UK factory orders slump; Moody's warns no-deal Brexit risks have risen - business live
British manufacturers have suffered the fastest falls in domestic and export orders since the financial crisis
- Latest: Bosses urge Boris Johnson to avoid no-deal
- UK factory orders in biggest fall since 2009
- CBI: New PM needs to get a Brexit deal
- Michael Saunders says UK growth below trend
- Saunders: Brexit means rate hikes less likely
2.59pm BST
Our economics editor Larry Elliott has analysed the IMF's new forecasts, and reports:
Donald Trump's claim that his protectionist measures are hurting Chinamore than the US has received support from the International Monetary Fund in new forecasts showing how a fresh slowdown in the global economy has been concentrated in emerging economies.
The Washington-based IMF said the outlook was gloomier than it envisaged three months ago due to the tit-for-tat tariff war between the world's two biggest economies, Brexit uncertainty and the impact of sanctions against Iran on oil prices.
Related: Donald Trump's trade war hurting China more than US, says IMF
2.57pm BST
Britain's days of growing faster than the rest of the G7 are long behind it....
UK in the middle of the G7 pack in 2019 according to the latest IMF GDP growth forecasts. Although given that the pack isn't exactly roaring along, that's not really saying much... pic.twitter.com/umfWFROvXd
2.57pm BST
The IMF has nudged up its forecast for eurozone growth in 2020 to 1.6%, from 1.5%.
But it still expects growth of just 1.3% this year, with Germany only expected to grow by 0.7% this year. France is tipped to grow by 1.3% this year, while Italy could only manage a meagre 0.1% growth.
The forecast for 2019 is revised down slightly for Germany (due to weaker-than-expected external demand, which also weighs on investment), but it is unchanged for France (where fiscal measures are expected to support growth and the negative effects of street protests are dissipating) and Italy (where the uncertain fiscal outlook is similar to April's, taking a toll on investment and domestic demand).
Growth has been revised up for 2019 in Spain, reflecting strong investment and weak imports at the start of the year.
2.53pm BST
In a small boost to Donald Trump, the IMF has revised up its growth forecast for America.
It now expects America's economy to grow by 2.6% this year, up from 2.3% previously.
The revision to 2019 growth reflects stronger-than-anticipated first quarter performance.
While the headline number was strong on the back of robust exports and inventory accumulation, domestic demand was somewhat softer than expected and imports weaker as well, in part reflecting the effect of tariffs. These developments point to slowing momentum over the rest of the year
2.20pm BST
The IMF warns that the global outlook has not improved in the last three months, since its previous forecasts:
Since the April World Economic Outlook (WEO) report, the United States further increased tariffs on certain Chinese imports and China retaliated by raising tariffs on a subset of US imports.
Additional escalation was averted following the June G20 summit. Global technology supply chains were threatened by the prospect of US sanctions, Brexit-related uncertainty continued, and rising geopolitical tensions roiled energy prices.
2.07pm BST
Newsflash: The International Monetary Fund has cut its growth forecasts for the global economy, blaming the US-China trade war and Brexit uncertainty.
Risks to the forecast are mainly to the downside.
They include further trade and technology tensions that dent sentiment and slow investment; a protracted increase in risk aversion that exposes the financial vulnerabilities continuing to accumulate after years of low interest rates; and mounting disinflationary pressures that increase debt service difficulties, constrain monetary policy space to counter downturns, and make adverse shocks more persistent than normal.
Multilateral and national policy actions are vital to place global growth on a stronger footing.
The pressing needs include reducing trade and technology tensions and expeditiously resolving uncertainty around trade agreements (including between the United Kingdom and the European Union and the free trade area encompassing Canada, Mexico, and the United States).
1.22pm BST
Newsflash: Rating agency Moody's has warned that Boris Johnson's win increases the risk of a no-deal Brexit.
In a new report to investors, Moody's also warns that crashing out of the EU would caused "significant" damage to Britain's credit rating, and that of major companies (such as UK banks, I suspect).
"With the election of Mr Johnson, the likelihood of a sustainable compromise appears lower than before...Our view remains that a no-deal Brexit would have significantly negative credit effects for the UK sovereign and related issuers."
1.06pm BST
City economists fear that Boris Johnson will face a rocky ride at Downing Street.
James Smith, economist at ING Bank, points out that Johnson faces the same problems as Theresa May.
12.55pm BST
The slump in UK factory orders underlines the challenges facing Boris Johnson, newly installed as the new leader of the Conservative Party (and prime minister by tomorrow).
"Business needs three things in the first 100 days. A Brexit deal that unlocks confidence; clear signals the UK is open for business; and a truly pro-enterprise vision for our country.
"On Brexit, the new Prime Minister must not underestimate the benefits of a good deal. It will unlock new investment and confidence in factories and boardrooms across the country. Business will back you across Europe to help get there.
"We congratulate Boris Johnson. He becomes Prime Minister at a pivotal time in our country's history. He must now move swiftly to set out his plans for the road ahead. Ongoing Brexit uncertainty is depressing business activity, but the financial and related professional services industry remains very clear that a no-deal Brexit is still the worst of all outcomes.
We hope the new Prime Minister can find an economically viable way through the ongoing political impasse in Parliament and with the EU27.
Related: Boris Johnson elected new Tory leader
12.20pm BST
The CBI's report also shows clearly that business optimism, and output, have both declined sharply of late:
12.06pm BST
This chart, from the CBI's survey, shows how activity across UK factories has slumped in the last few months.
11.43am BST
UK factories are struggling because the boost from pre-Brexit panic stockpiling earlier this year has faded.
Rain Newton-Smith, CBI Chief Economist, explains:
"As the tailwind from stockpiling weakens, clouds are gathering above the manufacturing sector. It's being hit by the double-blow of Brexit uncertainty and slower global growth.
"With orders, employment, investment, output and business optimism all deteriorating among manufacturers, it's crucial for the new Prime Minister to secure a Brexit deal ahead of the October deadline. And get on with pressing domestic priorities from improving our infrastructure to fixing the apprenticeship levy.
11.41am BST
#UK JULY CBI INDUSTRIAL TRENDS TOTAL ORDERS: -34 V -15E (lowest since Apr. 2010)
*Export Orders: -32 v -12 prior (lowest since Dec. 2011)
*Business Optimism: -32 v -20e (lowest since July 2016) pic.twitter.com/3aI01NTkIH
11.39am BST
Only five of the 17 sub-sectors that make up UK industry have grown in the last three months, according to the CBI.
Growth was strongest in food, drink & tobacco, and mechanical engineering. But the slump in output was particularly due to motor vehicles & transport equipment-making.
11.26am BST
OUCH! UK factory orders have fallen at the fastest pace in a decade, as Brexit uncertainty continues to hurt British manufacturing.
A new survey from the CBI found that UK manufacturing output fell in the three months to July, for the first time since March 2016.
11.12am BST
It looks like perfect conditions for a chilled G&T today (not in the newsroom, of course!), but bad weather earlier this year has hurt tonic maker Fever-Tree.
The poor weather in the past quarter has had a dampening effect on growth rates in the short term as we lap what was an incredibly strong period of trading in summer 2018.
"Fevertree, a former darling of the stock market and a popular share amongst retail investors, seems to have lost even more fizz from this morning's trading update....
The company has not been immune to issues affecting many other companies including the wetter start to the current summer season. It is also finding it increasingly difficult to find new customers in bars, pubs and supermarkets as the UK market appears to be quite saturated.
10.36am BST
The weakening pound has pushed up shares in major exporters (whose foreign earnings are more valuable in sterling terms).
The FTSE 100 is now 46 points higher, or 0.6%, at 7561, not far from an 11-month high.
10.28am BST
Sterling is also dipping against the euro, back down to a1.111, towards last week's six-month lows.
Fiona Cincotta at City Index says today's Conservative Party leadership election is casting a "dark cloud" over the currency markets.
Sterling's slide continues to reflect concerns that a Boris Johnson win will result in a messy Brexit despite the fact that Parliamentarians have been putting legal breaks in place to prevent this outcome. A lot of the weakness has already been discounted in the currency and if Johnson does win sterling may continue to slide but not actually crash as some analysts seem to expect.
Related: Boris Johnson on course to win Tory leadership contest
9.46am BST
The pound has dropped since Michael Saunders' comments hit the wires.
Traders are calculating that an early UK interest rate rise is even less likely, as Saunders was on the hawkish end of the Monetary Policy Committee.
*BOE ISN'T BOUND BY FORECASTS IMPLYING RATE HIKES, SAUNDERS SAYS
Marginally dovish comments by BoE hawk Saunders. Says limited scope for hikes given Brexit headwinds (obvious). $GBPUSD ticks marginally lower. 6M part of UK curve pricing in 72% of a BoE cut. Shouldn't be new news. pic.twitter.com/bfSrnsECiO
9.22am BST
Boom! One of the Bank of England's most hawkish policymakers has warned that the UK economy looks weak.
The economy right now is clearly not overheating -- the underlying pace of growth, stripping out all of the funny effects, inventories, car shutdowns and so forth, is weak and below trend."
"The link from the forecast to my actual vote [last time the MPC met] was quite loose."
Both the UK 2 year and 5 year Gilt yields have fallen below 0.5% meaning that financial markets are expecting a Bank Rate cut in the UK.
"It's hard to know how it would play out with any certainty....I wouldn't want to give a strong steer now as to which way policy would go."
9.00am BST
A resolution to the US-China trade war can't come soon enough for Huawei.
8.57am BST
European carmakers, and auto part manufacturers, are among the top risers this morning.
BMW has gained 4%, with tyre-maker Continental up 4.5%, lifted by optimism over a trade war breakthrough.
8.33am BST
Nancy Pelosi, speaker of the House, has admitted that avoiding a stock market crash was a key factor behind the budget deal hammered out yesterday.
In a brief interview Monday evening, Pelosi said two factors above all played a critical role in her successful behind-the-scenes negotiations with [Treasury secretary] Mnuchin: avoiding a stock market collapse and the fiscal fallout from failing to raise the debt ceiling.
"The debt ceiling and the stock market were always two major motivators for him to try and clear the way," Pelosi told CNN. "We avoided sequestration and for the moment avoided a shutdown. For federal workers, that was very important."
8.18am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy - on a two-year Budget and Debt Ceiling, with no poison pills....
....This was a real compromise in order to give another big victory to our Great Military and Vets!
Related: Budget deal: Republicans and Democrats agree to raise debt ceiling - as it happened
The deal raises the debt ceiling to mid-2021... and alleviates one of the risks overhanging policy in the US.
European Opening Calls From IG:#FTSE 7544 +0.38%#DAX 12364 +0.60%#CAC 5593 +0.47%#MIB 21823 +0.40%#IBEX 9202 +0.42%
Related: Boris Johnson warned by Tory rebels: ditch no deal or face fight for survival
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