewis is in cheery mood this morning, after reporting that profits jumped by a third last year.Tesco chief Dave Lewis is in cheery mood this morning, after reporting that profits jumped by a third last year.
Four years after taking control of the company (and promptly reporting a £250m black hole in its accounts), Lewis is preparing to wave the ‘mission accomplished’ banner.Four years after taking control of the company (and promptly reporting a £250m black hole in its accounts), Lewis is preparing to wave the ‘mission accomplished’ banner.
He says:He says:
“After four years we have met or are about to meet the vast majority of our turnaround goals. “I’m very confident that we will complete the journey in 2019/20.”“After four years we have met or are about to meet the vast majority of our turnaround goals. “I’m very confident that we will complete the journey in 2019/20.”
Under Lewis’s watch Tesco has slashed prices, simplified its ranges, merged with wholesale chain Booker, and managed to grow market share despite the rise of discount rivals.Under Lewis’s watch Tesco has slashed prices, simplified its ranges, merged with wholesale chain Booker, and managed to grow market share despite the rise of discount rivals.
On the Brexit front, Lewis says Tesco isn’t seeing signs of significant stockpiling, but suspects customers are fatigued with the issue.On the Brexit front, Lewis says Tesco isn’t seeing signs of significant stockpiling, but suspects customers are fatigued with the issue.
Today’s UK GDP report comes at a critical time for the global economy.Today’s UK GDP report comes at a critical time for the global economy.
Last night, Italy’s government slashed its 2019 growth forecast to just 0.2% - down from 1%. That means Rome is certain to miss its budget deficit target, teeing up a new clash with Brussels.Last night, Italy’s government slashed its 2019 growth forecast to just 0.2% - down from 1%. That means Rome is certain to miss its budget deficit target, teeing up a new clash with Brussels.
The International Monetary Fund has also added to the gloom, by cutting its growth forecasts and warning that a no-deal Brexit could trigger a long recession.The International Monetary Fund has also added to the gloom, by cutting its growth forecasts and warning that a no-deal Brexit could trigger a long recession.
IMF says no-deal Brexit risks two-year recession for UKIMF says no-deal Brexit risks two-year recession for UK
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 discover how Britain’s economy performed in February, in the face of Brexit gridlock and weakness in the global economy.Today we discover how Britain’s economy performed in February, in the face of Brexit gridlock and weakness in the global economy.
February’s GDP report is due at 9.30am today. City economists have a range of guesstimates, from solid 0.3% growth to a chilling 0.2% contraction. But the consensus is that there was no growth at all during the month.February’s GDP report is due at 9.30am today. City economists have a range of guesstimates, from solid 0.3% growth to a chilling 0.2% contraction. But the consensus is that there was no growth at all during the month.
Service sector firms and industrial groups are expected to have grown slowly, while construction output may have shrunk.Service sector firms and industrial groups are expected to have grown slowly, while construction output may have shrunk.
This would mean the UK only grew by 0.2% in the last quarter, the same as a month ago, following a 0.4% contraction in December but 0.5% growth in January.This would mean the UK only grew by 0.2% in the last quarter, the same as a month ago, following a 0.4% contraction in December but 0.5% growth in January.
If so, that would suggest that Theresa May’s failure to get her Brexit deal through parliament has hurt the economy. Economic weakness in the eurozone, and the knock-on impact of the US-China trade dispute, would also be blamed.If so, that would suggest that Theresa May’s failure to get her Brexit deal through parliament has hurt the economy. Economic weakness in the eurozone, and the knock-on impact of the US-China trade dispute, would also be blamed.
This morning’s data is also expected to show Britain ran its traditional trade deficit in February, at around £3.9bn.This morning’s data is also expected to show Britain ran its traditional trade deficit in February, at around £3.9bn.
Analysts at TD Securities say:Analysts at TD Securities say:
“Underlying our forecast are small gains in services and IP offset by a contraction in construction.“Underlying our forecast are small gains in services and IP offset by a contraction in construction.
Data in the coming months is likely to be choppy, and we would read little into a single month’s observation until Brexit uncertainty wanes.”Data in the coming months is likely to be choppy, and we would read little into a single month’s observation until Brexit uncertainty wanes.”
Also coming up todayAlso coming up today
Investors will be watching Frankfurt, where the European Central Bank holds a monetary policy meeting. Fireworks aren’t expected, though, as Lukman Otunuga, Research Analyst at FXTM, explains:Investors will be watching Frankfurt, where the European Central Bank holds a monetary policy meeting. Fireworks aren’t expected, though, as Lukman Otunuga, Research Analyst at FXTM, explains:
Mario Draghi and his fellow policymakers are expected to sit on their hands this month, with little room to maneuver amid significant headwinds.Mario Draghi and his fellow policymakers are expected to sit on their hands this month, with little room to maneuver amid significant headwinds.
While political tensions in France and Brexit uncertainties are beyond the central bank’s control, these factors have been highlighted by the IMF as putting downward pressure on growth, leaving the ECB to bide for time and watch how these risks manifest into the real economy.While political tensions in France and Brexit uncertainties are beyond the central bank’s control, these factors have been highlighted by the IMF as putting downward pressure on growth, leaving the ECB to bide for time and watch how these risks manifest into the real economy.
They’ll then turn their attention to Brussels, where European leaders will tonight consider the UK’s latest Brexit extension request (a long delay looks likely).They’ll then turn their attention to Brussels, where European leaders will tonight consider the UK’s latest Brexit extension request (a long delay looks likely).
Brexit: May's hopes dashed as EU targets delay of up to a yearBrexit: May's hopes dashed as EU targets delay of up to a year
On the corporate front, supermarket chain Tesco has just posted a near-30% rise in profits, as its turnaround plan bears fruit. UK retailers Dunelm and ASOS are also reporting results today.On the corporate front, supermarket chain Tesco has just posted a near-30% rise in profits, as its turnaround plan bears fruit. UK retailers Dunelm and ASOS are also reporting results today.
Tesco Fy sales up by 11.2% to £63.9bn while profits have jumped by 28% to £1.7bn -beating forecasts with the best results under Dave LewisTesco Fy sales up by 11.2% to £63.9bn while profits have jumped by 28% to £1.7bn -beating forecasts with the best results under Dave Lewis
The agendaThe agenda
9.30am BST: UK GDP report for February9.30am BST: UK GDP report for February
9.30am BST: UK trade and industrial production figures for February9.30am BST: UK trade and industrial production figures for February
12.45pm BST: European Central Bank interest rate decision12.45pm BST: European Central Bank interest rate decision
1.30pm BST: ECB press conference1.30pm BST: ECB press conference