UK retail sales soar, while January public finance surplus best since 2008 - as it happened

Crude oil dips on renewed supply glut fears, with markets set to end positive week on downbeat note

2.47pm GMT

A slide in oil prices on concerns about oversupply - notwithstanding the recent proposal from producers to freeze output at January levels - continues to take the shine off this week's stock market rally.

US markets have followed Europe lower, with the Dow Jones Industrial Average down 70 points or 0.4% in early trading. As well as oil, investors were unsettled by higher than expected inflation numbers, which could prompt the Federal Reserve to raise rates sooner than forecast.

2.42pm GMT

Another point about US inflation:

Markets are focused on the black line (goods = 30% of core CPI). Fed should be focused on blue line (services = 70%) pic.twitter.com/3vbr3ftfIZ

2.29pm GMT

Over in Greece, protesting farmers have upped the ante, expanding roadblocks nationwide ahead of what some are calling make-or -break talks with prime minister Alexis Tsipras on Monday. Helena Smith reports from Athens:

A month into their protests over pension and tax reforms, the powerful bloc of farmers that have brought chaos to Greece intensified their action, announcing that tractor blockades would be stepped up around Thessaloniki airport this afternoon.

More than 66 % of Greece's import and export trade is carried by road to Europe with the economy suffering huge damage as a result of the blockade.

2.16pm GMT

Turning back to the UK public finances, the Office for Budget Responsibility, the government's independent economic analysts, said there was uncertainty over the outcome for the rest of the year:

On the current data, meeting our full-year forecast for 2015-16 would require borrowing to fall by 18.4 billion in the year as a whole. That implies borrowing of 7.0 billion over the next two months, compared with 14.8 billion in the same period last year. Our November forecast does assume stronger growth in receipts in the remainder of the year (particularly income tax and stamp duty land tax) but local authority borrowing as measured in the statistical bulletin looks likely to exceed our November forecast. Considerable uncertainty remains over prospects for the remaining two months of the financial year, while data on local authority borrowing are often subject to substantial revisions over subsequent months.

Public sector net debt (PSND) in January 2016 is estimated to have fallen by 0.1 per cent of GDP relative to January 2015. A major contributor to the drop over the past 12 months has been the Government's programme of financial asset sales, including multi-billion pound sales of Lloyds shares and UK Asset Resolution mortgage assets. But the nominal GDP estimate used to calculate the debt ratio is in part still a forecast, so it remains to be seen if debt is still shown to fall on this basis in the year to January in future outturn estimates.

2.03pm GMT

Still, the higher than expected US inflation numbers may not prevent the Federal Reserve from sitting on its hands in terms of any imminent rate rises, says Rob Carnell of ING Bank:

US CPI for January came in a little stronger than had been expected, with the headline rate unchanged on the month, and the core rate rising by 0.3% month on month. Headline inflation in January is now double that in December at 1.4% year on year, with the core rate now at 2.2% (up from 2.1%).

Inflation has been one of the factors the Fed has cited for its cautious stance towards monetary policy changes. But despite these latest inflation increases, concerns over the ebbing strength of domestic activity may start to provide more of an excuse for further foot dragging, whilst external demand and financial market turbulence provides yet another excuse for the Fed to do nothing for the foreseeable future.

1.49pm GMT

The US data does seem to show a trend:

Beating estimates in past 2 wks:

* core CPI
* core PPI
* hourly wages
* retail sales
* Ind. Prod

1.36pm GMT

The US consumer price index climbed by 1.4% year on year in January, compared to expectations of a 1.3% increase.

Excluding food and energy the rise was 2.2%, better than the forecast 2.1%.

US CPI Data (Jan):
CPI Ex Food & Energy +0.3% v +0.2% exp, prev +0.2%
CPI Ex Food & Energy +2.2% v +2.1% exp, prev 2.1%

12.36pm GMT

Is the recent rally sustainable? Perhaps not...

Looking accross FTSE member charts I note a lot of waning volume during the recent rally. Not a good sign

12.34pm GMT

UK retail sales soared in January as shoppers snapped up bargains in the clearance sales, while the public finances showed the biggest January surplus since 2008.

After a positive weak, European stock markets are flagging as the oil price slips once more.

12.29pm GMT

Analyst Alexandra Russell-Oliver at Caxton FX said the pound was paying more attention to the EU negotiations than the day's data:

Sterling has weakened against the euro heading into today's session, as EU negotiations continue. The UK's EU Referendum continues to be a source of volatility for the pound. Brexit concerns have contributed substantially to recent sterling weakness and the referendum is set to remain a risk to sterling strength going forward. These concerns may continue to limit or off-set any gains by sterling in reaction to positive data, such as the jump in January Retail Sales out this morning.

12.08pm GMT

European markets are running out of steam after a positive week, as we head into the weekend.

The correlation with the oil price continues, with equities slipping as crude dips again. Brent crude is down 1.6% at $33.7 a barrel on renewed concerns about oversupply despite the recent proposal from Saudia Arabia and Russia to limit production to January levels.

11.33am GMT

More on the oil deal to freeze production at January levels, which was agreed between Saudi Arabia and Russia, and seemingly supported by Iran.

Iran of course has only just returned to the export market after sanctions were lifted, and so was unlikely to want to cut production. But the producers have realised they needed to do something to tackle the supply glut which, along with falling demand, has seen crude prices tumble.

10.49am GMT

David Kern, chief economist at the British Chambers of Commerce, agrees there is more to be done:

For the second month in a row the public finances are showing some gradual improvement, after months of disappointing performance. While it seems likely that borrowing in this financial year will be lower than in the previous one, there is still uncertainty as to whether the OBR's forecast for government borrowing made in the Autumn Statement will be met.

Lower revenues from Britain's banking and oil and gas sectors have reduced the UK's ability to generate tax receipts, making the task of repairing our public finances more difficult. More must be done to strengthen and broaden our tax base by boosting business growth if are we to achieve a budget surplus by the end of this parliament.

10.33am GMT

And here's the Chancellor on the public finances:

There's no shortcut to fixing public finances & today's figures show while deficit is falling, there's more to do

10.11am GMT

Back with the retail sales, and James Smith at ING Bank says the strong data could pave the way for a rate rise later this year if the UK votes to stay in the European Union:

After a disappointing Christmas run-up, retail sales surged by 2.3% month on month in January (way above expectations of 0.8%), bringing the annual comparison up to 5.2%. Previously reported figures from the British Retail Consortium were good, with footfall up, but even when taking this into account, these figures were very strong. The large rise was fairly broad based and was led by demand for clothing and computers, helped along by post-Christmas price cuts. Over the past year, rising real wages and more recently, cheaper energy costs, have helped boost consumer confidence and spending. Indeed, as job creation remains strong, this trend looks set to continue over the coming months.

Despite this strong data, the focus today will remain firmly on the EU Leader's Summit in Brussels. If the UK is able to agree a deal, the press is reporting that David Cameron could return to London tonight and announce the referendum date, which will most likely be set to take place on June 23rd. This will essentially mark the formal start of campaigning and with the polls likely to remain tight, we could see a loss of economic momentum over the next couple of quarters as uncertainty prompts firms to temporarily hold off on hiring and investment plans.

10.07am GMT

The public finance figures will have an impact on March's Budget, says Maike Currie, investment director for Personal Investing at Fidelity International:

January tends to be a good month for tax revenues as self-assessment tax returns are due this month, normally leaving the Treasury in the black in the first month of the year. Last year figures were boosted by record self-assessment income tax receipts of 12.3 billion. This year's number was even higher, ticking up to 12.4 billion.

Today's numbers are likely to have a significant impact on March's Budget announcement, not least given Chancellor George Osborne's announcement in the Autumn Statement back in November that public finances over the next five years were looking 27 billion stronger, thanks to a combination of better tax receipts and lower interest payments on debt. But since then the world has changed dramatically with concerns over China and global growth leading to tumbling stock markets and the governments' postponement of the sale of Lloyds Banking Group.

Between the November 2015 Autumn Statement and the end of January 2016, equity prices fell by 7%. According to the Institute for Fiscal Studies (IFS), if they were to remain 7% below the OBR's latest forecast, this could reduce capital tax receipts in 2020-21 by around 2 billion.

As the IFS has pointed out*, budget surpluses are rare events. Ignoring the immediate post-war period, when large surpluses were run, since 1952 there have only been eight out of 63 years in which the UK government has spent less than it has received in revenues, and it has never done so for more than three consecutive years.

10.01am GMT

Here is a chart from the Office for National Statistics showing the increase in the UK's national debt since the end of the tax year in March last year:

9.53am GMT

Here's Reuters report on the UK borrowing figures:

Britain recorded the largest public finances surplus for any January since 2008, while retail sales growth surged at a much faster rate than expected, according to official figures published on Friday.

The Office for National Statistics said the January surplus, excluding banks, rose to 11.210bn from 10.217bn a year earlier. Still, the surplus was some way short of 12.65bn forecast in a Reuters poll.

9.50am GMT

Dennis de Jong, managing director at UFX.com, said:

After an underwhelming Christmas for British retail, economists will be encouraged to see the sector return to growth in January.

British consumers are a key driver of the economy at a time when external demand has been weak, and fortunately big-ticket items such as furniture and electricals appear to have been on plenty of January shopping lists.

9.48am GMT

Back with the retail sales, and the year on year figure for January showed a 5.2% rise as the clearance sales brought shoppers back after a poor December.

The value of online sales increased by 10.4% in January 2016 compared with January 2015 and increased by 2.7% compared with December 2015, according to the Office for National Statistics.

Amid the recent heightened concerns over the UK economy, this is a major boost to first quarter GDP growth prospects. However, it will be tempered by concern that the UK economy remains unbalanced and too dependent on consumer spending and the services sector.

9.37am GMT

Meanwhile the UK public finances for January showed a smaller than expected surplus of 11.2bn, the largest surplus for the first month of the year since 2008.

9.31am GMT

Shoppers were out in force in January with UK retail sales up 2.3% month on month compared to expectations of a 0.8% rise. In December there was a 1.4% fall.

9.07am GMT

How long will negative interest rates last? Bloomberg has polled a group of economists on the subject:

CHART: Economists now expect SNB, DNB, Riksbank, BoJ & #ECB to remain in sub-zero territory until ... at least 2018. pic.twitter.com/LSmpznOpMD

8.56am GMT

The Dax is underperforming other European markets after worse than expected producer prices figures.

They dropped 0.7% month on month in January compared to expectations of a 0.3% dip and a 0.5% fall in the previous month.

Weak and worsening German PPI adds to pressure on Draghi & Co

8.49am GMT

As the negotiations about Britain's future in the European Union grind on, the pressure on the pound could continue when the outcome is finally reached. Simon Smith, chief economist at FxPro, said:

By the end of today, we should have a decent idea whether the UK is set to have a referendum on EU membership this year and also the deal on the table in terms of the UK's revised relationship with Europe. This matters for sterling, which has certainly shown strong signs of concern so far this year. In January, it was one of the weakest currencies on the majors as the uncertainty weighed. But there could be more of this to come should the referendum date be confirmed either today or early next week. The main issue is the behaviour of overseas investors in UK assets, of which there are increasing numbers given the UK's persistent current account deficit. January's price action was indicative of overseas investors both lightening up on sterling exposure and also hedging their asset positions. Such action could well accelerate into a Brexit referendum mid-year, not because investors are taking a view on the outcome, more that they are reacting to the on-going uncertainty created, given that polls are not decisive either way.

8.15am GMT

An interesting chart from RBS on US oil production, showing a large fall in the number of active rigs but a lower drop in actual output:

Rig count down 63%, production only down 10%. Efficiency gains and concentrating rigs in high producing areas #oil pic.twitter.com/zalDldL7yC

8.07am GMT

As expected, the dip in the oil price has taken the shine of what has been a good week for stock markets.

The FTSE 100 has dipped 10 points or 0.16%, Germany's Dax has dropped 0.4% and France's Cac is o.07% lower. The FTSEEurofirst is off 0.23% .

7.40am GMT

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

A positive week on the markets is ending on a more downbeat note, with Asian markets slipping back and Europe expected to open fairly mixed.

Our European opening calls:$FTSE 5970 down 2
$DAX 9479 up 15
$CAC 4244 up 4$IBEX 8291 down 4$MIB 17109 down 4

The slowdown in the UK economy has pulled the rug out of Chancellor George Osborne's relatively generous Autumn statement which saw him scrap plans to cut tax credits. The risk is that Mr Osborne is forced to raise taxes and/or raid pensions in the next budget after having relied too heavily on economic growth for his spending plans, which will act to further curtail future growth.

While positive surprises in economic data are naturally positive for sterling, it has been PM David Cameron's Brexit talks that have dictated the state of play. A weak or no deal with Europe would add to uncertainty over the referendum result and could see cable get another jolt lower to fresh six-year lows beneath 1.41.