UK retail sales jump 5.4% as Covid-19 restrictions ease – business live

Julia Kollewe

from on 2021-04-23 13:59 (#5GZ2S)

2.59pm BST

We've had rocketing UK retail sales for March and PMI data indicating the strongest private sector growth in eight years in April as coronavirus restrictions were eased, which pushed the pound higher. The eurozone shrugged off tighter lockdowns and enjoyed a record manufacturing boom in April, while the service sector returned to growth.

2.52pm BST

Chris Williamson, chief business economist at IHS Markit, says:

The US economy is enjoying a strong start to the second quarter, firing on all cylinders as loosening virus restrictions, an impressive vaccine roll-out, a brighter outlook and stimulus measures all helped boost demand.

The upturn is broad-based: the service sector is growing at the fastest rate recorded in almost 12 years of survey history, and manufacturers reported one of the strongest expansions seen over the past seven years. The latter was all the more impressive, as factories continued to be throttled by unprecedented supply chain delays, a consequence of which was a further steep rise in prices.

2.51pm BST

The IHS Markit survey for the US is out - showing a fresh record high in private sector growth in April.

US private sector businesses registered a survey record expansion of output during April, as looser Covid-19 restrictions and strong client demand boosted business activity. A steep upturn in manufacturing production occurred despite unprecedented supply chain disruptions, while services activity growth hit a new high.

U.S. private sector output growth hit a fresh series record in April, according to the Flash #PMI data (index at 62.2), as strong client demand boosted activity. Supply chain disruptions continued to hamper goods production, however. Read more: https://t.co/4E2YhYJkvH pic.twitter.com/HkdWSss83Z

2.46pm BST

On Wall Street, the Dow Jones fell 50 points at the open, or 0.15% while the S&P 500 rose 10 points, or 0.25%, and the Nasdaq climbed 74 points, or 0.5%, after yesterday's losses.

2.25pm BST

Daniel Kral at Oxford Economics has looked at the fiscal cost of the pandemic across different economies in the eurozone.

Data this week revealed that for the most indebted countries, the surge was mainly driven by a collapse in economic activity. For governments entering the pandemic with relatively low public debts, fiscal support measures were the main driver. Kral adds:

Governments can live with high public debt, subject to continued favourable interest rate and nominal growth dynamics. But the uneven fiscal response risks fuelling further economic divergence within the eurozone, although the joint support mechanisms introduced last year - the ECB's large asset purchases and Next Generation EU fund - are mitigating factors.

For the eurozone overall, the headline fiscal deficit widened to 7.2% of GDP in 2020 from 0.6% in 2019, with deficits ranging from 11.0% in Spain to 4.2% in Germany. Having declined for several years, eurozone public debt increased by 14.1pp to 98% of GDP. The largest increases were in Greece (by 25.1pp to 206% of GDP), Spain (by 24.5pp to 120% of GDP) and Cyprus (by 24.2pp to 118% of GDP). At almost 156% of GDP, Italy's public debt at end-2020 was close to its post-World War I record high.

2.20pm BST

Employees at the Bank of Italy headquarters in Rome experienced problems with their PCs, emails and internal bank programs early Friday, fuelling concerns of a hacker attack, Bloomberg News is reporting.

Employees at the Bank of Italy headquarters in Rome experienced problems with their PCs, emails and internal bank programs early Friday, fueling concerns of a hacker attack https://t.co/3UVpKO7X8H

2.18pm BST

Sterling has bounced back, erasing yesterday's losses after UK retail sales rocketed in March and PMI data indicated the strongest private sector growth in eight years. The pound is currently trading 0.2% higher at $1.3875, and is once again set for a weekly gain. Against the euro, sterling is flat at $86.86p.

1.23pm BST

While stocks across Europe continue to slide, with declines of 0.4% (France's CAC) to over 0.6% (UK's FTSE 100 and Germany's Dax), Chris Iggo of Axa Investment Managers has taken a broader look at the markets.

In financial markets things have been relatively calm. A phrase I have heard a lot over the last couple of weeks is that the market is in a wait and see" mode. The consensus is clear, and we are waiting for the data to confirm that the global economy is at the beginning of a long expansion.

The big movers have been equities this month. I pointed out that April tends to be a good month for stocks, and we are seeing new highs in several indices. In the US, the Q1 earnings season is in full swing and so far, with about a fifth of companies having released results, earnings are running 34% above expectations. Bottom-up consensus earnings-per-share forecasts for S&P500 companies remain bullish with 2021 expected to see a 24% increase over the 2020 outcome (and of course 2020 got better from the second quarter onwards) and another 16% increase expected in 2022.

12.31pm BST

Here is a round-up of today's other news.

JP Morgan Chase has said it misjudged its decision to bankroll football clubs' failed attempt to create a breakaway European Super League, after a huge backlash from fans and politicians.

11.49am BST

We have received a response from Lloyd's to the climate protests outside its London headquarters at 1 Lime Street in the City of London today, where a pile of black rubble - representing fake coal - was dumped outside the entrance. The insurance market says:

Lloyd's is committed to accelerating its transition towards a more sustainable insurance and reinsurance marketplace, and has set out specific actions and commitments to align with the goals of the Paris Agreement. We are actively involved in constructive engagement on the issue of climate change and continue to explore the ways in which Lloyd's can support a responsible transition.

To enable the market to support their customers as they transition their businesses away from fossil fuels, the new standards Lloyd's have set for the market are targeted and phased. We have asked managing agents to no longer provide new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands or new Arctic energy exploration activities from 1 January 2022. The target date for phasing out the renewal of existing insurance cover for these types of businesses is 1 January 2030.

11.41am BST

In a sign of spreading optimism, Wizz Air plans to fly between 60% and 80% of 2019 levels this summer, as the travel situation is expected to improve on the back of mass vaccination campaigns across Europe, but with some Covid-19 restrictions still in place.

The Hungarian airline's chief executive Jozsef Varadi made the comment at a virtual aviation conference today.

11.03am BST

On the markets, stocks continue to slide, amid a surge in coronavirus infections in India and Japan, and fears over the impact of mooted capital gains tax hikes in the US.

Japan has declared a state of emergency in Tokyo, Osaka and two other cities, in an attempt to combat a jump in infections three months before the Tokyo Olympics is due to open.

Bit of a wild ride for Coinbase so far - but then, does that surprise anyone?

BTC now below the 50k mark. $COIN pic.twitter.com/ZbZ9JgheiT

10.48am BST

At the Lloyd's headquarters in the City of London, 12 climate activists from Insurance Rebellion (a new umbrella group of various environmental movements) used a tipper truck to dump a large pile of fake coal - black rubble - to block the main entrance to the building this morning. Police arrested two people dressed as builders for obstruction of the highway.

At the London insurance market, specialist underwriters and insurance companies, grouped together as syndicates, operate globally, insuring around 40% of the global energy market, including fossil fuels.

Every day Lloyd's continues to insure fossil fuel projects we move one step closer to climate breakdown. They are complicit in the destruction of our planet, causing millions of people's homes to be flooded, burnt to the ground in wildfires, and reclaimed by rising sea levels. Fossil fuel companies can't run without insurance, so let's stop insuring them.

Adani is building its mine on stolen land. The Wangan and Jagalingou people have said no to Adani four times. Australia is already the world's biggest exporter of coal. If the Galilee Basin is opened up, this would double our output at a time when the world desperately needs to move away from coal to curb runaway climate change. That's why people from all over Australia are putting their bodies on the line to resist the building of this mine. Lloyd's need to stop insuring this deadly project. It's great to see people taking action in London today.

10.15am BST

Combined with the strong PMI figures, the bounce in retail sales bodes well for the British economic recovery in coming months.

Dean Turner, economist at UBS Global Wealth Management, says:

With all sectors showing an improvement relative to March, we believe this points to further strength in the economy in the months ahead.

As today's retail sales numbers signal, consumers and firms stand ready to unleash some of the pent-up demand which has been accumulated in recent months. Encouragingly, the outlook for the labour market continues to improve, with the surveys signalling the fastest rate of job creation since 2017. The news on prices is consistent with the ongoing rise in inflation that we are likely to see in the months ahead. In our view, this will not concern policymakers at the Bank of England too much, but will likely keep them in a hawkish mood.

10.08am BST

Here our story on UK retail sales, which jumped 5.4% in March from the previous month, as Britain's consumers started to spend more freely even before lockdown restrictions were eased.

People bought more clothes to spruce up their spring wardrobes, went to butcher's and bakeries at Easter time and purchases plants and garden equipment. There was also notable increase at medical goods retailers, as older people bought mobility equipment such as rollators as they ventured outside more after being vaccinated.

9.51am BST

Here is some instant reaction from Rhys Herbert, senior economist at Lloyds Bank.

We now seem to be seeing the first evidence of the release of the pent-up demand that was built up over the many months of lockdown as restraints begin to be lifted.

Rising consumer confidence data suggest that those who have been forced to save during lockdown are now eager to get out there and start spending. Household consumption has, after all, traditionally been the main engine of the UK economy.

9.39am BST

Looser pandemic restrictions resulted in the fastest UK private sector growth in April since late 2013, according to the flash estimate from IHS Markit.

Moreover, for the first time since the Covid-19 pandemic began, service activity growth outperformed manufacturing production. This was largely due to a boost from easing government stringency measures regarding some consumer services and non-essential retail in England and Wales from mid-April, with Scotland and Northern Ireland set to follow similar reopening paths by the end of this month.

9.31am BST

Bitcoin and other cryptocurrencies have tumbled, with Bitcoin dropping to below $48,000 this morning, amid fears that US president Joe Biden's plan to raise capital gains taxes will hold back investment in digital assets. This means Bitcoin is down by a quarter from last week's all-time high.

Bitcoin surged to a record high of $64,895 on 14 April, the day of the launch of the US's largest cryptocurrency exchange, Coinbase, on Wall Street's tech-heavy Nasdaq stock exchange.

The cryptocurrency came under fresh pressure on the Biden tax headlines.

The low tested several times in February at $44,000 is the big support. Basically, it seems to have been bid up on a lot of speculation (even more than usual) ahead of the Coinbase IPO and all this froth has evaporated like a lot of hot air.

There has also been a cluster of regulatory reports and rumours that point to a clampdown and tighter regulation. JPMorgan analysts led by the closely-followed Nikalous Panigirtzoglou say the rollover in prices has been led by a steep liquidation in speculative futures positions. Momentum signals will naturally decay from here for several months, given their still elevated level," he says.

9.20am BST

Here is our full story on the UK public finance data. The UK government was forced to borrow a peacetime record of 303bn to combat Covid-19 in the first full financial year of the crisis but the total was lower than originally feared, writes our economics editor Larry Elliott.

Government debt - borrowing that has accumulated over the years - stood at 2.14tn at the end of March, almost 98% of national income.

9.14am BST

Chris Williamson, chief business economist at IHS Markit, says:

In a month during which virus containment measures were tightened in the face of further waves of infections, the eurozone economy showed encouraging strength. Although the service sector continued to be hard hit by lockdown measures, it has returned to growth as companies adjust to life with the virus and prepare for better times ahead.

The manufacturing sector is meanwhile booming. Pent-up spending, restocking, investment in new machinery and growing optimism about the outlook have all helped fuel a further record surge in both output and new orders.

9.06am BST

In the eurozone as a whole, business activity picked up to the fastest growth rate since July thanks to a record expansion in manufacturing production and the first growth in the service sector since last August.

The headline IHS Markit eurozone composite PMI rose from 53.2 in March to 53.7 in April, according to the preliminary flash' reading. Output has now risen for two months after four months of decline, with the latest expansion the second-largest recorded since September 2018.

Eurozone business activity continued to rise sharply in April, according to the latest PMI data. The increase was underpinned by a record expansion in manufacturing output, while services activity grew for the first time since last August. Read more: https://t.co/2abC9uVpS0 pic.twitter.com/FWyogKlNAI

8.37am BST

Germany, meanwhile, has seen a slowdown in growth across its private sector in April, with services activity stalling and the upturn in manufacturing production partly held back by supply shortages, IHS Market reported.

The third wave of the pandemic has stifled progress in Germany's service sector, with April's flash PMI data showing activity close to stalling following the return to growth at the end of the first quarter. The country's manufacturing sector remains on a strong footing, though even here the data show growth being held back by supply problems.

The imbalance of demand and supply across manufacturing supply chains continues to drive up businesses' costs, which are now rising at the fastest rate for more than a decade. However, while factory gate prices are increasing rapidly in line with strong demand for goods, services firms remain more cautious with their pricing, which somewhat limits the spillover to overall consumer prices.

8.26am BST

Latest PMI data pointed to the first expansion of French private sector activity since last August. The upturn was predominantly driven by strong manufacturing growth, but services activity also increased for the first time in eight months.
Read more: https://t.co/c4EbilRuPZ pic.twitter.com/NuCd0ebTQc

8.20am BST

France has recorded its first expansion in business activity in April since August, despite the country's lockdown, according to the PMI flash estimate.

At the sector level, a fresh increase in services activity outweighed a slight slowdown in manufacturing growth. That said, the rise in output at goods producers was far stronger than that at their service sector counterparts. The expansion at services firms was the first for eight months but only marginal overall.

8.10am BST

The Institute for Fiscal Studies, a highly respected think tank, has looked at the rise in UK government borrowing to a peacetime record.

Isabel Stockton, research economist at the IFS, says

Today's figures confirm that government borrowing reached a peacetime record in the financial year that ended last month, with an initial estimate of borrowing of 303 billion, or almost 15%% of national income. The increase on the pre-pandemic forecast is unprecedented and highlights the extraordinary impact of the pandemic on government revenues and spending. We can also expect this estimate to be revised up, perhaps quite significantly, as the non-repayment of government backed loans by businesses is incorporated.

This has increased national debt to 2.14 trillion or almost 100% of national income. With the lowest interest rates in history this is currently perfectly manageable, but rising interest rates could create difficulties for the government finances. This is one of many uncertainties which the chancellor will have to manage over the coming years.

8.04am BST

European stocks have opened lower, as expected, after reports of potential capital gains tax hikes in in the US spooked markets. Rising Covid-19 infections in India and Japan, which could delay the global economic recovery, have also weighed on markets this week.

8.00am BST

Lisa Hooker, consumer markets leader at the consultancy PwC, says:

Clothing sales, while still over 40% lower than pre-pandemic levels, continued their strong bounceback, with a 17.5% improvement compared with February, suggesting that consumers are cautiously looking forward to the end of lockdown with new outfits ready for newly permitted social events.

The increase in petrol sales also reflects the ending of the stay-at-home order and greater willingness to travel, which is a promising sign as the country continues to open up from lockdown.

7.54am BST

Paul Dales, chief UK economist at Capital Economics, sums up this morning's UK data:

March's strong rise in retail sales showed that the economy made a fair bit of progress even before non-essential retailers reopened in April. And the further rise in public borrowing in March rounded out the worst year for the public finances since 1947.

Sales will probably leap further in April when non-essential shops reopened... Overall, we think a surge in retail sales in April will mark the start of a rapid economic recovery that may mean the extra tax hikes and spending cuts that most fear may not materialise.

That was some 24bn lower than the forecast the Office for Budget Responsibility made just a month ago on a like-for-like basis. And if we are right in thinking the economic recovery will be faster and fuller than the OBR anticipates, borrowing will probably fall more quickly than most expect.

7.34am BST

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

Retail sales volumes in the UK jumped 5.4% in March from the previous month, as coronavirus restrictions began to ease. This is up from February's 2.2% growth, and far stronger than the 1.5% gain expected by the City.

Our latest data show that retail sales increased by an estimated 5.4% in March 2021 compared with February 2021 https://t.co/IbqC4EwLbb pic.twitter.com/7gEU0XyZPs

Public sector net borrowing was 303.1 billion in the financial year ending March 2021 - 246.1 billion more than the previous year.

This was 14.5% of GDP, the highest proportion since the end of World War II, when it was 15.2% in 1945 to 1946 https://t.co/p64qO7vJ8E pic.twitter.com/pNCqMeQA74

While one could argue that the prospect of higher taxes is never welcome, and a doubling of a key tax rate even more so, the likelihood of anything of this nature passing through an evenly split Congress, lies somewhere between slim and none, however in these highly uncertainty times it doesn't take much to spook a little bit of profit taking, in what has already been a very choppy week. The reality is taxes may rise but certainly not by as much being touted.

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