Germany accelerates with 0.6% growth; US consumer confidence rallies – as it happened
All the day's economic and financial news, as Germany posts strong growth figures at the start of 2017
- US consumer confidence rises again
- Germany grew by 0.6% in Q1
- Business investment and domestic spending drive growth
- UK, US and France all lag behind
- The agenda: US-China trade deal, US data
4.41pm BST
That's all for today. Here's a quick closing summary.
Market back to thinking just one more Fed rate hike this year (in June) is a more likely scenario than two more after today's inflation data pic.twitter.com/LkckocGk1w
4.41pm BST
European stock markets have closed for the week, with Britain's blue-chip index leading the way.
It cannot be said to have been the most exciting week in stock markets, despite the FTSE 100 touching its highest level in over seven weeks.....
With US earnings season out of the way, it looks like investors are fast running out of reasons to buy stocks. The attempt at a rally from earlier in the week has fizzled out, and while the decline has yet to turn into a full-blown rout, the number of fallers continues to outnumber the gainers, a sign that all is not well beneath the surface of the S&P 500.
3.33pm BST
US consumer sentiment is still sky-high, says Michael Pearce of Capital Economics, thanks to the stock market rally and strong jobs market.
Here's his take on the Michigan confidence report:
The small increase in the University of Michigan measure of consumer confidence leaves it at a level consistent with consumption growth rebounding to over 5% annualised in the second quarter. Spending growth is unlikely to rise quite that sharply, but this still suggests that the weak 0.3% annualised gain in the first quarter was a one-off.
The slight rise in the headline measure to 97.7 in May, from 97.0 was a little better than the consensus forecast for no change. The high level of consumer confidence is consistent with the strength of its underlying drivers; labour market conditions are healthy, the stock market is close to a record high, and gasoline prices have remained low.
3.20pm BST
US consumer confidence has risen has people become more optimistic about economic prospects.
That's according to the University of Michigan's closely watched confidence index, which has jumped to 97.7 from 97.0 in April, beating forecasts of a smaller rise to 97.2.
2.59pm BST
There are a couple of sharp moves on the London stock market today.
Pharmaceuticals firm AstraZeneca has surged 9% to the top of the FTSE 100 leaderboard, after reporting that its immunotherapy drug, durvalumab, has been found to cut the risk of death in patients with advanced lung cancer.
2.37pm BST
Wall Street has just opened, cautiously, for the final trading day of the week.
The Dow Jones and S&P 500 both dipped a little, while the Nasdaq is creeping a little higher as the rally in tech stocks continues.
2.15pm BST
The drop in US core inflation last month is a headache for the Federal Reserve, says Paul Ashworth of Capital Economics.
He says:
To some extent, this new weakness in price inflation is due to competitive pressures rather than weak demand, so the Fed can afford to discount it.
But even under those circumstances, it increases the downside risks to our above-consensus view that the Fed will hike interest rates three more times this year.
1.54pm BST
The US retail sales figures are a somewhat mixed bag.
Retail spending rose by 0.4% in April, new figures show, missing forecasts of a 0.6% rise.
The increase suggests that consumers may spur faster growth in the April-June quarter after the economy barely expanded in the first three months of the year.
The rise also indicates that the struggles of large retail chains, such as Macy's and JC Penney's, reflect changes in consumer buying patterns rather than broader economic weakness. Sales at department stores fell 0.2 percent. Yet a category that includes online retailers reported sales growth of 1.4 percent, the strongest of any group.
US retail sales rose 0.4% in April, vs 0.6% increase expected https://t.co/aQLXW5MoxQ
1.39pm BST
Here comes the deluge of US economic data....
....and consumer prices rose by 0.2% month-on-month in April, bang in line with forecasts. That follows a 0.3% drop in March.
Core inflation down to 1.9% in the U.S. consumer price index, lowest since Oct. 2015
1.22pm BST
A few more photos from the G7 finance ministers' meeting in Bari have arrived.
"Inclusive growth means first of all that growth has to be shared with all segment and regions of society,"
"We will carry on working on this debt relief package.
There is not enough clarity yet but I hope that the European partners will continue to progress in that."
12.58pm BST
Germany's success is due in no small part to the euro, says Mihir Kapadia, CEO of Sun Global Investments.
That's because the single currency gives German exporters an extra competitive they wouldn't have with the Deutsche Mark (which would surely trade at a higher exchange rate if it still existed).
"The German economy is firing on all cylinders, delivering a robust economic performance across all sectors supported by a surge in business investments and higher consumer spending. Germany's gross domestic product grew at a quarterly clip of 0.6%, or 2.4% in annualized terms, outpacing the likes of Britain and France comfortably. The country may well be the top performer in the G7. The only other major competitor could be Canada.
One of the most important factors to note here is that German trade is strong and helped by a undervalued Euro, consistently delivering a trade surplus. It is now one of the most steady markets in Europe and amongst developed economies."
12.36pm BST
The pound hasn't had a great morning, as worries over the UK's economy linger.
Sterling has lost 0.25% this morning to $1.2843, a one-week low.
"The pound was down against major peers today despite the strength seen over the past week, mainly due to the reduction of the Bank of England's growth forecasts for 2017 which were cut from 2% to 1.9%.
11.57am BST
Germany's strong growth in the last quarter is partly down to Angela Merkel's open-door policy on refugees, argues Timo Klein, principal German economist at IHS Markit.
Klein writes:
Private consumption continues to be underpinned by the ongoing improvement in labour market and income conditions and should thus overcome the recent setback related to the surge in headline inflation that has reduced real purchasing power.
Government consumption is being supported by expenditures for refugees.
Investors seem to have come to the conclusion that the threat of US president Trump disrupting global trade patterns via protectionist measures has been overblown.
11.39am BST
Back in the UK, a software developer specialising in virtual simulation is celebrating after securing the biggest financing round for a private British company.
Improbable, set up by a group of 2o-something Cambridge computer science graduates, has raised over $500bn from Japan's Softbank. That values the company at over $1bn - putting it in Unicorn territory.
Related: Improbable sums? Cambridge graduates' tech firm raises $500m
Improbable sounds like a nice place to work pic.twitter.com/wOXodQpYmh
10.53am BST
With strong growth figures in his pocket, Germany's finance minister is calling on America to deliver strong leadership to help the world economy.
Arriving in Bari for a meeting of G7 finance ministers, Wolfgang Schiuble told reporters that his message to US Treasury Secretary Steven Mnuchin is:
We need a strong United States to lead the global economy and global politics on a sustainable way.
"Oh, I think we're excited about US trade policies and I think you probably saw last night we made an announcement of a100-day economic plan with the Chinese so I think we are very happy with how we are proceeding on trade."
10.16am BST
Ho hum. The latest eurozone industrial production figures have just landed, and at first glance they're weaker than expected.
Industrial output across the euro area fell by 0.1% in March, dragged down by weak energy production, dashing hopes of a rise.
Euro area industrial production -0.1% in March over February, +1.9% over March 2016 #Eurostat https://t.co/eNmRZrGW4Z pic.twitter.com/I1ICBkQ3Xz
#Eurozone #industrial production unexpectedly dipped 0.1% m/m in Mar (as in Feb). Dragged down in both months by shrp falls in energy output
#Eurozone industrial production only flat q/q in Q1 after 0.1% m/m dip in Mar. But underlying picture decent after energy falls stripped out
10.00am BST
Joshua Mahony, market analyst at IG, agrees that Germany's GDP report has cheered the City.
He writes:
This morning has started in positive fashion for the Eurozone, in what is fast becoming the go-to growth driver of the western world. The outperformance of German Q1 GDP should have come as no surprise given the positive signs coming out of the industrial powerhouse over recent months.
With the French hoping to strengthen their economy in the wake of Macron's election victory, there appears to be an end to the sight of the protracted downturn seen in the eurozone since the 2007 financial crisis.
9.41am BST
The pick-up in German growth should reassure global investors, who've been throwing money into Europe in recent weeks.
As this chart shows, investors have been buying European shares for several weeks now - with a record surge following the French presidential election:
BAML: record inflows to European equities in the week following Macron's win #EuroBoom2017 pic.twitter.com/xFL8FvY2lu
9.36am BST
Following a fresh warning on living standards from the Bank of England on Thursday, two leading economists have warned this morning that Britons will all be poorer over the next five years as Brexit delivers a blow to the economy.
Andrew Lilico, executive director of Europe Economics, said that Britain will probably lose out on a year's worth of growth over the next few years, before expanding at a faster pace in the 2020s.
Few things in life involving major changes come cost free so I think we should expect to lose a couple of percentage points of GDP growth - the equivalent of one year's growth over the period of 2019/2020. Then in the 2020s I expect it to grow a little bit faster and by 2030 everything will have come out in the wash."
The real effect of Brexit won't happen until Brexit happens. I'm optimistic that Britain can secure a free trade agreement with Europe, but it will take at least 10 years.
"If there are no smooth arrangements we're going to see a sharp decrease in investment and therefore a sharp decrease in jobs and that will mean a much more serious reduction in household incomes."
8.57am BST
Germany's robust growth has helped European stock markets to gain some ground in early trading.
Germany's DAX has gained 24 points, or 0.2%, and the other main indices are also up a little:
8.44am BST
Only Canada can prevent Germany from claiming the title of becoming the fastest growing major economy in the first quarter of 2017.
Nina Adam of the Wall Street Journal explains:
Germany's economy accelerated in the first quarter, driven by a revival in global trade and buoyant construction activity.
Germany's gross domestic product grew at a quarterly clip of 0.6%, or 2.4% in annualized terms, the Destatis statistics office said Friday.
German growth outpaces U.S. and U.K. as mild weather boosts construction https://t.co/Rr5ZymSXfW via @WSJ
8.22am BST
We have further good news on the European economy, via France.
8.10am BST
Today's growth report also provides fresh ammunition to critics - such as the Trump administration - who claim Germany is getting an unfair advantage from a weak currency.
Certainly, the jump in exports in Q1 indicates that German trade is humming. That means Germany's trade surplus (another cause of concern) will remain around record levels.
A boom without end in Germany... and despite all the risks.
However, it should be noted that the economy would be humming less without the support of interest rates which are too low for Germany."
7.59am BST
Today's GDP report doesn't contain any sign that Brexit is hurting Germany's economy.
The surge in business investment shows that German business leaders are planning for future growth, while higher consumer spending suggests families aren't worried either.
7.45am BST
Carsten Brzeski, chief economist at ING, is also impressed with Germany's performance, saying "The economy seems to be firing on all cylinders".
7.43am BST
Germany is on track for a decent year, according to Jens Kramer, an economist at NordLB in Hanover.
Kramer says (via Bloomberg):
"Economic momentum is extremely robust and very broadly based,"
"The steady increase in employment is fertile soil for domestic demand, and trade is providing impulses as well."
#Germany's never ending success story, as ING puts it: German Q1 GDP growth accelerates as investment jumps. https://t.co/3bdx1dHkoV pic.twitter.com/DT2rLmHwvS
7.35am BST
Fred Ducrozet of Swiss bank Pictet says Germany achieved broad-based growth in the last quarter - with decent weather helping to deliver that 0.6% growth.
Boost from construction due to mild weather, but otherwise broad-based expansion fueled by capex, exports & consumption. https://t.co/8v6S6WcVke
Germany's economy did better than France, the US, and the UK at the start of the year - expanding 0.6% https://t.co/YeP5Quxs1g pic.twitter.com/qcxKIK2HNq
Federal Statistics Office says Q1 #German #GDP growth of 0.6% q/q due to growth in domestic demand (notably investment) & +ve net #trade
Q1 #German #GDP #growth of 0.6%: robust investment, modest rises in consumer & govt spending, net trade +ve as exports up more than imports
7.23am BST
Breaking: Germany's economy grew twice as fast as Britain at the start of 2017.
Capital formation [business spending] increased substantially.
Due to the mild weather, fixed capital formation especially in construction, but also in machinery and equipment was markedly up compared with the fourth quarter of 2016.
7.08am BST
Good morning, and welcome our rolling coverage of the world economy, the financial markets, the eurozone and business.
Today we'll be looking at Germany, as GDP figures for the first three months of this year are released at 7am BST.
Relations between the world's two largest economies have hit "a new high", Donald Trump's commerce secretary has claimed, announcing a "herculean" trade deal between Washington and Beijing in the latest sign of warming ties.
Under the agreement China will allow imports of US beef, while the US will allow the import of cooked poultry from China. Beijing will also permit foreign financial services companies to provide credit-rating services in China.
Related: US hails China trade deal as sign relations are 'hitting a new high'
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