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US growth slows more than expected - business live US growth slows more than expected - as it happened
(35 minutes later)
3.01pm GMT
15:01
That’s it for today. Thank you for reading the blog and for all the comments below the line.
Have a good weekend. AM
2.56pm GMT
14:56
Kay Daniel Neufeld at the Centre for Economics and Business Research, looks back at the US economy under President Obama:
The mixed picture for GDP growth in 2016 has been characteristic of the economic performance of the outgoing Obama administration. Under Obama, the US managed to avoid a second Great Depression and embarked on a somewhat lacklustre recovery starting in 2010. But, although the economy added a fair amount of jobs and the economic situation of many US households has improved considerably after the crisis, some downsides remain.
Notably, the labour force participation rate has failed to pick up in line with what would be expected during the recovery of a sharp recession. Moreover, the US economy - similarly to the situation in the UK – is ailing from slow productivity growth. Most importantly, it seems that much of the increase in wages and job opportunities of the last six years has intensified already existing inequalities in the country.
In terms of Mr Trump’s economic policy programme, it is still unclear whether the administration will go ahead with the announced boost to infrastructure spending and additional tax cuts. If so we expect the Fed to raise interest rates in the second quarter of 2017 at the latest.
2.51pm GMT
14:51
FTSE outperforms European peers
The FTSE 100 is the only major European index making gains this afternoon, albeit small ones (up 8 points). Tesco is still the biggest riser, with shares up 10.5%.
FTSE 100: +0.1% at 7,170
Germany’s DAX: -0.2% at 11,822
France’s CAC: -0.6% at 4,840
Italy’s FTSE MIB: -0.7% at 19,308
Spain’s IBEX: -0.4% at 9,478
Updated
at 2.52pm GMT
2.45pm GMT
14:45
Harm Bandholz, chief US economist at UniCredit Research is fairly positive about the outlook for the American economy.
We think that the economy is on track to expand by 2% to 2.25% in the first half of the year. Under the assumption that the new administration will pass a fiscal stimulus in time without derailing global trade, growth in the second half of 2017 will most likely be faster.
2.38pm GMT
14:38
US markets open higher
US markets have opened (very) slightly higher:
Dow Jones: +0.01% at 20,103
S&P 500: +0.1% at 2,299
Nasdaq: +0.2% at 5,667
2.33pm GMT2.33pm GMT
14:3314:33
Ian Kernohan, economist at fund manager Royal London Asset Management, said the US economy could grow by more than 3% by 2018.Ian Kernohan, economist at fund manager Royal London Asset Management, said the US economy could grow by more than 3% by 2018.
US GDP growth was estimated at 1.9% on an annualised basis in the final quarter of 2016, and just 1.6% for the calendar year. However, this relatively slow expansion was still sufficient to drive employment levels higher and unemployment lower, leading to a pick-up in wage growth.US GDP growth was estimated at 1.9% on an annualised basis in the final quarter of 2016, and just 1.6% for the calendar year. However, this relatively slow expansion was still sufficient to drive employment levels higher and unemployment lower, leading to a pick-up in wage growth.
Going forward, much will depend on the scale and timing of any fiscal stimulus by the new Trump administration, which could push US GDP growth to over 3% by 2018. We do not expect the Federal Reserve to raise interest rates again until May, when they will have greater visibility on the new administration’s plans.Going forward, much will depend on the scale and timing of any fiscal stimulus by the new Trump administration, which could push US GDP growth to over 3% by 2018. We do not expect the Federal Reserve to raise interest rates again until May, when they will have greater visibility on the new administration’s plans.
2.23pm GMT2.23pm GMT
14:2314:23
US growth in 2016 overall was 1.6%, the slowest since 2011 and far weaker than the 2.6% growth achieved in 2015.US growth in 2016 overall was 1.6%, the slowest since 2011 and far weaker than the 2.6% growth achieved in 2015.
It was also a slower rate than the UK, which grew by 2% in 2016 - probably faster than any other G7 economy (we haven’t got all the figures yet).It was also a slower rate than the UK, which grew by 2% in 2016 - probably faster than any other G7 economy (we haven’t got all the figures yet).
Here is our full story on the US figures:Here is our full story on the US figures:
2.15pm GMT2.15pm GMT
14:1514:15
IG traders expect US markets to open higherIG traders expect US markets to open higher
US Opening Calls:#DOW 20126 +0.13%#SPX 2299 +0.09%#NASDAQ 5159 +0.05%#IGOpeningCallUS Opening Calls:#DOW 20126 +0.13%#SPX 2299 +0.09%#NASDAQ 5159 +0.05%#IGOpeningCall
2.06pm GMT2.06pm GMT
14:0614:06
Rob Carnell, chief international economist at ING, says the slowdown in US growth will not deter the Federal Reserve from raising interest rates in March.Rob Carnell, chief international economist at ING, says the slowdown in US growth will not deter the Federal Reserve from raising interest rates in March.
Q4 GDP of 1.9% is not a bad figure, when taken together with the unrevised 3.5% growth in Q3, and suggests that the US economy picked up momentum in the second half of the year.Q4 GDP of 1.9% is not a bad figure, when taken together with the unrevised 3.5% growth in Q3, and suggests that the US economy picked up momentum in the second half of the year.
With few shocks in the data, the main source of interest we think is the business investment figure, which rose by 3.1% (annualised quarter on quarter), following four quarters of declines.With few shocks in the data, the main source of interest we think is the business investment figure, which rose by 3.1% (annualised quarter on quarter), following four quarters of declines.
Fed hawks will take heart from this data. This is another clue that markets are still too cautious with respect to the timing of the next Fed rate hike. We see few reasons why the Fed should wait until June, and look for a March hike.Fed hawks will take heart from this data. This is another clue that markets are still too cautious with respect to the timing of the next Fed rate hike. We see few reasons why the Fed should wait until June, and look for a March hike.
1.48pm GMT1.48pm GMT
13:4813:48
US growth slows more than expectedUS growth slows more than expected
Growth in the world’s largest economy was held back in the fourth quarter by plunging shipments of soybeans, which in turn dragged exports lower.Growth in the world’s largest economy was held back in the fourth quarter by plunging shipments of soybeans, which in turn dragged exports lower.
Household spending was a key driver of the 1.9% headline rate of economic growth, the US department of commerce said.Household spending was a key driver of the 1.9% headline rate of economic growth, the US department of commerce said.
Worth pointing out that the US quarterly growth figures are annual rates...Worth pointing out that the US quarterly growth figures are annual rates...
Alternatively...Alternatively...
"The economy grew at a pace of 1.5 million per cent. Period." pic.twitter.com/2Fe5LafFSH"The economy grew at a pace of 1.5 million per cent. Period." pic.twitter.com/2Fe5LafFSH
UpdatedUpdated
at 1.51pm GMTat 1.51pm GMT
1.31pm GMT1.31pm GMT
13:3113:31
Breaking: Growth in the US slowed more than expected in the fourth quarter of 2016 to 1.9% from 3.5% in the third quarter.Breaking: Growth in the US slowed more than expected in the fourth quarter of 2016 to 1.9% from 3.5% in the third quarter.
Economists predicted growth of 2.2%. More soon.Economists predicted growth of 2.2%. More soon.
UpdatedUpdated
at 1.34pm GMTat 1.34pm GMT
12.51pm GMT12.51pm GMT
12:5112:51
US economy slowed in Q4, figures expected to showUS economy slowed in Q4, figures expected to show
Growth in the world’s largest economy slowed to 2.2% in the final quarter of 2016, from 3.5% in the third, figures out in less than an hour are expected to show.Growth in the world’s largest economy slowed to 2.2% in the final quarter of 2016, from 3.5% in the third, figures out in less than an hour are expected to show.
It will provide investors with a steer on what shape the economy was in as Obama handed Trump the keys to the White House.It will provide investors with a steer on what shape the economy was in as Obama handed Trump the keys to the White House.
UpdatedUpdated
at 12.52pm GMTat 12.52pm GMT
12.32pm GMT
12:32
Helena Smith
Failure to break the impasse of deadlocked bailout talks at Thursday’s Eurogroup meeting saw the Athens Stock Exchange shed 2.9% today with bank shares plummeting by more than 5%.
The next tranche of emergency funding from Greece’s third €86bn bailout hinges on the conclusion of a review by creditors of Greek progress on reforms.
If the funds are not released, a re-run of the Greek debt crisis looms. Athens has to meet around €10.5bn in debt repayments as of July – money it currently does not have.
Prime minister Alexis Tsipras’ leftist-led government has been keen to wrap up the review so that Greece can join the European Central Bank’s quantitative easing programme – viewed as essential if Greece is to regain access to international capital markets. But to do this Tsipras will have to agree to imposing more austerity once the current aid programme expires in mid 2018.
As eurozone finance ministers met, the International Monetary Fund reiterated its belief that Greek debt is unsustainable, predicting it would become “explosive” after 2030.
In Greece, fears of euro expulsion and fresh elections are growing. Either Tsipras bows to demands at a time when his government’s popularity has nosedived, or he calls early polls ushering in a period of renewed uncertainty for the EU’s weakest member state.
12.22pm GMT
12:22
Greek shares are down today after lack of progress between Greece and its fellow eurozone members at Thursday’s Eurogroup meeting.
Eurogroup President Jeroen Dijsselbloem called on Greece to move faster on reforms so that its creditors’ could return to Athens as soon as possible and resume negotiations about the next tranche of funding.
The Athens stock exchange is down 2.9%, with banking stocks the biggest fallers:
At presser #eurogroup @J_Dijsselbloem: quick finalisation of second review is in everybody's interest #greece
Dijsselbloem: We have encouraged #Greece & institutions to accelerate their work with a view to allow a return of the mission to Athens asap
11.59am GMT
11:59
Sticking with currencies, the European Central Bank has revealed that it withdrew about €17,000 worth of fake €500 bank notes from circulation in the second half of 2016.
The latest figures from the ECB show that almost 4.9% of the €353,000 withdrawn were €500 notes.
The ECB said:
Some 353,000 counterfeit euro banknotes were withdrawn from circulation in the second half of 2016, a slight increase compared with the first half of 2016 and 20.7% fewer than in the second half of 2015.
The number of counterfeits remains very low in comparison with the increasing number of genuine banknotes in circulation (over 19 billion during the second half of 2016).
The vast majority of counterfeits were €20 and €50 notes, accounting for 80%.
The ECB has already announced that it will scrap the €500 note over fears that the high denomination notes are used to finance crime.
11.29am GMT
11:29
The pound has slipped from a five-week high this morning but is still on track for a weekly gain.
Investors have been encouraged by better-than-expected growth figures which showed the economy grew by 0.6% in the final quarter of 2016.
The pound is currently down 0.4% against the dollar at $1.2539.
11.07am GMT
11:07
Personal insolvencies jump in 2016
The number of individuals to be declared financially bust in 2013 rose 13% in 2016 to 90,930 (from 80,404).
The figures from the government’s Insolvency Service cover England and Wales.
It was the first rise in six years. “It is very distressing to live with unsustainable personal debt so it is important for people to seek advice”, said Sarah Albon, chief executive of the service.
National Debtline which provides free advice online and over the phone, said the figures point to tougher times ahead for families.
Joanna Elson, chief executive of the Money Advice Trust which runs National Debtline, said:
While the government is rightly focused on those who are ‘just about managing’, these figures are a reminder that a smaller but growing number of households are not managing at all.
The rise in insolvencies in 2016 points to tougher times ahead for UK households. At National Debtline we are already seeing our busiest January in years, with calls up 17% on last January and a rise of 55% in the number people seeking advice online.
With household debt levels growing significantly and inflation now beginning to rise, we expect demand for debt advice to continue to be significantly higher this year than last.
10.52am GMT
10:52
Not much sympathy for BT from blog readers commenting below the line... but shares are not suffering too much this morning, off 0.5%.
That said, they did fall off a cliff on Tuesday, down 21% wiping almost £8bn off the value of the company after the extent of the problems in Italy were laid bare. The share price graph tells the story:
10.35am GMT
10:35
Over in France, households don’t appear to be concerned about uncertainty surrounding elections, Brexit, the future of the eurozone, or anything else.
Consumer confidence hit the a nine-year high in January according to the official statistics agency, Insee.
The headline index hit 100 for the first time since November 2007.
Julien Manceaux, ING senior economist covering France, says the upturn in sentiment and other positive indicators would be encouraging for the next French president.
It is the first time since 2007 that French consumers have been that positive about the future. Consumer confidence has been improving since mid-2014, but it took until recently to see all components improving.
In January, consumers were particularly optimistic on the future of unemployment and on their purchase intentions, although their current capacity to save remains limited.
All in all, if this is another significant improvement (business confidence rebounded as well and industrial production was remarkably strong in the fourth quarter of 2016), there is still some way to go before to label it a full-speed recovery.
However, these more positive signs have been awaited for a long time. If they are too late to save President Hollande’s legacy, they are a strong starting point for the next French president.
10.03am GMT
10:03
Here is our full story on the latest from BT, including a 37% slump in third-quarter profits.
9.58am GMT
09:58
Investors are clearly happy about Tesco’s £3.7bn deal with Booker. Tesco shares are now up almost 10%. Booker shares are up 16%.
Laith Khalaf, senior analyst at Hargreaves Lansdown, says Tesco is taking “a bold new direction”.
The deal with Booker shows Tesco is not going to sit on its hands and wait for its dominant market position to slowly leak away to competitors.
The UK’s supermarkets are engaged in new strategies to cope with the brave new world, where the discounters have stolen market share and consumers have turned away from big superstores, preferring instead to do their shopping in convenience stores or on their mobile phones. Sainsbury bought Argos, Morrisons is flirting with Amazon, and now Tesco has revealed its plans to drive further growth.
Nick Bubb, independent retail analyst, says the deal is likely to come under scrutiny from the competition regulator:
Our instant reaction is that the Competition and Markets Authority will have a field day with this, as although Tesco is mainly a retailer in the UK and Booker a wholesaler, Tesco does own the One Stop convenience store chain that competes with Booker’s interest in symbol groups and convenience store retailing (via Premier and Londis etc), so it is by no means clear that the CMA will allow things to proceed very far without having a good look at the overlap.
9.46am GMT
09:46
The mystery behind Richard Cousins’ departure from Tesco has been solved...
Cousins, the chief executive of catering group Compass, quit as senior independent director of Tesco on 3 January just days before the supermarket chain revealed its Christmas trading figures.
Dave Lewis, Tesco chief executive confirmed today that Cousins resigned because he didn’t agree with the Booker deal.
Lewis described the discussions as “good governance” and said he respected Cousins’ decision. The rest of the board was behind the deal, he added.