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US retail sales rise at fastest pace in a year - business live US retail sales rise at fastest pace in a year - business live
(35 minutes later)
3.22pm BST
15:22
Despite the strong US data today, the Federal Reserve may still decide not to hike rates in Junes, says James Knightley at ING Bank:
[The sentiment data] bodes well for consumer spending in 2Q16, particularly after the stronger than expected April retail sales report. While many at the Fed are keen to tighten monetary policy further we still feel that June is perhaps a little too early given the softness in data seen earlier in the year. We instead continue to favour a 3Q rate hike.
3.10pm BST
15:10
US consumer confidence jumps
Following the better than expected US retail sales figures comes news that consumer confidence is higher than forecast so far this month.
The University of Michigan survey of consumer sentiment rose from 89 in April to 95.8 in a preliminary reading for May. Analysts had expected a rise to 90.
This is the highest reading since June 2015.
The survey compilers said:
Consumer sentiment rebounded in early May due to more frequent income gains, an improved jobs outlook, and the expectation of lower inflation and interest rates. The largest gains were recorded among lower income and younger households, although the gains were recorded among all income and age subgroups as well as across all regions.
Nearly all of the gains were in the Expectations Index, which rose to its highest level in nearly a year. To be sure, the data still indicated the negative impact of uncertainty about future economic policies associated with the Presidential election, but its overall impact was overwhelmed by favourable economic developments. It is too early to judge the potential impact of the election on consumers’ expectations, and one month’s rebound in consumer confidence is insufficient to increase the current forecast for inflation-adjusted consumer expenditures from 2.5% during 2016.
3.03pm BST3.03pm BST
15:0315:03
And the Slovak finance minister has called for a swift agreement, with or without the IMF:And the Slovak finance minister has called for a swift agreement, with or without the IMF:
We would like to see a swift agreement unlocking a needed tranche for #Greece, with or without the #IMF consent if necessary. #eurozoneWe would like to see a swift agreement unlocking a needed tranche for #Greece, with or without the #IMF consent if necessary. #eurozone
3.01pm BST3.01pm BST
15:0115:01
Greece and its creditors are close to agreeing a basic package of measures worth €5.4bn, paving the way for a loan tranche of some €10bn to be released, according to the Athens-Macedonia-News Agency.Greece and its creditors are close to agreeing a basic package of measures worth €5.4bn, paving the way for a loan tranche of some €10bn to be released, according to the Athens-Macedonia-News Agency.
Clues emerge on size next payments to Greece: could be €9bln-€11bln with support to clear growth-sapping arrears. #Eurogroup still to decideClues emerge on size next payments to Greece: could be €9bln-€11bln with support to clear growth-sapping arrears. #Eurogroup still to decide
Three hurdles before Greece can get next bailout payment: pass laws on 1% savings, EU verification, eurozone approval... all by 24 May.Three hurdles before Greece can get next bailout payment: pass laws on 1% savings, EU verification, eurozone approval... all by 24 May.
UpdatedUpdated
at 3.03pm BSTat 3.03pm BST
2.52pm BST2.52pm BST
14:5214:52
Here are the percentage changes in retail sales from the previous month:Here are the percentage changes in retail sales from the previous month:
2.39pm BST2.39pm BST
14:3914:39
More on the US retail sales.More on the US retail sales.
The better than expected figures have eased some concerns about the state of the US economy, says David Morrison, senior market strategist at Spreadco:The better than expected figures have eased some concerns about the state of the US economy, says David Morrison, senior market strategist at Spreadco:
The number comes as a real relief for investors as it rounds off a week which has brought a lot of pain for US retailers. Department store operators Macy’s and Nordstrom posted weak earnings and slashed their forward guidance for the rest of the year. This comes on top of a number of high profile retail bankruptcies including American Apparel, Quicksilver and Aeropostale.The number comes as a real relief for investors as it rounds off a week which has brought a lot of pain for US retailers. Department store operators Macy’s and Nordstrom posted weak earnings and slashed their forward guidance for the rest of the year. This comes on top of a number of high profile retail bankruptcies including American Apparel, Quicksilver and Aeropostale.
All of this goes to demonstrate the US consumer’s unwillingness (or inability) to spend money, particularly on clothes and accessories. This is particularly worrying as consumer spending is widely accepted as accounting for over 70% of all US economic activity. If the recent disappointing news on payrolls and jobless claims proves to be the start of a trend rather than a blip, then there could be worse to come. But today’s retail sales numbers go some way to offsetting these concerns.All of this goes to demonstrate the US consumer’s unwillingness (or inability) to spend money, particularly on clothes and accessories. This is particularly worrying as consumer spending is widely accepted as accounting for over 70% of all US economic activity. If the recent disappointing news on payrolls and jobless claims proves to be the start of a trend rather than a blip, then there could be worse to come. But today’s retail sales numbers go some way to offsetting these concerns.
April department store sales -2.9% y/y. Non-store retailers +8.5% y/y. Structural change, in two numbers.April department store sales -2.9% y/y. Non-store retailers +8.5% y/y. Structural change, in two numbers.
Steve Murphy, US economist at Capital Economics, said:Steve Murphy, US economist at Capital Economics, said:
The retail sales report shows that recent claims of the demise of the US consumer have been greatly exaggerated. Thanks to a massive 0.9% month on month gain in control sales in April and a sizeable rebound in motor vehicle sales, it now appears that second-quarter GDP growth will be close to 3.0% annualised...The retail sales report shows that recent claims of the demise of the US consumer have been greatly exaggerated. Thanks to a massive 0.9% month on month gain in control sales in April and a sizeable rebound in motor vehicle sales, it now appears that second-quarter GDP growth will be close to 3.0% annualised...
At this stage, a June rate hike is a toss-up. The activity data certainly warrants a hike, but separately we are becoming worried that May’s employment figures could be pulled down by a couple of big temporary factors. Given how cautious the Yellen-led Fed has shown itself to be, the decision next month could go either way.At this stage, a June rate hike is a toss-up. The activity data certainly warrants a hike, but separately we are becoming worried that May’s employment figures could be pulled down by a couple of big temporary factors. Given how cautious the Yellen-led Fed has shown itself to be, the decision next month could go either way.
2.34pm BST2.34pm BST
14:3414:34
US markets open slightly downUS markets open slightly down
US markets have opened roughly flat, just a touch into the red:US markets have opened roughly flat, just a touch into the red:
2.20pm BST2.20pm BST
14:2014:20
Most major European markets are up this afternoon, but the FTSE 100 is off slightly.Most major European markets are up this afternoon, but the FTSE 100 is off slightly.
Christine Lagarde’s warning this morning that Brexit would send shockwaves through the UK economy - prompting the stock market and house prices to crash - is not helping sentiment.Christine Lagarde’s warning this morning that Brexit would send shockwaves through the UK economy - prompting the stock market and house prices to crash - is not helping sentiment.
2.10pm BST2.10pm BST
14:1014:10
James Knightley, economist at ING, says that the jump in US retail sales won’t be enough to convince the Federal Reserve it’s time to raise interest rates just yet.James Knightley, economist at ING, says that the jump in US retail sales won’t be enough to convince the Federal Reserve it’s time to raise interest rates just yet.
This report is likely to generate some encouraging headlines suggesting a bounceback in consumer activity, and it certainly is good news.This report is likely to generate some encouraging headlines suggesting a bounceback in consumer activity, and it certainly is good news.
However, the Federal Reserve will want to make sure it isn’t just a one-off. With other activity indicators suggesting that there has been something of a loss of momentum over the past twelve months we still favour just one-rate rise this year, which will most likely come in the third quarter of 2016.However, the Federal Reserve will want to make sure it isn’t just a one-off. With other activity indicators suggesting that there has been something of a loss of momentum over the past twelve months we still favour just one-rate rise this year, which will most likely come in the third quarter of 2016.
We continue to doubt that the Fed will hike in June. This partly reflect the need for a better run of data, but also external risks. One of those is Brexit – should the UK vote to leave the EU on June 23rd this could see both the euro and sterling tumble against the dollar, which will lead to a tightening of financial conditions that may deter the Fed from tightening policy.We continue to doubt that the Fed will hike in June. This partly reflect the need for a better run of data, but also external risks. One of those is Brexit – should the UK vote to leave the EU on June 23rd this could see both the euro and sterling tumble against the dollar, which will lead to a tightening of financial conditions that may deter the Fed from tightening policy.
1.52pm BST1.52pm BST
13:5213:52
The monthly 1.3% jump in April retail sales was the biggest increase in more than a year.The monthly 1.3% jump in April retail sales was the biggest increase in more than a year.
The number for March was also revised up, to show a 0.3% rise and not the 0.4% drop previously estimated.The number for March was also revised up, to show a 0.3% rise and not the 0.4% drop previously estimated.
The increase was broad-based across different kinds of goods, but car sales were particularly strong.The increase was broad-based across different kinds of goods, but car sales were particularly strong.
1.32pm BST
13:32
US retail sales rise more than expected
Breaking: US retail sales jumped 1.3% in April, beating expectations of a 0.8% increase.
Excluding cars, sales were up 0.8%, again beating expectations of a 0.5% increase.
The figures will bring relief to worried investors...
Updated
at 1.32pm BST
12.35pm BST
12:35
US stock index futures are lower as investors await April retail sales data from the world’s largest economy.
Economists are expecting to see a 0.8% rise in US retail sales over the month, and will be closely watching when the figures are published at 13.30 UK time.
Weak earnings from retailers - including department store Macy’s - have put investors on edge, not least because consumer spending accounts for more than two thirds of the US economy.
12.25pm BST
12:25
John McDonnell has had a word to say about the weak UK construction numbers.
Labour’s shadow chancellor said:
It is deeply disappointing that despite George Osborne’s rhetoric on construction the industry shrank by 1.1 per cent in the first quarter of the year.
Output in the construction industry has fallen since Osborne claimed at last year’s Tory party conference that ‘we are the builders’, and comes on the back of ONS figures earlier this week showing UK industrial production in recession. This is further evidence that Osborne’s recovery is one built on sand.
12.09pm BST
12:09
Most international business would like the UK to stay in the EU, according to an Ipsos Mori poll.
Most companies - 78% - from seven countries including Germany and China said Brexit would be negative and lead them to cut investment.
Only 5% felt it would be positive for their business, and the rest said the impact would be neutral or they didn’t know.
The countries involved were France, Canada, Spain, Italy, Sweden, Germany and China.
11.48am BST
11:48
Michael O’Leary, Ryanair’s chief executive, has also been speaking about Brexit and the potential impact.
He says fares would probably drop in the shorter term, comparing the impact in terms of air travel to other crises, including 9/11.
Reuters quotes O’Leary:
After 9/11, after every crisis Ryanair is selling cheaper fares, we keep people flying.
So the fact is we would have a downward effect on our pricing for 6 to 12 months, but we will keep people flying.
O’Leary said that over the longer term, Brexit would prompt Ryanair to move investments out of the UK.
The longer term effect is we will invest less in the UK.
We will certainly switch some of our existing UK investment into other European countries because we want to continue to invest in the European Union and it will bad for air travel and British tourism.
11.03am BST
11:03
Lagarde has also been making the point today that Brexit is not purely a domestic issue.
I know it is a big domestic issue for many of you, but it’s an international issue.
I don’t think that in the last six months, I have visited a country anywhere in the world where I have not been asked: ‘what will be the economic consequences of Brexit.
And in addition to Greece, Ukraine and a few others, what will be the outcome if the UK was to leave the European Union.
You will appreciate the level of anxiety there is around the world as a result of that particular potential decision.
IMF Managing Director @Lagarde says the EU referendum is "not just a domestic issue" https://t.co/J6m2KlD5PZ
10.51am BST
10:51
Chancellor: IMF makes it clear Brexit would cost us money
George Osborne has been speaking following the IMF’s damning report on the potential impact of Brexit.
He said the Fund makes it clear a UK exit from EU would “cost us money”.
That’s less to spend on public services like schools and the NHS.
Chancellor says IMF has "put to rest the fallacy" that leaving EU will make more money available for public services https://t.co/SMpvk9J6iH
Updated
at 11.30am BST
10.36am BST
10:36
Lagarde insists the IMF’s view on Brexit is completely independent.
Christine Lagarde: "We are not into politics. It is our duty to lay out the facts. #IMF #EUref pic.twitter.com/4Ro6cUWQPo
10.34am BST
10:34
IMF boss Christine Lagarde says IMF will complete a more comprehensive report on the impact of Brexit in time for the Fund’s next board meeting on 15 June. This will include more detailed numbers.
“If there are no leaks, the papers should get it on the 16th, 17th”, she says.
IMF's Christine Lagarde at speaking at Treasury says outcomes of Brexit range from "pretty bad to very bad"
Updated
at 10.38am BST
10.22am BST
10:22
Larry Elliott
Different location, same story. On Thursday it was Mark Carney sitting in Threadneedle Street issuing a warning from the Bank of England about the perils of Brexit. Less than 24 hours later it was Christine Lagarde, the managing director of the International Monetary Fund delivering the same message.
The approach being taken by the Government to the referendum appears to be similar to the tactics adopted by the British high command on the Western Front during the Great War: soften up the enemy with a constant and ferocious pounding.
Opinion polls suggest that the pounding is having only a limited effect, with the Brexiteers snug in their positions and largely oblivious to the ordnance being rained down on them.
The Government’s hope is that eventually the war of attrition will pay off, as perhaps it might. Lagarde certainly went for what she sees as a soft spot in the enemy’s defences - the risk that a no vote on June 23 could lead to a crash in house prices.
This is a cunning tactic. While there is scant evidence that the British public is moved by the difference between the Swiss model, the Norwegian model or the WTO model when it comes to Britain’s post-EU trading arrangements, the threat to house prices is a different matter altogether.
(Full comment here.)
Updated
at 11.20am BST