ECB's €500bn stimulus; US jobless claims jump; UK growth fizzles out – as it happened

Graeme Wearden

from on 2020-12-10 18:19 (#5BFAR)

UK economic growth hits a six-month low and European Central Bank launches new stimulus

6.19pm GMT

Time for a recap

Growth in the UK economy has all but fizzled out. GDP expanded by just 0.4% in October, the weakest in six months, with Covid-19 restrictions hitting the services sector hard.

OUT NOW: our latest #NIESRGDP Tracker suggests that the level of #GDP at the end of 2020 will be some 8.5% lower than it was at the end of 2019

Read here in full: #economicrecovery #GDPgrowth #CovidEconomics https://t.co/GuOKF4OMYs

5.40pm GMT

The UK-focused FTSE 250 index has also been hit by Brexit jitters, dropping by 127 points or 0.64% to 19756.

Housebuilders Crest Nicholson (-6.3%) and Bellway (-5.5%) were among the fallers, along with high street retailer (and Ocado partner) Marks & Spencer (-4.3%) and online electricals vendor AO World (-4.2%).

5.27pm GMT

The UK's largest nightclub operator, Deltic Group, is on the brink of administration as it battles to secure a rescue deal.

The group, which employs just under 1,500 people and runs 52 bars and nightclubs, including the Atik, Pryzm, eden and Bar&Beyond chains, has been seeking new investment since October after months of enforced closures under government measures to control the coronavirus pandemic....

5.22pm GMT

Brad Bechtel of Jefferies says the Brexit talks seem to be coming down to the wire", and weighing on the pound today.

Both sides are still talking, which is good, but we are still far from a deal according to the EU's Von Der Leyen. She also indicates that a decision on Brexit will be taken on Sunday which means they will be negotiating straight through the weekend.

The EU summit starting today is helping to stall further progress although both sides are still in conversation.

5.20pm GMT

In the City, shares in Britain's housebuilders and banks have fallen sharply today, amid fears that the UK and EU won't reach a free trade deal.

UK-focused companies such construction firms Persimmon, Barratt Development and Taylor Wimpey were among the top fallers on the FTSE 100.

5.02pm GMT

The slowdown in UK growth in October shows that warning lights were flashing even before new lockdowns were imposed last month, my colleague Phillip Inman writes:

While the manufacturing and construction sectors barrelled along, increasing output by 1.7% and 1% respectively, the services sector slumped back to register a tiny 0.2% increase.

It shows that Britons were expecting a second lockdown in November and had already begun to limit their journeys, visits to attractions and spending in the shops.

4.21pm GMT

Just in. The Bank of England is giving UK banks the green light to start paying dividends again, but with some guardrails' to avoid reckless payouts.

The Bank's Prudential Regulation Authority has decided that it does not need to extend the exceptional and precautionary action taken in March", when it pressured banks to suspend dividends for 2020 and cancel 2019's payouts.

Any distributions should be prudent, reflecting the still elevated levels of economic uncertainty and the need for banks to continue to support households and businesses through the continuing economic disruption, even in the event that this disruption is more prolonged and severe than currently anticipated.

As a stepping stone back towards its standard approach to capital-setting and shareholder distributions the PRA therefore asks boards, when making their decisions for 2020 distributions, to operate within a framework of temporary guardrails.

4.02pm GMT

Airbnb is about to make an extremely dramatic debut on the US stock market.

The short-term rental business is becoming the latest tech firm to float today, in an initial public offering that values the company at $47bn, or $68 per share.

AirBnB now valued at over $100 billion based off latest indicated bids $ABNB

Check out competitors by market cap$BKNG $87B$TRIP $4B$EXPE $18B

Airbnb ipo at $68 indicated to open later today at $150! Those lucky enough to get at $68 laughing all the way to the bank. Even at $68 extremely expensive on fundamentals. This market is one huge bubble in certain stocks. Enjoy the ride but don't be the last man standing!

*AIRBNB INDICATED TO OPEN AT $145; IPO PRICED AT $68

Company's CEO is literally speechless on @BloombergTV -- the first time he heard of the price surge.

"I don't know what else to say," Brian Chesky tells @emilychangtv. "The higher the stock price, the higher the expectations"

AIRBNB currently indicated to open with market cap close to $90bn, a 100%+ premium to the IPO price.

Founded in 2008 after co-founders Joe Gebbia, Brian Chesky and Nathan Blecharczyk came up with the idea of renting air mattresses in their San Francisco apartments, Airbnb now has more than 7m short-term listings worldwide and at $47bn would be valued more highly than Marriott, the largest hotel operator.

The sale will add billions to the fortunes of its founders and allow staff to sell up to 15% of their shares after the listing, instead of waiting for the usual lock-up period, creating more millionaires.

3.44pm GMT

Over in America, the number of people filing new claims for unemployment benefits has jumped, as the Covid-19 pandemic continues to hurt the US economy.

Around 853,000 new initial claims' were filed last week, sharply up on the 716,000 claims received the previous week (when Thanksgiving disrupted things).

GOLDMAN: "Initial jobless claims increased to 853k for the week ended December 5, a much larger increase than expected .. and likely reflects the worse national virus situation."

Initial jobless claims jumped last week to 853k, the highest since Sept. Also signaling weakness, all 50 of our State #Recovery Trackers fell in the last week of Nov - a first since the #recovery began, though Thanksgiving likely exaggerated the declines. https://t.co/qVghH0rk3Q pic.twitter.com/OUsKXhWmBR

So this was bad...
Initial claims (SA): 853khighest since mid-Sep
Initial claims (NSA): 948k
PUA: 428k
Total initial (NSA): 1.4mhighest since mid-Sep
Cont'd claims: 5.8mhttps://t.co/Mygqu6Howr

Initial jobless claims rose to a 2.5 month high of 853K last week, an increase of 137K from the week prior. The labor market is showing signs of slowing as #COVID19 cases and hospitalizations have surged. These headwinds for the recovery could persist through the winter. #economy pic.twitter.com/ERbnWOEDEx

3.35pm GMT

Back in the markets, the oil price has jumped to a new nine-month high.

Brent crude has surged over 3.5% today to $50.60 per barrel, the highest level since the start of March.

Brent oil on a tear, after breaking through $50 a barrel less than an hour ago now trading at $50.40 a barrel. #gkp #bp #jkx

3.27pm GMT

Finally, asked about the climate emergency, Christine Lagarde said the ECB should be mindful of this issue in everything that we do.'

We have to be mindful of climate change impact in terms of risks, and in terms of delivering on the inflation mandate, the ECB president says.

We have to bear in mind those risks and the direct and indirect impacts that it has on the natural interest rate, that it has on the price stability objectives and the impact on inflation, for instance, of major weather circumstances or draught, or a carbon tax if and when it comes

We have great debates ahead and they will come.

3.07pm GMT

The euro is heading higher against the US dollar, suggesting traders aren't cowed by Christine Lagarde saying the ECB is watching the exchange rate carefully.

It's not a good idea for the ECB to talk about the Euro because it invites markets to call the ECB's bluff, which they are now doing aggressively. EUR/$ is higher than before President Lagarde said they're watching Euro "carefully." Better to focus on dangerously low inflation... pic.twitter.com/HnvMSfCta0

ECB expands monetary stimulus by another 500 billion euros ($605 billion), @Lagarde says would "continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook."
Euro not impressed, shoots higher $eur

3.02pm GMT

Christine Lagarde says inflation is disappointingly low'

It's partly due to weak energy costs and the temporary VAT cut in Germany, but also caused by weak demand, lower wages, and the exchange rate appreciation.

2.59pm GMT

Q: When will the ECB decide the pandemic is over?

Christine Lagarde repeats the ECB has good reasons to believe the eurozone will have reached herd immunity against Covid-19 by the end of 2021.

2.55pm GMT

Q: Would the ECB wrap up its stimulus programme early, if the recovery was stronger than expected?

Christine Lagarde replies that the ECB's objective is to ensure favourable financing conditions' to support the eurozone.

2.39pm GMT

Asked about the strength of the euro, Christine Lagarde says the ECB will monitor the exchange rate very carefully':

The ECB president tells journalists:

We do not target the exchange rate, but clearly exchange rates and particularly the appreciation of the euro play an important role and exercise downward pressure on prices.

So we will monitor it, we will continue to monitor it very carefully going forward."

#ECB's Lagarde: ECB to monitor exchange rate very carefully' pic.twitter.com/lqYoKz6IhL

How many times have we heard this one?

"we do not target the FX rate but clearly the exchange rate plays an important role... exercising downward pressure on prices... we will continue to monitor it very carefully"

ECB President Lagarde pic.twitter.com/K0tIb6iGPy

2.32pm GMT

The European Central Bank extended its stimulus programme today because it believes the eurozone will achieve the herd immunity needed for the economy to operate normally again by the end of 2021.

Asked why the governing council decided today to extend the PEPP programme by nine months (until March 2022), president Christine Lagarde explains that the ECB is attentive to health literature.

We have good reasons to believe that by the end of 2021, with uncertainty associated with it, we will have reached sufficient herd immunity to hope that by the end of 2021 the economy will begin to function under more normal circumstances and that in particular the service sector will not be impaired by a lot of these social distancing and restrictions that apply to it at the moment and do not facilitate the growth of the sector.

That takes you into the beginning of 2022 where the economy really begins to recovery very seriously, the recovery takes root, and we are essentially two years after the beginning of Covid.

LAGARDE SAYS WE HAVE GOOD REASON TO BELIEVE THAT BY END 2021 WE WILL HAVE REACHED SUFFICIENT HERD IMMUNITY

LAGARDE SAYS DEPTH, DURATION OF SECOND WAVE BIGGER THAN EXPECTED

Lagarde: Depth, Duration Of Recent Infection Wave More Severe Than Expected; Says We Have Good Reason To Believe That By End Of 2021 we will have reached Sufficient Herd Immunity
-Reuters

1.55pm GMT

The ECB has also cut its inflation forecasts for this year, and for 2022.

#ECB cuts inflation forecast for 2020 and 2022. Reaching the 2% price target has become even more distant, at least when it comes to the ECB's forecasts. pic.twitter.com/WpUpRYcrKn

1.52pm GMT

The ECB's economists have downgraded their growth forecasts in the short term.

The ECB now expects a weaker recovery next year, although a stronger pick-up in 2022.

ECB: growth downgrades: lower for next year, higher for 2022

2020: -7.3% vs -8% in Sep
2021 3.9% vs 5%
2022: 4.2% vs 3.2%
2023: 2.1%

Inflation to remain negative until early 2021.
2023 (new inflation projection): 1.4%

1.47pm GMT

The economic impact of the pandemic is uneven across sectors, Christine Lagarde continues, with the services sector hit more than manufacturing by the need for social distancing.

While fiscal measures are supporting households and firms, consumers are still cautious - given the impact on employment and wages.

#Bce #Lagarde
Vaccine, recovery, restart...

"It'll take time" pic.twitter.com/KROFAmdN3o

1.41pm GMT

ECB president Christine Lagarde is briefing journalists on today's stimulus measures.

She explains that the latest data suggests the pandemic is having a more pronounced short-term impact on the economy then previously envisioned, and also creating more protracted weakness in inflation.

ECB's Lagarde: Economy Seen Shrinking In Q4
Services Activity Severely Curbed
Inflation Remains Very Low
Incoming Data Suggest More Pronounced Near Term Impact Of Pandemic

1.34pm GMT

Fawad Razaqzada, market analyst at ThinkMarkets, also reckons there's some disappointment that the ECB hasn't launched a larger stimulus package:

So, the European Central Bank did more or less what the markets had expected and extended the pandemic emergency purchase programme (PEPP) by 500bn to at least end of March 2022 and kept interest rates unchanged. The targeted longer-term refinancing operations (TLTRO) of ultra-cheap long-term loans offered to banks were extended by 12 months and there were a few other not-so-significant tweaks to its policy tools. The ECB re-iterated that it will continue to monitor exchange rate developments, regarding their possible implications for the medium-term inflation outlook.

In other words, the outcome of the ECB's policy meeting was not exactly the bazooka" that Christine Lagarde had indicated should was going to unleash. Sure enough, there was a bit of disappointment to the announcement as the stock markets barely responded and the euro extended its gains on the session on relief that the central bank was not going to intervene in the FX markets more meaningfully.

1.32pm GMT

Perhaps surprisingly, the euro has actually strengthened since the ECB's announcement -- up 0.3% at $1.212.

That also suggests the announcement was largely as expected' by the markets, disappointing those who hoped for a bigger new bazooka.

Well @ecb steps up to the plate and bunts it's way to first base. pic.twitter.com/g6Cw29nnVH

1.27pm GMT

Florian Hense, economist at Berenberg, says the ECB has delivered on its promise' to recalibrate its monetary policy tools to help the eurozone economy.

Unexciting if not almost boring - as in the ECB watches the Eurozone economy's back whatever betide" - is exactly how the ECB wants to be seen.

1.24pm GMT

Frederik Ducrozet, macro strategist at Pictet Asset Management, says today's stimulus measures look like a compromise between the ECB's hawkish and dovish wings:

ECB PEPP: the 500bn boost, to 1850bn, along with the extension until March 2022 (rather than June) looks like a compromise between the hawks and the doves, but it will also make it possible to increase the pace of purchases over 15bn/week, if needed. pic.twitter.com/oL4TB4MEQJ

(underwhelming) ECB decisions:
- 500bn PEPP boost until at least Mar-22
- PEPP reinvestment until at least end-2023
- 3 new TLTRO-III at -1% rate until Jun-22, larger allowances (from 50% to 55% of eligible book)
- looser collateral until Jun-22
- 4 new PELTROs
- APP unchanged

1.15pm GMT

The ECB also warns that uncertainty remains high -- including over the timing of Covid-19 vaccines that could end the crisis.

In a statement outlining today's moves, it says:

The monetary policy measures taken today will contribute to preserving favourable financing conditions over the pandemic period, thereby supporting the flow of credit to all sectors of the economy, underpinning economic activity and safeguarding medium-term price stability.

At the same time, uncertainty remains high, including with regard to the dynamics of the pandemic and the timing of vaccine roll-outs. We will also continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook.

Press release: Monetary policy decisions https://t.co/koy8zAVy9m

1.12pm GMT

As well as boosting its pandemic stimulus package by 500bn, the ECB has taken several other steps to support the eurozone economy through the crisis.

That includes providing even more extra cheap funding for banks, by:

12.59pm GMT

The European Central Bank has increased the size of its stimulus programme, and extended it by nine months.

It's a new attempt to protect the eurozone's economy from the damage caused by Covid-19, in view of the economic fallout from the resurgence of the pandemic".

In any case, the Governing Council will conduct net purchases until it judges that the coronavirus crisis phase is over.

*ECB LEAVES KEY RATES UNCHANGED, EXPANDS PEPP BY 500 BILLION UNTIL MARCH 2022 $EUR pic.twitter.com/PypRLC4PZq

#ECB extends PEPP by 500bn to at least end of March 2022, rates unchanged. Increases PEPP bond buys to 1.85tn from 1.35tn, extends it by 9mth. Adds more long-term, loans. https://t.co/jsDa9MkYci pic.twitter.com/RUwm7lmpOU

12.22pm GMT

Brexit fears are pulling the pound lower, on disappointment that the UK and EU are still far apart" on a deal.

Sterling has now dropped by around 1% to $1.327 against the US dollar (from around $1.34 during last night's dinner in Brussels).

I had a very long conversation yesterday night with Prime Minister Boris Johnson. It was a good conversation. But it is difficult.

We are willing to grant access to the single market to our British friends. It's the biggest largest single market in the world. But the conditions have to be fair. They have to be fair for our workers and for our companies, and this fine balance of fairness has not been achieved so far.

"Our negotiators are still working, and we will take a decision on Sunday"

European Commission President Ursula von der Leyen says she had a "very long" conversation with Boris Johnson, but post-Brexit trade talks remain "difficult"

Updates: https://t.co/jGQXOxCzEi pic.twitter.com/pQ4rlvprkx

On Brexit, negotiations are still ongoing. We trust the commission - we will have a short debrief from the commission. We will not have a long debate on Brexit and we will defend our European interests.

11.49am GMT

The congestion crisis at UK ports has forced carmaker Honda to suspend production at its Swindon factory until at least Monday.

The Swindon plant, which produces the Civic car, shut down on Monday night because of delays in receiving spare parts from east Asia. Honda is now considering flying in parts, as Bentley and Jaguar Land Rover have both previously weighed up.

A spokesman said: Honda UK has confirmed to employees that production will not run on Thursday 10 or Friday 11 December due to transport-related parts delays. The situation is currently being monitored with a view to restart production on Monday 14 December."

11.42am GMT

It's a troubling day for the tourism sector.

Tui, Europe's largest holiday company, has sunk to a 3bn (2.7bn) full-year loss, and said it does not expect bookings to return to normal until 2022.

The prospect of vaccinations from the beginning of the year will significantly increase demand for summer holidays in 2021."

11.15am GMT

Telecoms news: BT is to extend the discounted monthly fee it introduced for landline-only customers in 2018 for another five years, providing significant savings for more than 1 million customers.

10.57am GMT

The pound's weakness has pushed the UK stock market higher, with the FTSE 100 up 35 points at 6599, a gain of 0.5%.

Multinational companies are among the risers, including tobacco firm Imperial Brands (+2.2%), pharmaceutical maker Hikma (+2.3%) and medical implants firm Smith & Nephew (+2.2%).

10.44am GMT

In the financial markets, the pound has dropped further against the US dollar and the euro as fears of a no-deal Brexit cliff-edge mount.

Sterling has dropped by nearly a cent to around $1.33, and is down almost a eurocent at 1.099, after last night's turbot-charged dinner between Boris Johnson and Ursula von der Leyen resulted in a new Sunday deadline.

This reaction suggests the market is losing confidence in Boris Johnson being able to strike a deal and so currencies and equities are likely to be volatile for both today and tomorrow in anticipation of this weekend's conclusion to the drawn-out negotiations.

There is no guarantee that if and when an agreement is found it can enter into force on time. We have to be prepared including for not having a deal in place on 1 January.

Negotiations are still ongoing but the end of the transition is near. There is no guarantee that if & when an agreement is found it can enter into force on time. We have to be prepared including for not having a deal in place on 1 January. Today we present contingency measures pic.twitter.com/FQ4Urn9YUC

9.46am GMT

The UK faces a precarious" economic outlook as the pandemic hits confidence and Brexit trade deal talks continue, warns Charles Hepworth, investment director at GAM Investments:

He says October's slowdown shows the impact of lockdown measures - which could see the UK economy shrink again this quarter:

As lockdown restrictions resurfaced across much of the UK in the fourth quarter, the effects have started to show already in October's monthly GDP print, which posted a 0.4% advance against the 1.1% advance we saw in September. The general expectation is for a Q4 contraction in GDP as a whole as the economy continues to deflate from the record June growth rate as we bounced out of the first wave of the pandemic.

This monthly print shows the continual damaging effects of the pandemic, sapping any consumer and business confidence and now the UK economy is nearly 8% smaller than it was in January this year. As talks continue between Prime Minister Boris Johnson and the EU President von der Leyen, with the deadline to reach an agreement further extended to this Sunday, the outlook for the UK economy looks precarious.

9.43am GMT

Dr Jonathan Gillham, PwC chief economist, says October's GDP report confirms that the UK's economy was weakening before November's lockdown - with small firms suffering most.

Today's monthly GDP data confirms what we already knew - the economy was slowing ahead of the second national lockdown in November. Overall, there is still a lack of confidence in the economy, with sectors such as accommodation and food - which fell by 14.4% due to tightening COVID-19 restrictions - the worst affected.

Sectors such as air and rail transport, creative arts and entertainment, and travel agencies have recovered less than half of their pre-February levels of output. In line with this, the data published today suggests that much of the growth in the economy is coming from larger businesses, with smaller businesses the most adversely affected - particularly those that are customer facing and based in the service sector."

9.31am GMT

Economic growth across the UK slowed to a snail's pace' in October, says Ruth Gregory, senior UK Economist at Capital Economics.

The 0.4% m/m rise in real GDP was a far cry from the 2.2% m/m and 1.1% m/m gains seen in August and September respectively and suggests that the recovery had already burnt out even before November's lockdown was imposed.

That left the economy still 7.9% smaller than before the crisis, a bigger shortfall than during the whole of the Global Financial Crisis.

The second lockdown probably caused the economy to contract sharply in November, perhaps by up to 8% m/m, and the strict COVID-19 regional tier system put in place in December will limit the rebound in activity in the coming months.

The economy hardly grew at all in October and with the COVID-19 restrictions likely to stay in place for some time, the economy is in for a tough few months. But scope for a vaccine bounce" in 2021 should allow it to regain its pre-virus level in Q1 2022.https://t.co/e9w9rFHOm9 pic.twitter.com/GR9gc9Za5k

9.19am GMT

The UK has managed to sign one free trade deal today - with Singapore.

The agreement will provide continuity and certainty for businesses in both countries and send a strong signal of the UK's commitment to deepen its engagement of the region."

It removes tariffs, gives both countries access to each other's markets in services and cuts non-tariff barriers in electronics, cars and vehicle parts, pharmaceutical products, medical devices and renewable energy generation, the ministry said.

Duties will be eliminated by November 2024, the same timeline as the agreement between the EU and Singapore, a former British colony that maintains close links with London.

8.57am GMT

Britain's economic recovery from the first wave of the Covid-19 had almost come to a standstill as fresh restrictions affecting the hospitality sector were imposed in the autumn, our economics editor Larry Elliott writes:

Figures from the Office for National Statistics showed that national output - or gross domestic product - rose by 0.4% in October.

Latest @ONS data reveals that the UK economy grew by 0.4% m/m in October 2020. This is down from a 1.1% rise in monthly GDP in September, as the re-introduction of tighter #coronavirus restrictions weighed on activity. pic.twitter.com/r6i6HFJki8

8.47am GMT

The UK economy is likely to come to a juddering halt' this quarter, warns Rory Macqueen, Principal Economist at the NIESR thinktank:

Today's ONS data show that the fourth quarter got off to a ponderous start even before the second lockdown in England was imposed. Survey data suggest that, although the economic impact of the second lockdown in November was smaller than the first, it does seem more likely than not that the final quarter of the year will show little or no overall growth in GDP with the recovery shuddering to a halt.

While the rollout of the vaccine offers some positive momentum, the final act of Brexit is likely to offset that in the early months of 2021."

8.42am GMT

The slowdown in UK growth should focus political minds' on the importance of reaching a free trade deal with the EU, says Professor Costas Milas of University of Liverpool:

GDP remained, in October 2020, a massive 8% below its pre-pandemic level. That said, some good news might come out of this significant loss of GDP momentum if, and only if, it helps focus political minds to avoid a no-deal Brexit.

If anything, GDP will continue to underperform in November 2020 because government stringency measures remained elevated in an attempt to suppress the virus. GDP is expected to bounce back, albeit quite slowly, in December 2020 because of positive Google mobility developments (a proxy for consumer expenditure) in response to stringency measures being relaxed.

8.30am GMT

Four sectors of the UK services sector are still more 50% smaller than in February.

Travel agents, air transport, creative arts and entertainment, and rail transport have all suffered the worst hit to growth.

8.20am GMT

The ONS has also looked at the overall impact of the Covid-19 pandemic on the UK economy in October. Here are the key points:

8.06am GMT

James Sproule, chief economist of Handelsbanken in the UK, says the UK economy faces a rocky few months':

The pace of growth has fallen considerably since the relative highs seen in August and September - with accommodation and food services continuing to face significant difficulties.

The spike in restaurant activity in August, driven by the eat out to help out' program, was successful in driving revenues up at the time. This rate of recovery was clearly not sustainable and we are seeing all face to face activities lagging. The wide-spread roll out of the vaccine is clearly going to be necessary for a full recovery.

7.55am GMT

Yael Selfin, chief economist at KPMG UK, predicts the UK economy will shrink in the October-December quarter - and suffer a more severe downturn than major rivals for 2020.

Overall, the UK economy could shrink by 2% in the last quarter of 2020, taking the contraction for the year as a whole to 11.2%, one of the worst among developed economies.

GDP could rise by 6.1% next year in the event we get a Brexit deal, while growth could prove lower at 3.3% if there is no deal with a small recession at the start of the year.

October data shows significant slowdown in activity ahead of the second lockdown in November. Hospitality services were particularly hit after a summer reprieve, with prospects expected to remain gloomy until later next year when restrictions are likely lifted fully."

7.51am GMT

October's slowdown is likely to be followed by a significant' fall in GDP in November, warns the British Chambers of Commerce's head of economics, Suren Thiru.

The sharp slowdown in economic output in October reflected the squeeze on activity from the re-introduction of tighter coronavirus restrictions, including the tier system in England. Firms in hospitality, who are most acutely exposed to the renewed restrictions, suffering particularly badly in the month.

October's slowdown is likely to be followed by a significant contraction in economic activity in November as the effects of the second coronavirus lockdown are felt, despite the prospect of a temporary boost from Brexit stockpiling.

While a vaccine offers real hope, failure to avoid a disorderly end to the transition period or further lockdown restrictions before a mass vaccine rollout is achieved would severely drag on any economic recovery.

Mass testing remains crucial to keeping the economy moving until the Covid-19 vaccine is fully rolled out. Achieving a UK-EU trade deal is critically important to avoid a damaging cliff edge for the UK economy. With time running out, government must work urgently to close the major gaps in the guidance available to help businesses to prepare for the end of the transition period."

7.36am GMT

The health and social work sector made a strong positive contribution to growth in October, as did manufacturing.

But accommodation and food services shrank dramatically as Covid-19 restrictions were imposed.

Monthly GDP in October 2020 increased by 0.4%, where manufacturing had the largest contribution, as manufacturing of transport equipment saw increased demand.

Health also had a large positive contribution in October as there was an increase in the volume of activity. Accommodation and food service activities acted as a large drag on growth in October as tightening coronavirus measures had an adverse impact on trade and a subsequent lack of demand.

7.28am GMT

The ONS's deputy national statistician, Jonathan Athow, says the reintroduction of some restrictions" in October hit growth in the services sector (particularly hospitality), leading to the slowdown.

Commenting on today's GDP figures the Deputy National Statistician for Economic Statistics, @jathers_ONS said: 1/2 pic.twitter.com/xlcgRCIAht

.@jathers_ONS continued: 2/2 pic.twitter.com/G59WnsC4GL

7.20am GMT

Since July 2020, there has been a loss in momentum across all main sectors" of the UK economy, warns the Office for National Statistics in today's GDP report.

The services sector only grew by 0.2% in October, reflecting the new restrictions imposed on hospitality companies.

We've released GDP figures for October 2020.

GDP grew 0.4% in October but is 7.9% below its pre-pandemic peak
Services grew 0.2% (8.6% below Feb)
Manufacturing grew 1.7% (6.6% below Feb)
Construction grew 1.0% (6.4% below Feb)

https://t.co/OKSTHC8HDM pic.twitter.com/ml6GqluRdF

6.57am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain's economy has slowed sharply as the rise in Covid-19 infections and tiered restrictions imposed across the country hit activity.

With a backdrop of further national measures being introduced in response to the coronavirus pandemic, monthly GDP grew by 0.4% in October 2020. This is the sixth consecutive monthly increase following a record fall of 19.5% in April 2020.

October 2020 GDP is now 23.4% higher than its April 2020 low. However, it remains 7.9% below the levels seen in February 2020, before the full impact of the coronavirus pandemic.

The prime minister and Von der Leyen had a frank discussion about the significant obstacles which remain in the negotiations.

Very large gaps remain between the two sides and it is still unclear whether these can be bridged."

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