UK service sector growth hindered by ‘pingdemic’ and inflation – as it happened

Joanna Partridge

from on 2021-08-04 14:10 (#5MYEQ)

Rolling live coverage as UK service sector data was impacted by inflation and pingdemic' staff shortages, while US jobs figures disappointed

3.10pm BST

Closing summary - US stock markets have fallen at the open as a result of concerns about slowing economic growth, and fresh fears about the spread of Covid-19, especially the Delta variant.

Following on from the disappointing US ADP jobs data, the Dow Jones Industrial average fell 0.2% or nearly 69 points at the opening bell, to 35,047. Meanwhile the S&P 500 and the Nasdaq Composite were about 0.1% down.

The Delta variant now accounts for an estimated 93% of coronavirus cases in the US. The number is even higher in some parts of the country. https://t.co/r4OKdsW7n0

2.35pm BST

Growth in Britain's dominant service sector has slowed to its weakest since March after businesses were hit last month by a triple whammy of bottlenecks, workers self-isolating and a less generous tax break for homebuyers.

The latest monthly health check on UK services firms - which account for just under 80% of the economy - found costs rising at their fastest pace in at least 25 years in July, and raised concerns that the best of the UK's economic recovery from the winter lockdown restrictions might be over.

2.20pm BST

The slowdown in US employment growth is also an indicator that staff shortages remain a problem, according to Capital Economics.

Paul Ashworth, chief US economist at Capital Economics, said:

The ADP breakdown does show employment in leisure and hospitality rising by 139,000, but that represents a slowdown on recent months, so it isn't a sign that low-wage workers are returning to the labour force now that the enhanced unemployment benefits have been withdrawn early in many states. Otherwise, the gains were evenly spread across the remaining service sectors. But construction added only 1,000 jobs, with manufacturing adding 8,000.

1.58pm BST

The latest US jobs data has disappointed. The ADP national employment showed that showed 330,000 private sector jobs were created in July - less than half the 695,000 which had been forecast.

BREAKING: ADP private employment big miss at 330k vs 695 expected

US 10 year trading at 1.134% now. Will the Fed taper at all in 2021? There's now reason to doubt

First Look at July: ADP Says 330K New Nonfarm Private Jobs https://t.co/ahLd3gvObQ pic.twitter.com/hHhWC3IRwu

If the ADP survey is correct, the U.S. employment report on Friday might be a major disappointment. And that could push back the talk about a Fed decision to taper in September. Caveat: ADP is often off the mark. https://t.co/ZCRe6YmADe via @markets @readep @economics

12.42pm BST

Sony is among those companies whose results have beaten expectations, which has been helping to drive global stock markets higher.

In the case of the Japanese entertainment and electronics conglomerate it's thanks to ongoing demand for the PlayStation 5 games console, which at times is outstripping supply. Consumers have been clamouring for home entertainment throughout the pandemic.

12.24pm BST

Reaction to the UK's services PMI data from the economic forecasting group EY ITEM Club - it suggests inflation is likely to move higher in the second half of 2021, hitting 3.5% in later 2021, but this will only be temporary.

Given the growth business activity, the group anticipates further strong GDP growth between July and September.

The pace of activity growth has continued to slow, which is likely to reflect the notion that the biggest gains from reopening are now behind us. The PMI may also have been negatively affected by the rise in COVID-19 infections during July, which required growing numbers of people to self-isolate.

While the EY ITEM Club is cautious about these results, given the survey has tended to overstate price pressures in the past, inflation is likely to reach around 3.5% on the CPI measure in late 2021. But the EY ITEM Club remains confident that this rise will prove transitory and expects the majority of the MPC to take a similar view at tomorrow's meeting.

The services PMI fell to 59.6 in July, down from 62.4 in June but still some way ahead of the long-term average of 54.5. The pace of activity growth has continues to slow. Read comments from the #EYITEM Club on today's latest survey data https://t.co/d21Rp68IJ5

11.43am BST

The upgrade in profit guidance from Taylor Wimpey has boosted its shares this morning, making the housebuilder the highest riser on London's FTSE 100.

Taylor Wimpey's shares are currently up 3.7%.

11.06am BST

Taylor Wimpey, one of the UK's biggest housebuilders, has returned to profit and upgraded its earnings targets after building a record number of homes in the first six months of the year.

The High Wycombe-based firm built more than 7,300 homes in the first half of 2021, almost all of which have been pre-sold, allowing the company to lock in the benefit of soaring house prices triggered by cheap loans, the government's stamp duty holiday and a pandemic-driven preference for larger houses.

10.54am BST

In other euro zone news - retail sales in the bloc continued to rise in June, but less quickly than in May after shops reopened following the easing of coronavirus restrictions.

Euro area #RetailTrade +1.5% in June 2021 over May, +5.0% over June 2020 https://t.co/Uzwh2EQAko pic.twitter.com/du1tmyFJko

10.32am BST

Staffing shortages and supply chain disruptions also impacted firms in the euro zone last month, although business activity in the bloc grew at its fastest pace in 15 years.

The IHS Markit final composite PMI for the 19 countries which share the euro rose to 60.2 in July, up from 59.5 in June and the highest level since June 2006.

The Eurozone economy grew at the quickest rate since June 2006, as the #PMI rose to 60.2 in July to surpass June's 15-year high of 59.5. Inflationary trends meanwhile began to stabilise but were still at a marked pace. Read more: https://t.co/eSk1uFNgO9 pic.twitter.com/Pjp8w0CdT3

Among the four largest eurozone economies, the quickest rise was in Germany, where again the rate of expansion accelerated to a record high. In Italy, private sector activity growth jumped to a three-and-a-half year high, while Spain and France registered softer increases in output.

10.00am BST

Incoming data from the UK - the July services Purchasing Managers' Index (PMI) has come in above forecast, but still marks a slowdown in the recovery.

The seasonally-adjusted IHS Markit/ CIPS UK Services PMI came in at 59.6 for July. higher than anticipated, but a drop from 62.4 in June. A reading over 50 shows growth rather than contraction.

Staff shortages and supply issues were a severe constraint on business capacity, which led to another strong rise in backlogs of work. Tight labour market conditions led to greater wage pressures across the service economy and this contributed to the fastest increase in overall input costs since the survey began in July 1996.

UK growth slows sharply during July 'pingdemic' (but by a fair bit less than initial PMI data suggested, as the July 19 reopening boosted some businesses' spirits).
Record (25 year+) inflation pressures too.https://t.co/G2uHmu7kcz

9.16am BST

The British e-commerce specialist The Hut Group (THG) has snapped up online beauty retailer Cult Beauty for 275m.

The Manchester-based online firm, which listed last year, already sells directly to consumers through websites such as Lookfantastic, Glossybox and Zavvi, as well as sports nutrition company Myprotein, and racked up 1.1bn of revenues in 2019.

Cult is an authorised retailer for c.300 prestige third-party brands, two-thirds of which are not currently listed on existing The Hut Group beauty sites. The deal will also enable THG to expand Cult's overseas presence, given <50% international sales. Demographically Cult Beauty is at the younger end of the market, with a clearer bias to indie brands.

8.37am BST

More passengers took to the skies with Ryanair in July.

8.24am BST

Concerns about the Delta variant don't appear to be weighing on Asian stock markets today, which have been moving towards one-week highs.

After a hesitant start to trading in Asia, stocks had bounced back by mid-morning.

8.00am BST

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

Data overnight from China showed that the country's services sector accelerated in July, hitting its highest level since May, although the spread of the Delta coronavirus variant in the country is threatening the recovery.

#China's service sector activity rebounded in July with the #PMI at 54.9, up from the 14-month low previously (Jun: 50.3). Operating expenses meanwhile increased at a faster pace. Read more: https://t.co/yaIP71w4hH pic.twitter.com/skVY4gC7UH

Important! The Caixin #China's Services #PMI for July came in much higher than expected, rising to 54.9 from 50.3. pic.twitter.com/Z8dXfSUnKo

Concerns that rising infection rates across Asia, and in China especially, appear to be causing anxiety that the rebound story in that part of the world is about to become the weakest link in the global recovery story. Not only are we hearing about more cases in China, but we are also getting an acceleration of cases across Indonesia and Thailand, as the virus hunts out the parts of the global economy with low vaccination rates.

Services PMIs in focus as Europe gets set for a higher open https://t.co/N1DTsJmkAC @CMCMarkets

Despite less than convincing US economic data (PMI on Monday & Factory orders Tues), Wall Street puts its best foot forward following in the wake of Asia and Europe y'day. Opening calls suggest circumspection - FTSE +16 @ 7121, DAX +35 @ 15590, CAC +15 @ 6737, DJIA -30 @ 35086

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