UK missing deficit target, as households grow gloomier about Brexit – as it happened

Graeme Wearden (until 2.45) and Nick Fletcher

from on 2016-11-22 17:48 (#22H83)

British government unlikely to hit this year's deficit target despite cutting October's borrowing by 25% to 4.8bn

Dow breaks 19,000 as Wall Street hits new highs
Long-term pessimism about Brexit grows
UK public finances better than expected in October...
But deficit on track to breach 55bn target for this year
Corporation tax receipts rise

Earlier:

5.48pm GMT

Taking their cue from overnight records set on Wall Street, and boosted by further gains as US markets opened higher once more, European investors pushed shares higher once more. Despite dips in the oil price on renewed doubts about Opec agreeing output cuts next week, the prospect of a Trump boost to spending continued to support markets.

In Europe, French and German markets were lifted once again by recent political developments - Francois Fillon's victory in the French presidential primary and Angela Merkel standing for a fourth term as German chancellor.

Ahead of tomorrow's Autumn Statement sterling remains weak, dropping back from yesterday's highs above $1.25. It is clear that the chancellor faces a difficult set of choices, with little wiggle room. Given the still murky path ahead for the UK economy, it is hard to see how Mr Hammond can do more than tinker around the edges. Markets will be watching closely for signs of concern about the economic outlook, which could see the pound weaken further against the dollar and the euro.

4.48pm GMT

Here's an interesting chart showing the moves in various commodities following Donald Trump's US election victory:

Diverging fortunes across commodities after #Trump win. Oil has been a loser but #OPEC supply cut could change that: https://t.co/tawCcuTQwC pic.twitter.com/hL6FO3Ji2y

3.43pm GMT

Despite the better than expected eurozone consumer confidence figures, there is a chance the mood may not last, says economist Bert Colijn at ING Bank:

Eurozone consumers have good reason to cheer in November. The oil price fell sharply at the start of the month and Eurozone stock prices have gained on the Trump victory.

The unemployment rate has been flat over the summer months, but the employment outlook has been improving recently as companies are indicating to be hiring at a faster pace in both services and industry. This seems to have humoured the Eurozone consumer, who had been cautious through the summer months awaiting a negative Brexit response that has turned out to be mild so far.

3.19pm GMT

The improved eurozone consumer confidence figures bode well for future growth in the region, says Howard Archer, chief European and UK economist at IHG Markit:

An encouraging boost to Eurozone growth prospects as consumer confidence rose for a third month running in November - and markedly - to reach an 11-month high. Furthermore, consumer confidence is now at a very decent level compared to long-term norms. Consumers across the Eurozone hare currently benefiting from pretty decent fundamentals overall, notably including higher employment and still very low inflation.

This buoys hopes that the Eurozone is on course for improved GDP growth in the fourth quarter after expansion was limited to 0.3% quarter-on-quarter in both the third and second quarters. We currently expect fourth-quarter GDP growth of 0.4% quarter-on-quarter and believe that 0.5% expansion is a genuine possibility. However, we have significant concerns over the Eurozone growth outlook for 2017 amid an uncertain political outlook.

3.09pm GMT

Back with the eurozone, and consumer confidence rose by more than expected in November, despite the continuing uncertainties of Brexit.

The initial estimate for the eurozone rose by 1.9 points to -6.1 points, better than the forecast -7.8 points.

EU consumer confidence hasn't been in positive territory for nearly two decades so today's negative reading is no surprise, but [ECB president] Mario Draghi will be pleased to see the above expectations data is at least moving in the right direction.

Draghi deserves credit for maintaining a relatively stable eurozone economy at one of the most uncertain geopolitical times in memory.

3.04pm GMT

Some upbeat US economic news, with new home sales rising to their highest level in more than nine and a half years in October.

The National Association of Realtors said sales rose 2% to an annual rate of 5.6m, with September's figure revised up from 5.47m to 5.49m.

2.52pm GMT

Maybe it will be louder at NYSE if/when Dow tops 20K. Some cheers just after Dow hit a new record. But nothing crazy. Now it's quiet again.

2.34pm GMT

The surge in US markets - based on the recent strength of the oil price and hopes that Donald Trumps infrastructure plans will boost the economy - is continuing.

The Dow Jones Industrial Average has breached 19,000 for the first time, touching 19007, before slipping back to 18,991, up 0.18%.

2.15pm GMT

Over in the eurozone, and some good news from Portugal:

#Portugal default probability drops as govt says made a2.1bn early repayment of IMF loans today that were due between Sep2018-Feb2019. pic.twitter.com/6ltC3wukIo

1.57pm GMT

The oil price has been rising in recent days on growing expectation that Opec might agree to limit output at its meeting next week, following an outline plan drawn up in Algiers in September.

But as is always the case, it does not take much to dent the mood. Reuters is reporting that Iran, Iraq and Indonesia have doubts about the proposed output cut.

Prices reacting negatively to this comment as Iran and Iraq are amongst the top producing nations by size & shows fractions remain https://t.co/BKowhNs9yN

1.37pm GMT

1) Britain is on track to blow past its budget forecasts for this year, despite cutting its borrowing in October by 25%.

The UK has now borrowed 48.6bn since April 2016, down from 54.2bn a year ago, but already close to the 55bn target for this current financial year (to March 2017).

Here is the world's skewed distribution of wealth in a single graphic https://t.co/o1d5e7plXk pic.twitter.com/mQr0opX6Jm

1.25pm GMT

Back in the City, the FTSE 100 is on track to close at its highest level since 10 November - the day after the US election.

There's a general rally in the markets today, as investors react to last night's record close on Wall Street.

The week before Thanksgiving is never a good time to be short, since those of a bearish disposition tend to suffer a fate akin to a roasted turkey. Goldman Sachs' decision to turn into commodity bulls has bolstered the London mining community, aside from precious metals miners, with the investment bank remaining downbeat on the outlook for gold.

US Opening Calls:#DOW 18990 +0.21%#SPX 2200 +0.11%#NASDAQ 4876 +0.38%#IGOpeningCall

12.14pm GMT

British households have become more gloomy about the long-term economic consequences of leaving the European Union.

Data firm Markit reports that 49.3% of people surveyed think Britain's economic outlook over the next decade has worsened due to the Brexit vote, while 31% of survey respondents think prospects have improved.

"On average, people have become considerably more pessimistic about the impact of the decision to leave the EU on the economy over the next decade.

"Only those working in manufacturing have become more upbeat about the economy's prospects, presumably seeing some benefit of the weaker pound in relation to boosting export performance. However, even here the number of people seeing Brexit to have boosted the economy's prospects over the next ten years only narrowly exceeds those expecting to see a negative impact.

11.45am GMT

We have another gobbet of goodish news ahead of tomorrow's autumn statement.

British factory order books have improved to their best level since June's EU referendum, according to the CBI's monthly survey.

UK CBI Industrial Trends for November#GBP #GBPUSD pic.twitter.com/AekAapENUN

"It's good to see manufacturers' overall order books at healthy levels, and the outlook for output growth remaining robust as we head into Christmas.

"But the weak pound is beginning to make its mark, and prices are expected to rise, especially in the food and drink sector. On the flip side though, export orders remain above average.

11.30am GMT

Bloomberg say today's public finances are a "boost" to Philip Hammond ahead of tomorrow's autumn statement.

But... it won't spare the chancellor from announcing weaker growth and higher borrowing forecasts:

UK borrows less than forecast in pre-budget boost for Hammond https://t.co/PsAVAQyUCb pic.twitter.com/tMjEwvOPfV

11.14am GMT

Here's our news story about today's public finances:

11.12am GMT

This chart highlights how Britain has made little progress in cutting the deficit this financial year:

Public finances had a good month in October. Not good enough though pic.twitter.com/GVLjH6IBri

10.53am GMT

Today's figures show that the pace of deficit reduction is "frustratingly slow", says Martin Beck, senior economic advisor to the EY ITEM Club.

He agrees that the UK government has fallen behind its deficit reduction plan, despite cutting borrowing by 1.6bn in October to 4.8bn.

"The stronger October outturn and some favourable revisions to prior months meant that borrowing was 5.6bn lower than a year earlier over the first seven months of fiscal year 2016-17. But this still leaves the Government behind schedule in terms of achieving the OBR's full year forecast. If this trend continues over the remaining five months of the year then borrowing would overshoot by around 11bn.

In reality the situation is probably a little less bleak, as forestalling associated with the pre-announced increase in dividend tax should cause a sharp rise in self-assessment income tax receipts in the first couple of months of 2017. But even allowing for this, Public Sector Net Borrowing (PSNB) looks set to come in some way above the OBR's full-year forecast of 55.5bn.

10.46am GMT

Resolution Group's Duncan Weldon has crunched the tax receipt data, and found that growth has tailed off a little:

UK public finances: tax receipts data suggest a *gradual* slowing of nominal growth over the past 6 months or so. pic.twitter.com/aJKhpBSSFj

10.19am GMT

Britain's total national debt has risen by 50bn over the last 12 months, and now stands at a decidedly lofty 1,641.6 billion pounds.

But..... debt as a percentage of GDP has actually been falling for the last five months, as Britain's economy has been growing slightly faster than the debt pile.

10.17am GMT

Welcome improvement in public borrowfor Chancellor in Oct but deficit still likely exceed forecast by up to 10bn this yr.

10.04am GMT

Britain's public finances benefitted from a pick up in tax revenues last month, says the ONS.

9.57am GMT

Economist Sam Tombs of Pantheon tweets that Britain is on track to borrow around 68bn this financial year -- much more than the 55bn which was predicted in March's budget.

Despite Oct's figs, borrowing will = 68B this FY if trend persists. This & lower GDP f'casts mean JAMs won't get many sweetneers tomorrow pic.twitter.com/nGHUrZlUtY

9.42am GMT

Here's some instant reaction to October's public finances:

Modest boost for Chancellor ahead of Wed's #AutumnStatement as #UK public finances see y/y in Oct. PSNBex at 4.8n (6.4bn in Oct 2015)

The better UK Public Finances in October were driven by a 1.7 billion rise in Corporation Tax receipts

9.36am GMT

Here we go! Britain borrowed less than feared last month, but is still on track to breach this year's deficit target.

Britain borrowed 4.796bn in October, the ONS says. That's down from 6.4bn in October 2015.

9.25am GMT

The latest UK Public Finances data are due at 9:30 am #AutumnStatement

9.19am GMT

The weakness of the French economy continues to hurt Kingfisher.

The DIY chain has reported a 3.6% slide in like-for-like sales during the last quarter in France, where it runs the Castorama and Brico Di(C)pit chains.

Previous Kingfisher bosses have tried and failed with similar plans, and just now trading conditions look challenging.

UK builders merchants have reported tougher conditions, and the French economic outlook is uncertain."

9.00am GMT

Britain's vote to leave the EU destroyed $1.5trillion of wealth and cut the number of dollar millionaires in the UK by 15%.

"The impact of the Brexit vote is widely thought of in terms of GDP but the impact on household wealth bears watching.

"Since the Brexit vote, UK household wealth has fallen by $1.5tn. Wealth per adult has already dropped by $33,000 to $289,000 since the end of June. In fact, in US dollar terms, 406,000 people in the UK are no longer millionaires."

8.42am GMT

Kit Juckes of French bank Societe Generale also expects that today's public finances will show there's been little progress in eliminating the deficit this year.

We look for a deficit excluding public sector banks of 6bn, a small fall from a year ago and a cumulative fall of just 2.3bn for the first seven months of the fiscal year compared to 2015/2016.

This pace of improvement in the trend in public finances is disappointing relative to the resilience of the economy this year and limits the scope for any fiscal largesse going forwards.

8.20am GMT

European stock markets have jumped at the start of trading, after the US market hit fresh record highs last night.

All four of the main US stock market indices - S&P 500, Nasdaq, Dow Jones and Russell 2000 - hit new record highs today. #timestamp

There are clearly no signs of profit taking yet, with Donald Trump's reflationary economic plans of cutting taxes, infrastructure spending and less regulations remain to be the number one reason fueling stocks' gains.

2iaf We regret to inform you that the president-elect of the US has been tweeting again https://t.co/LsxUfLwojl pic.twitter.com/trdT6sdqWh

PM's spokesman says there is no vacancy for an ambassador to U.S. after Donald Trump tweeted that UKIP's Nigel Farage "would do a great job"

7.56am GMT

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

The public finances worsened appreciably in September compared to a year earlier.

Specifically, Public Sector Net Borrowing excluding banks (PSNBex) amounted to 10.6 billion in September, which was up from a shortfall of 9.3 billion in September 2015.

In order to shore up the economy the government is expected to increase its borrowing, with upward revisions to net borrowing figures ranging from 8 billion to an extra 18 billion for 2017-18, taking the total to somewhere in the region of 63.5 billion - 73.5 billion. Should this amount be added to gilt issuance it would represent a significant increase which we would then expect to increase the UK's rate at which it borrows.

Therefore, any significantly large increase in future borrowing tomorrow from Hammond in his Autumn Statement, is likely to send the yields higher.

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