New recession 'on the cards' as activity slumps amid lockdowns and Brexit disruption - live updates

  • In World
  • 2021-01-21 23:01:49Z
  • By The Telegraph
Services - AP Photo/Kirsty Wigglesworth
Services - AP Photo/Kirsty Wigglesworth  
  • UK PMIs disappoint across the board, with services sector experiencing heavy slump

  • Bar April 2020, biggest increase in suppliers' delivery times on record

  • Christmas retail sales disappoint

  • National debt passes £2 trillion, hits highest level relative to GDP since 1962

  • FTSE 100 falls

  • String of poor economic readings put pressure on the pound

  • Brexit deal gives Nissan a competitive advantage, boss declares

  • Garry White: The US oil industry will not ride off into the sunset

  • Sign up here for our daily business briefing newsletter

09:48 AM

Companies cut jobs amid new restrictions

Today's PMI report says higher operating expenses, squeezed margins and lower demand led to a "modest acceleration in the pace of private sector job shedding in January".

Mr Williamson says the pace of cuts was slower than in March and November, however. The worst-affected the sectors are the usual suspects of customer-facing services companies:

09:39 AM

Key findings

Here are the key findings from the latest PMI surveys by IHS Markit and CIPS:

  • Apart from April 2020, latest data pointed to the largest increase in suppliers' delivery times since the UK Manufacturing PMI survey began almost 30 years ago

  • Despite a swift return to falling business activity at the beginning of the year, latest data indicated that UK private sector companies remain upbeat about their prospects on a longer-term basis

  • The speed of the downturn in UK private sector output was still softer than at the start of the pandemic

  • Volumes of new work meanwhile decreased for the fourth consecutive month

  • Strong cost pressures persisted at the start of 2021

IHS Markit
IHS Markit  

IHS Markit's Chris Williamson said:

CIPS' Duncan Brock added:

09:35 AM

Output slumps amid lockdowns and Brexit disruption

UK private sector activity has slumped this month amid disruptions caused by new lockdown measures and the biggest jump in delivery times in at least 30 years (excluding last April).

PMI readings were worse than expected across the board, with a particularly acute slump in services:

  • Manufacturing: 52.9

  • Services: 38.8

  • Composite: 40.6

IHS Markit, which gathered the data, said:

09:24 AM

Coming up: UK PMIs

We'll get flash PMIs for the UK's private sector at half past.

Economists are expecting a broad-based slowdown in activity, with a divergence between rising manufacturing output and a continued services slowdown driven by the latest lockdown. Here are the predictions (per Bloomberg):

  • Manufacturing: 53.6 (Dec: 57.5)

  • Services: 45 (Dec: 49.4)

  • Composite: 45.5 (Dec: 50.4)

09:09 AM

Eurozone private sector activity slows

Follow divergent manufacturing and services performances in France and Germany, the eurozone-wide flash PMIs show evidence of a bloc-wide schism between sectors.

The eurozone manufacturing gauge came in at 54.7, clearing the growth threshold at 50, while services stood at 45. Together, that shifted the composite gauge of overall private sector activity to 47.5, indicating an overall decline.

IHS Markit, which gathered the data, said:

Here are some key findings:

  • The worsening performance in January was broad based across the eurozone, albeit with marked variations

  • Eurozone factory output expanded for a seventh consecutive month

  • There was an incidence of supply constraints limiting production

  • Employment across the eurozone fall for an eleventh consecutive month

  • Business expectations about output in the coming 12 months pulled back from December's recent peak, largely linked to worries about the persistence of the pandemic's impact on demand

IHS Markit's Chris Williamson said:

08:47 AM

German manufacturing boom continues

A rise in German manufacturing activity continued to gain pace in January, with the sector's strength continuing to offset a services slowdown.

The country's manufacturing PMI stood at 57, a mild slowdown in the pace of gains but well clear of the no-change threshold at 50. Services continued to slowdown amid tighter restrictions, but overall composite private sector growth gauge held in positive territory.

IHS Markit, which gathered the data, said:

Here are some key findings:

  • January's survey revealed unprecedented delays on the delivery of inputs to manufacturers amid growing pressure on supply chains and widespread freight disruption

  • Despite temporary closures across the tourism industry and restrictions on travel, German export business continued to rise thanks to another steep increase in international sales of manufactured goods

  • Overall backlogs of work across the German private sector rose for the sixth month running

  • Employment across Germany's private sector crept higher… The increase was driven by an acceleration in the rate of job creation across the service sector to the quickest seen since before the pandemic

IHS Markit's Phil Smith said:

08:27 AM

Divergence continues as French private sector slows down

There's evidence of a continued divergence between France's manufacturing and services sectors, as activity in the former accelerated alongside a slowdown in the latter.

The latest PMI data for the French private sector showed factories mildly above the growth threshold of 50, while tighter restrictions knocked services - putting a drag on wider performance that knocked the composite reading 47.

IHS Markit, which gathered the data, said:

Here are some key points:

  • The latest decrease in business activity was accompanied by another fall in new business

  • Foreign demand for French goods and services continued to decline

  • French businesses increased their staff numbers in the first month of 2020

  • Input costs faced by private sector firms continued to rise

  • Businesses cut their average output prices for the fifth month running

IHS Markit's Eliot Kerr said:

08:11 AM

FTSE falls at open

The FTSE 100 has opened lower amid widespread but moderate declines across European equities. London's blue-chips would likely be underperforming were it not for some upwards pull from a weaker pound.

Bloomberg TV - Bloomberg TV
Bloomberg TV - Bloomberg TV  

08:01 AM

Full report: Christmas sales a letdown as borrowing spree continues

My colleague Tom Rees has a full report on this morning's economic figures. He writes:

  • Read more: Christmas retail sales disappoint

07:59 AM

The blowout year for borrowing

Here's how public sector net borrowing for the UK so far this financial year compares to the full year figures for previous years. As is clear, the pandemic has already created a total blowout in terms of borrowing:

07:49 AM

John Lewis plans to repay loan on stronger profits

John Lewis - TOLGA AKMEN/AFP via Getty Images
John Lewis - TOLGA AKMEN/AFP via Getty Images  

John Lewis is to repay a £300m emergency Covid loan earlier than expected after trading picked up over the key Christmas period.

My colleague Simon Foy reports:

  • Read more: John Lewis repays government loan as trading picks up

07:45 AM

Pound dips after weak economic data

A moderate decline in the strength of the pound picked up pace following this morning's disappointing data. However, sterling remains close to a three-year high against the dollar.

07:39 AM

Food delivery is the big winner

Online retail sales soared by 46.1pc during 2020, with all sectors feeling the benefit of the drive to web ordering.

Nobody benefitted more than online food stores, which saw annual sales value growth of 79.3pc. That's likely to have been heavily driven by supermarkets, which scrambled to expand their delivery offering in the face of the pandemic.

Online orders come with heavy costs, however - with several retailers reporting that the heightened cost of fulfilling web orders has put pressure on their profit margins. So even if the blow to values and volumes of sales have been padded by online operations, the bottom line will be tougher for companies.

07:29 AM

Divided fates for the retail sector

Total annual figures for UK retail sales show the quantity bought fell by 1.9pc, the steepest drop since records began in 1997.

It ends a streak of unbroken growth since 2011, with many Britons cutting down on purchases due to the pandemic.

Although that fall may seem relatively in mild in the face of the pandemic, it's worth looking at a further breakdown to see how uneven Covid-19's impact has been:

The sectors that stick out like a pair of sore thumbs are clothing stores (where sales dropped more than a quarter), and fuel retailers who saw a 22.2pc drop.

The standout was non-store retailers - primarily ecommerce - who reaped the benefits as restrictions forced shoppers online.

07:21 AM

Debt ratio highest since 1962

The latest round of borrowing means public sector net debt rose £333.5bn in the first nine months of the financial year.

That took the total level to £2,131.7bn by the end of December, or around 99.4pc of GDP - the highest level since the financial year ending 1962. It's also the first time the national debt has topped £2 trillion.

07:13 AM

Pandemic deficit at £270.8bn as borrowing boom continues

Another month of huge Government borrowing brings the total deficit for the current financial year to £270.8bn.

That's a huge level, but it remains beneath the latest forecasts by the Office for Budget Responsibility.

The ONS notes borrowing is "£212.7 billion more than in the same period last year and the highest public sector borrowing in any April to December period since records began in 1993."

07:07 AM

Tepid retail growth likely to be followed by January drop

Retail sales are one of the few areas to have experienced a truly 'V-shaped' recovery in the wake of the first lockdowns, with consumer demand booming over the summer.

Difficulties are setting in, however, and December's poor growth figuresshow how devastating things have been for Britain's retailers:

The ONS note a series of record annual declines in sales:

07:01 AM

Christmas retail sales disappoint as borrowing surge continues

  • Retail sales including auto fuel rose 0.3pc month-on-month, missing estimates for 1.3pc growth. November's growth was also revised to an even-worse -4.1pc.

  • Public sector net borrowing excluding banks was £34.1bn, beating estimates for £32bn. November's figures were revised down to £26.1bn.

06:53 AM

What economists expect today

December is the most important month of the year for retailers - and there have been few years with a outlook for the holiday period as grim as 2020's.

Sales as likely to have rebounded early in the month as November's English lockdown lapsed, before falling off a cliff post-Christmas on tighter restrictions.

Economists polled by Bloomberg expect sales including fuel to have risen 1.3pc during the month, reversing a 3.8pc drop during November. That would leave them 4pc higher year-on-year.

Once again, online sales are likely to have been strong as many members of the public avoided heading out to the shops.

Payments data released by the Office for National Statistics yesterday showed card purchases were 4pc higher than pre-lockdown levels last month on average, the first time they have cleared that threshold:

Released simultaneously, the latest data on public sector net borrowing (excluding banks) is expected to show £32bn borrowed over the month, which would top November's £31.6bn - marking the steepest December borrowing ever, and the third-highest of any month.

As of November's figures, the UK's debt-to-GDP stood at 99.5pc - it might clear the symbolic 100pc threshold today, but that is unlikely.

06:39 AM

Agenda: Econ-heavy day for UK

Good morning. We'll get the latest data on UK retail sales during the crucial Christmas period today, as well as data on public borrowing as the Government continues to spend at a huge rate to combat the economic effects of Covid-19.

Later on, we'll get flash PMI readings, which will give an indication of how private sector performance around the world has held up in the face of new restrictions.

5 things to start your day

1) Brexit deal gives Nissan a competitive advantage, boss declares: Chief operating officer Ashwani Gupta said Boris Johnson's deal has prevented major turmoil - and dismissed ports disruption as "peanuts".

2) Next pulls out of Topshop bidding war: The joint venture between Next and US hedge fund David Kempner Capital Management withdrew from the auction on Thursday after it failed to match rival bids.

3) Pandemic forces 6,000 licensed venues to close: Despite almost 4,000 venues opening last year, more than 9,000 shut their doors for the last time as the pandemic wreaked havoc.

4) France demands Britain help bail out Eurostar: French transport minister Jean-Baptiste Djebbari said he is in discussions with his UK counterpart Grant Shapps about a bailout.

5) Furlough bill to soar by £9bn if job support extends to July: The Treasury's furlough bill could surge as high as £75bn by summer, piling an extra £3bn of costs per month onto taxpayers.

What happened overnight

Asian shares slipped off record highs on Friday as investors took profits after a recent rally that was driven by hopes of US economic stimulus by newly inaugurated President Joe Biden.

Sentiment was also hit by worries of new coronavirus restrictions in China which reported 103 COVID-19 cases on Friday.

MSCI's broadest index of Asia Pacific stocks outside of Japan extended losses in afternoon trading to be last off 0.6pc at 720.17 points following three straight sessions of gains.

The index is up a stellar 8.8pc in January so far, after hitting an all-time high of 727.31 on Thursday.

Bitcoin fell heavily on Friday and was heading toward its sharpest weekly drop since last March, as worries over its technology and regulation extended a pullback from recent record highs.

The world's most popular cryptocurrency fell more than 5pc to an almost three-week low of $28,800 in the Asia session, before steadying around $30,000. It has lost 15pc so far this week, the biggest drop since a 33pc fall in March.

Coming up today

Corporate: Ninety One (Interim results); Computacenter, (Trading statements)

Economics: Public sector net borrowing, retail sales, GFK consumer confidence (UK), flash PMIs (UK, eurozone, Japan, France, Germany, US)


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