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UK car sales fall again, but eurozone growth hits six-year high - business live UK service sector growth hits four-month low as political uncertainty bites - business live
(35 minutes later)
10.05am BST
10:05
Service sector slowdown: Snap reaction
Ed Conway of Sky News says this morning’s data paints a worrying picture of the UK economy:
Poor economic tidings today: car sales dropping, services sector weakening, productivity falling. Paints picture of a stuttering economy
Duncan Weldon of Resolution Group points out that Britain’s economy is lagging, just as the eurozone posts its best quarter in six years:
Shorter PMIs: UK economic momentum is slowing, Eurozone accelerating.
Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, says the “uncertain political backdrop” is hurting UK firms:
Many businesses may have delayed investment decisions in the face of an ambiguous political landscape.
“The continued rise in inflation and the general uncertainty is denting consumer confidence which may impact on demand. The question remains as to how much businesses will be looking to invest during the rest of the year to help stimulate demand.
9.56am BST
09:56
Markit: UK's economic resilience is being tested
This week’s disappointing PMI surveys suggest that the UK economy will slow over the summer, warns Chris Williamson of Markit.
Here’s his take on this morning’s data:
“A slowing in services sector growth completes a triple-whammy of disappointing PMI survey readings. Although the three PMI surveys are running at levels that are historically consistent with GDP growing by around 0.4% in the second quarter, it’s clear that the economy heads into the third quarter losing momentum.
“With business optimism having been hit by the intensification of political uncertainty following the general election and commencement of Brexit negotiations, at the same time that households are battling against rising inflation, the indications are that the economy’s resilience is being tested.
“There are pockets of growth, notably in financial services and business services, but the overall picture is one of business spending, investment and exports failing to provide sufficient impetus to fully offset the consumer slowdown.
“Given the deterioration in the forward-looking indicators, such as business optimism and order book growth, the risks are tilted towards the economy slowing in the third quarter.”
9.53am BST
09:53
A hattrick of bad PMIs
The service sector slowdown is the third piece of disappointing UK economic news this week.
A reminder:
Monday: UK manufacturing PMI dropped to 54.3, from 56.3
Tuesday: UK construction PMI dropped to 54.8, from 56.0
Wednesday: UK services PMI drops to 53.4, from 53.8
Now, all those PMI figures are over 50, which indicates that Britain’s private sector kept growing.
But there are some chunky falls, particularly in the factor data, which suggest June wasn’t a great month for the economy -- especially as we know that car sales fell too....
9.44am BST
09:44
Business optimism hit by Brexit blues
Worryingly, today’s report also shows that UK business optimism has fallen to its weakest level since last summer’s EU referendum.
Markit says:
Aside from the post-referendum dip last summer, the level of business optimism was the weakest since December 2011. Survey respondents cited anxiety related to the Brexit negotiations, alongside worries about the general economic outlook and heightened political uncertainty.
9.42am BST
09:42
UK service sector growth hits four-month low
Breaking: Growth in Britain’s service sector has slowed to its lowest in four months, according to data firm Markit.
Service sector companies, who make up around of the 80% of the UK economy, have reported that they experienced subdued business and consumer confidence in June.
Some blamed delayed decision-making due to June’s general election, and the uncertainty over Britain’s exit from the European Union.
This pulled the UK Services PMI down to 53.4, down from 53.8 in May.
That’s still over the 50-point mark that signals if the sector is expanding or contracting.
Many firms reported that new business growth slowed in June; a sign that political uncertainty is hitting the economy.
Markit says:
The slowdown in business activity growth in June was linked to a softer rise in incoming new work across the service economy. Moreover, the latest increase in new work was the weakest for nine months.
Anecdotal evidence cited Brexit-related risk aversion and heightened economic uncertainty as key factors holding back client spending.
More to follow....
Updated
at 9.46am BST
9.32am BST9.32am BST
09:3209:32
Graham Hiscott, business editor of the Mirror, says weakening consumer spending is hitting the car industry:Graham Hiscott, business editor of the Mirror, says weakening consumer spending is hitting the car industry:
New cars sales fell for the third month in a row, with demand for diesels diving 14.7%, says @SMMT. More evidence of consumer slowdown.New cars sales fell for the third month in a row, with demand for diesels diving 14.7%, says @SMMT. More evidence of consumer slowdown.
Howard Archer of the EY Item Club agrees that April’s tax changes are a factor (there’s a good explanation here on Auto Express)Howard Archer of the EY Item Club agrees that April’s tax changes are a factor (there’s a good explanation here on Auto Express)
#SMMT report #UK new #car sales down 4.8% y/y in Jun. Third successive fall after strong Q1 when some sales brought forward by VED changes#SMMT report #UK new #car sales down 4.8% y/y in Jun. Third successive fall after strong Q1 when some sales brought forward by VED changes
9.29am BST9.29am BST
09:2909:29
Car sales to UK individuals, rather than businesses, shrank by nearly 8% in June.Car sales to UK individuals, rather than businesses, shrank by nearly 8% in June.
Sam Tombs of Pantheon Economics predicts further falls in the month ahead.Sam Tombs of Pantheon Economics predicts further falls in the month ahead.
He’s tweeted a graph, showing how consumer confidence can be a leading indicator for the car market (he’s shifted the consumer confidence figures ahead by six months)He’s tweeted a graph, showing how consumer confidence can be a leading indicator for the car market (he’s shifted the consumer confidence figures ahead by six months)
UK private new car sales down 7.8% y/y in June and down 4.8% y/y in H1 overall. The slump in consumer confidence signals further falls ahead pic.twitter.com/wdue5GRXIwUK private new car sales down 7.8% y/y in June and down 4.8% y/y in H1 overall. The slump in consumer confidence signals further falls ahead pic.twitter.com/wdue5GRXIw
9.25am BST9.25am BST
09:2509:25
Diesel car sales fell particularly sharply last month, by almost 15%.Diesel car sales fell particularly sharply last month, by almost 15%.
Chris Giles of the FT says the figures are a concern:Chris Giles of the FT says the figures are a concern:
New car sales beginning to look rather sickly pic.twitter.com/zhY0JaIZMiNew car sales beginning to look rather sickly pic.twitter.com/zhY0JaIZMi
9.18am BST9.18am BST
09:1809:18
UK car sales fall againUK car sales fall again
Breaking: UK car sales have fallen for the third month running.Breaking: UK car sales have fallen for the third month running.
Car registrations declined by 4.8% in June, new figures from the Society of Motor Manufacturers and Traders show. That means that sales so far this year are down by 1.1%, following steeper falls in April and May.Car registrations declined by 4.8% in June, new figures from the Society of Motor Manufacturers and Traders show. That means that sales so far this year are down by 1.1%, following steeper falls in April and May.
The SMMT blames recent tax changes for the fall. It says there was “market turbulence’ as drivers rushed to buy vehicles in March before new vehicle excise duty changes pushed up the cost of running many cars.The SMMT blames recent tax changes for the fall. It says there was “market turbulence’ as drivers rushed to buy vehicles in March before new vehicle excise duty changes pushed up the cost of running many cars.
Mike Hawes, SMMT Chief Executive, says the drop in car sales isn’t a cause for alarm.Mike Hawes, SMMT Chief Executive, says the drop in car sales isn’t a cause for alarm.
“As forecast, demand for new cars has started to cool following five consecutive years of solid growth but the numbers are still strong and the first half of the year is the second biggest on record.“As forecast, demand for new cars has started to cool following five consecutive years of solid growth but the numbers are still strong and the first half of the year is the second biggest on record.
Provided consumer and business confidence holds, we expect demand to remain at a similarly high level over the coming months.Provided consumer and business confidence holds, we expect demand to remain at a similarly high level over the coming months.
But... this decline may be a signal that consumers are being more cautious, or struggling to cope with rising inflation.But... this decline may be a signal that consumers are being more cautious, or struggling to cope with rising inflation.
I’ll pull some more reaction together now.I’ll pull some more reaction together now.
9.08am BST9.08am BST
09:0809:08
You can read the full eurozone PMI report here.You can read the full eurozone PMI report here.
9.06am BST9.06am BST
09:0609:06
Eurozone service sector growth slows, but still strongEurozone service sector growth slows, but still strong
It’s official: The eurozone private sector has posted its best quarter since 2011, despite a slight slowdown in June.It’s official: The eurozone private sector has posted its best quarter since 2011, despite a slight slowdown in June.
That’s according to this morning’s service sector data from Markit, plus manufacturing surveys released on Monday.That’s according to this morning’s service sector data from Markit, plus manufacturing surveys released on Monday.
Markit reports that its service sector PMI dropped to 55.4 last month, down from 56.3 in May.Markit reports that its service sector PMI dropped to 55.4 last month, down from 56.3 in May.
That drags the ‘composite PMI’, covering the whole private sector, down to 56.3 from 56.8.That drags the ‘composite PMI’, covering the whole private sector, down to 56.3 from 56.8.
That’s comfortably over the 50 point mark that separates expansion from contraction. Firms reported that new work kept rolling in, boosting business confidence and leading to strong job creation.That’s comfortably over the 50 point mark that separates expansion from contraction. Firms reported that new work kept rolling in, boosting business confidence and leading to strong job creation.
Chris Williamson of Markit says the figure suggest the eurozone economy grew by an “impressive” 0.7% in the second quarter of this year.Chris Williamson of Markit says the figure suggest the eurozone economy grew by an “impressive” 0.7% in the second quarter of this year.
The dip in the PMI in June certainly doesn’t look like the start of a slowdown. Growth of new orders accelerated very slightly to reach the second- highest in just over six years, and companies are struggling to satisfy this increase in demand.The dip in the PMI in June certainly doesn’t look like the start of a slowdown. Growth of new orders accelerated very slightly to reach the second- highest in just over six years, and companies are struggling to satisfy this increase in demand.
“Operating capacity is being strained despite the region seeing the best spell of employment growth for a decade in recent months.“Operating capacity is being strained despite the region seeing the best spell of employment growth for a decade in recent months.
“Rising demand is also boosting firms’ pricing power, both for goods and services. While price pressures have cooled since earlier in the year, linked mainly to lower global commodity prices, this is still the strongest period of inflationary pressure that the region has seen for six years.“Rising demand is also boosting firms’ pricing power, both for goods and services. While price pressures have cooled since earlier in the year, linked mainly to lower global commodity prices, this is still the strongest period of inflationary pressure that the region has seen for six years.
8.59am BST
08:59
Germany’s service sector growth slowed to a five-month low in June:
#Germany Markit Services PMI Final at 54 https://t.co/67ci1U6XhK pic.twitter.com/lh3NnjLW0J
8.58am BST
08:58
French firms are still basking in the afterglow of Emmanuel Macron’s victory.
France’s services PMI has hit 56.9 for June, only slightly down on May’s 70-month high of 57.2. Firms reported a jump in new business, which meant they hired new staff at the fastest rate since March 2008.
Alex Gill of Markit says the future looks positive for France:
“As was the case in May, employment was a key talking point in June, with the rate of job creation the sharpest in over nine years. Robust client demand and a strong degree of optimism are likely to lead to further jobs growth over the coming months.”
8.53am BST
08:53
Italy is next.... and its service sector growth has also slowed.
The Italian services PMI has dropped to 53.6, down from 55.1 in May. That’s lower than expected, but still firmly in ‘expansion’ territory.
8.50am BST
08:50
After a rollicking couple of years, Ireland’s service sector took a little breather last month.
The Irish Services PMI came in at 57.6 in June, a seven-month low, down from 59.5 in May. But that’s still a pretty impressive figures, with firms reporting that new orders kept rising as client demand picked up.
8.33am BST
08:33
In the City, shares in housebuilder Persimmon have jumped by 3.5% to the top of the FTSE 100 leaderboard after posting strong financial results this morning.
Persimmon completed 8% more houses in the first half of 2017 than a year ago, and grew its revenues by 12%.
The company, which is Britain’s second-largest builder, bullishly told shareholders that business is pretty good:
“We have continued to experience good levels of customer demand… with the market taking the snap UK general election in its stride.
Consumer confidence remains resilient and compelling mortgage rates continue to offer good support to new home buyers.”
8.21am BST
08:21
Spanish service sector growth hits 22-month high
Olé! Spain’s service sector has just posted its fastest growth in almost two years, as its recovery continues to build.
The Spanish Services PMI has jumped to 58.3, up from 57.3 in May - a level showing strong growth. That’s the best reading since August 2015.
Spanish firms reported that growth in new business accelerated, job creation was the fastest in a year, and business optimism was high.
Encouragingly, almost a quarter of the firms surveyed said they’d taken on extra staff in June, partly because they’re optimistic about their future workload.
That could help to pull down Spain’s jobless rate - the second highest in the eurozone, after Greece.
Andrew Harker, Senior Economist at IHS Markit, says the
“The Spanish service sector ended the first half of 2017 with a flourish, with PMI data for June signalling the strongest increases in output and new orders for almost two years and employment growth picking up as well.
Firms also took advantage of strong demand conditions to raise their selling prices and provide a welcome boost to profit margins. Companies see little reason to doubt the sustainability of the upturn at present, reflected in our business confidence data remaining around the highest seen over the past two years.
8.13am BST
08:13
This morning’s UK service sector report will be “critical” for sterling, says Kathleen Brooks of City Index:
A weaker than expected services sector PMI could see GBP/USD lose more momentum, which ironically may be good for the FTSE 100.
This pair fell sharply on Monday after the worse than expected manufacturing PMI report for June, since the services report is more relevant for the UK economy then the pound reaction could be bigger if we get another data miss.
8.09am BST
08:09
Overnight, we’ve seen that China’s service sector slowed as firms were hit by subdued demand.
The China Caixin services purchasing managers’ index (PMI) dropped to 51.6, from May’s 52.8 (a four-month high).
Some businesses reported a drop in new orders, suggesting Beijing efforts to clamp down on cheap credit may be cooling the economy.
Signs of slower growth in #China services activity adds to sluggish manufacturing output. Services #PMI at 51.6. https://t.co/XNMKefyrsP pic.twitter.com/zRHlfnRGrK
8.00am BST
08:00
Reuters has jumped the gun, and is reporting that ‘preliminary data’ shows that UK car sales fell again last month.
They write:
British new car registrations fell by around 5% last month year-on-year and overall sales for the first six months of the year dropped by 1%, according to preliminary data from an industry body.
The Society of Motor Manufacturers and Traders will release the full numbers at 0800 GMT [9am UK time].
UK new car sales drop around five percent in June - preliminary data https://t.co/JeE2Wm6vWM pic.twitter.com/eMPI4lMPSx
Updated
at 8.13am BST
7.34am BST
07:34
The agenda: UK economy in focus
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s service sector makes up around 80% of the economy, from hotels and restaurants to haulage firms, accountants, and IT companies. So investors are nervously waiting to discover how they fared in June, and if last month’s general election had any impact.
Data firm Markit’s monthly service sector PMI, due at 9,30am, is expected to drop to 53.5 from 53.8 in May.
That would show that growth slowed last month, (50 being the cut-off point between expansion and contraction), and reinforce concerns that the economy is suffering from political uncertainty.
RBC Capital Markets say:
As with the earlier manufacturing and construction surveys, we expect to see some pull back in the services PMI this month; to 53.5 from 53.8 previously as the uncertainty caused by the general election result impacts on the predominantly domestically-focused sector.
Even allowing for the weaker readings in the other sectors, an outcome in line with that expectation would still leave our PMI-based indicator pointing to GDP growth of 0.4% q/q though it would also reinforce the signals from those other sectors of the economy losing some momentum at the end of the quarter.
The PMIs are calculated by asking purchasing managers across the country how their business is performing, so it’s a useful snapshot of the situation. Given the size of the service sector, it could shift the pound - which is hovering around $1.291 his morning.
Watching the #UK #PMIservices at 9:30am London time. #GBPUSD pic.twitter.com/hI5c9EFdlp
There’s also a flurry of other service sector reports from around the world today, including several European countries during the next couple of hours.
City investors are also bracing for the latest UK car sales figures, due this morning. Sales fell in April and May (partly due to tax changes) so June’s figure are nervously awaited.
A third fall would fuel fears that consumers are cutting back on big-ticket items (and perhaps show that the Bank of England should hold fire on interest rates).
On the corporate front, online supermarket chain Ocado and housebuilding group Persimmon are reporting results to the City.
The agenda:
9am BST: Eurozone service sector PMI for June
9am BST: UK car sales figures for June
9.30am BST: UK service sector PMI for June
10am BST: Eurozone retail sales for May
3pm BST: US factory orders for May
Updated
at 9.23am BST