UK economy grew by 2.3% in April; FTSE 100’s highest close since February 2020 – as it happened

Graeme Wearden

from on 2021-06-11 16:00 (#5JY3N)

Rolling coverage of the latest economic and financial news, as the UK records its fastest monthly growth since last July

FTSE 100 closes at pandemic high
IEA: Oil demand to surpass pre-pandemic levels in 2022
UK economy grew 2.3% in April as economy unlocked
Fastest growth since last summer, driven by service sector
Brexit still weighing on trade with EU
GDP still 3.7% smaller than February 2020
Sunak: Promising sign that recovery is beginning

5.00pm BST

And finally, the FTSE 100 index has closed at 7134 points, up 46 points or 0.65% today.

That's its highest closing level since the end of February 2020, and near to the 15-month high set in May (7164 points).

The successful vaccination programme has helped the economy bounce back from its deepest contraction in 300 years last year. With households expected to splurge the savings amassed over that time, and businesses gearing up for additional investment, the outlook is certainly bright.

There is, of course, the complication of rising cases of Covid-19, which could delay the final stage of reopening. For now, a return to pre-Covid output in Q4 looks to be very much on track.

4.56pm BST

The government has announced that it will remove limits inherited from the EU on about half of the UK's steel imports, in a move that provoked fury from British producers.

The Trade Remedies Authority (TRA) said on Friday that it would revoke the limits on nine categories of steel product, including some bars and wires, meaning imports will no longer face steep tariffs after quotas are filled. It extended limits for three years on another 10 products, including some steel for railways, gas pipes and large sheets.

On their first major test in a post-Brexit trading environment, the UK's new system has failed our domestic steel sector,"

4.33pm BST

European Closing Bell

FTSE100 +0.67% at 7,136

STOXX50 +0.73% at 4,126

DAX +0.76% at 15,690

CAC40 +0.83% at 6,601

IBEX35 +0.79% at 9,206

MIB +0.32% at 25,721

SMI +0.28% at 11,843

~ @Newsquawk

4.30pm BST

Speaking of inflation....US lumber prices are continuing to fall back, having surged dramatically this spring:

LUMBER LIMIT DOWN pic.twitter.com/KAud02yiiO

Lumber - haven't seen a chart formation like this for...well I can't think of one tbh. #lumber #timber @DailyFX Prices via @IGcom pic.twitter.com/6yTFNbKrUT

4.18pm BST

Sterling is on track for its second consecutive weekly loss versus the dollar, despite this morning's solid growth figures.

The pound has dropped by almost 0.5% today, to $1.411, with the row over the Northern Ireland protocol and concerns over rising Covid-19 cases weighing on the currency.

Although UK GDP registered strong growth, the numbers are nothing to shout about considering where we've come from.

As expected, the biggest contributions were consumer services that had previously been hampered by Covid-19 restrictions. Industrial production fell 1.3% Month-on-Month against an expected 1.2% gain although this will hopefully only be temporary. Sterling and UK equity markets have had a muted reaction to the figures and it'll be a good result if the UK economy manages to grow to pre-pandemic size by the end of the year."

UK GDP data release this morning, while strong, did not quite meet market expectations. Also, reports that the re-opening of the economy could be delayed beyond June 21 should limit enthusiasm for GBP versus the euro,"

3.55pm BST

Nightclubs and bars could sue the government to prevent a delay to Covid-19 restrictions being lifted on 21 June in England, amid mounting fears that struggling venues will go to the wall if they have to stay closed any longer.

The Night Time Industries Association (NTIA) is understood to be weighing up legal action on behalf of venues such as nightclubs that have spent money to be ready to welcome guests after a year of enforced closure.

We need people in the pubs to trade profitably. People might say it's only a fortnight or four weeks, but [publicans] are hanging on by their fingertips.

3.29pm BST

US households have grown more optimistic about economic prospects - and less worried about inflation.

The University of Michigan's preliminary consumer sentiment index has jumped to 86.4 in the first half of this month, from a final reading of 82.9 in May.

US consumer sentiment rebounded in early June, recovering 2/3 of last month's loss. Stronger economic growth is a key driver, but "rising inflation remained a top concern," yet "expected rate of inflation declined in early June," advises UoM's economist: https://t.co/arhOwftlNY pic.twitter.com/mtb2cLRfJR

US #consumers feeling more optimistic in early June: UMich Sentiment index +3.5pt to 86.4

Current conditions: 90.6 (+1.2pt)
Expectations: 83.8 (+5pt)

Middle & upper income households
Record expecting lower #unemployment
Inflation still top concern but expectations pic.twitter.com/yE16VXID7J

Strong **decline** in #inflation expectations in June despite the strong May #CPI readings earlier this week:

Expected #inflation rate, next year: 4.0% (-0.6ppt)

Expected #inflation rate, next 5 years: 2.8% (-0.2ppt) pic.twitter.com/u7xD8YYNPO

3.20pm BST

Goldman Sachs has told its staff in the US that they must disclose their Covid-19 vaccination status before a planned return to office working next week.

The investment bank, whose 6,000 UK workers have separately been told they have the option of filling out their status anonymously to give the business an idea of vaccination levels, had previously told US staff that disclosing their inoculation status would be optional.

As a result, it is mandatory that you submit your vaccination status. While we strongly encourage you to receive a Covid-19 vaccine, we understand that the choice to get vaccinated is a personal one."

3.20pm BST

A UK startup that makes flying taxis is to float on the New York stock exchange as Virgin Atlantic and American Airlines placed orders for as many as 1,000 of its prototype electric aircraft.

Vertical Aerospace, which is based in Bristol, said its electric vertical takeoff and landing aircraft (eVTOL) could be in service by 2024, once safety regulators certify it. Developers believe eVTOLs will transform urban transport, offering on-demand flights in and between cities more quietly, cheaply and safely than helicopters.

3.03pm BST

Stocks have opened slightly higher in New York, as investors continue to shrug off concerns that yesterday's jump in US inflation.

2.47pm BST

Rupert Murdoch has written down the value of The Sun newspapers to zero, after the Covid-19 pandemic hit sales and advertising, and the costs of the phone hacking scandal rose.

The Sun titles' accounts were published on Friday, and show that turnover fell by over 20% in the year to June 2020, to 324m.

The grim medium-term outlook for the print revenues, which carried the business through its heyday, forced the company to write down the asset by 84m, an impairment that left The Sun brand with zero carrying value.

The estimate of The Sun's asset value was based on the assumption that the titles, according to management estimates in the accounts, would not return to positive growth.

Rupert Murdoch has written down the value of The Sun newspapers to zero, acknowledging the UK tabloid brand that helped build his global media empire has become a worthless asset. https://t.co/Dax1IewYQ3 via @financialtimes @alexebarker

1.49pm BST

NEISR, the economic think tank, has predicted that the UK economy will post rapid growth this quarter, of around 5.3%.

It predicts that the recovery continued in May and June, with monthly growth of 1.5% and 0.9% forecast, on top of the 2.3% surge in output reported in April.

Like March, April was a month of rapid growth in services output, as anticipated, driven by the re-opening of non-essential retail, outdoor hospitality and near-full attendance in schools.

May will follow a similar pattern, as further restrictions are lifted, as will June if the final step of the roadmap goes to plan. But falls in construction and production, which were less affected by the 2021 lockdown, remind us that our focus should now be on the prospects for the economy in the second half of the year, after temporary re-opening effects have ceased to provide strong monthly increases."

Strong start to second quarter driven by re-opening - our latest #GDP Tracker is OUT NOW.

While the lifting of restrictions has helped return the #economy overall to just 3.7% below its pre-#COVID19 peak, some sectors remain badly affected https://t.co/o3pluE46Vb

12.37pm BST

Here's a handy thread on today's trade figures and the impact of Brexit, from LSE associate professor of economics Thomas Sampson:

New ONS data shows Brexit continues to depress UK trade with EU

Total goods trade in first four months of 2021 compared to 2019
EU: -25%
Non-EU: -4%

Or comparing Apr-21 to Apr-19:
EU: -12%
Non-EU: +3% pic.twitter.com/X5iXbwtppE

Comparing changes in trade with EU vs non-EU gives a rough estimate of the Brexit effect controlling for common supply shocks such as Covid-19

By this metric, Brexit cut goods trade with EU by 21% so far in 2021 vs 2019

Or comparing Apr-21 to Apr-19 implies a -15% Brexit effect

Story of UK-EU trade so far in 2021

January: collapse
February: strong bounceback
March & April: stagnation at below pre-Covid levels

In Mar & Apr-19 goods trade with EU (exc. precious metals) averaged 38 billion per month. In Mar & Apr-21 it averaged 31 billion per month.

Surprisingly, EU imports appear to have been hit harder than EU exports so far.

In past three months, exports to EU down 15% vs same period in 2019, while non-EU exports are down 10%. A relatively small difference as graph below shows. pic.twitter.com/NKdcnvIEWj

By contrast, imports from EU were 25% lower in past three months than for same period in 2019.

But imports from non-EU countries were up 3%.

EU now accounts for less than half of UK goods imports pic.twitter.com/aUoYItl6fw

Noteworthy that UK services trade still shows no signs of recovering from Covid-19

Total services trade 25% lower than pre-Covid

Whereas goods trade now similar to pre-Covid levels pic.twitter.com/1byO1LHlqo

Worth remembering also that ONS data on UK exports to EU in 2021 is much more positive than Eurostat data. We still don't have an explanation for the discrepancy.https://t.co/LREIh3E45r

12.15pm BST

In another sign of economic recovery, global oil demand is now expected to surpass pre-Covid levels by end of 2022.

That's according to the International Energy Agency's latest report, which calls on the Opec+ group to increase production to meet next year's demand -- despite the climate crisis.

Our first detailed look at 2022 balances confirms earlier expectations that OPEC+ needs to open the taps to keep the world oil markets adequately supplied.

Global oil demand will continue to recover and, in the absence of further policy changes, by end-2022 reach 100.6 mb/d.

The pace at which the OPEC+ cuts can be unwound will depend not only on the success in containing the spread of the virus and demand growth but also the timing of the eventual return of Iranian barrels to the market.

FORGET ABOUT PEAK OIL: Global oil demand will surge late next year above pre-covid levels of >100m b/d, the @IEA said on its first 2022 forecast, urging Saudi Arabia and Russia to pump more. "OPEC+ needs to open the taps to keep the world oil markets adequately supplied" | #OOTT pic.twitter.com/ATxEyTXxAb

Two quick takeaways:

With the IEA openly asking OPEC+ for more oil, Riyadh and Moscow are on the driving seat -- quite a turn-around for the petro-states

Oil demand growth continues, and 2020 covid crash proves a blip. Really bad news ahead of #COP26 climate change talks

And another important message on this month's @IEA oil market report: OECD oil inventories are now below the 5-year average (measured both as 2016-20 rather inflated average, or against the much better 2015-19 gauge favored by Saudi Arabia and OPEC+) #OOTT pic.twitter.com/YTluzIfylV

11.44am BST

Naked Wines has reported a 68% surge in sales over the past year as customers flocked to buy wine online during the coronavirus crisis.

The online wine retailer, whose website crashed at Christmas because of customer demand, also reported a 53% increase in regular customers, with the pandemic accelerating the trend of buying wine online.

It is clear to us that the pandemic has served to underscore the value of our business model in connecting winemakers and consumers directly and proven the opportunity before us."

11.24am BST

Germany's economy is on track for a strong recovery in the second half of this year, the country's central bank said today.

The German economy is overcoming the pandemic-related crisis."

The longer it takes to overcome the pandemic worldwide, the greater the risk. In addition to weaker foreign demand, direct protective measures at home could then again affect the German economy.

Bundesbank-Projektionen: Deutsche Wirtschaft steht vor starkem Aufschwung https://t.co/weIbVHi8qq #BIP #Konjunktur #Wirtschaft #Deutschland #Coronakrise #Covid19 pic.twitter.com/77TLmbywGf

10.42am BST

The UK economy grew by 2.3% in April as the easing of Covid-19 lockdown measures fuelled a rebound in consumer spending, according to official figures, my colleague Richard Partington explains:

The Office for National Statistics (ONS) said GDP rose for the third consecutive month as pandemic restrictions were scaled back across all four nations of the UK, with the economy growing at the fastest pace since the July reopening from lockdown last year.

10.42am BST

The week-long Suez Canal blockage in late March may have hit imports from China's manufacturers into the UK in April.

The ONS says:

Imports of goods from China fell across many commodity types, including office machinery, cars, general miscellaneous manufactures, and electrical machinery.

These commodities are typically transported by ship, and therefore may have been affected by the blockage of the Suez Canal, an important passage for ships travelling between Asia and Europe, at the end of March 2021.

10.08am BST

The ONS flags that goods imports from the EU are still significantly down' on last year's levels:

Commenting on UK trade figures for April, @jathers_ONS said: pic.twitter.com/mVtupCRV3s

10.03am BST

UK goods exports to the European Union rose slightly in April, but remain well below their levels before Brexit.

Total exports of goods fell by 0.6% month-on-month in April 2021 after two consecutive months of growth, today's trade data shows.

Falling exports of goods to non-EU countries were driven by cars, while increasing exports to the EU were driven by iron and steel.

The latest trade figures show that Brexit has continued to impede exports to the EU, albeit slightly less than in previous months now that traders are adapting to the new rules.

The value of exports to the E.U. rose by 2.3% month-to-month in April, but they were still 9.0% below 2019's average level. That is a disappointing performance, given the boom in global trade flows; U.K. exporters have lost market share.

Exports values to the EU excluding erratics were 5.7% below their December level, while imports were a whopping 19.1% below. In contrast, imports from non-EU countries are up by 4.9% compared to December and exports are down by just 1.3%.

9.32am BST

The London stock market is rallying this morning, pushing the blue-chip FTSE 100 to a one-month high.

The FTSE 100 has gained 44 points, or 0.6%, to 7132 points.

UK GDP posted a large gain in April for the second month running, growing 2.3% m/m in line with expectations. This left GDP up a massive 27.6% up from its low point last April but still down 3.7% on its pre-pandemic level in February 2020.

Today's data confirm a rapid recovery in the UK is well underway and will fuel hopes that the economy will in a few months' time have recovered all of its pandemic-related losses.

8.56am BST

Debapratim De, senior economist at Deloitte, predicts the UK could see very strong growth this summer, thanks to the successful Covid-19 vaccination programme.

She says:

April and March's GDP figures provide an early indication of the strong summer recovery coming the UK's way.

Vaccines and better weather seem set to supercharge activity. We expect the spring and summer months to deliver growth of almost 7.5%. That is higher than the cumulative growth seen in the four years before the pandemic.

Boris Johnson has been urged to pull the plug on the final easing of coronavirus restrictions across England later this month, as he prepares to consider the latest data this weekend.

With just 10 days until the final stage of his roadmap, when all legal limits on social contact could be removed, the prime minister is under growing pressure to err on the side of caution given a surge in cases of the Delta variant, first discovered in India.

8.31am BST

Although the recovery is underway, it's going to be a long journey (as Rishi Sunak acknowledged earlier, when he said the economy was beginning to recover').

James Smith, Research Director at the Resolution Foundation, warns the government must put more support in place, for when the furlough scheme ends this autumn:

The economy is recovering rapidly as it began to reopen in April. But with GDP still 3.7 per cent below pre-pandemic levels, and the UK having a Covid employment gap' of over four million workers as recently as April, the Covid recovery is far from complete.

Critically, the Government will need to plan for a recovery that continues beyond the phasing out of emergency support later this year."

The economy is recovering rapidly - but a full Covid recovery is far from complete. @JamesSmithRF comments on today's @ONS GDP data for April. pic.twitter.com/IodaqIgMHu

8.13am BST

April's GDP report confirms that the UK is witnessing a strong recovery, says Emma Mogford, fund manager of Premier Miton Monthly Income Fund.

The release of pent up demand, as consumers return to shops and restaurants, is significant.

Investment by businesses is also picking up, now that there is greater certainty over the outlook post covid and post Brexit. While the outlook is positive, the Bank of England has a challenge ahead, to continue to support the recovery, while also keeping a lid on inflation expectations."

8.11am BST

The UK economy reached a turning point in April, says Jonathan Sparks, CIO, UK and Channel Islands, Private Banking and Wealth Management, HSBC.

We've grown accustomed to erratic GDP figures since the pandemic, but today's data confirms that the UK reached a turning point in April, when the re-opening of non-essential retail and easing of hospitality restrictions boosted spending.

Consumer confidence has surged higher in recent months as the re-opening continues, which bodes well for more domestically focused companies.

8.03am BST

There's some good detail in the GDP report showing how parts of the service sector revived in April as restrictions were lifted.

7.56am BST

Overall, UK GDP grew by 1.5% in the three months to April 2021, compared with the previous three months.

This growth was mainly driven by services output and strong retail sales over the quarter, the ONS says.

UK economy posts record annual jump in April, up 27.6% https://t.co/PUmqJ923xX pic.twitter.com/h3yDM0gOeQ

7.37am BST

Chancellor of the Exchequer Rishi Sunak says:

Today's figures are a promising sign that our economy is beginning to recover.

With more than a million people coming off furlough across March and April and the number of employees in work rising, it is clear that our Plan for Jobs is working.

7.31am BST

Deputy national statistician Jonathan Athow says the 9.2% surge in retail spending in April boosted economic growth, as did the return of pupils to the classroom, and the reopening of hospitality firms.

Commenting on today's GDP figures for April, @jathers_ONS said: (1/2) pic.twitter.com/SLzxHAbIi1

Continuing, @jathers_ONS said: (2/2) pic.twitter.com/vQMCmv5XIP

7.22am BST

The UK's service sector drove growth in April, with output rising by 3.4%, partly due to the reopening of consumer facing business during during the month.

But manufacturing output fell by 0.3%, while construction saw a 2% drop in output.

GDP grew 2.3% in April 2021, but remains 3.7% below its pre-pandemic peak:

services grew 3.4% (4.1% below peak)
manufacturing fell 0.3% (2.4% below peak)
construction fell 2.0% (0.3% above peak)

https://t.co/yci1NmD9Ib pic.twitter.com/LEGO964d4B

7.19am BST

The UK economy has now posted its third consecutive month of growth, as coronavirus restrictions were eased to varying degrees in England, Scotland and Wales during April, the ONS points out.

7.16am BST

Despite April's growth, the UK economy is still 3.7% smaller than in February 2020, before the pandemic hit.

But.. GDP is now 1.2% above its initial recovery peak in October 2020, before restrictions were imposed last November.

7.05am BST

Newsflash: The UK economy grew by 2.3% in April - the fastest monthly growth since July 2020.

The easing of economic restrictions boosted output, due to the reopening of shops and hospitality companies during the month.

GDP MoM (APR)
Actual: 2.3%
Expected: 2.2%
Previous: 2.1%https://t.co/4zANViDePq

6.48am BST

The UK hospitality sector will have provided a growth boost in April, says Alvin Tan of RBC Capital Markets.

UK April GDP will be dominated by the reopening of those parts of the economy in April that had been closed (hospitality, non-essential retail, leisure) since January.

High-frequency data suggests that activity picked up swiftly in response. Retail sales jumped 9.2% m/m in April. Card (CHAPS) spending data, which captures broader categories of spending, showed aggregate credit and debit card purchases rising to their February 2020 level by the end of the month, from 80% of that level on average in March, driven mainly by delayable' spending (e.g. clothing and footwear, vehicles, household goods etc.) and, albeit to a much lesser extent, by social' spending (e.g. in restaurants and hotels).

6.38am BST

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

Today we learn how the UK performed in April as parts of the economy reopened as the lockdown was eased.

One of the things we can watch out for today is the GDP of UK which will show us economic strength. So far, we've seen an uptrend in GDP. It has shown to be quite steady near the median instead of being erratic like previous months. Let's see what happens later. pic.twitter.com/bcGDPoPGGI

The main focus today is on the UK economy in the wake of this week's comments from outgoing Bank of England chief economist Andrew Haldane who said that the economic rebound was going gangbusters", and that the Bank of England needs to start looking at turning off the stimulus tap.

This morning's latest economic data could well add extra fuel to that argument.

During the first quarter the economy contracted -1.5%, however with the further easing of restrictions on April 12^th optimism is high that April GDP is likely to see another decent monthly expansion, as Q2 gets off to a flier, with a 2.4% expansion expected, and top of the 2.1% in March. The strong PMI numbers in April further supports this view, with May expected to be equally as strong.

With the further relaxation of restrictions that were announced in April, optimism is rising that the decent performance that we've seen in the manufacturing sector over the last three months can be sustained into Q2.

UK economy expected to show an April boost https://t.co/815yYZG5ix #gbp #forex @CMCMarkets

EU #indices point higher as US bond yields fall, despite yesterday's 5% US #CPI read.
The #markets saw enough one-off factors in the data to believe the Fed's stance that high inflation is transitory.
Watch for UK #GDP shortly.#FTSE +0.17% #DAX +0.1%

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