UK business perks up after election, weakening case for rate cut: PMIs By Reuters



By Andy Bruce

LONDON (Reuters) – British companies are enjoying their best month in more than a year, a survey showed on Friday, the strongest evidence yet of a post-election boost to the economy that could deter the Bank of England from cutting interest rates next week.

The ‘flash’ early readings of the IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) showed Britain’s vast services sector returned to growth in January for the first time since August, while a downturn in manufacturing eased.

Britain’s performance bettered the euro zone’s for the first time since December 2018, as the PMI suggested the world’s fifth-largest economy looked on track to grow around 0.2% in quarterly terms after it slowed to a crawl late last year.

Earlier signs of weakness in the labor market had prompted two BoE rate-setters to vote for lower borrowing costs at the end of last year. Three others, including Governor Mark Carney, have hinted recently that more economic stimulus might be needed.

But Friday’s figures are likely to prompt investors to curb bets that the BoE will cut rates next Thursday, corroborating earlier signs that uncertainty among businesses and consumers has been tempered by Prime Minister Boris Johnson’s landslide victory last month.

The composite PMI, which combines manufacturing and services indexes, rose to 52.4 from 49.3, the highest reading since September 2018 and easily beating the 50.6 consensus forecast in a Reuters poll of economists.

The services PMI rose in January to 52.9 from 50.0, also its highest level since September 2018 and well above the consensus forecast in a Reuters poll of 51.0.

Service-sector optimism hit its highest in nearly five years this month, chiming with other business surveys from the Confederation of British Industry and Deloitte.

“It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait-and-see approach as they assess the performance of the economy in the post-Brexit environment,” IHS Markit chief business economist Chris Williamson said.

Still, the services PMI remained at levels historically associated with additional stimulus from the BoE and a long way below the survey’s long-run average of 54.8.

The reading for British factories was also better than expected, rising to 49.8 from 47.5, the highest level since April.

While the PMI signaled the ninth month of contraction for manufacturing, which accounts for 10% of economic output, new orders increased for the first time since April.

“The uplift in sentiment about the outlook hints at even better growth to come, but confidence needs to continue to rise to ensure this solid start to the year has legs,” Williamson said.

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British taxes are a matter for us, not United States, says UK trade minister By Reuters



LONDON (Reuters) – Britain’s tax policy is a matter for the British government, not the United States or the European Union, trade minister Liz Truss said on Thursday when asked about pressure from the U.S. administration over a planned digital tax.

“Let me be absolutely clear, UK tax policy is a matter for the UK Chancellor, it’s not a matter for the U.S. it’s not a matter for the EU, it’s not a matter for anybody else, and we will make the decisions that are right for Britain,” Truss said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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UK pay settlements slow in December, start 2020 cautiously: XpertHR By Reuters



LONDON (Reuters) – British employers offered their staff a median annual pay settlement of 2.2% in the three months to December, down from 2.6% in the three months to November, industry data showed on Thursday.

Human resources consultancy XpertHR said the slowdown, based on 23 pay deals between October and December, meant that awards in 2019 rose by an average of 2.5%, the same as 2018, and there were similar signs at the start of this year.

“The first pay deals of 2020 suggest that employers are taking a cautious approach, leading us to believe that there will be no jump in pay award levels in 2020,” XpertHR analyst Sheila Attwood said.

An early sample of 48 pay awards made in January showed an increase of 2.3%, XpertHR said.

Official weekly earnings data – which additionally include the impact on pay of job changes and promotions – showed annual pay grew by 3.2% in the three months to November, the joint slowest increase in over a year.

The Bank of England is watching pay growth and the broader labor market as it weighs up whether to announce a cut to interest rates on Jan. 30.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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UK confidence signs grow as Bank of England nears rate decision By Reuters



By Elizabeth Howcroft and Andy Bruce

LONDON (Reuters) – British households grew more confident about their finances and a measure of house prices rose by a record amount for January, according to surveys which added to other signs of a brightening mood in the economy since last month’s election.

Ten days before the Bank of England decides whether to cut interest rates, the surveys published on Monday suggested that some of the uncertainty that has weighed on the economy has lifted after Prime Minister Boris Johnson’s big election win.

IHS Markit, a data firm, said its Household Finance Index rose to a one-year high of 44.6 in January from 43.2 in December, chiming with other sentiment surveys from both businesses and consumers that have shown an increase in optimism.

Earlier on Monday, property website Rightmove said asking prices for houses increased in January at a record pace for the month, up 2.3% compared with December.

Still, BoE officials are likely to want to see whether the cheerier mood has translated into actual spending as they weigh up whether to cut rates on Jan. 30.

“What data there has been released capturing the post-election period suggests that the outcome has had a positive effect on consumer and business sentiment,” analysts at RBC said in a research note.

“Our view remains that a majority of (BoE officials) will prefer to wait for evidence of how the economy is responding to the outcome of December’s election and the removal of near-term Brexit uncertainty before deciding on a policy move.”

Money markets currently price in a roughly 65% chance that the BoE will cut interest rates on Jan. 30, although economists in a Reuters poll of economists published last week are more skeptical. Sixty out of 68 forecast no change to rates.

Investors will be watching Friday’s “flash” IHS Markit/CIPS purchasing managers’ indexes carefully for an early indication of the economy’s health this month.

Retail sales data last Friday showed an unexpected drop in December and investors will be eyeing Tuesday’s official labor market data for November carefully.

“Latest survey data certainly show some post-election bounce for UK households, with the headline index up to a one-year high and house price expectations at their strongest since October 2018,” Joe Hayes, an economist at IHS Markit, said.

Weakening inflation had helped to ease pressure on living costs, the survey showed.

However, a separate index measuring households’ expectations of future financial wellbeing slid back into negative territory in January, as gauges of perceptions of workplace activity and income weakened.

The proportion of households expecting a BoE rate cut “at some time” increased to 23.1%, while those expecting a rate hike in the next three months went down slightly to 19.5%, IHS Markit said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



U.K. Retail Sales Disappoint; Sterling Weakens By Investing.com


© Reuters.

U.K. disappointed again in December dropping 0.6%, adding further force to arguments for an interest rate cut from the Bank of England at the end of the month.

November sales were also revised down to a drop of 0.8% from an originally reported 0.6%.

Total retail sales were up 0.9% over the year in the reported month, a lot weaker than the 2.6% gain expected.

Sterling fell in response, with trading at $1.3066 at 4:30 AM ET (09:30 GMT), down from $1.3100 before the release. traded at 0.8518, up from 0.8506.

The British Retail Consortium earlier January pointed to the high street suffering the first annual sales decline since 1995. Many retailers, including big high-street names such as John Lewis and Marks and Spencer (LON:), have struggled as political instability and worries over Brexit weighed on consumer confidence.

Traders are pricing in around a 60% chance of a rate cut from the Bank of England later this month, with a reduction seen as a near certainty in the first half of the year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



UK consumers cut back on spending again, adding to economic gloom By Reuters



By William Schomberg and Andy Bruce

LONDON (Reuters) – British consumers failed to increase their spending for a record fifth month in a row in December, adding to signs of economic weakening that might prompt the Bank of England to cut interest rates this month.

Official data on Friday showed sales volumes fell by 0.6% from November, defying the median forecast for a rise of 0.5% in a Reuters poll of economists.

Sales in monthly terms have not risen since July, the longest such run since records began in 1996, the Office for National Statistics said, adding that food sales fell by the most in three years.

Sterling weakened and British government bond prices rose as investors increasingly bet on the Bank of England cutting rates on Jan. 30, at the end of its next meeting.

Two of its nine policymakers voted in November and December for a cut and three others, including Governor Mark Carney, have said lower borrowing costs might be needed soon.

Friday’s figures are the first hard data that suggest a bounce in consumer sentiment since Conservative Prime Minister Boris Johnson’s landslide election win on Dec. 12 might not have fed through into actual spending.

“December’s outright fall in retail sales, despite a potential boost from the lateness of Black Friday, does not bode well for GDP growth in December and could nudge the Monetary Policy Committee closer still to cutting rates at the end of the month,” said Thomas Pugh, an economist at Capital Economics.

“But the election and the removal of some uncertainty could represent a turning point for the economy. Indeed, there are signs that sentiment has already turned up. As a result, January might not be quite as bad.”

Allan Monks, a JP Morgan economist, said the weak picture of the economy in late 2019 meant surveys of businesses for January due next week would have to send a very clear signal of an imminent improvement to prevent a rate cut on Jan. 30.

Annual growth in retail sales volumes dropped to 0.9%, below all forecasts in the Reuters poll.

The also ONS revised down its sales data for November. In the fourth quarter as a whole, it found that volumes fell by 1.0%, their worst performance since early 2017.

The survey period ran from Nov. 24 to Dec. 28, including the Black Friday and Cyber Monday sales promotions and the Dec. 12 election.

The election outcome eliminated the risk of a disruptive no-deal Brexit as soon as Jan. 31, and there have been some signs of a bounce in confidence among consumers and companies since then.

But a hit to trade remains possible at the end of 2020, when Johnson insists a post-Brexit transition period will end, regardless of whether he can negotiate a trade deal with the European Union before then.

Consumer demand has been a strong point of the economy since voters decided to leave the EU three-and-a-half years ago. But more recently it has started to soften, despite low unemployment and modest inflation, which have boosted household incomes.

An industry group, the British Retail Consortium, said last week that sales in 2019 as a whole had fallen for the first time since its records began in 1995.

Retailers reported a subdued Christmas season while Sainsbury’s (L:) and Marks & Spencer (L:) have said they are not expecting a bounce in consumer spending in 2020.



Pound Falls After Weak U.K. Retail Boosts Prospect of Rate Cut By Bloomberg



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The slipped after U.K. data unexpectedly fell in December, increasing the chances that the Bank of England may cut a key interest rate this month.

Sterling dropped 0.2% to $1.3049 and declined against all its Group-of-10 peers as the volume of goods sold in stores and online fell 0.6% in December, confounding expectations of a 0.6% increase. Money markets are pricing a 75% chance of a rate cut on Jan. 30, compared with 62% on Thursday.

Markets are now turning their attention to impending purchasing managers’ indexes for further signs of the BOE’s direction.

“Clearly, there is a chance for a decent rebound of the PMIs next week and this may stay the BOE’s hand,” said Valentin Marinov, a strategist at Credit Agricole (PA:) SA. “That said, following this week’s weaker CPI and retail sales, the bar for stable rates is getting very high.”

Traders had been speculating that the central bank will cut rates at Mark Carney’s last monetary policy decision as BOE governor after a flurry of dovish comments from policy makers. The yield on 10-year U.K. government bonds was down three basis points at 0.61%, falling a sixth day and on course for its longest streak since August.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Javid aims to double UK growth after Brexit: FT By Reuters



LONDON (Reuters) – Finance minister Sajid Javid is aiming to roughly double Britain’s underlying rate of economic growth after it leaves the European Union, but will not champion big manufacturing sectors that want to stick to EU rules.

In an interview with the Financial Times before he travels to meet business leaders in Davos, Switzerland, Javid said Britain would not commit to sticking to EU rules in post-Brexit trade talks – something many businesses want to ease cross-border checks.

“There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year,” he said.

The British Chambers of Commerce (BCC) said businesses were willing to be pragmatic about this approach to Brexit but added that the government needed to be clear about its plans.

“Uncertainty around the extent of divergence risks firms moving their production elsewhere,” BCC co-executive director Claire Walker said.

The opposition Labour Party said Javid’s plans amounted to right-wing ideology overriding common sense and that jobs in the motor industry and manufacturing were under threat.

Prime Minister Boris Johnson has said there will be no extension to an 11-month window in which he hopes to negotiate a long-term trade agreement with the EU after Britain leaves on Jan. 31, despite the EU saying this is unrealistic.

The Financial Times reported that Javid wanted to boost annual economic growth rates to the 2.75% level seen in the second half of the 20th century through greater investment in skills training and physical infrastructure.

Britain’s economy probably grew about 1.3% last year, and the Bank of England estimates it will struggle to grow much faster over the long run due to reduced immigration and greater trade friction after Brexit.

Javid will present his first budget on March 11, and said it would focus on “people and place”, part of the Conservative government’s efforts to reward traditionally Labour-supporting areas that backed it due to Brexit in Dec. 12’s election.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



U.K. Economy Unexpectedly Shrinks Amid BOE Rate-Cut Debate By Bloomberg



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The U.K. economy unexpectedly shrank ahead of the general election, casting doubt over whether there was any growth at all in the fourth quarter.

The figures will add to concerns at the Bank of England, where officials are debating whether further stimulus might be needed if economic weakness persists.

Gross domestic product fell in November, the Office for National Statistics said Monday. Economists had expected unchanged output. It means growth of 0.1% to 0.2% was needed in December to prevent the economy contracting in the fourth quarter.

Markets have stepped up bets on an interest-rate reduction sooner rather than later after BOE Governor Mark Carney said there is plenty of room to act if necessary and policy makers Silvana Tenreyro and Gertjan Vlieghe warned they could join colleagues calling for cheaper borrowing costs. The is heading for its fifth day of decline.

The latest growth figures reflect caution in the run-up to the December election, with the dominant services industry contracting 0.3% — the biggest decline since early 2018.

Overall economic growth of 0.6% from a year earlier was the weakest since mid-2012.

Surveys taken after the election suggest Prime Minister Boris Johnson’s emphatic victory delivered a sharp boost to confidence. The question is whether that momentum can be maintained.

Britain is due to leave the European Union at the end of the month, and many doubt Johnson can deliver on his pledge to strike a trade deal with the bloc by the end of the year. If he fails, Britain will once again be facing a disruptive cliff-edge Brexit.

Upward revisions to recent months mean the economy expanded 0.1% between September and November, slightly better than expected though still the weakest performance since July.

Manufacturing output fell 1.7% in November, partly reflecting car factories shutting down to avoid supply disruptions around the now-postponed Oct. 31 Brexit deadline. Auto output alone fell more than 6%. Construction output rose 1.9%, rebounding from a weak October.

The trade deficit narrowed sharply in November as imports plunged almost 12%. The gap halved to 5.3 billion pounds, and trade with non-EU countries recorded a surplus for the first time since records began in 1998. However, the improvement was driven by flows of unspecified goods, which include non-monetary gold.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.