UK economy lags behind G7 rivals as growth revised down - as it happened

Graeme Wearden

from on 2018-02-22 17:09 (#3GFSB)

UK growth during 2017 has been revised down to 1.7%.

Earlier:

5.09pm GMT

And finally, Britain's stock market clawed back some of its losses to end the day down 29 points, or 0.4%, at 7272 points.

That's partly thanks to a pick-up on Wall Street, where traders welcomed today's strong weekly jobless figures.

UK GDP was revised downwards to 0.4% quarter on quarter, missing expectations of 0.5%. Britain grew just 1.4% year on year making it the slowest growing major economy, lagging behind Italy and Japan, as Brexit uncertainties continue to impact on data.

Whilst this isn't a huge downwards revision, it was sufficient to knock investor confidence over whether the BoE will be able to hike rates as soon as May. The question arises once again as to whether the UK economy is strong enough to sustain a rate rise in the Spring, with so many Brexit uncertainties still unresolved.

2.14pm GMT

Here's our full story on today's growth figures, by my colleague Angela Monaghan:

Britain's economy grew at a slower rate than first thought in the final three months of 2017, leaving the UK lagging further behind other major economies as it prepares to leave the EU.

The Office for National Statistics revised down its estimate for UK growth in the fourth quarter to 0.4%, following an earlier estimate of 0.5% and missing economists' forecasts that the rate would be unchanged.

2.12pm GMT

The Guardian's latest Brexit Dashboard is out.

This month's report warns that "Cracks are starting to appear in UK economic resilience", with growth revised down today and yesterday's jobs figures showing a rise in unemployment.

2.01pm GMT

Matt Whittaker of the Resolution Foundation has tweeted about today's GDP report, explaining how the recovery from the 2008 financial crisis has been so mediocre:

Today's GDP revision means UK output per person is just 3% above its pre-crisis level, nine and a half years on... At this stage following the 1980 recession, GDP per capita was up nearly 27%. Following the 1990 recession it was up nearly 20% pic.twitter.com/1fOHJUOYk6

We've now gone 45 quarters (11.25 years) without growth in annualised GDP per capita reaching its pre-crisis average. The longest previous period of this kind (starting 1990) lasted just one-third as long pic.twitter.com/x44Qt9n6JG

The UK's performance in 2017 contrasts with strengthening growth elsewhere, and means we've fallen behind Germany in terms of overall post-crisis growth in GDP pic.twitter.com/o7vLzK2TBi

The UK was already further down the international league table when post-crisis growth is measured on a per capita basis. Most of these figures stop in 2016, but suggestion is we're likely to have fallen further behind in 2017 pic.twitter.com/fR3zze1uKe

1.34pm GMT

Newsflash from America: The number of US citizens signing on for unemployment benefit fell to 222,000 last week, down from 229,000.

That's close to the 45-year low set in January, and shows the US labor market is robust.

US weekly jobless claims total 222,000, vs 230,000 expected https://t.co/1kC6zY3wYU

1.30pm GMT

Back in the financial markets, shares in mobile phone game-maker Rovio Entertainment have taken a real hammering.

12.32pm GMT

Bloomberg pins some of the blame for Britain's slow economy on the 2016 EU referendum, and the slide in sterling:

Part of the economy's weakness reflects the fallout from the pound's drop since the vote to leave the EU in 2016. After inflation surged, household spending rose the least in five years in 2017.

The UK economy expanded less than previously estimated in the fourth quarter as consumers and businesses absorbed faster price increases https://t.co/gSwSPs1Ge8 pic.twitter.com/nxylluPygf

12.02pm GMT

Professor Costas Milas of the University of Liverpool has created a neat chart, showing how economic uncertainty can hit business investment.

Efforts by Ms May to clarify Brexit issues in 2017 have contributed to a 2.1% growth in Business investment (in 2017) following from the disastrous 0.5% drop in 2016. What the graph is really telling us is that Business leaders are crying for additional clarity so that they can invest again!

11.22am GMT

Just in: UK retail sales growth has slowed, for the third month in a row.

That's according to the CBI's monthly healthcheck on the sector, which found that sales fell across clothing, footwear & leather, department stores, and furniture & carpets.

11.01am GMT

On a year-on-year basis, the UK economy grew by 1.4% in the last quarter of 2017.

In contrast, the eurozone grew by 2.7%, Germany expanded by 2.9%, France grew by 2.4%, and American GDP rose by 2.5%. Italy grew by a more modest 1.6%.

Until today's downward revisions, we had a month of thinking the UK wasn't at the bottom of the G7 league. h/t @samueltombs #Brexit happy days pic.twitter.com/aclycmr29S

10.44am GMT

Robert Gordon, CEO of Hitachi Capital UK, is disappointed that UK business investment was flat in the last quarter of 2017.

We would like to see businesses taking a more proactive approach to tackling productivity and driving growth through positive investment in key assets over the next few months."

10.34am GMT

John Hawksworth, chief economist at PwC, predicts that the UK will continue to lag behind major economies such as the US and Germany this year.

Here's his take on today's GDP figures:

"The big picture has not changed. The UK economy is still estimated to have slowed markedly in the first half of 2017 as higher inflation - linked primarily to the weaker pound after the Brexit vote - dampened real household spending power. This factor continued to dampen consumer spending growth in the second half of 2017, but was offset by a stronger world economy, which boosted UK exports in areas like manufacturing and financial and business services.

Government spending also provided some support as the Chancellor eased off on austerity, particularly as regards public investment.

10.17am GMT

Today's growth downgrade suggest the UK economy isn't ready for an interest rate hike, suggests Sam Tombs of Pantheon Macroeconomics.

Downward revision to Q4 #GDP puts the U.K. back at the bottom of the G7 growth leaderboard for 2017. This is not an economy that obviously needs to be cooled with higher interest rates. pic.twitter.com/HvebjlhM5y

Latest #UK #GDP estimate confirms the UK economy is unbalanced with business investment flat and net trade a drag on Q4 growth. There remains little sign of the 'positive' sterling effect that some are quick to point to with a lack of import substitution a key factor. pic.twitter.com/Q6YGGoyq90

10.13am GMT

Jacob Deppe, Head of Trading at online trading platform, Infinox, says:

"The brief flurry of optimism triggered by December's breakthrough in Brexit negotiations is looking ever more illusory.

"This downward revision to fourth quarter GDP confirms that Britain's economy ended 2017 with a whimper rather than a bang.

10.04am GMT

Britain's economy has just posted its weakest annual growth rate since 2012.

This morning's downgrade in UK growth, to just 1.7% last year, also means the UK is lagging behind other advanced economies.

UK now clearly bottom of the pack in terms of G7 economic growth in 2017.

(unless Canada has a total nightmare in Q4) pic.twitter.com/oAHw4YhrpO

UK GDP growth (of the %y/y variety) is currently the slowest among the G7. Last time this happened was 2010, but going further back it's clear that this situation is pretty unusual. pic.twitter.com/Wz5xKt8LMQ

9.58am GMT

City experts are disappointed that Britain's growth rate in the last quarter has been revised down to 0.4%.

Andy Bruce of Reuters says the data is rather worse than expected:

Disappointing UK GDP number.

Business investment stagnated in Q4 - worse than all forecasts in @ReutersPolls

UK #GDP revised down to 0.4% QoQ in Q4. Business investment flat between Q3 and Q4 - but up 2.1% YoY. Still mixed evidence that UK fully recoupling with global pick up in trade & investment. pic.twitter.com/96kCs9L736

UK GDP grew less than expected in Q4 (0.4% q/q) with consumers contributing half of that. I don't expect consumption to grow in 2018 pic.twitter.com/Z1o6fAPd3F

"The news comes at a crucial time for Prime Minister Theresa May, who welcomes her top ministers to Chequers for Brexit talks today. With economies on the continent and the eurozone as a whole both performing well at the moment, it's a tough day for Brexiteers to present their argument, as Britain risks being left behind."

#UK GDP growth revised down to 0.4% q/q in Q4 17 - the domestic growth engines (consumption + business investments) are weak at the moment. Growth held up by strong global growth. #Brexit $EURGBP $GBP $GBPUSD pic.twitter.com/9egyPUONR0

9.55am GMT

In another blow, Britain's trade deficit widened in the last three months of last year.

The ONS explains:

In Quarter 4 2017, the net trade deficit widened to 12,237 million in volume terms, from 9,661 million in Quarter 3 2017. This was due in part to large increases in the price of fuels that were imported combined with decreases in the volumes of fuels exported. Total trade imports increased by 1.5% whilst total exports decreased by 0.2%, between Quarter 3 and Quarter 4 2017.

Despite the widening of the trade deficit in the latest quarter, looking at 2017 as a whole the trade deficit has narrowed, from 46,912 million in 2016 to 40,404 million in 2017.

9.48am GMT

Today's growth report shows that UK business investment was flat in the last three months of 2017.

That could be a sign that firms are holding back until they have more clarity over Brexit (something Bank of England governor Mark Carney warned of yesterday).

9.46am GMT

9.40am GMT

Newsflash: Britain's economy grew slower than first thought in the final three months of 2017.

Uk growth in the fourth quarter of last year has been revised down to 0.4%, from an initial estimate of 0.5%.

9.31am GMT

Speaking of Greece....

"The Greek people must learn who turned pain and illness into a means of enrichment."

"Justice will speak the moment these bastards who set up this conspiracy find themselves in the dock."

9.18am GMT

Greek government bonds are rallying this morning, despite the wider selloff, after Moody's raised the country's credit rating by two notches to B3.

In a boost for Athens, Moody's said that it expects Greece to return to self-sufficiency and market-based funding when its bailout ends this summer.

Moody's believes that Greece will successfully conclude its third support programme and return to self-sufficiency and market-based funding.

Moody's : Greece has achieved material fiscal and institutional improvements under its current adjustment programme, which Moody's believes will be sustained in the coming years

8.52am GMT

Energy firm Centrica is cutting 4,000 jobs after posting a 17% tumble in adjusted profits.

The combination of political and regulatory intervention in the UK energy market, concerns over the loss of energy customers in the UK, and the performance issue in North America have created material uncertainty around Centrica and, although we delivered on our financial targets for the year, this resulted in a very poor shareholder experience.

We regret this deeply, and I am determined to restore shareholder value and confidence.

"Staff quite simply will be devastated. Although Centrica has already shed thousands of jobs, it's nowhere near out of the woods, and there's much more misery to come.

"British Gas staff shouldn't be feeling the heat today. It should be Centrica chief executive Iain Conn.

8.41am GMT

Barclays is defying the selloff, with its shares jumping almost 6% in early trading.

Barclays posted a 1.9bn net loss for 2017, dragged into the red by a charge following Donald Trump's tax reforms. But investors are happy that the bank has pledged to restore its dividend this year.

Barclays reports 1.9bn loss amid Trump tax change and legal costs https://t.co/UVsBynXJ28

8.32am GMT

European stock markets are a sea of red in early trading.

Just as it seemed traders had acclimatised to inflation, rising interest rates and higher bond yields, the fears that caused this month's crash were reignited by minutes from the Federal Reserve's last meeting.

The Dow Jones fell over 470 points, or 1.9% from its mid-afternoon peak as the dollar rallied, making a one-week high against the pound.

8.14am GMT

Economists have been quickly revising their forecasts for US interest rate hikes, following last night's Fed minutes.

#Fed Minutes (8) | As a result, according to Bloomberg, investors are now pricing >60% chance of 3 hikes by December. pic.twitter.com/u4sTcfmVqR

We revise our Fed call and go for four hikes this year https://t.co/42ItHWURRY pic.twitter.com/O2kjiB7jRq

8.12am GMT

The prospect of higher American interest rates has sent the US dollar spiking.

This has dragged the pound down to $1.388 against the dollar, from over $1.40 earlier this week.

8.08am GMT

Over in Tokyo, a Federal Reserve policymaker has given another hint that US interest rates will rise steadily this year.

Fed Governor Randal Quarles says:

I anticipate further gradual increases in the policy rate will be appropriate to both sustain a healthy labor market and stabilize inflation around our 2 percent objective.

"The U.S. economy appears to be performing very well and,certainly, is in the best shape that it has been in since the crisis and, by many metrics, since well before the crisis."

8.04am GMT

Last night's Fed's hawkish minutes have sent Japan's Nikkei down 1%, and wiped 1.3% off the Hong Kong Hang Seng.

7.41am GMT

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

"A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate."

Volatility soared in equity and fixed income markets in the final hours of yesterday's U.S. trading session. After dropping to 17, the Cboe Volatility Index gained 19%, ending the day above 20. The S&P 500 reversed a gain of 1% to end the day 0.55% lower.

Similarly, the Dow Jones gave up 470 points from peak-to-trough, while U.S. Treasury yields spiked across the curve, and 10-year yields breached 2.95% for the first time in four years.

European Opening Calls:#FTSE 7207 -1.02%#DAX 12373 -0.78%#CAC 5260 -0.80%#MIB 22487 -0.74%#IBEX 9750 -0.74%

#FTSE100 Index called to open -75pts at 7205 pic.twitter.com/Mt5wNbgBws

Centrica, owner of @BritishGas unveils 17% drop in profits as loses 1.4m customers,to cut 4000 jobs as eyes drastic savings

#Barclays #BarclaysResults pic.twitter.com/VlhVTjMaeY

BAE Systems underlying profits beats expectations, dividend a touch light, pension deficit reduced, improving outlook for defence budgets in several markets.

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