UK trade deficit swells and industrial output falls, but US creates 222,000 new jobs - as it happened
Britain's trade gap widened in May, and industrial output misses forecasts after a drop in manufacturing output
- Britain's trade deficit has jumped - details start here
- UK industrial output fell 0.1%, City expected a 0.5% rise
- Economists: It's bad news for growth
- Sterling drops to $1.291
- US adds 220,000 jobs in June, wages disappoint
Earlier:
4.52pm BST
PS: Here's Katie's story about today's weak UK data, and what it means for interest rates....
Related: Fears for UK economy after weaker-than-expected growth reports
3.08pm BST
Liam Fox, Britain's international trade secretary, has said there is no reason why the UK can't replicate the current smooth trading agreements it enjoys with the EU after Brexit, unless politics gets in the way.
We're going into an arrangement with the EU already with zero tariffs , we're going there with complete regulatory equivalence and with customs systems that already work.
The only reason we wouldn't replicate them would be if politics got in the way of good economics.
2.50pm BST
US markets are up in early trading, with those strong non-farm payrolls numbers giving investors a boost.
2.44pm BST
Analysts at Nomura said the stronger-than-expected payrolls number is good for riskier assets.
Equities, EM and high yielders should like it. Higher job creation indicates growth, but weak wages indicates firms are not yet allowing the labour force to reduce margins = higher profitability.
It shouldn't bear too much of an impact on the Fed timing of balance sheet reduction as this is an overall good number.
2.33pm BST
The US jobs market in graphics:
2.15pm BST
Paul Ashworth, chief US economist at Capital Economics, says the jobs reports is more evidence that the real economy is in "good health".
The only disappointment is that wage growth still shows few signs of accelerating. Average hourly earnings increased by 0.2% m/m in June, but the annual growth rate only edged back up to 2.5%, from 2.4%. That means there has been no pick-up in wage growth whatsoever over the past 18 months.
We will find out what Fed Chair Janet Yellen thinks of this next week, during her semi-annual congressional testimony. Our view is that, despite the lack of a pick-up in wage growth and core inflation, the Fed will nevertheless push ahead with hiking interest rates. The unemployment rate is already unusually low and is likely to fall further over the coming months.
2.02pm BST
My colleague Dominic Rushe has the full details on the US jobs report in the context of Donald Trumps big jobs promises. He writes:
The US economy added 222,000 new jobs in June, reversing a worrying slowdown in growth for president Donald Trump who campaigned on a promise of massive job creation.
Economists had been expecting the US to add around 178,000 over them month but the latest numbers from the bureau of labor statistics comfortably beat those estimates as healthcare and food services showed big monthly gains.
Related: US jobs report shows sharp recovery in June as unemployment ticks up slightly
Payroll employment rises by 222,000 in June; unemployment rate changes little at 4.4%
https://t.co/NsuHovcqn0 #JobsReport #BLSdata
1.58pm BST
Assessing what that non-farm payrolls update means for US interest rates, James Knightley, chief international economist at ING says the report is "good enough" to keep the Federal Reserve on a gradual policy tightening path.
Strong jobs growth should eventually translate into higher wages, but it is taking time to do so. The Fed remains confident it will come, suggesting gradual hikes will continue, but the market continues to have doubts.
...In any case, the Fed has repeatedly used the term "transitory" to describe the slowdown in activity and subdued inflation backdrop and believe that it is only a matter of time before the tightness in the labour market translates into rising wage pressures. We agree.
1.51pm BST
Some market reaction now to that news of stronger-than-expected growth in jobs but weaker-than-forecast wage growth in the US last month.
US stock futures have extended gains but the dollar has lost ground as traders focus on the wage growth undershoot - something that will temper expectations of further rate rises from the US Federal Reserve this year.
Disappointing US #wage growth is the key takeaway. Doesn't help the #Fed's quest to convince markets dip in inflation is "transitory" #NFP pic.twitter.com/py4BmuR2d0
Impressive 222K jobs number, but disappointing wage growth not budging from 2.5% 12-month change is more important.
Job growth is strong but sectoral shifts are clear:
59.1K jobs added in health care and social assistance
1K jobs added in manufacturing.
1.34pm BST
More details now on that US jobs report:
More jobs were added than expected but wage growth missed forecasts. The report from the Labor Department shows average earnings rose by 0.2% month-on-month in June, and were up 2.5% over the last year. Forecasts were for average hourly earnings to increase 0.3% in June and for the year-on-year growth rate to stand at 2.7%.
1.31pm BST
BREAKING: The US economy added 222,000 jobs in June, according to the latest non-farm payrolls report.
That was higher than the 179,000 forecast by economists in a Reuters poll.
1.05pm BST
Newsflash: The NIESR thinktank has estimated that Britain's economy only grew by 0.3% in the second quarter of this year.
That would be an improvement on the 0.2% growth recorded in January-March, but below the 0.6% trend growth rate.
Growth in services has offset a contraction in industrial output, yet remains subdued when compared with last year.
The saving ratio reached an historic low of 1.7 per cent in the first quarter of this year, implying that, so far, households have reduced their saving to cushion the effect of falling real incomes on consumption as inflation rises".
Our monthly estimates of GDP suggest that output grew by 0.3% in 2017Q2https://t.co/7Mrev3gkzd#NIESRGDP pic.twitter.com/vYbIFpOZ4d
12.34pm BST
Philip Coggan of the Economist points out that the drop in the pound after the EU referendum hasn't helped the trade gap:
Ave UK trade deficit in Jan-May 2016 (pre-referendum) 2,801m; ave in Jan-May 2017 2,806m. Living standards squeezed but no boost to trade
12.03pm BST
If you're just tuning in, here are some charts that show today's data.
First, the widening of the UK trade gap to 3.1bn, from 2bn, as a jump in imports drove the 'trade in goods' deficit to over 11bn:
11.20am BST
Sustained selling pressure has just pushed the pound down through $1.29, a drop of 0.7 of a cent today.
Bloomberg explains:
The pound fell for the first time in three days versus the dollar after data showed U.K. factories and construction companies' output unexpectedly declined in May, adding to a spate of recent data that pointed to an economic slowdown.
Sterling was on course for weekly declines against all but two of its Group-of-10 peers, as manufacturing, industrial and construction output all dropped and undercut analysts' forecasts.
Pound falls for first time in 3 days against dollar as fears grow of an economic slowdown https://t.co/t22JoRr4qe pic.twitter.com/IT8bZwLeL8
11.14am BST
This morning's data paint a rather bleak picture for the UK economy and underline the challenges lying ahead, says Kay Daniel Neufeld of the CEBR.
He fears that growth is going to be subdued this year, and next:
So far, the depreciation in Sterling has not led to a significant reduction in the trade deficit - at Cebr we have repeatedly stressed that the UK's high-value added exports are less price sensitive and that any rebalancing in the make-up of exports will take time to manifest itself.
In the meantime the lack of clarity about future trading relationship with the EU - further exacerbated by the result of the general election - weighs on activity in the manufacturing sector.
10.53am BST
Britain's export performance remains "underwhelming", says Sam Tombs of Pantheon Economics.
He blames manufacturers for hiking their prices since the pound fell, rather than trying to grow their market share.
The main problem remains that exporters have hiked their prices, blunting the boost to competitiveness from the weak pound. Foreign-currency prices for U.K. goods exports in May were just 5% lower than in Q4 2015.
Exports are earning healthy profits, but few are willing to invest and ramp up production due to Brexit risk. Markit's survey of export orders also has weakened over the last few months, casting further doubt over the likelihood of a sustained trade boost going forwards.
10.31am BST
Today's data suggest that Britain's economy has only grown by 0.3% in the second quarter of the year, says Howard Archer, Chief Economic Advisor to the EY ITEM Club.
That would only be slightly better than the 0.2% growth posted in Q1 - the weakest of any G7 nation.
"Based on today's data and the business survey results for June, we now think that industrial production is likely to have contracted by 0.5% in Q2, with construction output down 1.8%.
And though an improved performance from the services sector will provide some support, GDP is likely to have grown by just 0.3% with the risks to that projection skewed to the downside.
10.25am BST
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10.21am BST
Sterling has also hit a nine day low against the euro.
The pound has dropped by almost half a eurocent to a1.1311.
10.15am BST
Today's trade data provides little evidence that Britain's economy is rebalancing away from consumer spending and towards exports.
My colleague Katie Allen points out that the weak pound doesn't seem to be providing much support.
Imports rising faster than exports in UK. Remains to be seen if weak pound can boost exports enough to offset consumer slowdown pic.twitter.com/opT6YU0xPx
Aaaaaaany minute... now! No... now! Now! pic.twitter.com/wpsRo4dstU
Grim U.K. data!
The pound has dropped after UK industrial production missed forecasts for the 4th month in a row https://t.co/tuMJRoUXIX pic.twitter.com/0IFGpegEJe
UK industrial production fell by 0.1%, missing a 0.4% expansion estimate - this is the 4th consecutive month of failing to hit forecasts. pic.twitter.com/WtFvDg4CEB
10.09am BST
ONS senior statistician Kate Davies sums up today's flurry of disappointing UK data:
"Activity in the production sector was broadly unchanged in May, though the underlying position is weaker with both total output and manufacturing falling in the three months to May compared with the previous three months.
Construction output also fell on a three-monthly basis, though this is after several years of growth.
10.08am BST
Actually, it's a triple-dose of bad news -- UK construction output fell by 1.2% in May.
It also shrank by 1.2% in the March-to-May quarter, compared to the previous three months. That's the biggest drop since September 2012.
New construction work, most notably from infrastructure, fell 4.0% in May (ONS). Surprising given all the talk of infrastructure spending.
10.01am BST
The 0.2% drop in UK manufacturing output in May was triggered by a drop in car production.
The ONS says:
Transport equipment provided the largest downward contribution, falling by 2.3%; within this, motor vehicles, trailers and semi trailers fell by 4.4%, the largest fall since February 2016, when it fell by 5.8%.
9.53am BST
That double-dose of disappointing UK economic data has hit the pound.
Sterling has slumped to $1.2917, down half a cent, as traders digest the news that Britain's trade deficit has widened and industrial output fell in May.
9.49am BST
More bad news! Britain's trade deficit has widened, due to a surge of imports.
The total trade deficit jumped by 1bn in May, to 3.1bn - a worse reading than the City expected.
2.0bn rise in total trade deficit, to 8.9bn, in Mar-May compared with Dec-Feb, with goods imports up https://t.co/TkORTiM7gq
9.42am BST
Newsflash! Britain's industrial production fell by 0.1% in May.
That's a weaker performance that expected, and reinforces fears that the UK economy is faltering.
*U.K. MAY INDUSTRIAL PRODUCTION FALLS 0.1%; EST. 0.4% INCREASE
*U.K. MAY MANUFACTURING OUTPUT FALLS 0.2%; EST. 0.5% INCREASE
In May 2017, total production was estimated to have decreased by 0.1% compared with April 2017, due to falls of 0.2% in manufacturing and 0.8% in energy supply; transport equipment provided the largest contribution to the manufacturing decrease, followed by food products, beverages and tobacco.
9.34am BST
Here's Martin Ellis, Halifax housing economist, on the 1% drop in house prices last month.
"House prices have flattened over the past three months. Overall, prices in the three months to June were marginally lower than in the preceding three months. The annual rate of growth has fallen, to 2.6%; the lowest rate since May 2013.
"Although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages. This, combined the new stamp duty on buy to let and second homes in 2016, appears to have weakened housing demand in recent months.
9.14am BST
Factories in the eurozone's Big Two economies powered on in May, new figure show.
German industrial output jumped by 1.2% month-on-month. That's the fifth monthly rise in a row, marking the best run since 2010.
German industry is enjoying its best run of growth in over seven years https://t.co/bivk4NWNwb pic.twitter.com/929LpDdQ5R
8.53am BST
In classical market theory, bonds and shares are supposed to move in opposite directions.
The idea is that investors pour money into equities when they're feeling optimistic, or dump their shares and scurry into fixed-income (bonds) in times of anxiety.
Are we heading towards another taper tantrum? Both bonds and equity markets are showing similar pattern- bonds down and equity markets down pic.twitter.com/V0Oj2CpcGj
8.42am BST
Newsflash: UK house prices fell by 1% in June, according to the Halifax's monthly survey.
That's rather weaker than the 0.2% rise which the City expected, and could be another sign that higher inflation and falling real wages are hitting the economy.
Halifax: UK house prices fell 1% in June. Down to 2.6% annual rate of increase. Worrying to think of how things might change when rates rise pic.twitter.com/fFK5FFrowC
8.38am BST
Bonds are also suffering from the prospect that central bankers might have finally tired of topping up the punchbowl of monetary policy.
The interest rate on German 10-year bunds is hovering at an 18-month high this morning, while Italian bond yields are at a two-month high.
Bond rout eases a bit. German 10y yields rise 1bp to 0.57%. pic.twitter.com/7OI79rjPMb
At the risk of a circular argument, if the ECB signalling a teeney-weeny shift in the direction of travel for monetary policy prompts a big reaction, that does pose the question of how, when or if central bankers can actually escape the gravitational pull downwards from the ZIRP/QE world.
That's a question we asked a lot when we entered this mad world. Is the right image one of a man caught in quicksand, or one of a rocket floating aimlessly in space?
8.32am BST
European stock markets have dipped in early trading.
The very aggressive easing policy [by the ECB] certainly assisted the economic health of the region, but it also pushed up equity markets. Now central bankers are thinking about moving away from an easing bias, it prompted traders to cash in their positions.....
The non-farm payroll report at 1.30pm will be the highlight of the trading session, and the consensus is for a 179,000 jobs to have been added in June. The unemployment rate is tipped to remain at 4.3%, and average earnings is anticipated to rise from 0.2% to 0.3% on a month on month basis.
8.23am BST
You can keep tabs on all the G20 action here:
Related: G20 summit: Trump and Putin to meet as world leaders gather in Hamburg - live coverage
8.11am BST
Shares have fallen across Asia today, as traders hunkered down ahead of the US jobs report.
Investors are digesting hawkish ECB minutes and prepping for further withdrawal of global easy money policy; tapering of ECB QE, unwind of Fed's balance sheet. Maybe even a UK rate hike.
7.54am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors are edgy today as they brace for a splurge of economic data from both sides of the Atlantic. Bonds and equities are both under some pressure.
US Non-Farm Payroll is one of the top events on the economic calendar for Friday, July 7 pic.twitter.com/824mDfGvcr
Related: Trump to meet Putin for first time after accusing Russia of testing west's will
Though unlikely to move markets, the G20 meeting is expected to have a major focus on trade after the removal of standard language about resisting trade protectionism at the previous finance ministers meeting in March.
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