UK avoids 'Brexit black hole' in January, but economy still sluggish - as it happened

Graeme Wearden

from on 2019-03-12 16:48 (#4AWD2)

Britain grew faster than expected in January, as consumers shake off Brexit anxiety, but the longer-term picture is less rosy

Latest: Pound hit by backstop advice
Breaking: GDP up by 0.5% in January
Fastest monthly growth in two years
Services, manufacturing and construction all grew
But economy only grew 0.2% in November-January quarter
Economists: Economy still subdued

8.38pm GMT

A late PS: Business leaders are tearing out what's left of their hair, after MPs rejected Theresa May's deal again.

Carolyn Fairbairn, CBI Director-General, summed up the mood:

"Enough is enough. This must be the last day of failed politics.

"A new approach is needed by all parties. Jobs and livelihoods depend on it.

4.48pm GMT

In the City, the FTSE 100 index of blue-chip shares has closed 20 points higher at 7,151.

The pound is still off last night's highs, down 0.5% at $1.3077 as traders await Theresa May's likely defeat over her Brexit deal tonight.

3.30pm GMT

The Republic of Ireland and France have now announced bans on the Boeing 737 Max 8, shortly after the UK's own move.

Boeing, though, has issued a statement insisting that it has "full confidence in the plane".

Boeing: "We have full confidence in safety of the 737 MAX..Federal Aviation Administration is not mandating any further action at this time, and based on the information currently available, we do not have any basis to issue new guidance to operators."@SkyNews

3.21pm GMT

Here's our news story on the UK growth figures:

3.20pm GMT

UK chancellor Philip Hammond will have been relieved by today's growth figures, as he prepares to update the House of Commons with his Spring Statement tomorrow.

Our economics editor Larry Elliott explains:

In the end, the figures were not nearly as bad as the surveys had suggested. Output was up 0.5% in January, the sharpest one-month rise for more than two years, with increases in the three big sectors: services, manufacturing and construction. Spending in the shops was strong and the UK's annual growth rate picked up from 1% to 1.4%. While not exactly booming, Hammond will be able to tell MPs that the UK is growing faster than all the other G7 countries bar the US and Canada.

Of course, there are plenty of caveats. The stronger than expected performance in January did little more than reverse a 0.4% drop in gross domestic product in December, and the quarterly growth rate - a better guide to the underlying trend - remained unchanged at 0.2%. It is always a mistake to read too much into a single month's data, and manufacturing and construction were both down over the quarter.

3.00pm GMT

Despite the pick-up in GDP in January, growth in the first quarter of 2019 will be weak.

So says the UK think tank NIESR, which estimates that the economy will only expand by 0.2% in Q1, the same as in the last quarter of 2018.

"The latest ONS data come as something of a relief, after several successive months of downside news and some recent pessimistic commentary.

Nevertheless, the pace of UK economic growth remains lacklustre, reflecting the impact of Brexit -related uncertainty and similarly weak growth in the global economy outside of the United States. The near-term outlook for the UK economy depends very much on the outcome of the Brexit negotiations that are being discussed in Parliament today, and the extent of any fiscal response promised in the Spring Statement tomorrow".

OUT NOW: Our latest #NIESRGDP Tracker suggests that the UK #economy is on course to grow at the lacklustre pace of 0.2% in the first quarter of 2019 - Read here in full: https://t.co/TOnXS197vy

2.39pm GMT

Several Turkish Airlines planes heading to the UK have been forced to turn back mid-flight, and return to Istanbul, following the CAA's ban on the Boeing 737 Max 8.

At this point all outbound Turkish Airlines #737MAX are returning to Istanbul. Inbound flights continuing. https://t.co/7pmTOm1Yei pic.twitter.com/UGEiQT8RaW

2.31pm GMT

Re Trump's line on complex aircraft, despite a leap in 2018 fatalities have plunged since innovations like fly-by-wire were introduced pic.twitter.com/7QWQ6A1FOQ

2.26pm GMT

We don't know why two Boeing 737 Max 8's have crashed in the last five months, but this hasn't stopped president Trump weighing in on airline safety.

Airplanes are becoming far too complex to fly. Pilots are no longer needed, but rather computer scientists from MIT. I see it all the time in many products. Always seeking to go one unnecessary step further, when often old and simpler is far better. Split second decisions are....

....needed, and the complexity creates danger. All of this for great cost yet very little gain. I don't know about you, but I don't want Albert Einstein to be my pilot. I want great flying professionals that are allowed to easily and quickly take control of a plane!

Over the last two decades, aviation deaths around the world have been falling. As recently as 2005, there were 1,015 deaths aboard commercial passenger flights worldwide, the Aviation Safety Network said.

Despite the increase, 2018 was still the third safest year ever in terms of the number of fatal accidents and the ninth safest measured by deaths, the Aviation Safety Network said.

2.16pm GMT

TUI, the UK holiday group, says it is discontinuing all Boeing 737 Max 8 flights "for the time being", following the CAA's announcement.

1.41pm GMT

Just in: Britain has become the latest country to ban Boeing's 737 Max 8 plane, following Sunday's Ethiopian Airlines crash.

The Civil Aviation Authority has ruled that the aeroplane - Boeing's newest model - is not permitted to take off, land, or even fly within UK air space.

"Our thoughts go out to everyone affected by the tragic incident in Ethiopia on Sunday.

"The UK Civil Aviation Authority has been closely monitoring the situation, however, as we do not currently have sufficient information from the flight data recorder we have, as a precautionary measure, issued instructions to stop any commercial passenger flights from any operator arriving, departing or overflying UK airspace.

BREAKING: U.K. joins Australia and Singapore in becoming the latest country to suspend passenger flights on Boeing's 737 Max jet; Britain is also banning the operation of the jet in its airspace. https://t.co/Mu6tLvtQ8G

1.24pm GMT

Nissan only started making its luxury Infiniti cars in Sunderland in 2015, so the decision to abandon production is a big, sudden, blow.

When the first Q30 vehicle rolled off the production line, Nissan declared that it had created "a new generation of premium car builders" and master craftsmen at the "world class" Sunderland factory.

It all adds up to a powerful demonstration of INFINITI's commitment to the UK.

1.05pm GMT

NEWSFLASH: Japanese carmaker Nissan is halting production of its premium brand Infiniti cars at its Sunderland plant in North-East England, in another blow to the UK auto industry.

Nissan says it plans to stop making its Q30 Sedan and QX30 SUV vehicles in the UK by mid-2019. Both models are only made in Sunderland, but sold around the world.

Nissan Motor Co's premium brand Infiniti said on Friday it will exit western Europe early next year, as it restructures its global operations and turns its attention to sales in the world's top two auto markets.

Infiniti said it will discontinue the Q30 sedan and the QX30 sport-utility vehicle (SUV) and cease their production by the middle of 2019 at Nissan's manufacturing factory in Sunderland.

Breaking - Sunderland plant loses two more car models

Nissan cancels production of Infiniti Q30 and QX30 from this summer.

Move is part of wider plan to withdraw Infiniti from Western Europe & to refocus on China and US.

Story to follow.

#Nissan will stop manufacturing its premium brand #Infiniti models in Sunderland later this year - bad news for Nissan workers and could mean job losses. @BBCBusiness

12.51pm GMT

Over in the US, the latest inflation data shows little sign that price pressures are building -- good news for American families.

US core consumer prices, excluding volatile items such as food and energy, increased 0.1% month-over-month in February 2019, compared to a 0.2% increase in the previous month . It's the smallest rise in core consumer prices since August last year. $DXY #CPI #FOREX #FUTURES pic.twitter.com/k4PFynaq25

Inflation sure looks like a non-event. pic.twitter.com/Z9Q7GwpP80

12.17pm GMT

Britain's economy is "stuck in low gear" says Alastair Neame, senior economist at the CEBR thinktank.

Here's his take on this morning's GDP report:

The latest data show that the manufacturing sector has continued its run of poor performance. Compared to the previous three months, output in the sector declined by 0.7% in the three months to January, making this the fourth consecutive period of negative growth. Construction output also recorded a decline of 0.6% over the same period. The more volatile monthly data do indicate some respite, however, with both sectors returning to growth after sharp contractions in output during December 2018.

The service sector, which forms the backbone of the UK economy, indicated a more sustained, albeit small, glimmer of improvement as rolling three-month growth accelerated by 0.1 percentage points to 0.5%. The largest contributor to growth in services came from wholesale and retail trade. Wholesalers in particular will have benefited from firms' continued stockpiling in January, following the government's failure to win a vote on the Brexit withdrawal agreement ahead of the Christmas recess.

11.37am GMT

Sterling has suddenly taken a tumble after attorney general Geoffrey Cox published his legal opinion of the new concessions negotiated by Theresa May last night.

Cox's views appear to be bad news for the prime minister, as she tried to persuade MPs to support her withdrawal agreement.

....the legal risk remains unchanged that if through no such demonstrable failure of either party, but simply because of intractable differences, that situation does arise, the United Kingdom would have, at least while the fundamental circumstances remained the same, no internationally lawful means of exiting the Protocol's arrangements, save by agreement.

Cox's verdict is out, and devastating for No10: Risk of being kept in the backstop is reduced, but remains unchanged if the EU is not found at fault. pic.twitter.com/vXVXzwyEwe

11.28am GMT

Professor Costas Milas of Liverpool University reckons today's GDP report suggests the UK should finally cut its economic losses, accept the Brexit withdrawal agreement, and move on.

Today's GDP growth of 0.2% on a three-month rolling basis is well below its historical mean growth rate of 0.5%. The sustained under par economic performance provides a good excuse for undecided MPs to finally push Mrs May's "improved" deal over the finish line.

I suspect that a number of MPs will realise that it is about time we cut our economic losses and move on by supporting what appears to be the very final Brexit deal offered by our EU partners.

11.00am GMT

Alongside death and taxes, the other certainty at present is that Britain will be running a trade deficit with the rest of the world.

And today, we've learned that the trade gap widened in the last three months, as the UK continued to buy more than we sold abroad.

Imports from EU countries increased 2.3 billion, offset in part by exports, which increased 0.7 billion in the three months to January 2019. The rise in imports was due mainly to a 2.0 billion increase in machinery and transport equipment, of which 0.9 billion was cars.

The largest contributor to the increase in exports to EU countries was also machinery and transport equipment, which increased 0.4 billion, due mainly to a 0.2 billion increase in ships and aircraft.

10.57am GMT

The BBC's Dharshini David reckons Brexit stockpiling boosted UK output in January:

"Brexit fog" may have temporarily boosted activity: GDP growth in Jan largely due to maufacturing rebound (which surveys suggest reflect speeding up production to stockpile). wholesale retail trade (more stockpiling?) also driver. Strip these out & economy sluggish

10.38am GMT

Britain's economy isn't "out of the woods yet" despite recording decent growth in January, says Yael Selfin, chief economist at KPMG UK.

She write:

"The first glimpse of GDP data for this year points to a UK economy hovering well below its growth potential, as we wait for the Brexit fog to dissipate.

"Clarity on the direction of Brexit should lift business confidence and increase investment, but that could take time to materialise, so we expect growth to remain subdued in the short-term.

10.35am GMT

John Hawksworth, chief economist at PwC, says the pick-up in growth in January is welcome, but not the end of the story:

"There was some good news on the economy this morning ahead of the Brexit vote and Spring Statement, as monthly GDP bounced back more strongly than expected in January after falling sharply in December.

"All major sectors of the economy saw a return to positive growth in January, with a particularly marked turnaround in construction sector output as a 2.8% fall in December was entirely reversed in January.

10.31am GMT

You can see the UK's growth data for January here.

10.27am GMT

Publishing monthly UK GDP is a recent innovation from the ONS...and one that has its critics.

The problem is that, certainly in normal times, you can't read too much into a single month's growth figures.

UK economy grew 1.3%y/y (0.2%q/q) in the three months to January. Finance & insurance and manufacturing were the most notable areas of weakness, contributing -0.1%y/y and -0.2%y/y. The contribution from professional services fell from 0.4%y/y to 0.3%y/y. pic.twitter.com/37HqyvJnqh

Worth noting that in quartely terms, construction output fell -0.6%q/q, dragged down mainly by a-0.8%q/q contribution from repairs & maintenance. Worth noting also that private house building fell, having experienced a bit of a revival in the second half of 2018. pic.twitter.com/67qZq0UZ6z

Zeroing in a bit on manufacturing, the quarterly change picture was less bad than in the 3 months to december, with growth improvements in: chemicals, pharmaceuticals, clothing and wood & paper (plus a less bad fall in transport equipment) offsetting the worsening in basic metals pic.twitter.com/giDAPQDOQH

10.15am GMT

UK GDP bounce back in January after slump in December according to latest @ONS monthly estimate... pic.twitter.com/V1Jc8xoCUr

10.04am GMT

The strong growth recorded in January may be a sign that consumers aren't panicking about Brexit (plus, any stockpiling of essential food and medicines would boost output)

Here's economist Sam Tombs of City firm Pantheon:

January's 0.5% m/m jump in U.K. GDP beat even our top-of-the-range 0.4% forecast and supports our view consumers will carry the economy over the line in Q1. Note services output up a healthy 0.5% q/q/ in Jan, matching post-ref average. pic.twitter.com/PW4Z0Wmhxv

9.55am GMT

Rupert Thompson, head of research at wealth managers Kingswood, points out that Britain is doing better than the eurozone - despite Brexit anxiety.

Here's his take on the 0.5% growth recorded in January:

"The January GDP data provided some reassurance that the UK economy is not already heading headfast into a Brexit black hole.

Following a worrying drop in December, GDP bounced back more than expected in January and while the 3m/3m* gain was in line with expectations at 0.2%, the year-on-year gain was a stronger than expected 1.4%.

9.51am GMT

Rob Kent-Smith, Head of GDP at the Office for National Statistics says growth over the last three month's has been 'sluggish', despite the bounce-back in January.

"Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services.

"This sluggish growth came despite the economy bouncing back from a weak December."

9.47am GMT

City experts say Britain's January growth figures look solid:

Decent beat in UK GDP (M/M: +0.5% vs +0.2% exp) but this data is very much playing second fiddle to Brexit in terms of driving the pound at present

Solid numbers from the UK.

UK GDP YoY (January): 1.4% vs 1.2% expected, prior 1%

UK industrial output MoM (January): 0.6% vs 0.2% expected, prior -0.5%

UK manufacturing output MoM (January): 0.8% vs 0.2% expected, prior -0.7%

Ahead of brexit vote, GDP in January grows at 0.5% - beating analyst expectations + the biggest monthly gain in two years. Sterling also up at $1.32 #BrexitCrisis

9.42am GMT

Good news! Britain's services, production, manufacturing and construction all grew their output in January, after shrinking in December.

9.39am GMT

However... Britain's growth over the last quarter is somewhat less impressive.

UK GDP only rose by 0.2% in the November-January quarter compared with the previous three months. That's the same reading as a month ago, and is a better measure of the economy's underlying performance.

0.2% growth in #GDP in the 3-months to January https://t.co/yg8vsmQs6w pic.twitter.com/kAFjksvFlV

9.37am GMT

On an annual basis, the UK grew by 1.4% year-on-year in January, up from 1.0% in December.

9.32am GMT

NEWSFLASH: Britain's economy returned to growth in January, after its December slump.

UK GDP expanded by 0.5% in January alone, new figures from the Office for National Statistics show. That means growth picked up after contracting 0.4% in the final month of 2018.

9.26am GMT

Here we go...

UK GDP and manufacturing figures out in 5 mins, they're obviously overshadowed by whats going on with Brexit. But initial algo reaction to lower than expected numbers could provide good buy levels. $gbpusd

Stand by your desks! UK production trade and manufacturing data is due in a few minutes so a lot to digest. Production is expected to be negative on an annual basis but there is a fair bit of uncertainty #GBP #GDP

9.24am GMT

Beijing's top statistics official has tried to calm concerns over the state of the Chinese economy.

Last week, there was alarm when trade figures showed export and imports both plunged in February.

According to part of the statistics already known, China's economic operation in January-February generally showed an improving trend and overall production improved.

"Excluding the Spring Festival (Lunar New Year) factor, the total value of imports and exports increased 10.2% year-on-year, of which exports rose 7.8% and imports gained 12.9%," he said.

Credit growth-the key fuel for China's economy-is only just beginning to inch up again. If squabbling in Beijing derails that, China's downturn could end up deeper and longer than expected. https://t.co/ksCIRwblC6 pic.twitter.com/L83WJkrHXL

8.56am GMT

Shares in UK banks and housebuilders have risen this morning, as the City hopes that Britain may avoid crashing out of the EU without a delay.

Persimmon and Taylor Wimpey, two of the UK's biggest building firms, are leading the FTSE 100. Royal Bank of Scotland and Lloyds are close behind.

Though the expectation remains that May will lose the vote, the size of the loss could now be far less than it would have been without these changes, which...well, it's something, and could pave the way for a third, finally successful, vote, even if the EU is pretty damn adamant it doesn't want to come back to the negotiating table.

8.49am GMT

Pendragon, which runs car showrooms across the United Kingdom, is also feeling the chill winds of Brexit uncertainty.

It has reported a 1.3% drop in revenues for 2018, mainly due to weaker sales of new cars.

Economic and market conditions remain relatively subdued and the expected UK exit from the EU has resulted in a continuing level of uncertainty in terms of consumer confidence, manufacturer behaviour in respect of new car supply and the possible impact of tariffs and currency movements.

8.26am GMT

Pizza delivery chain Domino's has warned that the lack of clarity over Brexit has hurt consumer spending.

As in 2017, we have been operating in an uncertain consumer environment. Although employment is at record levels and wage inflation has picked up, costs of living are rising and customers are very focused on value.

Until the UK's future relationship with the EU becomes clearer, we expect this uncertainty to continue.

8.16am GMT

January's GDP report really should be better than December's weak effort.

These charts, from a month ago, show how the economy stumbled at the end of 2018. Services, production and construction output all shrank in December, for the first time since September 2012.

7.57am GMT

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

Britain's economy ended 2018 with a whimper, with the economy shrinking by 0.4% in December alone. Today we discover whether growth recovered in January, when the latest monthly GDP figures are released at 9.30am.

As is so often the case with the Brexit story, a big dramatic statement is made followed by it quickly unravelling under scrutiny in Parliament.

How do you turn 230 vote defeat (432 v 202) into victory? Change the mind of 116 MPs.....May needs >
- 10 DUP
- Up to 65 of ERG (about 110 in group)
- 4 Independents (Field/Lady Hermon/Kelvin Hopkins/Ian Austin)
- Up to 40 Lab leave MPs 2/

European Opening Calls:#FTSE 7128 -0.04%#DAX 11609 +0.57%#CAC 5288 +0.42%#MIB 20753 +0.56%#IBEX 9218 +0.50%

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