Brexit fears hit UK service sector growth - business live

Discussion in 'Market News' started by Lily, Mar 3, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    All the day’s economic and financial news, as fresh data shows how the global economy fared in February


    10.55am GMT

    Here’s some optimism from Kallum Pickering, economist at Berenberg Bank, who reckons the threats hitting the UK economy are ‘transitory’:

    The real problem for the UK is not fundamentals. In fact, a broad range of indicators point to sustained healthy growth in domestic demand; low unemployment, cheap oil, low interest rates and moderate real wage growth. The real problem is that risks appear to be ‘all or nothing’.

    Since Autumn of last year the global economy has delivered a treadmill of threats; China slowdown, EM crisis and the EU migrant problem, to name but a few. And in 2016 they have intensified. First, the financial market rout and overstated fears of a global recession hit confidence in January.

    10.54am GMT

    Today’s service sector report follows disappointing data from the manufacturing sector on Tuesday, which showed growth at a 34-month low.

    Construction firms also had a weak February, as this chart shows:

    10.20am GMT

    Economists are split over whether the Bank of England will slash interest rates to fresh record lows, in response to these signs of economic slowdown.

    Independent economist Shaun Richards reckons at least one policymaker will vote for a cut:

    With UK #GDP growth forecasts post #PMI of 0.2%,0.3% &0.4% I think someone at the #BoE will vote to cut Bank Rate #ForwardGuidance

    PMIs are only just above levels when MPC has cut rates. But the tight lab. market & weak £ suggest a cut is unlikely

    10.10am GMT

    The service sector slowdown is a ‘hammer blow’ to Britain’s growth prospects, warns Howard Archer of IHS Global Insight.

    He predicts a sharp slowdown in the current quarter, compared with the 0.5% growth recorded in October-December.

    We have pencilled in growth of 0.4% quarter-on-quarter in the first quarter, but there look to be downside risks to this – especially as heightened uncertainty over the EU membership referendum could well foster increasing business and consumer caution.

    This is uncomfortable news for George Osborne as he readies his March budget.

    10.06am GMT

    The UK service sector makes up around 70% of the economy, so the scale of the slowdown in February is quite worrying.

    Jeremy Cook, chief economist at the international payments company, World First, flags up that many firms are too nervous to expand.

    “Momentum in services is slowing with everything from Chinese growth concerns, low oil prices, the UK’s referendum on EU membership and global market volatility all increasing the level of uncertainty that businesses are feeling. These doubts have meant that less than 50% of survey respondents expect their businesses to expand in the next 12 months although only 8% expect a contraction; there are simply too many all-encompassing questions that need answering for businesses to feel that they have a solid foundation to grow.

    So, for now, expect the engine of UK economic performance to tread water, at best.”

    9.55am GMT

    Today’s UK service sector report is much weaker than expected, says financial newswire RANsquawk.

    UK Services PMI noticably softer than expected, with survey referencing #Brexit concerns for the first time

    9.52am GMT

    Brexit fears mean British companies have little to be optimistic about right now, according to David Noble of the Chartered Institute of Procurement & Supply.

    He warns:

    “A maelstrom of sluggish global economic performance and relatively subdued business confidence resulted in a downbeat message in February.

    The combined pressures from uncertainties around the EU referendum, China and Middle East crowded out any strong optimism for the future.

    9.41am GMT

    BREAKING: UK service sector growth has hit its weakest level in three years.

    Markit’s services sector PMI, which tracks activity at hundreds of British firms, has fallen sharply to 52.7 in February, from 55.6 in January.

    Survey responses reveal that firms are worried about signs of faltering demand, but boardrooms have also become unsettled by concerns regarding the increased risk of ‘Brexit’, financial market volatility and weak economic growth at home and abroad.

    The extent of the slowdown will be a shock to policymakers and surely puts to bed any talk of the Bank of England raising interest rates. The focus will instead increasingly shift to whether policymakers may soon need to dig deeper into their toolbox to introduce new measures to shore up the economy with additional stimulus, and what tools might be used.

    9.32am GMT

    Today’s PMI reports confirm that the eurozone recovery has been faltering for a few months now:

    CHART: Euro-area #PMI still expansionary but slide continues in February. So far down in all top 4 economies in Q1.

    9.17am GMT

    The slowdown across Europe’s private sector has worsened.

    Data firm Markit has found that growth decelerated to its weakest rate in 13 months, dragged back by France (not for the first time).

    The survey data raise the prospect of economic growth deteriorating further from the already meagre pace seen late last year, when GDP rose only 0.3%.

    “Germany and Italy both reported the smallest expansions for five months, while Spain recorded the worst growth for 14 months. It was France, however, that remained the weakest link, seeing business activity fall for the first time in just over a year.

    8.59am GMT

    The economic chasm between Germany and France has widened, according to today’s purchasing manager reports.

    France’s service sector PMI fell to 49.3 in February, showing that activity shrank last month - at the fastest pace in over a year.

    Ooops. French final PMI composite revised down to 49.3 in February (prelim: 49.8, January: 50.2). Lowest level since January 2015.


    8.54am GMT

    Satellite firm Inmarsat is the biggest faller in London this morning.

    It warned that trading may be tough this year due to weak government spending; a reminder that fiscal cutbacks have a nasty habit of hitting the private sector.

    8.39am GMT

    A weak start to trading in London has sent the FTSE 100 down by 17 points to 6129.

    Connor Campbell of SpreadEx reckons the weak Chinese data has hit sentiment:

    Kicking off the day’s data dump with a whimper was China, Caixin reporting that the country’s economy is ‘weak and unstable’ as the latest PMI slipped to 51.2.

    Of course this won’t have helped the markets regain the confidence that was so rampant on the first day of the month, a reminder of the Chinese slowdown the last thing anyone needs to hear when they wake up for a day’s trading.

    8.35am GMT

    After five months of contraction, Russia’s service sector has finally returned to growth.

    Firms reported that they won new orders at the fastest pace since last July. And that pushed Markit’s Russia Services Business Activity Index up to 50.9, up from January’s 47.1, showing a small expansion.

    Faced with a lower level of incomplete work, Russian service sector firms continued to shed jobs. Moreover, workforce numbers have declined in every survey for the past two years. There was some evidence that lower employee numbers were associated with efforts to cut back on costs.

    8.23am GMT

    China’s vice central bank governor has pledged to maintain a prudent approach to monetary policy this year, rather than shocking the markets with another yuan devaluation.

    Reuters has the details:

    Yi Gang said the central bank would keep the yuan basically stable against a basket of currencies this year.

    #China to keep Yuan stable against a basket of currencies and implement prudent monetary policy in 2016, said Yi Gang, #PBCO deputy governor

    8.14am GMT

    The weak service sector report comes as thousands of Chinese officials travel to Beijing for the National People’s Congress.

    This year’s meeting will focus on crafting China’s development plan for the next five years. And the proceedings may provide crucial details on how the government plans to control a slow down in growth while avoiding the dreaded “middle-income trap.”

    8.01am GMT

    Chinese policymakers have been given a new warning that their economy is weakening.

    Growth in the Chinese service sector slowed in February, according to a new report from data provider Caixin.

    The Caixin Composite Output Index for February came in at 49.4, dipping below 50 again, indicating the economy is still weak and unstable.

    Overall, the services sector has outperformed manufacturing industries, reflecting continued improvement in the economic structure. While implementing measures to stabilize economic growth, the government needs to push forward reform on the supply side in the services sector to release its potential.”

    7.46am GMT

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

    It’s another big day for economic data, as we look for signs that the world economy is fighting off the risk of a new downturn.

    While there is no question that the global manufacturing sector continues to find its growth prospects somewhat difficult, the recent rebounds in commodity prices has raised the hope that we could well see a similar rebound in economic activity in the coming months.

    In that time, concerns about a ripple out effect to the services sector do appear to have been contained, but there is still a worry that the slowdown in the services sector could last a little bit longer than many expect.

    Continue reading...

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