A surplus of £14.9bn in January was the highest since monthly records began, in a boost to Philip Hammond ahead of his spring statement on 13 March
- Eurozone economy ‘close to stagnation’ in February
- Barclays pledges to hand shareholders more cash
- Centrica shares fall after gloomy outlook for 2019
- Trump says ‘no magical date’ in trade talks with China
Time for a quick summary:
Some more upbeat US data just out, as a pick-up in services growth in February offset slowing growth in the manufacturing sector.
Here are the headline numbers in the IHS Markit PMIs, where anything above 50 signals growth:
February data provides a positive signal for first quarter economic growth, with US businesses reporting the fastest output expansion since the middle of 2018.
Service sector firms led the way, supported by solid improvements in business and consumer spending. Private sector payroll numbers increased to the greatest extent for five months, which adds to hopes that robust domestic demand will act as a growth tailwind over the near-term.
The opening bell has rung on Wall Street and US markets edged lower, reflecting some disappointing economic data:
Investors are digesting some gloomier US economic data, after new orders for key, American-made capital goods fell unexpectedly in December.
The figures suggested business spending on machinery and metals is slowing, with orders for non-defence goods excluding aircraft down 0.7%, following a 1% fall in January.
The December durables goods data suggest that equipment investment growth slowed further in the fourth quarter, and we expect it to remain weak for most of this year.
As we await the opening bell on Wall Street – with US markets expected to open roughly flat – it’s time for a recap of how it’s looking across Europe.
The FTSE is the biggest faller, off 62 points or 0.9%:
There were 216,000 new jobless claims in the US last week, down from 239,000 the week before and fewer than the 229,000 predicted by economists.
U.S. initial unemployment claims sink by 23,000 to 216,000 https://t.co/YGV5dnOWrJ
Andy Haldane, the Bank of England’s chief economist, has been speaking at the Glasgow School of Art:
Our Chief Economist Andy Haldane asks if robots will take all our jobs. Not, he says, if we turn our ‘knowledge economy’ into a ‘creative economy’ and rework our education system from ‘universities’ into ‘multiversities’. https://t.co/v6yDpcReiW pic.twitter.com/GyVavxu7u6
Purplebricks, the largest online estate agent, is having a very bad day. Rob Davies reports:
Shares plunged 40% after the company slashed its revenue forecasts and announced the surprise departure of both its US and UK bosses.
The Office for Budget Responsibility says there is still “significant uncertainty” about the full-year borrowing figure, despite there only being two months to go before the end of the fiscal year.
Self-assessments might be weaker in February, for example, because more people paid on time, the OBR says in its monthly commentary on the latest figures.
The fall in borrowing so far in 2018-19 has been somewhat greater than that in our October forecast for the full year, thanks primarily to stronger receipts growth. This reflects the effect of stronger earnings growth on PAYE and NICs receipts and, given the payment lags, stronger growth in self-assessment (SA) liabilities in 2017-18.
Despite there being only two months of the fiscal year remaining, there is still significant uncertainty over the full-year figure – which itself will inevitably be revised over time.
Things might be looking up for Phillip Hammond in terms of the public finances, but a report published overnight by a thinktank claims government austerity policies since 2010 have left UK households £300m a month worse off.
Here is our full story on those better than expected UK public finances figures:
The pound is a fraction lower against the euro and the dollar following earlier gains. Sterling is off 0.1% against both currencies at €1.1494 and $1.3036.
It appears that comments made by an unnamed government source are weighing on sentiment.
Economists say the latest figures suggest the chancellor should comfortably undershoot the full-year borrowing target of £25.5bn, with little sign so far of a Brexit impact on the public finances:
John Hawksworth, chief economist at PwC:
So far the public finances seem to have been largely immune to the adverse effects of Brexit-related uncertainty, because this has mostly affected business investment. More tax-rich areas of economic activity, notably earnings from employment and consumer spending, have held up better over the past ten months.
The budget deficit for 2018/19 as a whole now looks set to come in some way below the OBR’s October budget forecast of £25.2 billion, giving the chancellor some potential additional fiscal room for manoeuvre going into his Spring Statement next month. This could allow him to offer more support to the economy in the short term depending on how the Brexit negotiations progress over the next few weeks.
The last public finances figures released before the Spring Statement put the government on track to undershoot the OBR’s forecast of borrowing of £25.5bn in the 2018-19 financial year.
If a Brexit deal is secured, we think that a pickup in economic growth in 2019 will increase the size of that headroom. And if there is a no deal Brexit, the chancellor should have plenty of scope to support growth, and if needed to the chancellor would sacrifice his fiscal rules for the economy.
January is traditionally a surplus month for the public coffers because of the flow of income tax receipts, but this year was the strongest January since records began in 1993.
Income Tax and capital gains tax receipts were £21.4bn in Jan, £3.1bn more than last Jan.
Breaking: Good news for Philip Hammond, after public finances hit a record monthly surplus of £14.9bn in January thanks to strong income tax receipts.
It easily beat City expectations of a £10.05bn surplus, and compared with borrowing of £3bn in December according to the figures from the Office for National Statistics.
Data just out shows the eurozone economy was almost at a standstill in February.
The ‘flash’ PMI surveys from IHS Markit suggest the region’s manufacturing sector contracted unexpectedly this month – and for the first time in more than five years – while the services sector grew at a faster than expected rate.
The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014. The survey data suggest that GDP may struggle to rise by much more than 0.1% in the first quarter.
The weakness is being led by manufacturing, which has now entered its first downturn since mid- 2013. With factory order books deteriorating at an increased rate, the rate of contraction in the goods- producing sector will likely worsen in coming months.
At the other end of the table, Barclays is the biggest FTSE riser this morning after a pledge to return more money to investors.
Shares in Centrica are down 11% this morning at 122p after the parent company of British Gas gave a very gloomy outlook for the year ahead.
Profits rose in 2018 but the company lost 742,000 accounts and said profits this year would be hit by the energy price cap imposed by the regulator, Ofgem.
We have been very clear that we do not believe a price cap is a sustainable solution for the market, and is likely to have unintended consequences for customers and competition.
Yes, the profits are up, but with price caps being pinned on suppliers and the precarious nature of the energy industry any expansion within the sector is a nervy and tentative process.
Our ‘red flag alert’ has shown a contraction in the market with more than 3,000 utilities providers in significant financial distress – a number that increased 2% in the lead up to the Christmas period. And some smaller providers such as Utilitywise have already gone into administration in 2019.
Most European markets are mainly higher this morning, following a more optimistic mood in Asia and on Wall Street.
The FTSE 100 is the exception, down 25 points. More on that soon.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Asian markets have followed Wall Street higher this morning after Donald Trump boosted hopes that a planned increase in tariffs to 25% on goods imported from China could be avoided.