UK retail sales surge; US business growth slows sharply - business live
Rolling coverage of the latest economic and financial news, including new health checks on the eurozone private sector
- Latest: UK retail sales surge 1.1% in March
- Retail spending jumps 6.7% compared with 2018
- But... credit card defaults have risen
Earlier:
- Eurozone slowdown continues
- Another big fall in German manufacturing
- French factory output weakens again
4.48pm BST
It's been another quiet day in London's stock market, with the FTSE 100 closing down 11 points at 7,459.
David Madden of CMC Markets sums up the main movers:
Unilever announced a 1.6% drop in first-quarter sales to a12.4 billion, which topped analysts' forecasts expectations of a12.3 billion. The disposal of the spreads business was responsible for the dip in sales. Prices ticked up by 1.9% while volumes edged higher by 1.2%, and that is a little concerning as a company can't depend on higher price hikes forever. Well established markets like the Americans and Europe posted sales growth of 0.4% and 0.6% respectively, while emerging markets like Asia, Africa, the Middle East and Eastern Europe registered a 6% rise in sales.
Rentokil shares have reached another all-time high this morning after the group revealed a solid first-quarter update. Revenue for the first three months jumped by 8.9%, but a sizeable portion of that was down to acquisitions, and the organics growth rate was 4%, which was an improvement on the 3.2% achieved in the previous years.
4.41pm BST
Pop! Pinterest shares have begun trading at nearly $24 per share.
That's around 25% above their IPO price of $19.
PINS out at 23.75!
3.45pm BST
Pinterest shares are expected to pop higher when trading begins later today...
Pinterest stock indicated to open at $22.50-$23.50, 18% to 24% above IPO price https://t.co/9o1flp4VqO
"Pinterest plays an important role in the media mix by helping brands reach audiences at key moments of inspiration. While other channels specialize in facilitating high-level brand awareness or direct-response purchase activity, Pinterest generates results across the entire marketing funnel.
We've seen continued increases in investment on Pinterest from advertisers using 4C to buy an array of formats including Promoted Pins, Video, and Shopping Ads."
3.22pm BST
Now that Brexit has been delayed, the UK public are dashing to book their summer holidays.
Ferry bookings have surged in the last week, as families conclude that the risk of being stuck at the border after a no-deal Brexit has receded.
Related: Surge in ticket sales for European ferries after Brexit delay
3.12pm BST
Ouch. Growth across America's private sector companies has slowed sharply this month, to a 31-month low.
Data firm Markit has reported that its Flash US composite output index has fallen to 52.8 for April, down from 54.6 in March. That indicates that growth has weakened this month.
"The US economy started the second quarter with its weakest expansion since mid-2016 as businesses reported a marked slowing in output, new orders and hiring.
"The survey indicates that the manufacturing downturn seen in the first quarter has persisted into April, but growth in the service sector has now also slumped to a two-year low as the malaise showed further signs of spreading beyond the factory sector.
2.40pm BST
Over in New York, the US stock market has opened gently as traders watch attorney general William Barr discuss the Mueller Report (we're live-blogging it here).
Stocks open mostly higher with Dow in the lead as investors await Mueller report https://t.co/lKKo4mFulM
2.07pm BST
American consumers, like the UK counterparts, also hit the shops with unexpected vigour last month.
US retail sales jumped by 1.6% month-on-month in March, the bigger jump in 18 month.
Today's big beat right in line w what @jpmorgan ceo Jamie Dimon told us today. Economy strong. No recession right now growth likely continues next couple of years @MorningsMaria @FoxBusiness March retail sales up 1.6% vs 0.9% estimate.
1.50pm BST
Newsflash: America's employment market continues to show surprising strength.
The number of US citizens filing new claims for unemployment benefit has dropped to a 49-year low, of just 192,000 people.
U.S. Jobless Claims: (still at its lowest levels since the late 60's) pic.twitter.com/aRN8O39ALM
1.37pm BST
Rising credit card default are a worrying sign for the UK economy, warns Professor Costas Milas of Liverpool University.
He's plotted the Bank of England's data against UK GDP growth, to show that that they have a very strong negative correlation (one goes up when the other goes down).
Correlation does not indicate causality but we should assume that (big) rises in defaults coincide with lower GDP growth rates.
From the attached plot, a big rise in default danger occurs instantaneously with big dips in GDP growth. At face value, this seems to suggest that the big increase in the default danger in 2019 Q1 will coincide with a substantial drop in GDP growth for 2019 Q1.
1.00pm BST
The pick-up in retail sales shows that Brexit worries are being shrugged aside by consumers, argues George Buckley, an economist at the Japanese bank Nomura.
He told clients:
Whichever way you cut the figures it is still the case that sales grew by 1.3% q-o-q in the first quarter of this year. And with annual retail sales growth having averaged 3.5% over the past year there is little evidence to suggest that Brexit is doing serious damage to the retail sector.
Rather, the combination of low unemployment, employment rising at a rate twice its long-run average, continued real wage growth and low interest rates is clearly providing significant support.
12.17pm BST
Here's Bloomberg's take on the increase in UK consumers defaulting on their borrowing:
UK credit card defaults have risen to the highest level in almost two years, according to figures from the Bank of England.
Its index of defaults rose to 22.9 in the first quarter, according to its Credit Conditions Survey. That's up from 12.7 at the end of 2018 and, along with the second quarter of 2017, is the highest since the financial crisis.
UK credit card defaults have risen to the highest level in almost two years https://t.co/PQHrplKuzw via @fergalob #tictocnews pic.twitter.com/QHPYtcdWkV
12.05pm BST
Quite....
Shot: *U.K. 1Q RETAIL SALES INCREASE 1.6%, ADDING 0.09 PPT TO GDP
Chaser: *BOE SAYS CREDIT CARD DEFAULTS INCREASED SIGNIFICANTLY IN 1Q
Both via BBG
11.19am BST
The latest credit figures are out, and they paint a more worrying picture.
Lenders have told the Bank of England that default rates on credit cards have jumped significantly in the first three months of 2019.
Default rates increased significantly for total unsecured lending in Q1. This was driven by a significant increase in default rates on credit card loans. Lenders expected default rates for total unsecured lending to decrease slightly in Q2.
The credit card balance default rate hasn't been higher since the first half of 2017 and marks a return to rocky ground, far outpacing the deterioration seen with other forms of unsecured lending.
In fact the default rate for credit cards has nearly doubled as a percentage of net balances between the last quarter of 2018 and the first few months of 2019.
11.01am BST
Our economics editor, Larry Elliott, writes:
Britain's consumers ignored the turmoil at Westminster last month and splashed out in high street stores and online.
Despite fears that spending would plummet as a result of mounting Brexit uncertainty, figures from the Office for National Statistics showed retail sales were up 1.1% in March.
Related: Shoppers ignore Brexit chaos as UK retail sales show surprise jump
10.58am BST
Britain's retailers are keen to dampen the impression that all is rosy on the high street.
Anne Alexandre, RSM manager at the British Retail Consortium, says:
We welcome the improving sales figures. However, these numbers may not tell the whole story, as Easter distortions are notoriously hard to seasonally adjust. It is clear that retail is going through a tough year, with increasing store closures and job losses. This has been reflected in both the BRC's Retail Sales Monitor, as well as Visa Consumer Spending Index, which both showed a slowdown in sales.
Retail is under enormous pressure from both rising costs and Brexit uncertainty. Despite being 5% of the economy, retailers pay 10% of all business taxes and a staggering 25% of Business Rates. Unless the government want to see more closures on the high streets, and more jobs lost, they must act by reforming Britain's broken business rates system.
10.42am BST
Retailers may also be benefiting from the recent pick-up in pay.
UK earnings are rising at their fastest pace in a decade (or since 2016, once you adjust for inflation). That gives shoppers more disposable income.
These figures are surprising - a late Easter and declining credit card spending would typically mean a softer retail environment. Stronger employment and higher wages are natural drivers of higher consumer sentiment, while the effect from last year's 'Beast from the East' brightens the year-on-year comparison.
10.36am BST
We often hear that Brexit has hit confidence in the British economy.
But economist Rupert Seggins points out that UK retail sales have been stronger than other G7 economies since the 2016 referendum.
The "UK retail sales" version of the popular - "compare UK post-Referendum performance with G7 peers" series. UK's figs are more up to date, but this is still a pretty sharp contrast with some of the other charts in the series (e.g. investment or "Doppelganger GDP")). pic.twitter.com/gbC4AMEeNB
European Parliament voting intention:
BREX: 27%
LAB: 22%
CON: 15%
GRN: 10%
LDEM: 9%
UKIP: 7%
CHUK: 6%
via @YouGov, 15 - 16 Apr
10.05am BST
Some snap reaction to the UK retail sales figures:
Okay why were UK Retail Sales so strong in March? The numbers are adjusted for Easter but not for the very cold weather last year. Also inflation in this sector is very low at 0.6% so real wages are strong but overall the UK consumer continues to shop. #GBP #GDP
Quite a gulf opening up between the UK #retail sales and consumer confidence. March figs also at odds with Brit Retail Consortium findings. That said, temporary #Brexit reprieve could help spending in near-term, particularly given Easter aa pic.twitter.com/s7xl9mleh4
Big jump in UK retail sales but the rise is exaggerated in Y/Y terms by the March 2018 data rolling into the base level - a month that was particularly poor for consumer spending due to adverse weather caused by the Beast from the East. Bounce in GBP already fading pic.twitter.com/3DtZmcCJGg
10.00am BST
Britain's love affair with internet shopping deepened last month (another reason that department stores are struggling).
The ONS says:
Internet sales increased by 12.4% for the amount spent in March 2019 when compared with March 2018, with all sectors showing growths except food stores and household goods stores. The month-on-month picture showed a similar trend with total growth of 8.0%.
Online sales as a total of all retailing increased to 18.6% in March 2019, increasing from the 18.1% reported in February 2019
9.56am BST
At first glance, such strong retail sales figures don't really chime with the tales of gloom on the high street.
But dig into the figures, and you can see the department stores are really struggling.
9.48am BST
The ONS's head of retail sales, Rhian Murphy, says there has been "sustained growth" in the first three months of 2019.
March's mild weather boosted sales, with food shops also recovering after a weak February.
Over the longer term, department stores were the only shop type to see their sales shrink.
9.39am BST
Newsflash: UK retail sales jumped strongly last month, as consumers shrugged off the Brexit crisis.
Retail sales increased by 1.1% in March, the Office for National Statistics says, thanks to a surge in spending at food stores and at "non-store retailing" (such as internet sites).
9.33am BST
Neil Wilson of Markets.com says today's PMI report will dampen hopes of a eurozone recovery:
April is the cruellest month, full of false hope - and so it is for the ECB and Mario Draghi they look in vain for signs of a recovery in the European economy. What's clear from today's PMI numbers is that there are as yet no green shoots of spring for the Eurozone. Manufacturing remains on the floor, offset to a degree by a healthier services sector which is now also showing signs of malady.
Services remains in expansion, with the Flash PMI at 52.5. However, this was a three-month low and signals that even here there is pressure. Suggestions that the wider slowdown is starting to 'engulf' the service sector is a big worry.
9.33am BST
We only have country-specific data for France and Germany today, but it's clear that the smaller members of the eurozone are also finding April tough.
Output growth in the eurozone periphery sank to the lowest since November 2013, with new orders and jobs growth weakening.
9.21am BST
The eurozone economy is at risk of stalling, warns Markit's chief economist Chris Williamson.
The eurozone economy started the second quarter on a disappointing footing, with the flash PMI falling to one of the lowest levels seen since 2014. The data add to worries that the economy has failed to rebound with any conviction from one-off factors that dampened activity late last year, and continues to show only very modest growth in the face of headwinds from slower global demand growth and subdued economic sentiment.
The surveys indicate that quarterly eurozone GDP growth has slowed to just under 0.2%. A similar 0.2% rate of expansion is being signalled for Germany but France stagnated and the rest of the region has moved closer to stalling.
Flash eurozone #PMI data for April not only showed weaker business activity growth but also a further easing of inflaitonary pressures, which will concern the #ECB pic.twitter.com/aPzqWYrA8y
9.14am BST
Newsflash: The eurozone is still bogged down in its worst growth spell since 2014, as factories across the region keep struggling.
That's according to Markit's 'flash' eurozone PMI Composite Output Index, which shows that growth is slowing in April, for the second month running.
Reduced optimism was often linked to the recent slowing in demand and lower sales enquiries, as well as downgraded forecasts for economic growth. Specific concerns focused on rising political uncertainty, including Brexit, trade wars and protectionism.
The weakness of the auto sector was also again often cited as an area of concern.
8.57am BST
Currency analyst Marc-Andri(C) Fongern is also concerned, telling us:
Disappointing German manufacturing data pretty much underlines the warnings from the ECB on economic growth in the Eurozone.
German manufacturing is the Achilles' heel of Europe and unfortunately it's still injured.
8.52am BST
Economists and investors are disappointed to see factories in Europe's largest economies still struggling.
Here's some snap reaction:
Europe's troubles resurface as German and French manufacturing PMIs disappoint expectations again$EUR pic.twitter.com/yxWnoZPBMW
The gap between the German manuf. & serv. PMI remained close to historic highs in April as booming domestic demand pushed services higher, while industry remains under pressure from weak global trade & uncertainties despite the first increase in the manufacturing PMI in 9M. pic.twitter.com/dte7sZD6HL
#France: the good news is some of the #GiletsJaunes impact on services has subsided. #PMI Services at 5 month high. BUT has caught the manufacturing bug - at a 32 month low
Divergence among Manufacturing and Services PMI in Europe continues, with both France and Germany showing manufacturing recession and strong domestic demand....
Good for Paris (manufacturing sector is 10% of GDP), less good for Berlin (21% of GDP)
8.49am BST
Phil Smith, principal economist at IHS Markit, says Germany's services companies are propping the economy up, while manufacturing struggles.
He explains:
Amid reports of a declining car industry, strong competition across Europe and generally subdued global demand, [today's PMI] data showed another steep drop in German goods exports and the lowest confidence among manufacturers for six and a half years.
8.43am BST
Newsflash: German factories are also having another torrid month, and Brexit may be to blame.
The German manufacturing PMI, just released, has come in at 44.5, weaker than expected, and deep in 'contraction territory'.
The drop in manufacturing order books in April was led by a further steep decline in new export orders, which fell at the second-fastest rate in the past 10 years.
Anecdotal evidence highlighted weak demand across the automotive sector in particular, whilst also suggesting some hesitancy among UK based clients.
#GERMANY APR PREL PMI #MANUFACTURING: 44.5 V 45.0E (4th straight contraction)
*The a in mfg order books was led by a further steep a in new export orders, which a at the second-fastest rate in the past 10 years.
*PMI Services: 55.6 v 55.0e
*Link: https://t.co/HRERqhKzJh pic.twitter.com/vqHa7eltwE
8.33am BST
Eliot Kerr, economist at IHS Markit, reckons the French economy is now recovering from the disruption on the streets of Paris in recent weeks, but remains weak.
Here's his take on today's PMI report.
The stabilisation of output in April is further evidence of the dwindling economic impact of the 'gilets jaunes' demonstrations. Protestor numbers have fallen to approximately 10% of their peak and the remaining disruption has been limited.
However, protests aside, an underlying slowdown in demand remains evident in the French PMI data. New orders fell for the fifth month in a row during April, partly driven by a sixth consecutive contraction in exports. Although the rate of deterioration in new business eased, many panellists mentioned a decline in activity at their clients.
8.32am BST
This chart shows how France's private sector clawed its way back to stagnation this month (the light blue line)
8.26am BST
Newsflash: France's economy is stagnating, as its factories continue to suffer from falling output.
8.13am BST
New economic data from Japan is already out, showing a worrying drop in exports.
Japan's factory sector is shrinking this month, extending a contraction that began in February, according to Nikkei-Markit's new survey of purchasing managers.
Japan's manufacturing sector remained stuck in its rut at the start of Q2, with the factors which have prohibited any growth such as US-Sino relations, growth fears in China and the turn in the global trade cycle, all remaining prominent risks.
#JAPAN APR PRELIMINARY PMI #MANUFACTURING 49.5 V 49.2 PRIOR (3rd straight contraction)
*Export orders dipped at a stronger rate in April.
*Link: https://t.co/4G0rHYLsPx pic.twitter.com/DJvn9B9IiB
7.42am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Is Europe's economy still stuck in a rut, or turning a corner? Investors will get fresh clues today when data firm IHS Markit releases its 'flash' surveys of purchasing managers in France, Germany, and the rest of the eurozone for this month.
There is a feeling in the markets that the global economy is just starting to stabilise. Traders will pay particular attention to Germany's manufacturing sector, which suffered a sharp contraction across recent months.
Investors are slowly starting to believe that the second quarter could be an improvement on the first, economically. However, more economic data is needed to confirm these suspicions. Today's eurozone and US PMI data could go a long way to confirming or disproving such beliefs.
Brexit uncertainty during the past month, as the UK was scrambling to get an extension from the EU, should be reflected on the consumer spending figures.
UK RNS today #1 -
Unilever - underlying sales +3.1% with 1.2% from volume and 1.9% from price with the underlying sales in emerging markets +5.0%. Sales growth still lower half of 3-5% range for FY but better noises around margin/cash flow
UK RNS today #3 -
Polymetal - gold equivalent production +27% yoy in Q1 and reiterates FY outlook. Pox-2 project rollout continues
Rentokil - 'good start to the year' with 4% organic revenue growth driven by Pest Control
Today on #StreetSignsEurope:
- Eurozone April Flash PMIs
- Weakness in Asian Markets
- Pinterest/ Zoom IPOs with Richard Clode, @JHIAdvisorsUS
- UK Retail Sales
- Easter trends with @Fortnums
- @nbctracie previews Mueller Report release