UK retail sales spooked by Brexit, as German factory orders slide - as it happened
Rolling coverage of the latest economic and financial news, as UK retailers suffer their worst September since at least 1995
- Latest: BRC retail survey shows consumers suffering
- Eurozone investor confidence weakest since 2013
- Introduction: German factory orders fell 6.7% year-on-year
- Orders dropped 0.6% month-on-month in August
2.51pm BST
Time for a recap
Related: UK retailers demand Brexit deal after worst September on record
German factory orders fell by 0.6% m-o-m in August. Foreign orders rose by 0.9% m-o-m, driven by incoming orders from both euro area (+1.5%) and non euro area (0.4%) countries. In contrast, domestic orders decreased by 2.6% m-o-m. pic.twitter.com/UdYpkvvRIH
Can't actually see Pizza Express actually vanishing. Too much discounting and too much debt are the problems. Both fixable. Brand is strong though and model workable.
Eminently restructurable with a big hair cut.
2.36pm BST
Wall Street has opened cautiously, as worries about a global slowdown continue to weigh on markets.
2.25pm BST
The slowdown in consumer spending is bad news for restaurant groups, such as high street stalwart Pizza Express.
Pizza Express sources (sauces?) very much playing down the suggestion that the chain is in trouble.
Bondholders forming a group does suggest some anxiety though.
By my reckoning, the proceeds of one pizza slice out of every six you buy goes direct to paying interest on debt.
Gonna risk looking stupid here and say that I reckon Pizza Express will be fine (barring a major econ downturn). Yes it has big debts but that's the private equity model. So did Wagamama when Restaurant Group paid 560m for it.
Debt = risk but PizzEx's doesn't mature til 2021.
1.35pm BST
Here's my colleague Larry Elliott on today's retail sales worries:
Retailers have urged the government to secure a Brexit deal with the EU after their latest health check of high street and online spending showed the weakest growth since the survey was launched in the mid-1990s.
The British Retail Consortium - the trade body for shops, stores and digital suppliers of consumer goods - said a 1.3% drop in sales in September meant the annual increase in activity had dropped to just 0.2% - its lowest level since 1995.
Related: UK retailers demand Brexit deal after worst September on record
1.28pm BST
Is it too easy to blame everything on Brexit?
Scott Corfe, Research Director at the Social Market Foundation, reckons retailers should take responsibility for the drop in sales last month:
Has Brexit *really* had a material impact on consumer psyche, as BRC says? I have yet to meet a consumer that is reining in spending because of Brexit uncertainty. Like Jamie Oliver with his restaurants, this does feel like using Brexit as a scapegoat for poor performance. https://t.co/y6M2qhHyvw
1.12pm BST
Barclaycard has reported that retail spending on credit cards was subdued last month, with people spending less on clothes and household items.
Overall consumer confidence remained low in September, with just 29 per cent of UK adults feeling positive about the state of the UK economy. Two in five (41 per cent) feel actively pessimistic about their ability to spend money on discretionary items - five per cent more than in August. Moreover, half of Brits (51 per cent) say they are worried about the rising cost of everyday items impacting their buying power.
The trend towards stockpiling continues with 18 per cent of consumers buying essential items in case of future shortages - up one per cent from August. Topping the list of products being stockpiled are tinned goods (52 per cent), dried produce (45 per cent), household supplies such as toilet roll and cleaning products (40 per cent), and teabags and coffee (37 per cent). Additionally, one in eight Brits (12 per cent) has already started buying food and drink for Christmas in case of shortages between now and the start of the festive season.
1.04pm BST
Richard Lim, chief executive at Retail Economics, has an interesting theory -- he reckons Remain supporters are more likely than Leavers to be cutting back on spending.
Here's his take on the BRC's gloomy retail sales figures:
"Despite vast improvements in spending power, these figures suggest that Brexit fears are damaging confidence, particularly for buying non-essential items.
"However, our research shines a light on the polarisation between 'remainers' and 'leavers'. Intuitively, this makes sense, but the differences are vast - much larger than I had expected. Deep-rooted divisions have manifested into consumers' spending intentions, with 30% of 'remain' voters claiming Brexit is the greatest source of concern affecting their confidence to spend, compared to just 6% of 'leave' voters. Indeed, 86% of leavers suggested that Brexit was "not important at all" in their confidence to spend, more than twice the proportion of remainers (39%).
12.40pm BST
The BRC-@KPMG September Retail Sales Monitor showed the worst September since records began in 1995. Unsurprisingly, sales decreased by 1.3% as the prospect of #NoDeal weighs increasingly on consumers minds. pic.twitter.com/hEPppUzpv4
12.17pm BST
Paul Martin, UK head of retail at KPMG, reckons retailers will be forced to slash prices to shift stock, given the drop in sales during September.
"Unsurprisingly September proved to be another difficult month for retailers, with like-for-like sales declining by 1.7 per cent compared to last year. Worryingly, even online sales moved closer to stalling, with growth of non-food online sales only 0.7 per cent.
"Ongoing Brexit uncertainty is clearly having a material impact on the consumer psyche, with all but one non-food category being in decline in September. Consumers are choosing to focus on the essentials, with food one of the few categories delivering growth.
12.07pm BST
The fall in retail spending last month suggests that consumer are "cracking" under the pressure of Brexit, says Reuters.
Survey from @the_brc not a pretty sight. i
Worst September since records started in the mid-1990s.
"Ongoing Brexit uncertainty is clearly having a material impact on the consumer psyche," the BRC says.
(figures had been due at midnight, BRC brought forward)
11.55am BST
Newsflash: UK retailers have suffered their worst September in at least 24 years, as the threat of a no-deal Brexit looms over the sector.
BRC UK retail sales spending
- Dropped 1.3% Y/Y on total basis in September
- Dropped 1.7% Y/Y on LFL basis in September
"With the spectre of a no-deal weighing increasingly on consumer purchasing decisions, it is no surprise that sales growth has once again fallen into the red. Many consumers held off from non-essential purchases, or shopped around for the bigger discounts, while the new autumn clothing ranges suffered from the warmer September weather. The longer-term prospect continues to be bleak, with the 12-month average once again plumbing new depths at a mere 0.2 per cent. Online non-food sales growth was the lowest on record, though still compared favourably to the decline in growth at physical stores.
"With four months of negative sales growth since March, the ongoing political gridlock surrounding Brexit is harming both consumers and retailers. Clarity is needed over our future trading relationship with our closest neighbours, and it is vitally important that Britain does not leave the EU without a deal."
11.24am BST
Shares in UK construction and building materials firms are taking a bath this morning, after a profits warning from UK company SIG.
SIG makes specialist insulation, roofing and air handling products across Europe - from cladding and tiles to fans and ducts. And this morning, it warned shareholders that its business is struggling, due to weak demand and rising political uncertainty.
The Group has been reporting during the year a deterioration in the level of construction activity in key markets and highlighting a number of key indicators pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany.
This deterioration in trading conditions has accelerated over recent weeks, and political and macro-economic uncertainty has continued to increase.
11.20am BST
According to Sentix, eurozone investors haven't been this gloomy since the euro debt crisis was sizzling in 2013.
10.01am BST
This morning's sharp decline in eurozone investor confidence has alarmed economists - here's some snap reaction:
Euro area Sentix investor confidence at the lowest level since the European debt crisisiii
German factory orders earlier this morning did not look encouraging either! pic.twitter.com/QZUnY5lVAJ
Ouch!
New Sentix survey out (-16.8) in line with a Euro area composite PMI around 45.
Stay short EUR/USD and long bunds.
Weekly -> https://t.co/IvvpL7elmc pic.twitter.com/Q2JUSQl3W4
#ZEW bellwether Sentix survey shows sharp drop in German investor sentiment. "The economic climate in #Germany is eroding at record speed," Sentix said. $EUR pic.twitter.com/qtefNTbWrw
Very weak set of readings from #Sentix #investor sentiment index: #Eurozone measure fell sharply in October to lowest level since April 2013 with current situation index lowest since end-2014; #German index lowest since July 2009. https://t.co/UGA75FfW8r
9.48am BST
Newsflash: Eurozone investors have grown even gloomier about economic prospects, particularly those based in Germany.
The Sentix survey of euro-area investor morale has fallen to its lowest level in six and a half years, dropping from -11.1 in September to -16.8 in October.
"Fears of a recession are imminent".
There hasn't been a positive reaction to the support measures taken by central banks, with economic assessments falling in October on a broad front.
More dire German data !!!
German Sentix Index Oct -19.4 (prev -12.8), Lowest Since July 2009
- German Sentix Current Situation -18.0 (prev -10.5)
- German Sentix Expectations -20.8 (prev -15.0) https://t.co/T3Zo3QibVT
9.22am BST
Germany's economy ministry has responded to August's weak factory orders, saying:
"The weakness in demand in industry continues.
The industrial sector remains subdued for the time being."
9.16am BST
Nadia Gharbi, senior economist at Pictet Wealth Management, has spotted that German factory orders actually rose in August, if you exclude bulk orders.
That may show that customers are being cautious, and holding back from placing large orders for new products [typically, if you buy in bulk you get a better price, in return for purchasing a large amount]
German factory orders fell by 0.6% m-o-m in August. Foreign orders rose by 0.9% m-o-m, driven by incoming orders from both euro area (+1.5%) and non euro area (0.4%) countries. In contrast, domestic orders decreased by 2.6% m-o-m. pic.twitter.com/UdYpkvvRIH
Of note, excluding bulk orders, total factory orders rose by 1.6% m-o-m in August. pic.twitter.com/GatR0qoXgU
8.54am BST
German factory bosses must be hoping for a breakthrough in the US-China trade war, when negotiations resume on Thursday.
But there's bad news there too. Chinese officials have reportedly told their US counterparts that the range of topics they're willing to discuss has narrowed considerably.
8.40am BST
Oliver Rakau, chief German economist at Oxford Economics, has dug into today's German factory orders.. and found some reasons for optimism.
He reckons that the slump may be bottoming out:
For one, orders are holding up better than gloomy surveys have predicted and it looks like annual growth is bottoming out. The current dynamics look a bit similar to 2012, when the euro-crisis and the associated large tail risks weighed heavily on firm sentiment. 2/n pic.twitter.com/rETX9BY1Ba
Car sector orders also continue to outpace weak production with a further improvement signaled by the already released VDA data for September. No fast bounce, but a moderate turnaround looks likely. 5/n pic.twitter.com/ZBaWTC2hRv
8.34am BST
European stock markets have dropped in early trading, as investors digest this morning's German factory data.
Apertura #MercadosEuropeos
DAX a -0,09%
EuroStoxx 50 a -0,22%
FTSE 100 a -0,24%
CAC 40 a -0,34%
FTSE MIB a -0,23%https://t.co/S6BlqjZDk3
8.25am BST
Angela Merkel's government can expect more calls to boost spending, to support the struggling German economy.
Thomas Gitzel, economist at VP Bank Group, explains (via Reuters):
"The German economy is in the midst of a recession. Today's
data make that clear again.
8.09am BST
Martin Enlund, chief foreign exchange strategist from Nordea, fears that German factory orders will keep slumping in the coming months.
He points out that they are closely aligned to the IFO business climate index, which has also weakened alarmingly in recent months:
German factory orders vs Ifo momentum: AAAAAAAH!
FX weekly: Is everything falling apart?
-> https://t.co/lmSlrILE3E pic.twitter.com/I5adJeKYUs
7.54am BST
Christophe Barraud, chief economist at Market Securities, says the ongoing slump in German factory orders does not bode well for the global economy:
#GERMANY AUG FACTORY ORDERS Y/Y: -6.7% V -6.4%E (15th straigth a; largest a since May 2019)
a It confirms that global trade growth will remain under pressure in the short term. pic.twitter.com/tt2GvxHacw
#Germany's manufacturing recession deepens. Germany Aug factory orders fall 6.7%% Y/Y; Est. -6.4% Y/Y pic.twitter.com/XLaiFWJohR
Not out of the woods yet! #Germany's factory orders fell 6.7% YoY in August, more than expected, and marking the 15th consecutive month of YoY decline. pic.twitter.com/wwc28lPhUi
German factory orders for August show the industrial sector languishing near recent lows (-6.7% yoy v -5.0% in July and a recent low of -8.4% in May).
7.34am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Domestic orders decreased by 2.6% and foreign orders increased by 0.9% in August 2019 on the previous month. New orders from the euro area were up 1.5%, new orders from other countries rose 0.4% compared to July 2019.
Based on provisional data, the Federal Statistical Office (Destatis) reports that price-adjusted new orders in #manufacturing had decreased in August 2019 a seasonally and calendar adjusted 0.6% on the previous month. https://t.co/BjCTzYez5f pic.twitter.com/3lmbuoh8mx
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