Latest data shows UK households feeling the pinch, as Britain posts a trade surplus with non-EU countries
Bad news: Latest: Savings ratio hits record lowDisposable incomes fall tooGood news: Current account deficit shrinksBritain runs £7.4bn surplus with non-EU countriesUK GDP confirmed at 0.7%UK house prices fell this month
More signs of growing activity from US oil companies, with drills added for the eleventh week in a row.
The Baker Hughes rig count showed 15 rigs were added last week, taking the total to 824, which is 374 higher than this time last year. This marks the best quarter for rigs being added since the second quarter of 2011.
U.S. OIL RIG count rises to 662, highest since Sep 2015. Gas rig count rises to 160, highest since Dec 2015 pic.twitter.com/1NMnkk8st5
It’s not been a particularly good quarter for oil prices despite the agreed production quotas for OPEC, and it’s not hard to see why when you look at the rise in the US rig count since the beginning of this year…This return of US shale, and record inventories has taken the edge off any expectation that oil producers will be able to engineer higher prices in the short term.
It has been a positive quarter for markets but it drifted away somewhat on the final day.
The FTSE 100 rose for the fourth quarter in a row, as the drop in the pound following the Brexit vote continued to boost overseas earnings. But a dip in commodity companies as metal prices fell, plus a drop in South African-related stocks such as Old Mutual following the sacking of the country’s finance minister, saw the index slip back on the day.
As the quarter drifts to a close, the FTSE 100 is on course for its fourth quarter of straight gains as dollar earners boosted the index in the wake of sterling’s post-Brexit slump.
Despite the gains, the quarter is ending on a downbeat note, with the index currently 23 points or 0.3% lower but the decline may not last into the next three months, says Chris Beauchamp, chief market analyst at IG:
Those hoping for more downside in equities once the second quarter gets underway should beware the impact of seasonality. April, far from being the cruellest month for equity markets, is in fact one of the strongest historically, and over the past twenty years it is the strongest. This time could be different, but given an reflationary environment, economic growth and still relatively accommodative central bank policies, does it really make sense to argue with history?
Over in Greece, there is more uncertainty after EU officials ruled out negotiations over the country’s latest bailout programme being wrapped up any time soon. From Athens our correspondent Helena Smith reports:
Adding to the intense speculation now swirling around debt- stricken Greece’s ability to conclude fraught bailout talks in the coming weeks, the Dutch finance minister Jeroen Dijsselbloem dismissed any possibility of the review being concluded at the next eurogroup session on April 7.
The Malta meeting of euro area finance ministers had been mooted as the next deadline for the impasse between Greece and its creditors to finally be broken.
If Greece is to realistically conclude talks with creditors in time for massive debt repayments to be paid on 7 July, this needs to be done by May at the latest, insiders say. Any additional delay would reignite fears of a Greek default and unnerve markets.
But the differences are manifest and myriad. The leftist-led government, which appears to have given ground on demands for yet more pension cuts and tax increases, is determined not to yield on what it sees as the illogical demands of the IMF for further liberalisation of the labour market. Energy reforms and the spectre of additional job losses have stoked deep disgruntlement in the ranks of the ruling Syriza party amid growing speculation of leftist MPS refusing to endorse the measures – and a government crisis erupting – when they are put to vote just before Easter.
European markets are edging higher as we head to the close of trading, but the FTSE 100 is still lower and the Dow Jones Industrial Average is down around 41 points after a host of US data. Connor Campbell, financial analyst at Spreadex, said:
There was plenty of US data for investors to deal with this afternoon; they just weren’t that interested. The core PCE price index slipped from 0.3% to 0.2% month-on-month, while personal spending and income fell to 0.1% and 0.4% respectively. The Chicago PMI then rose to a better than forecast 57.7, something that was countered by a worse than estimated drop in consumer sentiment to 96.9. But, as mentioned, none of this mattered to investors, who seemed keen to end the quarter quietly. The Dow Jones trickled 0.2% lower after the bell, taking the index just the wrong side of 20700, but still up from where it was during Monday’s ‘Trump slump’.
Considering how soft the Eurozone’s inflation figures were this morning it is surprising that the region has been so lifeless. Perhaps the euro had time to prepare following yesterday’s weak German CPI reading, meaning the currency merely maintained its month low against the pound rather than seeing its losses widen. The flatness of the euro did nothing for the Eurozone indices, with both the CAC and DAX, the latter admittedly at a 2 year high, shrugging their way through the day.
Following the weaker than expecting US spending figures, it is probably not a surprise that consumer confidence was lower than expected this month.
The University of Michigan’s consumer sentiment index came in at 96.9 for March, up from February’s 96.3 but below expectations of a figure of 97.6.
#UnitedStates Michigan Consumer Sentiment Final at 96.9 https://t.co/gV73G1pzKf pic.twitter.com/6mzDNQHAQ7
And now some stronger than expected US data. The Chicago purchasing managers index for March has come in at 57.7, up from 57.4 in February and better than the forecast figure of 56.9.
USA Chicago PMI announcement – Actual: 57.7, Expected: 56.9 pic.twitter.com/42YyC45Esy
In line with other global markets, Wall Street has edged lower as investors decided to take some profits on the last day of the quarter. The first three months of the year have seen the strongest January to March performance in four years.
The Dow Jones Industrial Average has dipped 31 points or 0.15%, while the S&P 500 and Nasdaq Composite both opened down a similar amount percentage-wise.
Still with the US, and new data shows that consumer spending was virtually flat in February, and lower that forecasts.
According to the Commerce Department, consumer spending rose just 0.1% last month following a 0.2% gain in January. The February increase was the lowest since August 2016 and fell short of expectations of a 0.2% gain. Analysts said part of the reason for the meagre increase was that the government delayed issuing income tax refunds this year in an effort to combat fraud.
If you’re looking for some lunchtime reading, check out this piece on Bloomberg on how financial workers in New York (and beyond, one imagines) are using WhatsApp to avoid compliance checks and share information.
How encrypted messaging is used varies widely on Wall Street.
At the big banks, employees will often use such apps to share gossip, tell clients during morning sales meetings what they’re looking to buy and sell (often within sight of their bosses) or even boast about a particularly profitable trade, the people said. A “don’t ask, don’t tell” mindset prevails.
Great story from @LauraJKeller about how everyone on Wall Street is using WhatsApp to evade compliance rules. https://t.co/c8dBxcxJJX
For those of you who want to dig into the details, here’s some links to today’s data:
Here’s our news story on the fall in the savings ratio, and what it means for the UK economy:
Related: UK households’ savings fall to record low in warning sign for economy
Meanwhile in the eurozone, Mario Draghi might be tempted to enjoy a glass of gavi with his lunch, following the latest inflation data.
Inflation in the eurozone tumbled to just 1.5% this month, according to new ‘flash’ figures, down from 2% in February.
#Easter, which fell in March last year, but in April this year, holidays are to blame for the drop in #Eurozone core #inflation, says @UBS pic.twitter.com/f6UB4gnkxJ
In another concerning development, the UK service sector suffered a small contraction in January.
Services output decreased by 0.1% between December 2016 and January 2017, says the ONS. That’s only the fourth monthly fall since January 2015.
Earlier this week we learned that UK borrowing on credit cards had hit an 11-year high; another sign that people are feeling a financial squeeze.
“Today’s figures should set alarm bells ringing. The last thing our economy needs right now is another consumer debt crisis.
“But with wage growth stalling and prices rising, many households are having to rely on credit cards and loans to get through the month.
Duncan Weldon of the Resolution Group has a theory for why Britons are saving less…
Has anyone done any work on how much of the fall in the UK household savings ratio is a compositional effect of an ageing population?
Presumably as the boomers retire and draw down savings that pushes the HSR lower.
The Bank of England may be worried by the slump in Britain’s savings ratio to that record low of just 3.5%.
As the Indie’s Ben Chu points out, the Bank had predicted it would fall — but not as sharply as this!
.@TheIndyBusiness …the Bank of England’s February forecast is already well off… pic.twitter.com/ub1nj6Shi8
The fall in Britain’s current account deficit is partly thanks to the slump in sterling since the Brexit vote.
The cheaper pound makes imports pricier and exports more competitive, so it should cushion UK firms from the impact of Britain leaving the EU.
The uncertainty created by Brexit led to some weakness in business investment during the quarter, however the weakness in Sterling did lead to an improvement in the current account, with the trade component leading the charge.”
Dario Perkins of City firm TS Lombard says there are two reasons why Britain’s savings ratio has hit record lows:
Could be because 1) £ squeezed real incomes but we’re in denial, or 2) we’re expecting a massive post-Brexit productivity boom. You decide
Martin Beck, senior economic advisor to the EY ITEM Club, is concerned by the fall in Britain’s savings ratio and disposable incomes:
“There are worrying signs in the data on the household sector, with a further drop in real incomes meaning that the savings ratio fell to the lowest level on record.
Given that this pre-dates the worst of the inflationary pressures, it provides further evidence that 2017 is likely to be a very tough year for the consumer, with little or no scope to offset the headwinds from higher inflation by borrowing more. And given that higher household borrowing was a key part of the MPC’s strong forecast for GDP growth, there must be a good chance that this will not be achieved, strengthening the case for a lengthy period of monetary policy inaction.”
Bad news! Britains households are saving less than at any time since record began over 60 years ago, as household disposable incomes slide.
The UK saving ratio shrank to 3.3% in the last quarter, today’s report shows, a sharp slide from 5.3% in July-September.
The saving ratio fell to 3.3% in Quarter 4 2016, the lowest rate on record. The saving ratio has been declining since Quarter 3 2015 which primarily reflects stronger growth in consumer spending outweighing the rate of growth in household disposable income. Strong growth in consumer spending comes on the back of robust labour market activity, while the slowing in household disposable income growth largely reflects a fall in other investment income from property income.
Increased squeeze on #UK households as real disposable income fell 0.4% q/q in Q4 2016 & flat y/y. Savings ratio dived to 3.3% (from 5.3%)
Today’s figures also show how Britain runs a large trade deficit with Europe, and a surplus with the rest of the world.
The UK-EU trade deficit came in at £19.5bn in October-December 2016, down from £22.7bn in July-September,.
This was due mainly to the movements in erratic items widening the total trade surplus from £2.6 billion in Quarter 3 2016 to a surplus of £13.6 billion in Quarter 4 2016.
Good news! Britain’s current account deficit with the rest of the world has shrunk sharply.
The UK’s current account deficit was £12.bn in October-December 2016, less than half the £25.7bn racked up in the third quarter of last year.
Breaking: Britain has cemented its place as the second-fastest growing advanced economy last year.
UK GDP rose by 0.7% in the October-December period, the Office for National Statistics reports, unchanged from the earlier reading.
UK GDP growth in Quarter 4 2016 saw a continuation of strong consumer spending and strong output in consumer-focused industries; there has been a slowdown within business investment which fell by 0.9% driven by falls within the other buildings and structures and transport equipment assets, although this is a slightly improved picture from the second estimate of GDP, being revised up by 0.1 percentage points.
UK households are still nervous about their financial situation as the Brexit process gets underway, a new report has shown.
The Consumer Confidence Index produced by polling firm GfK came in at minus 6 in March, unchanged from February..
“Consumers remain cagey about the state of their personal finances and the general economic picture for the UK, especially as wage growth fails to keep pace with the rising costs of living.
We continue to expect overall confidence to soften in the course of this year, in line with weaker activity and slowing real income as inflation peaks just above 3% by mid-year.
Confidence with regard to the wider economy could also deteriorate further as consumers begin to register the economic impact of the UK’s withdrawal from the EU, now that article 50 has been triggered and that negotiations are set to start.
Newsflash: Germany’s unemployment rate has hit a new post-reunification low.
The seasonally adjusted jobless total fell by 30,000 in March, to 2.556 million, new figures show. That pulls the jobless rate down from 5.9% to 5.8%.
*GERMAN JOBLESS RATE DROPS TO RECORD LOW 5.8% VS. ESTIMATED 5.9%
Buoyant #German news as #unemployment falls 30,000 in Feb (-17,000 in Jan) to new low of 2.556 million. Unemployment rate down to 5.8%
European markets have fallen in early trading, as investors prepare for this morning’s UK growth figures and the eurozone inflation reading.
In London, the FTSE 100 has shed 23 points, or 0.3%, to 7345.
Market weakness may be explained by an element of risk-off into the week-, month- and quarter-end following one of the best starts to the year since 2013. This despite political risk aplenty, the most recent coming from South Africa.
Britain’s government has taken another step towards extricating itself from the financial sector, nearly 10 years after the credit crunch struck.
“The sale of these Bradford & Bingley assets for £11.8 billion marks another major milestone in our plan to get taxpayers’ money back following the financial crisis.
“We are determined to return the financial assets we own to the private sector and today’s sale is further proof of the confidence investors have in the UK economy.”
Is Britain’s housing market catching a spring cold?
Six regions saw the pace of house price growth accelerate, six saw a deceleration and one (East Midlands) recorded the same rate as the previous quarter. Interestingly, the spread in the annual rate of change between the weakest and strongest performing regions was at its narrowest since 1978 at 6.8 percentage points – the second smallest gap on record.
“The South of England continued to see slightly stronger price growth than the North of England, but there was a further narrowing in the differential. Northern Ireland saw a slight pickup in annual house price growth, while conditions remained relatively subdued in Scotland and Wales.
UK property pop pic.twitter.com/tVdGs6FLly
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Two fairly interesting pieces of economic data are coming up this morning.
The National Accounts will bring news of the current account deficit for Q4 2016 where the smallest trade deficit since Q2 2011 should be a contributing factor to a narrowing in the overall current account deficit from the 5.2% recorded in Q3.
Last month we saw CPI hit the ECB’s 2% target for the first time in four years, however this is expected to slip back to 1.8%, while core prices could also slip back from their current 0.9% to 0.8%. Anything weaker than this is likely to pressure the euro further in the short term.
South Africa’s rand falls 2% after Zuma dismisses finance minister https://t.co/A2blJymUNF pic.twitter.com/5VTSUHSbod