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UK household incomes rise at sharpest rate since 2009

Employment income in Britain has enjoyed the fastest rise since the global financial crisis, according to data published by IHS Markit in its household finance index on Monday.

Workplace activity pointed to the strongest rate of expansion for over three-and-a-half years, suggesting an improved rate of underlying economic growth in June, the data firm reported.

“Resilient labour market conditions and a faster rise in workplace activity meant that job insecurity across the UK as a whole was the least widespread for more than nine years”, said Tim Moore, associate director at IHS Markit.

Despite the surge, living costs weighed on household budgets over the month, leaving households “relatively downbeat” about their financial outlook.

Overall Markit’s index, which is intended to anticipate changing consumer behaviour, eased 3.3 per cent in June, down from a 25-month peak in May and signalling a sharper squeeze on household budgets.

“Stubbornly high inflation is set to hold back consumer confidence this summer, with rising fuel costs a prominent reason that increased wages are having a limited impact on spending power,” Moore said.

The survey recorded the strongest increase in living costs for three months.

Interest rate expectations also moderated over the month, with 45 per cent of respondents anticipating a Bank of England rate hike by the end of 2018, down from 54.6 per cent in May.

The Bank of England is broadly expected to leave interest rates on hold when it announces its June policy decision on Thursday.

Around three-quarters of households expect a rate rise by June 2019.

Source: City A.M.

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Consumer borrowing bounced back in April – Bank of England

Household borrowing nudged up in April, signalling that consumer confidence could be headed for a recovery.

According to the Bank of England’s Money and Credit report, net lending for consumer credit came in at £1.8 billion last month.

It represents the highest level since November 2016 and is a bounce back from March’s paltry £400 million, which was the lowest level since November 2013.

The increase was driven by credit card spending and other loans, helping the 12-month growth rate in consumer credit rise to 8.8% versus 8.6% in March.

Howard Archer, chief economic adviser to the EY ITEM Club, said the data may play into the Bank’s thinking when considering whether to hike interest rates in the coming months.

He added: “The Bank will be focusing on whether the rise in unsecured consumer borrowing in April is a sign that consumer appetite for borrowing is beginning to pick up anew or primarily a rebound from a particularly weak performance in March, when consumer activity and borrowing was affected by the severe weather.”

The Bank’s figures also show that UK mortgage approvals dropped slightly in April, falling from 62,802 to 62,455.

Mr Archer said that the numbers indicate that housing market activity “remains muted” as it remains under pressure by limited consumer purchasing power, fragile confidence and likely the prospect of an interest rate rise.

This was borne out earlier on Thursday when figures from Nationwide Building Society showed house prices went into reverse in May.

Source: BT.com

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What’s the relationship between inflation and interest rates?

Inflation reports and interest rate announcements are two of the most important events to watch for any forex trader. But how do the two affect each other, and what does that mean for the currency markets?

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Economic Calendar – Top 5 Things To Watch This Week

The big event in the coming week for global financial markets will be Friday’s release of the March U.S. employment report, as traders and investors look for further clues on the Federal Reserve’s likely rate hike trajectory through the end of the year.

U.S.-China trade frictions will also remain a central focus this week.

Over in Europe, investors will await the first estimate of euro zone inflation figures, which if they remain strong could push the European Central Bank another step closer to ending its mass stimulus program.

Meanwhile, in the UK, traders will focus on a trio of reports on activity in the manufacturing, construction and services sectors for further hints on the health of the economy and the likelihood of the Bank of England raising interest rates this year.

Elsewhere, in Asia, market participants will be looking ahead to monthly data on China’s manufacturing sector amid recent signs that momentum in the world’s second largest economy remains strong.

Finally, a monetary policy announcement from the Reserve Bank of Australia will also be on the agenda.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. U.S. Employment Report

The U.S. Labor Department will release the nonfarm payrolls report for March at 8:30AM ET (1230GMT) on Friday, and it will be watched more for what it says about wages than hiring.

The consensus forecast is that the data will show jobs growth of 198,000, after adding 313,000 positions in February, while the unemployment rate is forecast to dip to 4.0%from 4.1%.

However, most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.2%, following a gain of 0.1% a month earlier. On an annualized basis, wages are forecast to increase 2.7%, a tad faster than the 2.6% increase recorded in February.

A pickup in wages is usually a sign of rising inflationary pressures, which could support the case for a faster pace of rate hikes from the Fed in the months ahead.

This week’s calendar also features reports on ISM manufacturing and service sector growthADP private sector payrolls, auto salesconstruction spendingtrade figuresas well as factory orders.

In addition to the data, market players will also pay close attention to comments from a few Fed speakers this week for insights into the outlook for monetary policy.

Topping the agenda will be remarks from Fed Chair Jerome Powell, who is scheduled to speak about the economic outlook at the Economic Club of Chicago on Friday at 1:30PM ET (1730GMT).

Speeches from Fed Governor Lael BrainardCleveland Fed President Loretta Mesterand Atlanta Fed boss Raphael Bostic are also on the agenda.

The Fed hiked rates last month and stuck to its projection for two more rate hikes this year.

Meanwhile, on Wall Street, equities could see more volatility in the coming week after each of the three major U.S. averages logged their worst quarter in more than two years, as concerns over a global trade war and a rout in technology stocks dampened sentiment.

Elsewhere, news out of Washington D.C. is expected to keep investors on their toes, as they watch further developments amid a brewing trade war between the U.S. and China.

2. Euro Zone Flash Inflation

The euro zone will publish flash inflation figures for March at 0900GMT (5:00AM ET) Wednesday.

The consensus forecast is that the report will show consumer prices rose 1.4%, quicker than the 1.1% gain seen in February.

Perhaps more significantly, the core figure, without volatile energy and food prices, is seen inching up to 1.1%, from 1.0% a month earlier.

Besides the inflation report, this week’s calendar also features final survey data readings on euro zone business activity.

Even if inflation remains short of the European Central Bank’s target of almost 2%, its policymakers are now debating whether to end lavish bond buys later this year.

The ECB dropped its long-standing easing bias at its meeting last month, taking another small step in weaning the euro zone economy off its protracted stimulus.

3. UK PMI’s

The UK will release readings on March manufacturing sector activity at 0830GMT (4:30AM ET) on Tuesday, followed by a report on the construction sector on Wednesday and the services sector on Thursday.

The manufacturing PMI is forecast to dip to 54.8 from 55.2 a month earlier, construction activity is expected to weaken slightly to 51.2 from 51.4, while a survey on Britain’s giant services sector is forecast to slip to 54.2 from 54.5.

On the central bank front, Bank of England Governor Mark Carney is due to speak at the International Climate Risk Conference for Supervisors, in Amsterdam on Friday afternoon.

The BoE kept interest rates steady last month, but two policymakers unexpectedly voted for a hike, reinforcing the view that borrowing costs will rise in May for only the second time since the 2008 financial crisis.

Politics is also likely to be in focus, especially as the Brexit negotiations enter a key phase with a just a year to go until the deadline to agree to an official deal is reached.

While Britain’s economy is lagging behind the global recovery, it has held up better than the gloomy forecasts made at the time of the 2016 vote to leave the European Union.

4. China Manufacturing PMI

The Caixin manufacturing index, which focuses more on small and mid-sized firms, is due at 0145GMT Monday.

The survey is expected to rise by 0.2 points to 51.8 from 51.6.

The official Purchasing Managers’ Index released on Saturday rose to 51.5 in March, from 50.3 in February. That was well above the 50-point mark that separates growth from contraction on a monthly basis.

The PMI survey is seen as a good indicator of economic conditions and it is even preferred by some analysts to gross domestic product, which might be affected by poor seasonal adjustment and is prone to revisions.

China’s economy grew 6.8% in the fourth-quarter from a year earlier, helped by a rebound in the industrial sector, a resilient property market and strong export growth.

5. Reserve Bank of Australia Policy Meeting

The Reserve Bank of Australia’s (RBA) latest interest rate decision is due on Tuesday at 0430GMT.

Most economists expect the central bank to keep rates unchanged at the current record-low of 1.5% for the 18th straight meeting and maintain its neutral policy stance.

Policymakers are also expected to sound less confident that the economy would grow at 3% or more this year, in another sign rates will likely remain on hold for months to come.

Data on retail sales and the trade balance published later in the week should also capture some attention.

Investors expect policy will stay on hold for a long time to come, with interbank futures not fully pricing for a 25-basis point rise until early 2019.

Source: Investing

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UK savings ratio fell to record low in 2017

The UK savings rate declined to the lowest level since records began in 2017, while the pace of growth in disposable income has also fallen, according to the Office for National Statistics (ONS).

The ONS reported the UK savings rate fell to 4.9 per cent of income in 2017, the lowest level since records were first collected in 1963.

The ONS stated people have been spending more than they earn for the past five consecutive quarters to the end of 2017.

This is the first time since records began there has been a full year where the savings rate has declined in every quarter.

But Sir Steve Webb, former pensions minister and now director of policy at Royal London, said the data creates a misleading impression, as it includes withdrawals made under the pensions freedom legislation.

Individuals were not permitted to make those withdrawals prior to the pensions freedoms being introduced back in 2015.

This makes the change in the savings data look more extreme in recent years than would otherwise have been the case, according to Sir Steve.

Sir Steve also noted that reduced income for pension pots as a result of low interest rates have also made the data look worse than it is.

Fund manager Neil Woodford said he views the drop in the savings rate as a positive sign for the UK economy.

This is because conventional economic theory states that a fall in the savings rate means people are confident enough about their immediate economic prospects to spend.

If an individual is worried about their future, the instinctive reaction is to horde cash, pushing the savings rate upwards.

Mr Woodford said he views the fall in the savings rate as a positive sign for the UK domestic economy, and a justification of his view that the UK economy will perform better than expected.

However if the savings rate drops to an excessively low level, conventional economic theory states that the danger is a credit bubble builds in the economy, leading to a crash.

Source: FT Adviser

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Wages, Rates, Recycling, Connectivity – Spring Statement Need to Knows

No Budget this time around but Chancellor Hammond has issued his Spring Statement – here’s what you need to know with a summary of what Philip Hammond said in Parliament:

The Spring Statement gives people and businesses certainty and stability to plan for the future. Major tax or spending changes will now be made once a year at the Budget in the Autumn.

Living Wage

In April 2018 the National Living Wage will rise to £7.83. National Minimum Wage rates for under 25s and apprentices will also rise.

The tax-free personal allowance – the amount you earn before you start paying income tax – will rise to £11,850 from April 2018.

Business rates revaluation – 2021

At Autumn Budget 2017 it was announced that business rates revaluations will take place every three years, rather than every five years to makes bills more accurately reflect the current rental value of properties. However, the next revaluation, currently due in 2022, will be brought forward to 2021.

Transport in English cities

£1.7 billion was announced at Autumn Budget 2017 for improving transport in English cities. Half of this was given to Combined Authorities with mayors. The government is now inviting bids from cities across England for the remaining £840 million.

Digital connectivity

The Autumn Budget 2017 launched a £190 million Challenge Fund to help roll out full-fibre to local areas. Hammond has now allocated the first wave of funding, providing over £95 million for 13 areas across the UK.

Reducing single-use plastic waste through the tax system

Disposable plastics like coffee cups, plastic cutlery and foam trays damage our environment. The government is seeking views on how best to use the tax system to encourage the responsible use of plastic.

Some of the money raised from any tax changes will be used to encourage the creation of new, greener products and services. In addition, £20 million from existing budgets will be given to businesses and universities to research ways to reduce the impact of plastics on the environment.

Seeking views on the role of cash in the new economy

While cash will continue to be an important method of payment, more people are moving towards digital payments every year. The government is seeking views on what more it can do to support people and businesses who use digital payments, ensure that those who need to are able to pay with cash and prevent the use of cash to evade tax and launder money.

Supporting people to get the skills they need

To support upskilling and retraining, the government is seeking views on extending the current tax relief to support self-employed people and employees when they fund their own training.

Housing

An investment programme of at least £44 billion over the next five years was announced at Autumn Budget 2017, putting the UK on track to raise the supply of homes to 300,000 a year on average by the mid-2020s.

Economy and jobs

The economy has grown for five consecutive years, and exceeded expectations in 2017.

Employment has increased by 3 million since 2010, which is the equivalent of 1,000 people finding work every day. The unemployment rate is close to a 40-year low. There is also a joint record number of women in work – 15.1 million.

The Office for Budget Responsibility (OBR) expect inflation to fall over the next 12 months and wages to rise faster than prices over the next five years.

Borrowing

Borrowing has fallen by three-quarters since 2010. In 2009-10 the UK borrowed £1 in every £4 that was spent. The OBR expect that we will borrow £1 in every £18 this year.

Even so, the UK’s debt remains equal to around £65,000 per household.

The cost of debt interest payments is around £50 billion each year – more than the amount spent on the police and armed forces combined.

Brexit

Over £1.5 billion has been allocated to departments and devolved administrations to prepare for Brexit in 2018-19. It is part of the £3 billion to be spent over two years announced at Autumn Budget 2017.

Colliers International Reacts

Oliver Kolodseike, Senior Property Economist said: “The Chancellor delivered his Spring Statement, which laid out scant initiatives impacting on commercial property. The Office for Budget Responsibility revised up its 2018 growth forecast marginally from 1.4% in the Autumn Statement to 1.5% and now believes that positive real wage growth will return in the second quarter of 2018. This does not come as a surprise. However, it is indeed surprising that the OBR is now more pessimistic about the longer-term outlook for the UK economy beyond 2020. For both 2021 and 2022, it now predicts slower growth. This comes despite the strongest labour market in four decades, a predicted return of positive real wage growth, signs of rising productivity and improving public finances, which should provide the government with extra money to spend should they have to.”

Infrastructure investment

Mark Charlton, Head of UK Research at Colliers International said: “Recognising the cost to the UK economy of congestion on British roads (c. £9bn per annum), £1.7bn was announced in the Autumn Budget for improving transport in English cities. Half of this has been allocated to Combined Authorities with mayors. The government is now accepting bids from English cities for the remaining £840m. The resulting infrastructure spend could result in new relief roads and the subsequent release of land parcels ripe for development. This could provide opportunities for the development community – both residential and commercial (retail and logistics).”

Business Rates Revaluation

John Webber, Head of Colliers Rating, said: “The Chancellor’s proposal to bring the next Business Rates Revaluation forward to 2021 and that revaluations would then be every three years rather five, enabling a fairer reflection of rental values, is all very good but it does nothing to help those businesses, particularly the retailers, who are struggling with the system today.  The change from a seven year to a five year, then a four year and finally a three year revaluation system, only underlines how the Government has finally realised how disastrous the seven year 2017 Revaluation really was. The Chancellor has missed a trick in his Spring Budget by failing to properly tackle the issue of business rate reform, leaving many businesses and retailers out to dry, particularly as the 2018/9 rate bills for 1st April start to hit home.”

Late payments

The Chancellor’s announcement of a new consultation on late payment should be the beginning of the end for unfair payment practices which hit small businesses across the UK, the Federation of Master Builders (FMB) has said.

Brian Berry Chief Executive of the FMB said: “The Chancellor’s announcement of a consultation to tackle the scourge of late payment should mark a turning point on this issue. We should use this opportunity to bring about a spring clean of payment practices which negatively impact on small business. Construction giant Carillion’s collapse at the start of the year brought to light once again the need to eliminate poor payment practises that plague the construction sector particularly.  Indeed, one London based small building firm was once paid more than 270 days late by a construction giant. Now is the time to move away from these unsustainable business models which threaten the existence of many firms and their supply chains.

“This announcement should be followed by a fundamental rethink ending in the permanent abolition of late payment terms and the exploitative use of retention payments.”

More on late payments

Commenting on the Spring Statement, John Newcomb, Chief Executive of the Builders Merchants Federation said: “The BMF is pleased to see the government focus attention on tackling the issue of late payments which is a big issue for our members, particularly for smaller builders merchants. The collapse of Carillion gave a clear indication of how vulnerable suppliers can be to their customers and we support measures that minimise these risks to our members in the future. In order to keep Britain building and delivering the building blocks for growth, it is vital that merchants are paid quickly.”

Source: TwinFM

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New Report Reveals Liverpool is One of The Top Hotspots for Growth

The UK’s 24 leading urban economies have been scrutinised and Liverpool city region has been rated as one of the top four hotspots in the UK for economic growth potential.
The potential of all 24 cities have been measured analysed and brought together in a report carried out by global design and infrastructure consultancy, Arcadis. The data was measured against six key areas: workforce and skills, infrastructure, business environment, place, city brand and housing.
In the final league table of the report, Liverpool was fourth behind Edinburgh, Oxford and Cambridge, but ahead of London. The city’s main strengths were its brand, infrastructure, positive business environment and the quality and affordability of housing supply.
A large part of the city’s attraction is its strong global brand. Due to Liverpool’s rich history, its music, the diverse cultural make up, along with the open-for-business environment radiated from the city. This helps to signal to the rest of the world the huge opportunities here and what potential exists within the city and wider city region. Liverpool attracts investors, both in the commercial and property market, from across the UK and overseas. It creates an attractive package adding more to Liverpool future long-term prosperity.

Not a new phenomenon

This isn’t a new phenomenon. Merseyside’s economy grew faster than London, Manchester and any other major British city in 2015 according to figures by the Office for National Statistics (ONS). Less than three years ago Merseyside enjoyed an economic growth rate of 3.1% in the year, faster than any similar major city region in the country. In fact, major cities across the North West performed strongly during that year according to statistics by the ONS.
Liverpool city region continues its process of improving its performance, catching up with other places that used to perform better in the past. It has recorded a strong economic performance over recent years, demonstrating the progress made. In order to continue its fantastic growth, Liverpool is a city that cannot be complacent. The city region is narrowing the gap in terms of GVA (gross value added) per head but the push must continue if the city region is to achieve its full economic potential.

Regeneration helps city to rank

Undergoing several regeneration schemes and large-scale work across the city has certainly helped Liverpool reach its number four ranking. And through this, pricing across Liverpool is expected to rise. The L1 postcode is a good example of this and has seen house prices risen by a 41.2 per cent according to property website Rightmove. You can find out more information and view properties in Liverpool here at RWinvest.
The student population also means that a combination of low house prices and high rental values has given the city some of the highest rental yields in the UK, making it an appealing possibility for property investors keen to create a portfolio in the student rental market.

Source: FINSMES

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Economic Calendar – Top 5 Things to Watch This Week

Global financial markets will focus on this week’s European Central Bank meeting for further details on when the central bank plans to end its massive economic stimulus program.

Staying on the central bank front, traders will pay close attention to a monetary policy decision from the Bank of Japan for hints on when it will start withdrawing stimulus.

Meanwhile, investors will keep an eye on the monthly U.S. employment report to gauge how it will impact the Federal Reserve’s view on monetary policy in the months ahead.

Elsewhere, in the UK, investors will focus on a report on activity in the dominant services sector for further indications on the health of the economy and the likelihood of the Bank of England raising interest rates this year.

Market participants will also be looking ahead to monthly trade figures out of China amid recent signs that momentum in the world’s second largest economy remains strong.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. European Central Bank Policy Meeting

The European Central Bank is widely expected to keep interest rates at their current record low levels and make no changes to its guidance on future policy when it holds its second meeting of the year at 1245GMT (7:45AM ET) on Thursday.

President Mario Draghi will hold what will be a closely-watched press conference 45 minutes after the rate announcement. How he views signs of undershooting inflation and any clues on when the central bank plans to end its €2.5 trillion stimulus program will be important.

Concerned about recent market turbulence, the strong euro and a dip in both headline and underlying inflation, officials prefer waiting, perhaps as late as the summer, before starting to signal the end of asset buys, three sources with direct knowledge of the discussion said last week.

The ECB will also unveil new macroeconomic projections, but sources familiar with the matter said they are unlikely to offer many surprises as growth and inflation are broadly on the same path as before.

The central bank cut its monthly bond purchases from €60 billion to €30 billion back in October, but extended the program until the end of September 2018, citing muted price pressures.

The euro-area economy is undergoing its broadest expansion in a decade. Yet inflation pressures remain feeble, with the headline rate falling last month to the lowest since 2016, underlining the ECB’s caution in removing stimulus.

Results of Sunday’s Italian general election as well as political developments in Germany will also be on the agenda.

2. BOJ Policy Announcement

The Bank of Japan is also seen keeping policy on hold at the conclusion of its two-day rate review on Friday, including a pledge to keep short-term interest rates at minus 0.1%, while painting a slightly better picture of the economy.

BoJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision. His comments will be monitored closely for any new insight on his views on inflation and how that can affect its current stimulus policies.

Investors will also be watching for comments on the yen, in light of its recent surge against the dollar.

There have been some indications recently that the central bank is setting the ground to begin discussions on winding back its quantitative easing program thanks to an improving economic outlook and hints of rising inflation.

Japan’s economy, the world’s third-largest, marked eight straight quarters of expansion in October-December, its longest such run since a 12-quarter stretch of growth during the 1980s boom years.

3. U.S. Employment Report

The U.S. Labor Department will release the nonfarm payrolls report for February at 8:30AM ET (1330GMT) on Friday, and it will be watched more for what it says about wages than hiring.

The consensus forecast is that the data will show jobs growth of 204,000, after adding 200,000 positions in January, while the unemployment rate is forecast to dip to a 17-year low of 4.0% from 4.1%.

Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3%, following a similar gain a month earlier. On an annualized basis, wages are forecast to increase 2.9%, slowing slightly from 2.9% in January, which was the largest annual gain in more than 8-1/2 years.

A pickup in wages could be an early sign for higher inflation, supporting the case for higher interest rates in the months ahead.

This week’s calendar also features the ADP private sector nonfarm payrolls report and the ISM non-manufacturing survey.

Besides the data, markets will also be paying close attention to comments from a few Fed speakers this week for their views on the recent uptick in inflation and how that can affect monetary policy. Topping the agenda will be remarks from influential New York Fed boss William Dudley as well as Fed Governor Lael Brainard, a known dove.

In his first congressional hearing as head of the Fed last week, Jerome Powell vowed to prevent the economy from overheating, while sticking with a plan to gradually raise interest rates. Those comments fueled speculation in equity markets over U.S. monetary tightening this year happening faster than expected.

Indeed, many economists have started to forecast four rate hikes this year, compared to the three the Fed currently predicts.

The Fed is scheduled to hold its next policy meeting on March. 20-21, with interest rate futures pricing in an 85% chance of a rate hike at that meeting, according to Investing.com’s Fed Rate Monitor Tool.

Meanwhile, on Wall Street, retailers such as Target (NYSE:TGT), Costco (NASDAQ:COST) and Dollar Tree (NASDAQ:DLTR) report results, as do a number of smaller chain stores, in what will be the last busy week of earnings season.

Elsewhere, news out of Washington D.C. is expected to keep investors on their toes, after President Donald Trump announced plans to slap tariffs on aluminum and steel late last week. He kept up pressure on trading partners on Saturday, threatening European automakers with a tax on imports.

4. UK Services PMI

A survey on Britain’s giant services sector due at 0930GMT (4:30AM ET) on Monday is forecast to inch up to 53.3 from the previous month’s reading of 53.0.

While Britain’s economy is lagging behind the global recovery, it has held up better than the gloomy forecasts made at the time of the 2016 vote to leave the European Union.

The Bank of England kept interest rates steady last month, but signaled it was likely to raise rates sooner and by more than it thought a few months ago as it seeks to keep a grip on inflation.

Politics is also likely to be in focus, especially with the Brexit negotiations entering a key phase. Prime Minister Theresa May urged the European Union on Friday to show more flexibility in talks on future ties, saying Britain was ready to swallow the “hard facts” of Brexit but did not believe they prevented a successful trade deal.

5. China Trade Figures

China is to release February trade figures at around 0300GMT on Thursday.

Exports are forecast to have climbed 13.9% from a year earlier, following a gain of 11.1% in the preceding month, while imports are expected to rise 9.7%, after soaring 36.9% in January.

Additionally, on Friday, the Asian nation will publish data on February consumer and producer price inflation. The reports are expected to show that consumer prices rose 2.4% last month, while producer prices are forecast to increase by 3.8%.

China’s economy grew 6.8% in the fourth-quarter from a year earlier, helped by a rebound in the industrial sector, a resilient property market and strong export growth.

China’s annual two-week long National People’s Congress commencing on Monday will also grab some attention. The political meeting is used by leaders to set policies for the year and detail plans to curb financial risk, air pollution, and excess industrial capacity.

Investors will also want to see how the world’s largest steel producer might react to Trump’s plans to impose heavy import tariffs on steel and aluminum.

Stay up-to-date on all of this week’s economic events by visiting: http://www.investing.com/economic-calendar/

Source: Investing

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UK Construction Activity Picked Up in February but Outlook Remains Challenging

Britain’s third largest economic sector, the construction industry, has been mired in recession for three consecutive quarters. Economists are now looking for signs this downturn eased during February.

The UK construction industry enjoyed a surprise boost during February, according to the latest IHS Markit Construction PMI, although “there is little sign of an imminent turnaround in overall growth momentum”.

February’s IHS Markit PMI index rose to 51.4, up from 50.2 in January, when economists had forecast a much more meagre increase to 50.5.

This marks the first rise for the index in three months and, although IHS say the growth outlook remains bleak, it may provide some hope that the three-quarter downturn in the industry is now easing.

The PMI is a survey that measures changes in business conditions in the construction industry from month to month. It asks respondents to rate current conditions across a range of areas including employment, production, new orders, prices, supplier deliveries and inventories.

A number above the 50.0 level indicates industry expansion while a number below is consistent with contraction.

A sudden jump in commercial construction activity was the biggest contributor to February’s gains which, expanding at its fastest pace since May 2017, is notable because the commercial segment made the greatest contribution to 2017’s downturn.

“Civil engineering was the worst performing category of construction work, with activity falling at the sharpest pace for five months. A soft patch for house building continued in February, meaning that residential work remained on track for its weakest quarter since Q3 2016,” IHS Markit says.

“At the same time, strong input cost pressures were reported in February, with higher raw material prices, fuel bills and staff wages reported by survey respondents.”

PMI surveys frequently overestimate economic activity and IHS Markit Construction survey is no different.

The construction survey has printed only one number that is consistent with an industry recession during the last 12 months yet official output data shows the industry has contracted for three separate quarters.

Nonetheless, February’s report rhymes with the changing tone of the latest Office for National Statistics data, covering December, which showed the three-quarter downturn easing a touch in the final month of last year.

Construction is Britain’s third largest economic sector. Much of its earlier weakness was the result of commercial construction being hindered by Brexit uncertainty and oversupply of new office space in key hubs like London.

Residential activity has remained robust, in broad terms, although it has softened a touch of late.

The London market has been an exception to this as stamp duty tax changes and the outcome of the Brexit referendum in June 2016 have both hit demand for prime real estate in the capital.

Friday’s data comes closely on the heels of the IHS manufacturing PMI, which showed the manufacturing index slipping for the third month running as production slowed in February while export order book growth moderated a touch.

It also comes after a flurry of other gloomy news for the UK, the economy and its currency. Nationwide Building Society data released Thursday showed UK house prices falling 0.3% in February, following a brief and surprise pickup in January.

“Month-to-month changes can be volatile, but the slowdown is consistent with signs of softening in the household sector in recent months,” Robert Gardner, chief economist at Nationwide, wrote in a note accompanying the figures.

The mortgage data followed an Office for National Statistics report released last week, showing the UK economy grew slower than was previously thought during the final quarter of 2017.

ONS says UK economic growth was in fact 0.4% during the final quarter, not the 0.5% previously suggested by the ONS, dealing a blow to observers who had cheered a last minute lift in UK economic momentum during 2017.

The annual pace of growth was also downwardly revised, from 1.8% to 1.7%, with the revised number marking a fall from the 1.9% growth seen back in 2016.

That was the result of downward revisions to industrial production figures, due to the closure of a key oil pipeline in the North Sea, and business investment having ground to a standstill.

This data came closely on the heels of the fourth quarter labour market report, which showed the unemployment rate rising for the first time since July 2015. The ONS attributed this to a rise in the participation rate rather than an increase in job losses.

All of this matters for the Pound because it could impact on the Bank of England and its thinking about whether the UK will be able to sustain another rise in interest rates. It hiked the base rate by 25 basis points already, to 0.50%, in November.

For what it’s worth, the fourth quarter growth performance was in line with the BoE’s forecasts and it’s well known now the bank’s primary concern is inflation, which sits stubbornly at 3%.

So far, the bank says it’s taken heart from the broad fall in unemployment over recent years, which is now beginning to push wages higher, and because of this it is less willing to play it cautious by holding back on interest rate rises.

Nonetheless, a further deterioration in UK economic conditions, particularly around unemployment and Brexit, may change this.

Source: Pound Sterling Live

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UK jobless rate rises unexpectedly, wage growth steady

Britain’s jobless rate rose for the first time in almost two years at the end of 2017 and pay growth remained modest, keeping the Bank of England waiting for an acceleration in wages that would justify a new interest rate hike.

British government bond prices rose and sterling briefly fell against the U.S. dollar after Wednesday’s figures showed the sharpest rise in the number of people out of work in almost five years.

Nonetheless, the data painted a mostly robust picture of the labour market, with productivity – a major weakness of Britain’s economy over the last decade – recording its best performance since the 2008-09 recession in the second half of 2017.

British households lost spending power last year due to a jump in inflation, caused by the post-Brexit vote fall in the pound, and only weak wage growth.

The BoE expects pay to pick up soon, a big reason why it says interest rates are likely to rise faster and to a greater extent than it thought until recently.

Economists were split on whether the latest data made an interest rate hike in May more likely.

“If stronger productivity continues into 2018, the Bank of England may decide to hold at least once on raising rates this year,” said Yael Selfin, chief economist at accountancy KPMG.

BoE Governor Mark Carney and other officials are to speak in parliament at around 1415 GMT.

The ONS said the unemployment rate rose to 4.4 percent from 4.3 percent in the three months to December, the first increase since the three months to February 2016, and the number of jobless rose for a third monthly report in a row.

The ONS attributed the rise in unemployment to a fall in the number of people who are neither working nor looking for a job.

However, the number of people in work grew by less than expected, rising by 88,000, about half the consensus forecast in a Reuters poll of economists.

SUBDUED PAY GROWTH

Growth in employment has been one of the bright spots in Britain’s economy since the financial crisis but as in many other countries pay growth has been anaemic.

Workers’ total earnings, including bonuses, rose by an annual 2.5 percent in the three months to December, as expected and unchanged from the three months to November.

BoE officials are likely to note pay jumping 2.8 percent in December alone. But that was still weaker than the 3.0 percent reading of British consumer price inflation for December.

Excluding bonuses, earnings rose by 2.5 percent year-on-year against expectations for a 2.4 percent rise.

BoE policymakers will be watching closely for signs that employers – who have found it harder to recruit workers since the 2016 Brexit vote – have offered improved pay settlements at the start of the year.

The ONS said the number of EU nationals working in Britain rose by an annual 4.5 percent over the fourth quarter, the smallest increase since the third quarter of 2013. The number of Eastern European workers fell.

Overall migration data has shown a drop in net migration from the EU into the UK since the Brexit vote.

Separate ONS figures showed finance minister Philip Hammond likely to meet his target for cutting Britain’s budget deficit this year with room to spare.

The government recorded a January budget surplus of 10 billion pounds, slightly above forecasts, helped by strong income tax receipts which typically jump in that month.

With only two months left in the 2017/18 financial year, cumulative borrowing now stands at 37.7 billion pounds, down 16 percent on the same point a year ago.

In November, Britain’s Office for Budget Responsibility forecast borrowing of 49.9 billion pounds for the full year. On Wednesday it said it now looked clear that Hammond would undershoot this “by a significant margin”.

The finance ministry said Wednesday’s figures were strong.

Source: Yahoo News UK