UK economic growth rises to 0.3% in May thanks to service sector – as it happened
All the day's economic and financial news, as Britain publishes monthly estimates of economic growth for the first time
- Latest: Growth picked up in May after March stagnation
- GDP rose 0.3% in May, from 0.2% in April
- But UK also flatlined in February-April
- Service sector grew, but manufacturing struggled
- Introduction: Britain's first ever monthly growth figure are being released
5.35pm BST
The lack of further trade tensions between the US and China, better than expected results from PepsiCo and a slightly calmer day on the UK political scene has seen markets end the day (mostly) in positive territory. But with Brexit tensions still apparent (including two Conservative vice chairs resigning), and UK growth figures suggesting an interest rate rise in August, the FTSE 100 has underperformed most of its European peers. David Madden, market analyst at CMC Markets UK, said:
Investors are still in buying mode as there has been no update regarding the trade dispute. [They] are using the relatively quiet period in terms of newsflow as an opportunity to buy into the market...
Traders...are also getting ready for the latest [US] earnings season, and it is drawing attention away from the trade spat.
4.24pm BST
The pound is fairly steady at the moment, as the UK political chaos of the past few days eases and investors consider the prospect of a soft(er) Brexit. Oliver Jones at Capital Economics says:
After rising and then falling by more than 1% against the dollar since Friday, sterling has been more stable today, after a lull in the storm in the UK Conservative Party.
In the wake of the high-profile resignations of the past couple of days, the prospect of an immediate challenge to Theresa May's leadership appears to have subsided. For the time being at least, it appears that not enough Conservative MPs are willing to back a vote of no confidence in her that could trigger a leadership contest. And Michael Gove has pledged not to resign from the Cabinet, contrary to speculation that he would follow David Davis' and Boris Johnson's lead.
3.46pm BST
More positive employment data from the US, with the latest job opening numbers (one of the key pieces of information considered by the Federal Reserve under former chair Janet Yellen):
Latest "JOLTS" numbers just posted from late May reflect some decline in total number of job openings in the U.S., but still robust at 6.6 million. More Americans were willing to leave their jobs, showing confidence about their prospects.
3.27pm BST
Markets continue to edge higher, with the absence of further trade war developments helping to give some support. Connor Campbell, financial analyst at Spreadex, said:
A fairly uneventful session allowed the Western indices to push higher, with the Dow Jones climbing to a fresh 3 week peak.
Rising 140 points, the Dow Jones crossed the 24900 mark for the first time since 19th May. The main driver of the index's recent growth appears to be a lack of trade war escalation in the last week or so. And while that may sound odd given that Friday saw the tariff tit-for-tatting between the US and China, those measures were well-trailed, and since then there hasn't been anything to cause another macro-wobble.
2.38pm BST
Over in the US, markets have got off to a positive start, helped by better than expected results from PepsiCo and a rise in oil shares as crude is supported by supply problems.
So the Dow Jones Industrial Average has climbed 108 points or 0.44% in early trading, while the S&P 500 opened 0.16% higher and the Nasdaq Composite added 0.19%.
2.17pm BST
Following the official UK growth figures, the National Institute of Economic and Social Research has published its latest GDP forecasts, which suggest a pick-up in the second quarter.
The think tank said the 0.2% growth seen in the three months to May was in line with its own forecasts. It now expects the UK economy to grow by 0.4% in the three months to June, as the effects of the bad weather earlier in the year drop out of the equation.
The economy is showing clear signs of recovering from the unexpected slowdown in the first quarter. Taking the business surveys together, we believe that this recovery will be most noticeable in manufacturing and construction where output should start to increase once more. Overall though, we continue to expect the economy to grow broadly in line with its potential in the second and third quarters and not by enough to compensate for the slowdown in the first quarter.
There are a number of plausible explanations for the weakness in the first quarter and the subsequent recovery. Extreme weather in the UK in March appears to have impacted adversely on the construction sector and to some extent on the retail sector as well. Growth in the Euro Area, our largest trading partner, also slowed and some of the weakness there can be attributed to similar one-off factors, particularly in France and Germany. Although Brexit and protectionist agendas loom large, there is little clear evidence that these factors specifically dragged economic growth lower in the first quarter. The international picture is mixed. Activity in the Euro Area has recovered since the first quarter slowdown, but growth is likely to be subdued in the single currency block compared with the pace achieved in 2017. By contrast, economic growth in the US is expected to gain momentum as the full effects of the fiscal expansion take effect.
2.02pm BST
Britain's economy has picked up pace, according to the first ever monthly GDP reading. GDP rose by 0.3% during May, the Office for National Statistics says, up from 0.2% in April as growth benefitted from warmer weather.
The ONS also reports that the economy stagnated in the February-April quarter, before picking up with 0.2% growth in March-May.
1.38pm BST
Newsflash: 25 Poundworld stores are shutting, with the loss of 242 jobs.
A memo to staff penned by the professional services firm, and seen by the Press Association, said: "As previously advised, the administrators have been preparing contingency plans in the event that we are not able to deliver a sale of the business as a whole.
"These plans have been continuing and it is with regret that the administrators have taken the decision to effect an organised wind down of 25 stores, starting today."
1.22pm BST
Meanwhile in Germany, investor confidence has sagged to its lowest level in six years.
The ZEW index of German investor morale dropped to -24.7 in July from -16.1 in June. That's the weakest reading since August 2012, when the eurozone crisis was raging.
German ZEW Investor Confidence Lowest Since Aug 2012
Chart shows ZEW historically against EURUSD pic.twitter.com/2LdOPWGSjg
In particular, fears over an escalation of the international trade war with the United States have dampened the economic outlook.
The positive news regarding industrial production, incoming orders and the labour market have been greatly overshadowed by the anticipated negative effects on foreign trade."
12.54pm BST
Here's our economics correspondent, Richard Partington, on today's growth figures:
The start of the summer heatwave has helped the British economy recover ground after grinding to a halt earlier this year, despite a severe downturn for the manufacturing industry in the three months to May.
Presenting its first ever estimates for gross domestic product (GDP) on a monthly basis, the Office for National Statistics said warmer weather and the royal wedding in May helped Britain bounce back from zero growth in March, when the "beast from the east" caused the UK economy to flatline.
Related: Warm weather and royal wedding help UK return to GDP growth
12.40pm BST
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), isn't too impressed by the pick-up in growth in May.
He says the UK economy remains "underwhelming", and unbalanced -- and is also concerned that the trade gap has widened.
"The latest GDP data confirms that there was a modest rally in economic activity over recent months but coming after the marked slowdown in the first quarter there is further confirmation that UK growth remains underwhelming.
"The uptick in growth also masks a number of key concerns. The persistent imbalances in the UK economy remain, so while there was solid growth in the services sector, industrial production and construction sectors are adding little to overall growth. The widening in the UK's trade deficit for the second successive month is also a concern and means that trade is likely to have been a drag on GDP in the second quarter of the year.
12.11pm BST
Bad news: Britain's trade deficit with the rest of the world has widened.
The ONS reports that the total UK trade deficit widened by 5.0bn in the three months ot May 2008, to 8.3bn
The UK trade figures for 3 months to May do not look good. Falling car imports and rising unspecified imports mean a 5bn widening of the total trade deficit to 8.3bn... pic.twitter.com/W8v8B7iNe8
Worrying chart for manufacturing in ONS stats - export growth has fallen to zero in 3 months to May. Appears to show post-Brexit vote (pound devaluation) manufacturing export boom is well and truly over. pic.twitter.com/7kd81i1kpG
The UK imported 55% of its goods from the EU and exported 51% of its goods to countries outside of the EU in the 12 months to May 2018.
11.59am BST
Britain's economy appears to have bounced back, following a "lacklustre" performance earlier this year.
"The UK economy appeared to bounce back over the last three months compared to its lacklustre performance in the first quarter of 2018. GDP grew 0.2% in the three months to the end of May with the month of May alone delivering 0.3%. The ONS has now changed how it calculates GDP. Instead of the previous quarterly estimates, it will now deliver monthly estimates along with a rolling three month number in an effort to provide more accurate numbers that aren't so prone to revisions.
"Services, accounting for 80% of the economy, predictably was where the growth was seen - retail performed strongly, with the Royal Wedding no doubt helping.
11.37am BST
Professor Costas Milas of the University of Liverpool has calculated that the new monthly GDP data released today gives a rosier picture of UK growth since the EU referendum.
He tells me:
I have plotted together annual GDP growth (based on the latest release of quarterly GDP data) and inferred annual growth (based on today's release of monthly GDP data from ONS code: ECY2 ).
The monthly data paint a much rosier picture from 2016Q3 onwards. To the extent that the MPC members decide to trust today's monthly GDP data, it is more likely than not that they will hike in August, unless, of course, Boris Johnson and his Brexit colleagues have other ideas about the government's fate!
11.22am BST
This chart from Morgan Stanley shows how services drove the UK's economic growth in the last three months:
The UK's first monthly GDP print showed growth picking up in May, driven in particular by a strong services sector, helped by a partial May rebound in construction and manufacturing.
Services strong, manufacturing and construction weak: While services grew strongly manufacturing and IP remained drags on growth on the 3M measure. However, manufacturing and construction bounced back partially in May.
10.55am BST
Ben Brettell, Senior Economist at Hargreaves Lansdown, points out that Britain's economy still looks unbalanced.
The Royal wedding and some great weather boosted the economy in May, with GDP rising 0.3% on April. The economy grew 0.2% in the quarter to May.....
While the news is undoubtedly positive, the usual concerns will no doubt surface around the bias towards the service sector, which drove the growth. Industrial production and construction both fell in the quarter, though the latter rebounded slightly in May.
10.36am BST
Michael Thirkettle, chief executive of construction consulting and design agency McBains, is concerned that Britain's building activity shrank in the last quarter (despite the recovery in May).
"Today's figures make for further depressing reading and show that construction is well and truly mired in the deep waters of recession.
UK and international companies and investors that are looking to invest in the UK are still struggling to get a read on the post-Brexit destination, meaning a reluctance to commit to new projects.
Construction fell 1.7% in the 3-months to May but grew 2.9% in the month of May https://t.co/BGI9ujQnu9 pic.twitter.com/M83RI5cvIC
10.25am BST
This is from Mike Jakeman of PwC:
Implications from ONS' new monthly GDP figures:
-May was a much better month than February
-June is likely to be better than March
-August rate hike remains possible if good weather/World Cup spending outweighs Brexit/trade concerns pic.twitter.com/BeokQrR8XB
10.24am BST
The continued dominance of Britain's services companies shows why the sector needs to be protected from Brexit disrupion, says Anthony Kurukgy, senior sales trader at Foenix Partners:
The latest growth figures were spearheaded by the service sector, despite contraction in both production and construction industries. Last week, Prime Minister May's 'softer' Brexit stance highlighted the need to protect the very sector that carries significant importance to the UK economy.
Although somewhat lacklustre, today's figures show that the PM's call to protect the freedom of services at home and across the Channel should not be jeopardised.
10.08am BST
Andy Bruce of Reuters shows how Britain's economy was still reliant on service sector growth in the last three months:
Rebalancing? Nah.
Britain back in the familiar groove of services-driven growth, which has strengthened a bit compared with early 2018.
Manufacturing output fell 1.2% 3M/3M in May -- the weakest 3 months since Dec 2012. pic.twitter.com/Vk3sALUK2W
10.05am BST
On the other hand, Tom Stevenson, investment director for Personal Investing at Fidelity International, isn't convinced UK interest rates will rise next month.
"The first of a new-style monthly GDP report shows a continuation of an old-style economic story.
Good weather and a Royal Wedding provided a boost to the services side of the economy in the three months to May but construction and manufacturing remain in the doldrums. The overall trend is yet to break out of the downward path it has traced since the beginning of 2017.
10.04am BST
John Hawksworth, chief economist at PwC, has analysed today's data and predicts that UK growth may have picked up to 0.4% in April-June.
He says:
"GDP growth in the three months to May was still relatively modest at 0.2% relative to the previous three months, but this is dragged down by the weak performance in March, when the bad weather caused GDP growth to fall to zero. Since then a revival in retail sales and other services sectors has led GDP growth to pick up steadily in April and May. Construction output also picked up strongly in May after a couple of weak months.
"As a result, we estimate that growth in the second quarter will end up at around 0.4%, given signs from business surveys of continued forward momentum in services and construction in June.
9.53am BST
The ONS's head of national accounts, Rob Kent-Smith, says shopping and coding helped to drive growth in recent months.
Here's his take on today's growth figures;
"The first of our new rolling estimates of GDP shows a mixed picture of the UK economy with modest growth driven by the services sector, partly offset by falling construction and industrial output.
"Retailing, computer programming and legal services all performed strongly in the three months to May while housebuilding and manufacturing both contracted.
9.52am BST
Britain's factories and builders suffered a sharp contraction in the last three months, but the service sector grew.
UK manufacturing sector contracted by 1.2% in the three months to May, according to today's report, thanks to "weak exports".
9.41am BST
Today's growth report also shows that Britain's economy flatlined in February-April, before bouncing back in May.
Perhaps the most interesting finding from the first ever UK monthly GDP statistics is not that the UK economy grew in the three months to May but that it flatlined between Feb and April https://t.co/zC6uHAOACX pic.twitter.com/UzWvYtzKGo
9.39am BST
This chart shows how the UK economy fared in the last few months:
9.34am BST
Newsflash: Britain's economy grew by 0.3% in May, as the economy strengthened from the winter slowdown.
That's up up 0.2% in April, and stagnation in March, according to new figures from the Office for National Statistics.
9.24am BST
Financial news service RANsquawk are getting excited about today's GDP figures...
REMINDER: ONS releases - for the first time ever - monthly GDP today! pic.twitter.com/K5oEelXQHZ
Citi: Expect 3M/3M to be weak, perhaps 0.1%-0.2%, reflecting weak growth in Match and April but this should be mitigated by solid prints in May and June, which would keep BoE hike in August on track
TD: May's (and April's) GDP prints should confirm a growth rebound in Q2, giving the BoE confidence to hike next month
RBC: We think growth in the 3 months to May should be in the region of 0.1%. That would still be consistent with Q2 GDP growth at 0.3% Q/Q, as predicted by the latest PMIs
9.21am BST
Speaking of Brexit... Airbus has provided Theresa May with some valuable air support today.
The Franco-German aircraft maker has welcomed the PM's Brexit strategy, and urged Angela Merkel, Emmanuel Macron, and the top brass in Brussels to cut the PM some slack.
Tonight at a German Chamber of Commerce event in London, our CEO T. Enders said: "The Chequers statement appears to show that HM Government are going in the right direction.We are not shy to request that Brussels & our other home countries are similarly pragmatic & fair" #Brexit pic.twitter.com/Os9Rz108q9
8.53am BST
The City is calm as investors await this morning's snapshot of the UK economy.
The pound has inched up to $1.327 against the US dollar, and a1.13 against the euro.
The resignation of UK Foreign Secretary Boris Johnson led to a small market reaction - unlike some other former UK ministers, international investors have heard of Johnson. The former foreign secretary's notoriety owed perhaps more to a slapstick comedy style than to diplomatic skill. Sterling weakened a little [yesterday], then firmed.
Investors are unlikely to be concerned about the quality of the UK government changing after the loss of Davis and Johnson. The focus is the implications for the interminably tedious EU exit process. Prime Minister May seems relatively secure for now. If the EU were to demand major concessions over the exit, that may undermine May and the government.
8.39am BST
In the media world, Sir Martin Sorrell has burst back following his shock departure from WPP earlier this year.
Sorrell's new venture has bought Dutch firm MediaMonks for a300m (266m). I imagine he'll be particularly pleased to have pipped WPP to the prize.
Sorrell pursued the deal despite receiving a legal letter from WPP alleging that he was being "unlawful" and in breach of his confidentiality agreement on the basis that he looked at buying the digital ad production firm when he was still chief executive. Sorrell denies the allegations.
Related: Martin Sorrell beats WPP to 266m MediaMonks deal
8.27am BST
Tesco has announced that Charles Wilson is stepping down as chief executive of its UK and Ireland business following treatment for throat cancer.
Wilson is the former boss of Booker and took on the role at Tesco when the supermarket chain bought the wholesaler for 3.7bn earlier this year.
"The good news is that Charles has responded very well to the treatment and all the signs are that the treatment has been successful."
8.20am BST
Today's change to reporting GDP each month is meant to provide UK policymakers with a better of Britain's economy.
James Scruton, the head of GDP data at the statistics body, said recently:
"While this might seem like a small change, monthly GDP will mean higher-quality and quicker estimates of our changing economy, ensuring policymakers have the important information they need to take vital decisions."
Related: UK GDP data to be published monthly for 'higher-quality' figures
8.16am BST
Economist Simon French of Panmure Gordon also expects decent economic data today:
A raft of economic data out of the UK at 0930BST. Production, construction & trade alongside Mar-May GDP. Recent data point to a sufficient Q2 bounceback to allay fears of a sharp slowdown. Would still represent the weakest backdrop to an (August) interest rate hike in >20 years.
8.00am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
A blizzard of economic data is heading our way this morning, giving new insight into how the UK economy is faring.
UK GDP is expected to have increased at 0.3% month on month in May, with the 3-month average forecast to be 0.2%, reflecting the slower growth from the earlier months.
Stronger data is expected to lift the pound, particularly a solid figure from the monthly GDP release, which could help boost the case at the BoE for a rate rise, when policy makers meet in 3 weeks time.
Away from #Brexit, we get a new monthly UK #GDP figure today. Likely to show that the economy has regained a bit of poise in 2Q. Should keep the #BoE on track for an August hike - despite the latest turmoil (well, for now...) pic.twitter.com/cufXzcjJQU
Related: Theresa May to meet new cabinet after Boris Johnson's Brexit resignation - live
Continue reading...