UK growth revised up; Unilever vows to unlock value –as it happened
All the day's economic and financial news, as a second estimate of UK GDP shows faster growth than first thought
- Latest: Unilever acts after Kraft Heinz approach
- UK economy grew faster than expected in October-December
- Details: GDP revised to +0.7%...
- ..but business investment has dropped
- Britain no longer fastest growing G7 economy last year
- What the experts say
5.31pm GMT
It was far from convincing, but most European markets managed to end the day in positive territory.
News that Franiois Bayrou was not standing in the French presidential election, and would support rival Emmanuel Macron, gave a lift to the euro, with investors betting that this meant a win for the anti-EU candidate Marine Le Pen could be less likely.
4.57pm GMT
Unilever shares have ended as the day's biggest riser in the FTSE 100, following news of their plans to boost shareholder value in the wake of the rejected bid from Kraft Heinz.
The shares ended up 5.7% at 37/91, just shy of the record close of 37.97 on Friday when the Kraft bid emerged.
3.49pm GMT
Inflationary pressures are building in the economy, and here are more signs of that. Ada, Vaughan reports:
Britain's big six energy suppliers are under pressure to pass on more price hikes to consumers' energy bills, the industry trade body has warned.
Npower, EDF and Scottish Power have already announced price rises for millions of customers, blaming a mix of rising wholesale costs, installation of smart meters and government policies paid for through bills. British Gas has frozen prices until August, while SSE and E.ON have yet to declare their intentions.
Related: Energy firms may need to raise prices further, warns industry body
Related: British Gas price freeze is unlikely to impress customers
3.25pm GMT
Back with Unilever, and the company's shares are now up 5.5%, making it the biggest riser in the FTSE 100. The rise follows its announcement it is acting to boost shareholder value following the rejected bid from Kraft Heinz. Rob Davies writes:
Unilever has upgraded profit margin expectations and announced a "comprehensive review of options" to improve value for shareholders in an apparent effort to shore itself up against a renewed bid from the US food group Kraft Heinz.
The Anglo-Dutch company knocked back a 115bn bid from Kraft on Friday, and 48 hours later its US rival withdrew its bid, with both sides saying talks had ended "amicably".
Related: Unilever takes steps to fend off renewed bid from Kraft Heinz
3.07pm GMT
Some strong housing figures from the US will increase expectations that the Federal Reserve will raise interest rates before too long.
Existing home sales climbed by 3.3% in January to a seasonally adjusted annual rate of 5.69m units, a ten year high and well above the 5.54m expected by economists. The December figure was revised up from 5.49m to 5.51m. Demand for housing is being supported by a strong employment market, with buyers undeterred by higher prices and mortgage rates.
Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home. Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.
2.42pm GMT
After consistently hitting new peaks in recent days, US markets have slipped back as investors pause for breath.
The Dow Jones Industrial Average is down 44 points or 0.21% while the S&P 500 and Nasdaq Composite both opened slightly lower. A dip in oil prices sent energy stocks lower, while there was some profit taking ahead of the latest Federal Reserve minutes.
1.55pm GMT
Alasdair Pal of Reuters is tweeting about the Unilever news:
Unilever now almost at the Kraft-approach highs, after confirming a strategic review pic.twitter.com/U7wsbwJj95
Talk among contacts is increasingly that Unilever will look at spinning off some of their household brands to focus on high-margin food
John Bennett at Henderson bought Unilever on Monday for this very reason pic.twitter.com/Dbc8WGEGGe
1.53pm GMT
A second announcement from Unilever just hit the City -- saying it is on track to hit the higher end of its profitability guidance
The company say:
The management of Unilever now expects Core Operating Margin improvement for 2017 to be at the upper end of its 40-80 basis points guidance.
Unilever announces "comprehensive review" of options
Translation: "What could we sell to keep big shareholders happy?"
1.16pm GMT
Unilever's shares have jumped by 3%, following its pledge to unlock more value....
Stay tuned, latest from @Unilever : "events of the last week have highlighted the need to capture more quickly the value we see in Unilever" pic.twitter.com/UdlpdF2MCh
1.15pm GMT
Hello.... consumer good firm Unilever has just issued an intriguing statement to the City.
It says:
Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. The events of the last week have highlighted the need to capture more quickly the value we see in Unilever.
We expect the review to be completed by early April, after which we will communicate further.
Unilever Conducting Comprehensive Review of Options; Seeking to Accelerate Delivery of Value for investors; Review completed by early April
Unilever sounding rattled: "he events of the last week have highlighted the need to capture more quickly the value we see in Unilever."
12.51pm GMT
Newsflash: Britain's government is drawing up proposals for how it could intervene when a foreign company tries to buy a UK firm.
It's a timely move, with Unilever having just told Kraft Heinz where it can stick its 114bn takeover offer.
"We will be setting out some proposals in the weeks ahead."
Rt Hon Greg Clark MP, Secretary of State for #Business, #Energy & #Industrial Strategy addresses a packed audience at #EEF2017 today. #LEEA pic.twitter.com/RJNqpRCfmg
Clark: I believe in free trade, should continue to have best possible, tariff free access without bureaucratic restrictions #brexit #eef2017
12.16pm GMT
Business investment in the UK fell by 1.5% during 2016, a decline of 2.7bn, according to new ONS figures.
That's the first annual decrease in business investment since 2009, after the financial crisis.
"It's very worrying to see that business investment is already falling with the challenges of Brexit ahead. If this trend continues, working people will pay the price through weaker wages and fewer jobs.
"Despite a modest boost to public investment last year, UK investment still lags behind the world's leading industrial nations. With private sector investment in retreat, the Chancellor must focus on closing the gap with our competitors in next month's budget. This would help protect jobs and wages, and it would give a much needed boost to business confidence."
11.36am GMT
The momentum in the UK economy at the turn of the year continues to surprise to the upside, says Sam Hill of Royal Bank of Canada.
But he expects growth to slow in the current quarter, to around +0.4%, because:
...higher inflation and Brexit uncertainty present on-going headwinds to consumer spending and business investment, which the erratic contribution from the external sector is unlikely to compensate for.
11.16am GMT
Ben Chu of the Independent has created a handy graph, showing how business investment has tailed off:
...and business investment estimated to have fallen 1% in Q4 2016 pic.twitter.com/2VOcCUtfHA
11.15am GMT
The weak pound helped to cushion Britain from the Brexit vote shock, says Nancy Curtin, Chief Investment Officer at Close Brothers Asset management.
"The improved GDP revision for the final quarter of 2016 confirms that it was business as usual for the UK economy, despite the UK's momentous vote to leave the EU. The lower pound appears to have acted as shock absorber and continues to aid industrial activity and exports. The UK is also in a fortunate position of capitalising on any pick up in global growth given that 70% of its market is international.
11.03am GMT
Britain's economic growth was less impressive when you adjust for population changes.
GDP rose by 0.5% on a per-head basis in the last quarter, and is now 1.8% above its pre-crisis peak in 2008.
10.42am GMT
John Hawksworth, chief economist at PwC, has a good take on today's GDP report:
"Today's revised GDP data were a mixed bag of good and bad news, but this doesn't change the big picture that the UK continued to grow steadily during the six months following the Brexit vote.
"Estimated fourth quarter GDP growth was marked up slightly from 0.6% to 0.7% due primarily to stronger estimated growth in manufacturing. This was linked also to a combination of stronger export growth on the back of a more competitive pound and a gradually strengthening world economy.
10.38am GMT
Reuters have also spotted that Britain has lost its crown as the world's fastest growing major economy:
Britain's 2016 GDP growth revised down to 1.8% from 2.0% - now no longer fastest in G7 (Germany 1.9%) https://t.co/EH0RQY6OuN via @ReutersUK
Headlines you will never read:
"Britain actually not fastest-growing economy in western world after all." https://t.co/LPLJQFoqdN
10.35am GMT
Today's growth report shows that fears of an immediate recession if Britain voted to leave the EU were misplaced.
But...the fall in business investment is a concern, says Ian Kernohan, Economist at Royal London Asset Management:
"Far from slowing down after the vote to leave the EU, GDP growth actually picked up in the second half of the year. However, there were some signs that Brexit uncertainty is starting to have some impact on the corporate sector, with business investment down during the last three months, combined with slower growth in consumer spending.
10.33am GMT
Britain appears to have lost its claim to be the fastest-growing major economy.
Despite the strong expansion in Q4, growth for 2016 as a whole has been revised down to 1.8%, from 2%.
The UK has lost its title as the world's fastest growing advanced economy in 2016, despite a Q4 growth upgrade https://t.co/fmFQ9mtjfY pic.twitter.com/STLLWgE7Ku
10.26am GMT
Darren Morgan, head of GDP at the ONS, has warned that consumer spending has tailed off in recent months.
Overall, the dominant services sector continued to grow steadily, due in part to continued growth in consumer spending, although retail showed some signs of weakness in the last couple of months of 2016, which has continued into January 2017.
10.19am GMT
Sam Tombs of Pantheon Economics is concerned that Britons are spending beyond their means....
UK GDP breakdown shows real household spend up 0.7%, even though employees' compensation grew by just 0.1%. This is not sustainable growth
Maybe the most striking thing from GDP revisions today is detail on where growth is coming from. 2016 entirely driven by household spending
10.08am GMT
The City has given today's growth report a rather muted reception.
Jeremy Cook, chief economist at the international payments company, World First, says that last year's growth figures are rather ancient history.
"UK GDP may have gained some momentum into the end of 2016 but recent news from UK seems to have shown that that momentum has been lost in the early weeks of 2017.
Services growth is set to slow, buffeted by rising inflation and slowing real wage gains and a consumer that is not waving but drowning, business investment remains poor given uncertainty over the negotiations between the UK and the EU following the Brexit vote last summer and while trade was stronger on the quarter this is purely a function of the devaluation of the pound
Mixed UK GDP picture: decent net trade but weak biz investment.
Weak gross fixed capital formation is kinda a problem if you want to run a capitalist economy. Just saying. It's sort of important.
It doesn't really look like an investment-led boom, does it? https://t.co/9Z1JCZpAJX
Revision to #UK Q4 GDP (0.7% v 0.6%) after strong Dec manufacturing output, itself the result of a surge in (volatile) pharmaceutical output
"The UK economy performed more strongly that first estimated at the end of 2016, aided by a particularly solid quarter for manufacturing growth.
The resilience of the UK economy, particularly in the latter part of 2016 has been supported by a robust support from net trade and a rapid post-referendum recovery on consumer's confidence to keep spending.
"The UK economy is rarely without its weak points and at the end of 2016 it was business investment. Capital expenditure by businesses saw a contraction in the final months of last year contributing the first year-on-year contraction in business investment since 2009. It's too soon to declare this an worrying omen for 2017, especially as more recent survey indicators have been signalling a more positive trend.
9.52am GMT
But..in a worrying signal, UK business investment fell by 1% in the last quarter.
The ONS reports that there was "a slowdown within business investment" in the last three months of 2016. This was driven by subdued growth within the "ICT equipment and other machinery and equipment" assets.
9.46am GMT
As this chart shows, Britain's economy has just posted its fastest quarterly growth in a year.
9.45am GMT
Today's report shows that net trade helped to drive Britain's economic growth in the last quarter 0f 2016.
Net trade added 1.3 percentage points to the UK growth rate in October to December, says the ONS. That reverses a 1.2% decline in the third quarter.
UK Q4 GDP growth revised up to 0.7%q/q off the back of a big contribution from net trade. Consumers chipped in too. pic.twitter.com/YG8CGnoVlb
9.34am GMT
Breaking! Britain economy grew faster than expected in the final three months of 2016!
GDP expanded by 0.7% in the October-December quarter, according to new estimates from the Office for National Statistics, up from 0.6%.
9.14am GMT
It's possible, although unlikely, that Britain's growth rate for the last quarter could be revised higher in a few minutes, from 0.6% to 0.7%.
Analysts at Royal Bank of Canada say:
The first estimate of Q4 GDP growth was 0.6% q/q in real terms. Since then we have learnt that favourable revisions to industrial production added 0.04ppts to headline GDP growth with marginally positive news in the construction sector too. This clearly means the prospect of an upward revision to GDP needs to be considered.
However, as a central case our forecast is that Q4 GDP is confirmed at 0.6% q/q, as the preliminary estimate had an index level which translated into 0.56% to two decimal places. So, even with the known upward revisions it still isn't sufficient to turn into an upgrade to 0.7% q/q.
UK GDP is due at 9:30 am with a possibility of an upwards revision due to the production and trade numbers #GBP #BoE
9.05am GMT
Newsflash: German business confidence has risen this month, according to the IFO thinktank.
IFO's business confidence index index has unexpected come in at 111.0, beating forecasts, and ahead of 109.9 in January.
*IFO FEB. GERMAN BUSINESS CONFIDENCE INDEX AT 111.0; EST. 109.6
9.02am GMT
The euro has now fallen its lowest level against a basket of currencies since last november, says Kit Juckes of Societe Generale.
He says:
Political risk is beginning to the Euro in earnest, reflected by the Euro's trade-weighted value reaching the lowest levels since the US Presidential election, and the OAT/Bund spread reaching the widest levels since then as well. Looking further back, we last had an OAT/Bund spread this wide in November 2012.
Bloomberg have now been tracking the implied probability of the main candidates winning from Oddschecker for just over a month and Marine le Pen's odds have risen steadily over that period while Emmanuel Macron and Franiois Fillon's have varied more. The net result is that all three are virtually level-pegging now. So much uncertainty with 9 weeks to go until the first round of the election means we will probably see nervousness persist, and undermine the Euro across the board.
Latest betting odds for French presidential election: 3 candidates neck and neck (via @kitjuckes). pic.twitter.com/2UYRoKsizS
8.41am GMT
Housebuilder Barratt is also having a good morning, after it reported a 9% jump in profits for the last year.
Investors like @BarrattHomes H1 statement as well they might as firm turns focus from biz investment to cash for shareholders w/ special div pic.twitter.com/ftIimwdXKS
8.35am GMT
London's stock market is rising in early trading, led by Lloyds Banking Group.
"Our performance is inextricably linked to the health of theUK economy which has been more resilient than the market expected post referendum."
8.17am GMT
Boom! The German DAX share index has hit 12,000 points for the first time since April 2015.
Shares in German exporters are up, thanks to the weak euro (which makes them more competitive). Industrial giant Thyssenkrupp is leading the charge, up 4.6% after agreeing to sell its Brazilian steel business.
8.15am GMT
Worries over the French election are also driving investors into the safety of German debt.
This has pushed the interest rate on two-year bonds to a fresh record low of -0.87% this morning.
Wow! #Germany's 2y yields just drop to fresh all-time low at -0.87% on Bund shortage. 2y Bunds used as collateral and bought by #ECB for QE. pic.twitter.com/oGVqcvmw2C
8.00am GMT
The pound has his a two-month high against the euro, as European political worries weigh on the single currency.
Sterling has gained half a eurocent to a1.188 for the first time since 21 December, meaning one euro now only buys 84.17p.
Nice to see the UK Pound pushing higher towards 1.19 versus the Euro this morning. #BoE #GBP
No one seems optimistic about the political future. Marine Le Pen in France is now the front-runner to win the first round of the French Presidential election, and her prospects are also improving for the second round.
This has caused the spread between French and German yields to surge, and we expect this to continue. Political risk also weighed on the EUR/USD, which managed to hold above key 1.0500 support but still looks vulnerable as victory for Eurosceptic Le Pen could spell the end for the single currency.
7.42am GMT
Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We're about to get a more detailed look at how Britain's economy performed in the last quarter.
The weakness of the pound is expected to help exports contribute 2%, while imports are expected to fall from 1.4% to 0.5%.
Services are still expected to provide the majority of the expansion at 0.8%, though a little worryingly business investment is expected to stall.
And @AskLloydsBank seeing a good 2016 too, profit before tax of 4.2 billion, more than double the 1.6 billion in 2015
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