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US inflation falls and retail sales disappoint, as Britain's real wage squeeze worsens - business live US inflation falls and retail sales disappoint, as Britain's real wage squeeze worsens - business live
(35 minutes later)
2.42pm BST
14:42
Dow hits new high as Wall Street opens
With the uncertainty over the Federal Reserve’s view on further interest rate rises in the wake of the day’s weak data, Wall Street has made a mixed start.
The Dow Jones Industrial Average hit a new peak of 21,354 initially, before falling back to 21,334, a gain of around 6 points. The S&P 500 edged up 0.12% at the open, while the Nasdaq Composite was unchanged.
2.36pm BST
14:36
Jasper Lawler, senior market analyst at London Capital Group, also believes the weak US data casts doubts on further Federal Reserve rate hikes after today:
A double dose of soft economic data sent the US dollar plunging and gold rallying before the Federal Reserve rate decision. Slowing inflation and flat retail sales add to the growing sense that today’s meeting could see the last US rate rise this year.
We would be in a state of shock if the Federal Reserve didn’t lift interest rates at its meeting later today.... Movement in the dollar will depend on what kind of signal policymakers give about the next hike, possibly in September. The US economy has not been firing on all cylinders but the Fed risks losing credibility if it backed off from a rate hike when it’s been so heavily intonated. A ‘dovish hike’ seems most appropriate, which may not be enough to generate enthusiasm for the dollar.
Updated
at 2.39pm BST
2.17pm BST
14:17
Pound above $1.28 for first time since election
With the expectations for further US rate rises after today dimming, the dollar is continuing to weaken.
This is to the benefit of the pound, which has climbed above $1.28 for the first time since the UK election. It was a brief moment, but sterling is still up 0.36% at $1.2795.
2.11pm BST2.11pm BST
14:1114:11
The weaker than expected US inflation and retail sales figures could mean the Federal Reserve being more cautious about further interest rate rises this year, says James Knightley of ING Bank:The weaker than expected US inflation and retail sales figures could mean the Federal Reserve being more cautious about further interest rate rises this year, says James Knightley of ING Bank:
This [data] creates more of a headache for the Federal Reserve in how it communicates its hiking strategy. They keep talking about slower growth and weaker inflation being transitory (the word was used on nine separate occasions in the minutes to the May FOMC meeting), but the longer we go without seeing growth and inflationary pressures is resulting in the markets becoming less convinced about higher interest rates.This [data] creates more of a headache for the Federal Reserve in how it communicates its hiking strategy. They keep talking about slower growth and weaker inflation being transitory (the word was used on nine separate occasions in the minutes to the May FOMC meeting), but the longer we go without seeing growth and inflationary pressures is resulting in the markets becoming less convinced about higher interest rates.
With little sign of tax reform and fiscal stimulus coming the Fed will likely sound more cautious on the prospect of an additional hike later this year even though their forecasts will almost certainly include it when released later on today.With little sign of tax reform and fiscal stimulus coming the Fed will likely sound more cautious on the prospect of an additional hike later this year even though their forecasts will almost certainly include it when released later on today.
1.57pm BST1.57pm BST
13:5713:57
US data gloom: What the experts sayUS data gloom: What the experts say
The dollar has just hit a one week-low against a basket of currencies, as the markets give their verdict to that double-dose of US data.The dollar has just hit a one week-low against a basket of currencies, as the markets give their verdict to that double-dose of US data.
Jamie McGeever of Reuters says today’s inflation figures were much weaker than expected:Jamie McGeever of Reuters says today’s inflation figures were much weaker than expected:
US core CPI falls to 1.7% in May, the lowest in 2 years and below every one of 48 economists' forecasts in a Reuters poll.US core CPI falls to 1.7% in May, the lowest in 2 years and below every one of 48 economists' forecasts in a Reuters poll.
Matt Boesler of Bloomberg has spotted that the markets are repricing their interest rate hike expectations:Matt Boesler of Bloomberg has spotted that the markets are repricing their interest rate hike expectations:
Market odds on a Fed rate hike in September following that CPI release are below 20% for the first time since the eve of the U.S. electionMarket odds on a Fed rate hike in September following that CPI release are below 20% for the first time since the eve of the U.S. election
Colin Cieszynski of CMC Markets wonders if the Fed might even leave interest rates on hold today, rather than delivering the hike that has been priced in by the markets:Colin Cieszynski of CMC Markets wonders if the Fed might even leave interest rates on hold today, rather than delivering the hike that has been priced in by the markets:
#USD selling off as soft #CPI inflation and poor #retailsales spark spec #Fed could pause or deliver a dovish hike today. #FOMC #forex pic.twitter.com/zNq3dALTX8#USD selling off as soft #CPI inflation and poor #retailsales spark spec #Fed could pause or deliver a dovish hike today. #FOMC #forex pic.twitter.com/zNq3dALTX8
Chris Vecchio of Daily FX suggests the US dollar will have a volatile dayChris Vecchio of Daily FX suggests the US dollar will have a volatile day
Between CPI & Retail Sales, and the FOMC meeting, today could be a rough day for the US Dollar $DXY https://t.co/wZMhyCKdCWBetween CPI & Retail Sales, and the FOMC meeting, today could be a rough day for the US Dollar $DXY https://t.co/wZMhyCKdCW
1.44pm BST1.44pm BST
13:4413:44
...and US retail sales disappoint too!...and US retail sales disappoint too!
Another newsflash! US retail sales have suffered their biggest decline in 16 months.Another newsflash! US retail sales have suffered their biggest decline in 16 months.
Retail sales declined by 0.3% in May, new figures from the Commerce Department show. That’s the biggest drop since January 2016, and dashes expectations of a 0.1% rise.Retail sales declined by 0.3% in May, new figures from the Commerce Department show. That’s the biggest drop since January 2016, and dashes expectations of a 0.1% rise.
It’s another signal that the US recovery might not be as strong as hoped, and means the dollar is getting quite a hoofing.It’s another signal that the US recovery might not be as strong as hoped, and means the dollar is getting quite a hoofing.
Dollar drops after CPI and retail sales miss ahead of Fed decision https://t.co/qVADYLT5r8 pic.twitter.com/UfV0dFC2qpDollar drops after CPI and retail sales miss ahead of Fed decision https://t.co/qVADYLT5r8 pic.twitter.com/UfV0dFC2qp
1.38pm BST1.38pm BST
13:3813:38
US inflation falls unexpectedly.....US inflation falls unexpectedly.....
Newsflash: America’s inflation rate has fallen!, surprising the markets and sending the dollar sliding.Newsflash: America’s inflation rate has fallen!, surprising the markets and sending the dollar sliding.
Consumer prices across the US dropped by 0.1% during May, having risen by 0.2% in April.Consumer prices across the US dropped by 0.1% during May, having risen by 0.2% in April.
And that dragged the annual inflation rate down to 1.9%, down from 2.2% a month ago.And that dragged the annual inflation rate down to 1.9%, down from 2.2% a month ago.
US 'Consumer Pice Index' falls short of expectations in May; core rate also soft . . . #USD #CPI #FED pic.twitter.com/8irQ5fnPpXUS 'Consumer Pice Index' falls short of expectations in May; core rate also soft . . . #USD #CPI #FED pic.twitter.com/8irQ5fnPpX
Core inflation, which strips out the prices of volatile elements like gasoline and food, only rose by 1.7% - the weakest rise since May 2015.Core inflation, which strips out the prices of volatile elements like gasoline and food, only rose by 1.7% - the weakest rise since May 2015.
This gives America’s central bankers something to think about, as they gather for today’s meeting.This gives America’s central bankers something to think about, as they gather for today’s meeting.
It probably won’t stop the Federal Reserve raising interest rates in under six hours time, but it might make them more cautious about the next rise....It probably won’t stop the Federal Reserve raising interest rates in under six hours time, but it might make them more cautious about the next rise....
Dollar sinks after US CPI miss pic.twitter.com/alJZ2vvjvrDollar sinks after US CPI miss pic.twitter.com/alJZ2vvjvr
UpdatedUpdated
at 1.40pm BSTat 1.40pm BST
1.17pm BST1.17pm BST
13:1713:17
Our economics editor, Larry Elliott, says Britain’s wage squeeze since the financial crisis struck is “staggeringly” bad.Our economics editor, Larry Elliott, says Britain’s wage squeeze since the financial crisis struck is “staggeringly” bad.
He writes:He writes:
Cast your mind back to March 2008. The financial markets have been in turmoil since the previous summer and in the previous month the Labour government has been forced to nationalise the troubled bank Northern Rock. Few realised it at the time but the economy had peaked. A deep and brutal recession was about to begin. In that month, the average basic weekly wage, excluding bonuses, was £473.Cast your mind back to March 2008. The financial markets have been in turmoil since the previous summer and in the previous month the Labour government has been forced to nationalise the troubled bank Northern Rock. Few realised it at the time but the economy had peaked. A deep and brutal recession was about to begin. In that month, the average basic weekly wage, excluding bonuses, was £473.
The recession officially came to an end by late 2009 and after a couple of years of weak and patchy growth, the worst seemed to be over. Activity picked up, unemployment started to come down. Yet more than nine years after the slump of 2008 began, wages – the yardstick by which most people judge whether the economy is doing well or not – have not recovered. In fact, according to the Office for National Statistics, they have gone backwards. The average basic weekly wage, adjusted for movements in prices, now stands at £458.The recession officially came to an end by late 2009 and after a couple of years of weak and patchy growth, the worst seemed to be over. Activity picked up, unemployment started to come down. Yet more than nine years after the slump of 2008 began, wages – the yardstick by which most people judge whether the economy is doing well or not – have not recovered. In fact, according to the Office for National Statistics, they have gone backwards. The average basic weekly wage, adjusted for movements in prices, now stands at £458.
More here:More here:
12.12pm BST12.12pm BST
12:1212:12
Eurozone industrial production risesEurozone industrial production rises
Over in Europe and eurozone industrial production rose by 0.5% month on month in April, with March’s figure revised up from a 0.1% fall to a 0.2% increase. Edoardo Campanella, economist at UniCredit Research, said:Over in Europe and eurozone industrial production rose by 0.5% month on month in April, with March’s figure revised up from a 0.1% fall to a 0.2% increase. Edoardo Campanella, economist at UniCredit Research, said:
The eurozone enters the second quarter on a good footing. Industrial production accelerated in April, expanding by 0.5% month on month from 0.2% in the previous month. The industrial production increase was broad-based across its main components (with durable capital goods being the only exception), but not across the largest economies. Germany led the way, while France and Italy recorded slight declines. However, part of the weakness is due to some technical factors related to both the Easter break and a bridge-day effect in Italy that weighed on the number of working days and, thus, on factory activity. This might explain why today’s figure, albeit good, seems disappointing when compared to the exceptionally strong manufacturing PMI reading that in April hit a six-year high.The eurozone enters the second quarter on a good footing. Industrial production accelerated in April, expanding by 0.5% month on month from 0.2% in the previous month. The industrial production increase was broad-based across its main components (with durable capital goods being the only exception), but not across the largest economies. Germany led the way, while France and Italy recorded slight declines. However, part of the weakness is due to some technical factors related to both the Easter break and a bridge-day effect in Italy that weighed on the number of working days and, thus, on factory activity. This might explain why today’s figure, albeit good, seems disappointing when compared to the exceptionally strong manufacturing PMI reading that in April hit a six-year high.
Since the most recent surveys continue to point to a rather solid growth in manufacturing activity in the eurozone, it is fair to expect that May’s hard data from the industrial sector will finally reflect this acceleration in output activity.Since the most recent surveys continue to point to a rather solid growth in manufacturing activity in the eurozone, it is fair to expect that May’s hard data from the industrial sector will finally reflect this acceleration in output activity.
ING Bank economist Bert Colijn pointed out that much of the growth was due to improvements in energy production, which had underperformed in the first quarter due to a mild winter:ING Bank economist Bert Colijn pointed out that much of the growth was due to improvements in energy production, which had underperformed in the first quarter due to a mild winter:
Growth in production of goods dropped in April though and capital goods production even declined. While the monthly data for production is volatile, this does show that industry continues to struggle on its way up.Growth in production of goods dropped in April though and capital goods production even declined. While the monthly data for production is volatile, this does show that industry continues to struggle on its way up.
The outlook for industry does remain bright though as businesses have been indicating that backlogs of work are increasing as new orders are coming in at a faster pace. This will likely translate into accelerating growth over the course of Q2. Still, while backlogs of work have been increasing, this does not mean that Eurozone industry is overheating. Capacity utilisation has been improving over 2016 and is getting closer to peaks seen in previous expansions, but businesses are also still indicating that a lack of demand is limiting production far more than a lack of labour, funding or equipment.The outlook for industry does remain bright though as businesses have been indicating that backlogs of work are increasing as new orders are coming in at a faster pace. This will likely translate into accelerating growth over the course of Q2. Still, while backlogs of work have been increasing, this does not mean that Eurozone industry is overheating. Capacity utilisation has been improving over 2016 and is getting closer to peaks seen in previous expansions, but businesses are also still indicating that a lack of demand is limiting production far more than a lack of labour, funding or equipment.
Meanwhile eurozone employment grew by 0.4% quarter on quarter and 1.5% year on year in the first quarter. In all, statistics office Eurostat said 154.8m people were employed in the eurozone in the first quarter, the highest number on record.Meanwhile eurozone employment grew by 0.4% quarter on quarter and 1.5% year on year in the first quarter. In all, statistics office Eurostat said 154.8m people were employed in the eurozone in the first quarter, the highest number on record.
UpdatedUpdated
at 12.41pm BSTat 12.41pm BST
12.02pm BST12.02pm BST
12:0212:02
Here are the Liberal Democrats on the fall in real wages. The party’s leader Tim Farron joined the calls for an end to the freeze on public sector pay rises:Here are the Liberal Democrats on the fall in real wages. The party’s leader Tim Farron joined the calls for an end to the freeze on public sector pay rises:
For a government that used to bang on about the Just About Managing, they are doing diddly squat to help them. This represents the biggest fall in real wages since August 2014.For a government that used to bang on about the Just About Managing, they are doing diddly squat to help them. This represents the biggest fall in real wages since August 2014.
Staff are working more hours, for less pay and with higher levels of stress. More people are living pay cheque to pay cheque and having to struggle at the end of every month to get by.Staff are working more hours, for less pay and with higher levels of stress. More people are living pay cheque to pay cheque and having to struggle at the end of every month to get by.
Britain needs a pay rise and it is time the government delivered it, especially for the public sector.Britain needs a pay rise and it is time the government delivered it, especially for the public sector.
Our nurses, care workers, teachers and soldiers have bared the brunt of the economic crisis and seen their pay capped and wages squeezed. Enough is enough. We need to raise the wages of our public sector workers.Our nurses, care workers, teachers and soldiers have bared the brunt of the economic crisis and seen their pay capped and wages squeezed. Enough is enough. We need to raise the wages of our public sector workers.
11.56am BST11.56am BST
11:5611:56
If you’re just tuning in, here’s our news story on today’s unemployment report:If you’re just tuning in, here’s our news story on today’s unemployment report:
11.56am BST11.56am BST
11:5611:56
The pound has now dropped into the red, as the City shows its disappointment with Britain’s poor wage growth.The pound has now dropped into the red, as the City shows its disappointment with Britain’s poor wage growth.
Sterling is now down 0.2% today at $1.2725.Sterling is now down 0.2% today at $1.2725.
11.31am BST11.31am BST
11:3111:31
Joseph Rowntree: Families are in a precarious positionJoseph Rowntree: Families are in a precarious position
The wage squeeze is a “headache” for Britain’s government (on top of everything else) says the Joseph Rowntree Foundation.The wage squeeze is a “headache” for Britain’s government (on top of everything else) says the Joseph Rowntree Foundation.
Helen Barnard, JRF’s head of analysis, says the labour market has now reached a tipping point which can’t simply be ignored by Westminster.Helen Barnard, JRF’s head of analysis, says the labour market has now reached a tipping point which can’t simply be ignored by Westminster.
“It’s encouraging to see that employment levels continue to rise and unemployment has fallen again. But the troubling news for the government is the continued squeeze on wages for those are in work. This is the first time that there has been a year-on-year decrease in real total pay since 2014.“It’s encouraging to see that employment levels continue to rise and unemployment has fallen again. But the troubling news for the government is the continued squeeze on wages for those are in work. This is the first time that there has been a year-on-year decrease in real total pay since 2014.
“We have reached a tipping point where rising costs are outstripping earnings, leaving millions of just managing families in a precarious position. The election campaign paid precious little attention to the squeezed living standards of low income households and their prospects of finding secure, well-paid work.“We have reached a tipping point where rising costs are outstripping earnings, leaving millions of just managing families in a precarious position. The election campaign paid precious little attention to the squeezed living standards of low income households and their prospects of finding secure, well-paid work.
“It means the new government must act to ease the strain by lifting the damaging freeze on tax credits, and prioritising plans to drive up pay and productivity across the country.”“It means the new government must act to ease the strain by lifting the damaging freeze on tax credits, and prioritising plans to drive up pay and productivity across the country.”
11.30am BST11.30am BST
11:3011:30
UNISON, the union, says today’s report shows how much stress the public sector is facing, as it also calls for the 1% pay cap to be ditched.UNISON, the union, says today’s report shows how much stress the public sector is facing, as it also calls for the 1% pay cap to be ditched.
General secretary Dave Prentis warns:General secretary Dave Prentis warns:
“Demand for public services continues to rise, but these figures confirm that the workforce is still being cut.“Demand for public services continues to rise, but these figures confirm that the workforce is still being cut.
“Services are being starved of funds and staff shortages mean nurses, paramedics, teaching assistants and council employees are having to work even harder, but for less money.“Services are being starved of funds and staff shortages mean nurses, paramedics, teaching assistants and council employees are having to work even harder, but for less money.
“Public sector workers have not had a proper pay rise since 2011. It is no wonder they feel so undervalued. The public sector pay cap must go.”“Public sector workers have not had a proper pay rise since 2011. It is no wonder they feel so undervalued. The public sector pay cap must go.”
11.06am BST11.06am BST
11:0611:06
Unemployment: The political reactionUnemployment: The political reaction
The governent’s Secretary of State for Work & Pensions, David Gauke, is encouraged that employment remains at record levels.The governent’s Secretary of State for Work & Pensions, David Gauke, is encouraged that employment remains at record levels.
He says:He says:
“This government wants to give everyone the opportunity to succeed, regardless of where they live or their background.“This government wants to give everyone the opportunity to succeed, regardless of where they live or their background.
“This is yet another strong set of record-breaking figures with employment up and unemployment down, fuelled by full-time opportunities.“This is yet another strong set of record-breaking figures with employment up and unemployment down, fuelled by full-time opportunities.
“This is good news for families as we continue to build a stronger, fairer Britain.”“This is good news for families as we continue to build a stronger, fairer Britain.”
But opposition parties are alarmed by the fall in real wages.But opposition parties are alarmed by the fall in real wages.
Debbie Abrahams MP, Labour’s Shadow Work and Pensions Secretary, says:Debbie Abrahams MP, Labour’s Shadow Work and Pensions Secretary, says:
“We welcome the overall increase in employment, but are deeply concerned that millions remain in low paid, insecure work.“We welcome the overall increase in employment, but are deeply concerned that millions remain in low paid, insecure work.
“The Government has also failed to close the employment gap faced by women, disabled people and BAME groups, who have too often borne the brunt of austerity cuts.“The Government has also failed to close the employment gap faced by women, disabled people and BAME groups, who have too often borne the brunt of austerity cuts.
“With the cost of basic essentials rising by 2.9 per cent, while wages stagnate, too many of Britain’s families are struggling to get by while Theresa May focuses on holding her unstable coalition of chaos together.“With the cost of basic essentials rising by 2.9 per cent, while wages stagnate, too many of Britain’s families are struggling to get by while Theresa May focuses on holding her unstable coalition of chaos together.
“Only a Labour government will ensure working people’s living standards are protected with a real Living Wage of £10 per hour, and an immediate end to austerity spending cuts.“Only a Labour government will ensure working people’s living standards are protected with a real Living Wage of £10 per hour, and an immediate end to austerity spending cuts.
“The Prime Minister must stand aside and let a Labour government build an economy that works for the many, not the few.”“The Prime Minister must stand aside and let a Labour government build an economy that works for the many, not the few.”
10.54am BST10.54am BST
10:5410:54
PWC: Public sector pay cap will come into doubtPWC: Public sector pay cap will come into doubt
John Hawksworth, chief economist at PwC, suggests the government may have to bow to pressure and end its 1% cap on public sector pay rises, as the TUC and others demand.John Hawksworth, chief economist at PwC, suggests the government may have to bow to pressure and end its 1% cap on public sector pay rises, as the TUC and others demand.
With inflation likely to be heading above 3% later this year, the squeeze on real pay growth is now getting serious and is likely to dampen real consumer spending growth for some time to come. The cost of Brexit to people’s living standards due to the fall in the pound is becoming ever more apparent.With inflation likely to be heading above 3% later this year, the squeeze on real pay growth is now getting serious and is likely to dampen real consumer spending growth for some time to come. The cost of Brexit to people’s living standards due to the fall in the pound is becoming ever more apparent.
“The squeeze is even more severe in the public sector, where pay is only rising at around 1%. The sustainability of this pay policy for nurses, doctors, teachers and other key public service workers will come increasingly into doubt as inflation rises to 3% and above later this year.”“The squeeze is even more severe in the public sector, where pay is only rising at around 1%. The sustainability of this pay policy for nurses, doctors, teachers and other key public service workers will come increasingly into doubt as inflation rises to 3% and above later this year.”
Today’s report also shows how the public sector has shrunk since the financial crisis.Today’s report also shows how the public sector has shrunk since the financial crisis.
Just 17.0% of all people in work were employed in the public sector, which is the lowest proportion since comparable records began in 1999.Just 17.0% of all people in work were employed in the public sector, which is the lowest proportion since comparable records began in 1999.
There are now 5.42 million people employed in the public sector, down 20,000 in the last year, and the lowest since June 1999.There are now 5.42 million people employed in the public sector, down 20,000 in the last year, and the lowest since June 1999.