A cloud of uncertainty is gathering over the UK, economists say, as service sector growth dips Latest: UK service sector PMI hits 17-month lowEurozone PMIs make grim readingM&S hit by warm weather, but profits rise 11.33am GMT Over in Athens, the race is on to get the troika back in town so that a deal can be cut on Greeces exit from its bailout programme.The two men hope by this evening to have wrapped up a plan that will entice international auditors back to Greece so that it can be presented by the Greek finance minister Gikas Hardouvelis at tomorrows Eurogroup meeting. Officials here are saying they hope mission heads representing the EU, ECB and IMF will return next week in order for negotiations to finally begin. 11.10am GMT Yet more gloomy news -- eurozone retail spending has taken quite a tumble, highlighting the weakness of the Europe economy.Retail sales volumes across the eurozone slid by 1.3% month-on-month in September, a rather bigger decline than expected. Its the biggest monthly decline since April 2012.The highest increases in total retail trade were registered in Malta (+1.0%), Luxembourg (+0.9%), Hungary and Slovakia (both +0.7%), and the largest decreases in Germany (-3.2%), Portugal (-2.5%) and Poland (-2.4%). Retail sales in the euro-zone dropped 1.3% in Sept..and the biggest drop was in Germany 3.2%. Reflects weak consumer confidence. 10.54am GMT Martin Beck, senior economic advisor to the EY ITEM Club, agrees that the UK growth rate appears to be dipping, given todays drop in service sector growth.It appears that some of the clouds that have been lingering over the manufacturing sector in recent months have now started to cast a shadow over services as well. A weaker new business pipeline and softer confidence is likely to reflect heightened concerns about global economic and geopolitical risk.These results are consistent with our long-held view that the pace of growth will cool a little around the turn of the year. 10.40am GMT Update, the pound actually hit a one-year low against the US dollar this morning.Sterling fell as low as $1.5867 after Octobers service sector PMI came in weaker than expected, below the previous 11-month low set in mid-October. 10.31am GMT Britains service sector firms probably suffered a knock-on effect from the stock market volatility in October, says Rob Wood, economist at Berenberg bank.That being said, for now we have to get used to more average rather than spectacular PMI readings. Firms expectations for growth over the next twelve months, a decent leading indicator, are a little below their historical average.With UKIPs surge prompting the Conservatives to consider more extreme immigration policies and Labour seemingly suffering an implosion of support in Scotland, the chances of an unstable government after the May-2015 election seem to be rising, as is the chance of Brexit. We do not expect doomsday scenarios to come to pass we expect the UK to remain in the EU and a stable coalition government to emerge after the 2015 election but those political risks are worth watching very carefully. 10.13am GMT Howard Archer of IHS Global Insight is also unimpressed by todays UK service sector PMI:This is a relatively disappointing survey adding to the recent evidence that both the dominant services sector and the economy overall has come off the boil. 10.11am GMT The UK services sector is entering the winter lacking the self-belief that it exhibited earlier in this year, says Jeremy Cook of World First, the currency exchange firm. Although new business measures increased, this rate has fallen. Combined with slower demand growth from respondents, there is a new unease in the services sector as to where the industry moves from here. 10.10am GMT The pound has fallen to a two-week low, following the weaker-than-expected service sector report.It has lost a cent against the US dollar this morning, to $1.5887 9.49am GMT City economists arent panicking about the UK service sector slowdown. Heres some instant reaction: UK services PMI drop reinforces our sense of caution for Q4. But, perspective. 56.2 is still a strong number, and firms hiring strongly.UK services PMI badly overshot actual activity;Im quite sanguine about correction.Also the report reflects certain amount of price pressureKey phrase in UK PMI report; "Wage cost pressures were reportedly the principal driver of another round of input price inflation in Oct" 9.43am GMT More disappointing data! Growth in the UKs service sector dropped sharply in October, according to Markits survey of the sector.That suggesting Britains economic growth is slowing as 2014 comes to a close.A sharp easing of service sector growth to the weakest since May of last year comes on the heels of data showing construction growth sliding to a five-month low and the goods-producing sector shifting down a gear since earlier in the year.After GDP growth slowed to 0.7% in the third quarter, a 0.5% expansion is currently being signalled by the surveys for the fourth quarter. However, with inflows of work rising across all three sectors at the slowest rate for 16 months, there is a risk that economic growth could weaken further. This month appears to be a slowdown month as the services sector comes off the boil, challenged by capacity constraints, increased backlogs and a slight reduction in new business growth. 9.25am GMT Credit Agricole economist Frederik Ducrozet remains hopeful that the eurozone economy will pick up next year, despite struggling last month. Eurozone services PMI details weaker than headlines - true, but resilient domestic demand good enough into 2015. 9.15am GMT Its official: Eurozone economy remains weak, dragged back by weak demand and renewed job losses among companies.Thats the conclusion of this mornings service sector data (details start here), and Monday manufacturing PMIs.The rate of economic expansion in October was little-changed from Septembers ten-month low, with modest output growth registered at manufacturers and service providers alike. Job losses were reported for the first time since November 2013, while price pressures remained muted. The eurozone PMI makes for grim reading, painting a picture of an economy that is limping along and more likely to take a turn for the worse than spring back into life. While output grew at a slightly faster rate than in September, consistent with quarterly GDP growth of 0.2%, a near- stagnation of new orders, with the worst reading for 15 months, suggests that the pace of growth may deteriorate in coming months. A fall in employment for the first time since November casts a further cloud over the outlook. Firms are often being forced to cut employment due to squeezed profits margins. Input costs are rising but prices charged for goods and services have fallen almost continually over the past three years, with the rate of decline accelerating to the fastest seen over this period in October as companies increasingly turn to discounting to help boost sales. 9.02am GMT Germanys service sector grew at its slowest pace in six months, Markit says.Its service sector PMI dropped to 54.4 in October, down from 55.7 -- showing that growth slowed last month. Companies are worried about the introduction of a national minimum wage in January 2015, a general economic slowdown and sluggish new order growth. German service sector activity growth at 7-month low (54.4 in Oct, 55.7 in Sep) and sentiment drops to 22-month low http://t.co/OFA36VqbNB 8.56am GMT Bad news from France -- its service sector has shrunk again, with activity shrinking at the fastest pace in four months.New business declined at the sharpest rate since August 2013.The performance of Frances service sector worsened further in October. Activity contracted for a second successive month, reflecting a steeper reduction in new business. Backlogs of work declined, while firms continued to cut staffing levels. Output prices decreased at the steepest rate in five years, in contrast to a further rise in input costs. 8.50am GMT Back to the eurozone.... and Italys service sector has returned to growth, but firms are still laying off staff.The monthly Italian services PMI, calculated by data firm Markit, rose to 50.8 in October, up from 48.8 in September. Any reading over 50 shows growth. employment in the sector returned to contraction after having held steady during September. Although still positive, sentiment was the weakest in almost a year, having eased for the third time in four months Italy Services PMI (Oct) comes in at 50.8 exp: 49.4 8.41am GMT Back to M&S briefly.... chief executive Marc Bolland has told reporters that sales in October werent as badly hit by the weather. Hes also upbeat about Christmas trading: 8.36am GMT Over to the eurozone, and Spains service sector has posted its 12th month of consecutive growth, as it continues to recover (slowly) from the eurozone crisis.The Spanish PMI, which measures activity across the sector, rose to 55.9 in October from 55.8 in September.The twelfth successive rise in activity during October means that the Spanish service sector has been able to sustain growth for a year for the first time since 2007, and with the expansion in new business picking up the recovery looks set to continue in the near-term at least. The rate of job creation was weak, but the return to hiring after employment stabilised in September provides some reassurance. Spain PMi services at 55.9 .... bit better than expected 8.21am GMT Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, reckons that Marks & Spencer is still a work in progress. Hes impressed, though, that the company managed to grow profits and gross margins despite the warm autumn (apparently) hitting clothing sales.The profit beat and improvement to gross margins have taken investors by surprise, with the share price strongly ahead in early trade.Even so, with General Merchandising sales down, food sales up and online yet to gain traction, the summary is a familiar one, even if the initial share price reaction may suggest some optimism on prospects. 8.18am GMT 8.11am GMT ZING. Marks & Spencer shares have jumped by over 7% at the start of trading in London, to 432p.Investors are cheered that the company has raised its interim dividend by 3.2% (details), after increasing its underlying profits by 2.3%. 8.02am GMT Veteran City commentator David Buik says that M&Ss results (details start here) were not quite as bad as expected. 7.53am GMT Marks & Spencer's reports clothing sales drop for 13th consecutive quarter, but a surprise half-year pre-tax profits rise: up 2.3% to £268m. 7.53am GMT Its not all bad news from Marks & Spencer this morning -- the company is handing more cash than back to shareholders.M&S has raised its interim dividend for the first time in several years, by 0.2p to 6.4p per share.Blimey, M&S have increased the interim dividend by 0.2p to 6.4p, to show their free cash flow generation...So, the M&S interims weren't a damp squib after all and the shares should rocket first thing today (Nov 5th)... 7.50am GMT Marks & Spencer has opened a Simply Food store in Hong Kong, which is going v well by all accounts. Fresh food being flown in 7.48am GMT Some instant reaction:@marksandspencer say "increasingly positive feedback from customers" but clothing sales still down 2.2% - is that really down to weather?Marks & Spencer like-for-like clothes sales down 3.4% in Q2 as warm September weather took its toll. Ouch. H1 profits up 2.3% to £268m.@graemewearden @BusinessDesk It's not just the weather - M&s clothing is now v. expensive for the majority of us. 7.46am GMT M&S is planning to build on its success in food, by opening 200 more Simply Food stores over the next three years -- up from 150 previously. 7.45am GMT M&S also warns that geopolitical issues, and foreign exchange movements, have hurt trading overseas:In our International business, we have delivered sales and profit growth in our Owned business, despite currency headwinds and unseasonal conditions across Europe. However, our Franchise business has been impacted by currency and political issues in our Middle East region and lower shipments, which we expect to continue into the second half of this year. 7.41am GMT British retailer Marks & Spencer reports its 13th consecutive quarterly drop in clothing sales http://t.co/Ap9Pyoip5h 7.30am GMT Marks & Spencer has become the latest UK retailer to warn that the unseasonably warm UK weather has hit trading.The high street chain just reported that clothing and general merchandise sales fell again in the last six months.M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year: GM gross margin, improving Womenswear, driving Food growth and Cash generation. 7.29am GMT Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.Coming up today....Is Marc Bolland testing beleaguered investors patience? Shares down 16% over the last year. Market down just 4.5% pic.twitter.com/6W8APypI3LNational central bankers in the euro area plan to challenge European Central Bank chief Mario Draghi on Wednesday over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said.He sits there with these three mobile phones in front of him and sometimes hes sending text messages or going out to make or take phone calls, one source usually in the room said. On at least one occasion, a national governor has skipped his turn to speak because Draghi was not present.This has got a bit better. Hes paying a bit more attention now, the source said. Continue reading...
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