Summary: Signs of rebalancing in British economy
UK GDP rose by 0.7% in Q4 2013 - details start here
6.09pm GMT
Thats all for today. A quick summary:
Britains economy grew by 0.7% in the last three months of 2013, with a rise in business investment bolstering hopes that the recovery is becoming more balanced. Summary here. The news came at 9.30am from the Office for National Statistics.
5.53pm GMT
Unemployment up again in France. Hollande's "growth plan" continues... http://t.co/TpZUqZmx5T
5.48pm GMT
Unemployment in France has hit a fresh record high, in another reminder of president Francois Hollandes failure to get to grips with the jobless crisis.
The French labour ministry reported that the number of people out of work rose by 0.3% in January to 3,316,200, the highest level since records began in 1996.
Latest figures show a small increase (0,3%) in French unemployment in January http://t.co/r5m3bh9lNm via @LeHuffPost (in French)
Even during the 2000s "boom years" French unemployment never dropped much below 2 million
5.25pm GMT
Ahead of its financial results tomorrow, Royal Bank of Scotland has told the City it is selling its 28% stake in Direct Line, the insurance firm. Heres the statement.
RBSs results could reignite the ongoing row over bank bonus payments.
Taxpayers will be staggered if huge bonuses continue to be paid out at a time when significant losses are being made.
George Osborne should make clear he will reject any request from RBS to increase the bank bonus cap so bonuses worth more than 100 per cent of salary can be paid.
5.09pm GMT
And back over to Greece where the issue of bank recapitalization has dominated talks between visiting troika auditors and the Greek government today.
It was meant to be the meeting that would finally end the controversy encircling the refinancing needs of Greek banks. But after several hours of talks between visiting mission chiefs representing the EU, ECB and IMF and Greeces central bank governor George Provopoulos, word emerged this evening that while amicable nothing had been agreed and further discussions would now be necessary.
Finance ministry officials confirmed that technical teams representing the debt-stricken countrys troika of creditors would meet with central bank officials in the coming days before Provopoulos and troika mission heads met again next week.
5.00pm GMT
The IMF has also given Ghana the hurry-up, warning that it needs to make further spending cuts to bring its deficit - which broke through the 10% of GDP mark last year - into line:
4.36pm GMT
Looking back at the International Monetary Funds staff note on inequality -- its authors say they have built on previous work that found:
...inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks, and thus that it tends to reduce the pace and durability of growth.
On average, across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes, unless they were extreme.
And the resulting narrowing of inequality helped support faster and more durable growth, apart from ethical, political, or broader social considerations.
4.11pm GMT
Speaking of inequality.... the UKs minimum wage is likely to rise by 3% in October, ahead of inflation for the first time since the financial crisis began.
Business secretary Vince Cable has told MPs that Low Pay Commission has recommended raising the minimum wage to £6.50 per hour.
This is a welcome increase in the minimum wage, which starts to recover some of the ground it has lost since 2008.
We hope this is the first in a series of bolder increases that will give real help to the low paid, and not just a pre-election boost.
Good news that the minimum wage is going up 3% - first real terms increase since 2008.
The Low Pay Commission has to tread a careful balance, recommending changes to the minimum wage that help low-paid employees without undermining employers ability to generate jobs and growth.
As the economy continues to improve, businesses agree that the minimum wage must rise. In recent polling, sixty percent of Chamber members supported an increase in line with current inflation, and fourteen percent favoured an above-inflation increase. After years of pay restraint, companies now feel somewhat more confident when it comes to the question of pay.
3.57pm GMT
Oxfam has thrown its weight behind the IMF staff note on inequality (see 3.45pm) -- arguing that the researchers are right to conclude that inequality is bad for growth, and that it is possible to redistribute wealth without undermining growth.
Nicolas Mombrial, head of the anti-poverty charitys Washington Office, declared that the research should encourage the IMF to stop pushing austerity:
Oxfam agrees with the IMF extreme inequality is damaging not only because it is morally unacceptable, but its bad economics.
The IMF has debunked the old myth that redistribution is bad for growth and demolished the case for austerity. That redistribution efforts -essential to fight inequality- are good for growth is a welcome finding. Low tax and low public spending are clearly not the route to prosperity.
3.45pm GMT
The International Monetary Fund has issued a research paper which warns that income inequality is bad for growth, and argued that it is possible to redistribute wealth without any impact on economic expansion rates.
Its an important contribution to an issue that has rattled up the agenda in both politics and economics -- even the World Economic Forum made it a priority at Davos last month.
We find that higher inequality seems to lower growth. Redistribution, in contrast, has a tiny and statistically insignificant (slightly negative) effect.
IMF study: disentangling the effects of inequality and redistribution on growth [pdf] - http://t.co/Qy2UvVfqtL
3.21pm GMT
Despite brutal weather, new home sales surge to 468K ann rate in Jan. Looks like lack of existing inventory sending buyers to new homes.
3.16pm GMT
Heres a surprise - new home sales in America hit a five and a half-year high last month, defying fears that bad winter weather would hit demand.
The Commerce Department reported a 9.6% jump in sales last month, beating estimates, taking the annual rate to 468,000 -- the highest since July 2008.
There's no truth in the rumour that the 9.6% gain in US home sales was all Igloos.
3.04pm GMT
Back to the UK growth data....Mark Gregory, transaction partner and chief economist at EY, says it shows firms are more confident, and in a good position to spend:
Companies have weathered a prolonged period of uncertainty during which time they strengthened their balance sheets and optimised their capital structures.
Having warehoused cash for a number of years, and with ready access to credit, leading UK corporates are in a strong financial position to do deals they now have more confidence to pull the trigger - and this is evidenced todays positive GDP figures highlighting sustained business investment.
2.59pm GMT
Familiar scenes in Athens today -- dock workers marched in front of the parliament building to protest at plans to privatise some of the countrys ports, during a 24-hour strike.
Greek dock workers across the country walked off the job on Wednesday in a 24-hour strike to protest plans to sell a stake in the Piraeus Port Authority, the countrys largest port.
Hundreds of striking port workers gathered in central Athens and marched to Parliament for a protest rally. Nearby, protesting farmers market suppliers demonstrated outside the Finance Ministry against higher taxes. Both rallies ended peacefully.
2.07pm GMT
Greeces sovereign debt has strengthened in value today, as talks continue between government ministers and officials and its Troika of lenders over the countrys bailout programme.
This has driven down the interest rate, or yield, on 10-year Greek bonds to just 7.2% -- the lowest level since March 2010.
1.22pm GMT
This mornings GDP data didnt prevent the FTSE 100 index dropping again today, further away from Mondays 14-year closing high.
The blue-chip index is down 32 points, or 0.5%, at 6797. Tesco is the biggest faller, down 4.2%, as investors fail to be impressed by its new strategy of price wars and cutting back on new stores.
12.37pm GMT
Our news story on todays GDP data, by Angela Monaghan, is here:
Britains economy grew at a slightly slower rate than previously thought in 2013, but economists welcomed signs that growth was more balanced in the final three months of the year.
Gross domestic product increased by 1.8% last year compared with an earlier estimate of 1.9% after growth in both the first and second quarters was revised down by 0.1 percentage points by the Office for National Statistics. However it was still the strongest annual rate of growth since 2007, when the economy grew by 3.4% before the financial crisis.
12.14pm GMT
Time for a quick recap.
However, it is now important to improve the quality of Britains recovery. While it is encouraging that consumer spending is growing, we need to rely more on investment and net exports.
The expenditure breakdown shows that the recovery is now less dependent on consumer spending
12.01pm GMT
Allan Monks of JP Morgan has hailed todays data as evidence that the UK has taken a significant step towards a more balanced recovery.
A steady acceleration in business investment is underway, he points out (up over 8% during 2013, with the ONS revising data from earlier quarters).
11.38am GMT
A Treasury spokesman has warned that Britains recovery is not complete, despite confirmation that growth remained steady at 0.7% last quarter:
As the Chancellor said last week the recovery is not yet secure.
The Budget next month will do more to support investment and exports, and the biggest risk to the recovery would be abandoning the plan thats providing economic security for hardworking people.
11.31am GMT
Missed this earlier -- the prime minister tweeted about the GDP data:
More encouraging news our #LongTermEconomicPlan is working, providing security #ForHardworkingPeople - as growth figures are confirmed.
11.28am GMT
This chart shows how household consumption, business investment and trade all made positive contributions to economic growth:
11.01am GMT
Rob Wood of Berenberg says the 2.4% rise in UK business investment in the last quarter shows the recovery is less reliant on householder consumption:
The UK recovery is broadening as rising confidence gets firms investing again.
Though consumption growth slowed, it probably still outpaced meagre income gains. Wage earnings rose only 0.5% qoq in Q4, so the saving rate probably fell again.
Further falls in household saving are likely over the coming years.
10.47am GMT
Heres a snapshot of the key points in todays GDP data (reminder, the full report is online here).
10.37am GMT
Alan Clarke of Scotia Bank welcomes the rise in business investment:
Business investment rose by 2.4% q/q following 2% q/q in Q3. That is a very healthy pace and long may it continue.
Net exports provided a decent addition to growth as expected. However, this was more because of lower imports than stronger exports. Really, we would prefer it to be the other way around i.e. stronger exports in the driving seat.
10.34am GMT
Samuel Combs of Capital Economics argues that todays data shows the UK recovery is a little more sustainable:
The expenditure breakdown shows that the recovery is now less dependent on consumer spending, which rose by just 0.4% q/q [graph]. In contrast, both overall and business investment rose by a chunky 2.4%.
With investment now picking up strongly, the recovery is unlikely to hit the buffers and generate inflation soon. Meanwhile, net trade contributed 0.4 percentage points to quarterly GDP growth, thanks to a combination of rising exports and falling imports.
10.32am GMT
David Kern, chief economist at the British Chambers of Commerce (BCC), says todays revisions paint a mixed picture.
Hes encouraged that business investment is up, and that net trade made a positive contribution to GDP growth. But also concerned that growth was weaker than expected in early 2013 (graph):
Overall, these figures will underpin business confidence. However, it is now important to improve the quality of Britains recovery. While it is encouraging that consumer spending is growing, we need to rely more on investment and net exports.
These figures show a small move in the right direction, but there is still more to do.
10.26am GMT
There are some signs that the UK economy is rebalancing away from consumer spending, argues Neil Prothero, deputy chief economist at EFF (the manufacturers organisation):
While household spending was again the main driver of activity there was an encouraging uptick in business investment and a small positive contribution from net exports.
10.24am GMT
UK household consumption rose by 0.4% in the October-December quarter -- the ninth rise in a row, but not as strong as the City had expected.
10.18am GMT
Ben Chu of the Independent tweets a helpful graph showing that the ONS revised down its GDP estimates for the first six months of last year. Thats why the annual growth rate last quarter was cut to +1.8% rather than +1.9%.
ONS says Q1 2013 revised down from 0.5 to 0.4%. Q2 revised down from 0.8 to 0.7%. Full 2013 down from 1.9 to 1.8%: pic.twitter.com/9wjyRNUnlt
10.11am GMT
Britains manufacturing sector did not grow as rapidly as first thought in the last three months of 2013.
The ONS has revised down its estimate of manufacturing output growth to +0.7%, down from the initial forecast of +0.9%. Thats slightly slower than in the third quarter, as this graph shows:
10.01am GMT
Some early reaction:
Revised estimate Q4 GDP unchanged at 0.7%. But biz investment up 2.4% - good news for balanced (ie non-services/spending dominated) recovery
Small pick up in investment as a % of GDP. Long way to go. pic.twitter.com/4UANeYViwL
9.54am GMT
Todays GDP data is also a reminder that the UK economy suffered a stomach-churning drop in activity when the global recession struck, and has still not reached its pre-crisis peak.
The failure to bounce back in 2011 and 2012 means its the slowest recovery in decades, as this chart shows (the zero on the y-axis is the GDP level before each recession).
9.49am GMT
The UK Treasury team was quick to point out that firms are spending almost 9% more on new equipment and offices than a year ago:
GDP growth confirmed at 0.7% in Q4. Big upwards revisions to business investment which has now grown by 8.7% on a year ago
9.46am GMT
This looks encouraging -- gross fixed capital formation (in basic terms, this includes firms buying new equipment for their production process) rose by 2.4% in the final quarter of 2013.
This shows firms spend more on new buildings and structures, and various machinery and equipment, the ONS said.
9.40am GMT
The Office for Statistics second estimate at UK GDP for the last three months of 2013 is online here.
Heres the key findings:
9.35am GMT
So whilst the headline UK GDP number was unrevised at 0.7% for Q4 the past was nudged slightly weaker this morning. #GBP
9.33am GMT
Reuters snaps the key points:
9.31am GMT
Breaking: The UK economy grew by 0.7% in the fourth quarter of 2013, in line with the first estimate.
But the annual growth rate was revised down to 2.7%, from a previous estimate of 2.8%.
9.29am GMT
More on this later...
UK is no more open to international economy than 150yrs ago. Great chart from BoE's Ben Broadbent speech today pic.twitter.com/tDrAhxbatP
9.22am GMT
Nearly time for the UK GDP data!
Jeremy Cook of World First, the foreign exchange dealer, reckons theres a chance that the Office for National Statistics will revise up its assessment that the UK grew by 0.7% in the last quarter.
Today sees the first revision to Q4s UK GDP number of 0.7% with the market happy to see no change at 09.30 GMT. Upside surprises are possible once Decembers retail sales rocket-ship number of a 2.6% increase are folded into the calculations.
We will also receive a better breakdown of growth at this iteration and while consumption will have contributed the lions share we will look to see what effect business investment has had. This confidence will be the lifeblood of the new recovery. Exports will also be interesting to watch to see if the recent strength of the pound has had a negative effect.
9.10am GMT
Ukraines currency, the hryvnia, just hit a fresh record low of 10 to the US dollar, after falling another 3.5% this morning.
8.54am GMT
Swiss bank UBS has just increased its growth forecasts for this year and 2015, flags up Reuters Jamie McGeever:
UBS raises its 2014 UK growth forecast to 2.8% from 2.5% and 2015 forecast to 2.7% from 2.5%.
8.53am GMT
Speaking of interest rates (see here), some Tory backbenchers want George Osborne to announce pre-election tax cuts in next months budget to head off the risk of a rate hike during next years election campaign (Britain goes to the polls in May next year).
Mark Garnier and David Ruffley, both members of the Treasury committee, told the FT they fear Osborne could get the blame if the Bank of England raises borrowing costs. Ruffley dubbed it a political iceberg heading their way.
8.34am GMT
The big news overnight was that another European bank, Credit Suisse, is in hot water with the US authorities.
Senators accused Credit Suisse of costing US taxpayers billions of dollars through various activities straight out of a spy novel, in an official report into offshore tax schemes.
According to the report, bankers filed false visa applications pretending they were tourists, and conducted business at sponsored golf events. One customer told the investigation that his bank statements were passed to him over a business breakfast hidden inside a copy of Sports Illustrated. US clients who visited the bank in Switzerland were whisked to meetings in a button-less, remote controlled elevator.
Once they arrived, they would be advised on the best way to circumvent US tax laws, said Senator Carl Levin.
Most read on Telegraph Finance this morning: Credit Suisse helped Americans hide $10bn from taxman, government claims http://t.co/C0kdw4RgXx
Most read on http://t.co/attg1qzKtO Credit Suisse employed 1,800 bankers to help American clients avoid paying tax http://t.co/W1rJVY3hCm
8.25am GMT
Two members of the Bank of Englands monetary policy committee have assured the nation that the Bank isnt planning to raise interest rates any time soon, even though the UK economy is growing at a decent pace (well find out just how fast in an hours time).
At the moment [our aim] is not to increase interest rates in the very near term, because we have got inflation at target, it looks like it is going to stay there, and there is plenty of scope to encourage strong demand in the economy
Were not planning to raise interest rates any time soon.
Interest rates will have to rise at some point but not yet. And when they do they will rise very gradually and cautiously to make sure we continue to nurture the recovery we have seen in output growth and employment.
8.07am GMT
Samuel Tombs of Capital Economics reckons todays GDP report, due at 9.30am GMT, will confirm the UK grew by 0.7% in the last quarter of 2013. He also expects some signs that the recovery widened:
The second estimate of Q4 GDP seems unlikely to revise quarterly growth from the 0.7% provisional figure reported by the ONS last month. Admittedly, the second estimate often surprises since the first quarter of 2005, it has been different to the first nearly two-thirds of the time. But the latest industrial production and construction output figures released since the initial estimate of GDP provide no basis for expecting a revision.
Meanwhile, the expenditure breakdown of GDP is likely to show that the recovery has broadened, with net trade and investment both making positive contributions to overall growth in the fourth quarter.
More important for the markets though is some indication that businesses are starting to feel more confident about the economic outlook and feel more confident about boosting investment and capital expenditure.
Ideally we would like to see an improvement on business investment, however expectations are for a slight decline from the previous 2% to 1.3%.
8.01am GMT
Good morning, and welcome to our rolling coverage of the financial markets, economics, business and the eurozone.
New rules to boost energy competition. Big 6 to be forced to publish wholesale prices. @ofgem on @SkyNewsBiz at 1145 http://t.co/DnIEW3MFxL
Deja Vu - another housebuilder with chunky profit growth - 3 days in a row - $TW #TaylorWimpey +39%
 |
| READ THE ORIGINAL POST AT www.theguardian.com |