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| UK factory growth hits seven-month low, but eurozone powers on - business live | UK factory growth hits seven-month low, but eurozone powers on - business live |
| (35 minutes later) | |
| It’s turning into another rough day for Britain’s outsourcers. | |
| Capita’s shares are now down almost 15%, having shed almost half their value yesterday after the firm announced a profit warning. This takes its value down to almost £1bn -- not far from the £700m it is hoping to raise in a rights issue. | |
| Mitie, another outsourcing firm, are down almost 8% while Serco have lost 5%. | |
| DING DING goes the opening bell of the New York stock exchange, setting off a little burst of selling on Wall Street. | |
| The Dow Jones industrial average has dropped by 115 points, 0r 0.44%, to 26,034 points. The broader S&P 500 is down 0.2%. | |
| After a strong January, markets seem to have entered February in a more nervous mooed. | |
| Neil Wilson of ETC Capital reckons that rising government bond yields are causing nervousness in the equity markets. The prospect of US interest rate rises are another factor, he adds: | |
| The Fed’s marginally hawkish tilt is undoubtedly a factor. They’ve given markets the greenlight for a March hike, raising prospects for 4 hikes this year, and are sounding more upbeat on inflation. | |
| European stock markets are mostly in the red today, despite the strong performance by eurozone factories last month. | European stock markets are mostly in the red today, despite the strong performance by eurozone factories last month. |
| Germany’s DAX has shed 1%, and there are smaller losses in France and London too: | Germany’s DAX has shed 1%, and there are smaller losses in France and London too: |
| Wall Street is expected to open lower too. Yesterday it rallied, after two days of losses. | Wall Street is expected to open lower too. Yesterday it rallied, after two days of losses. |
| Newsflash from America: US productivity shrank by 0.1% in the last quarter. | Newsflash from America: US productivity shrank by 0.1% in the last quarter. |
| That’s the first drop in hourly output per worker since early 2016, and may undermine hopes that America’s growth rate can be pushed higher. | That’s the first drop in hourly output per worker since early 2016, and may undermine hopes that America’s growth rate can be pushed higher. |
| Economists had expected productivity to rise, by 1%. | Economists had expected productivity to rise, by 1%. |
| US #productivity growth turns negative again! pic.twitter.com/BrU9Py6AYq | US #productivity growth turns negative again! pic.twitter.com/BrU9Py6AYq |
| Andy Bruce of Reuters points out that the rise in factory goods prices will probably push UK inflation higher: | Andy Bruce of Reuters points out that the rise in factory goods prices will probably push UK inflation higher: |
| BoE won't like sharp pickup in UK consumer goods manufacturers' selling price index from latest IHS Markit/CIPS #PMILinks well with official "all goods" series (ie. 52.5% of CPI basket, 42% of CPIH) pic.twitter.com/BFqd1MtQkT | BoE won't like sharp pickup in UK consumer goods manufacturers' selling price index from latest IHS Markit/CIPS #PMILinks well with official "all goods" series (ie. 52.5% of CPI basket, 42% of CPIH) pic.twitter.com/BFqd1MtQkT |
| There are ructions in the UK jobs market today. | There are ructions in the UK jobs market today. |
| Morrisons is axing 1,500 roles as it cuts middle-management roles across its supermarkets. It is also creating 1,700 junior positions, in an attempt to improve customer service. | Morrisons is axing 1,500 roles as it cuts middle-management roles across its supermarkets. It is also creating 1,700 junior positions, in an attempt to improve customer service. |
| It’s a bad morning for fans of burger chain Byron too. It is closing 20 stores, or nearly a third of its estate, as part of a rescue deal with creditors. | It’s a bad morning for fans of burger chain Byron too. It is closing 20 stores, or nearly a third of its estate, as part of a rescue deal with creditors. |
| And here’s our latest Capita story, by Rob Davies: | And here’s our latest Capita story, by Rob Davies: |
| Government officials met executives from the outsourcing firm Capita to discuss its financial problems, it has emerged, as Labour accused ministers of being complacent and warned of similarities between the company and its collapsed rival Carillion. | Government officials met executives from the outsourcing firm Capita to discuss its financial problems, it has emerged, as Labour accused ministers of being complacent and warned of similarities between the company and its collapsed rival Carillion. |
| In response to an urgent question from Labour’s business select committee chair, Rachel Reeves, the Cabinet Office minister Oliver Dowden said a crown representative had been appointed to monitor Capita. | In response to an urgent question from Labour’s business select committee chair, Rachel Reeves, the Cabinet Office minister Oliver Dowden said a crown representative had been appointed to monitor Capita. |
| The move, which came after Capita halved in value following a shock profit downgrade on Wednesday, is part of a procedure designed to help officials monitor the finances of struggling companies that provide public services. | The move, which came after Capita halved in value following a shock profit downgrade on Wednesday, is part of a procedure designed to help officials monitor the finances of struggling companies that provide public services. |
| Here’s my colleague Richard Partington on today’s UK manufacturing report: | Here’s my colleague Richard Partington on today’s UK manufacturing report: |
| Britain’s manufacturers showed signs of a slowdown at the start of the year amid rising costs for raw materials, sending factory output to a seven-month low. | Britain’s manufacturers showed signs of a slowdown at the start of the year amid rising costs for raw materials, sending factory output to a seven-month low. |
| The Markit/Cips UK manufacturing PMI index showed activity fell to 55.3 last month from 56.2 in December, missing City forecasts of a further acceleration in growth. However, the PMI remained well above its long-run average of 51.7 and above the 50 mark which separates expansion from contraction. | The Markit/Cips UK manufacturing PMI index showed activity fell to 55.3 last month from 56.2 in December, missing City forecasts of a further acceleration in growth. However, the PMI remained well above its long-run average of 51.7 and above the 50 mark which separates expansion from contraction. |
| Britain’s manufacturers have experienced growing demand for orders from China, Japan, the Middle East and North America in recent months. There has also been an upturn in sales in Europe as the continent returns to economic growth after years in the doldrums. The readings come as ministers enter critical talks over trade with Brussels. | Britain’s manufacturers have experienced growing demand for orders from China, Japan, the Middle East and North America in recent months. There has also been an upturn in sales in Europe as the continent returns to economic growth after years in the doldrums. The readings come as ministers enter critical talks over trade with Brussels. |
| However, the upswing in demand for goods has prompted rising global demand for raw materials, pushing up the cost of oil, metals, food and chemicals, and further pressuring manufacturers’ profit margins. The PMI survey showed purchase prices rose at the fastest rate in 11 months in January, and to one of the greatest extents in its history. | However, the upswing in demand for goods has prompted rising global demand for raw materials, pushing up the cost of oil, metals, food and chemicals, and further pressuring manufacturers’ profit margins. The PMI survey showed purchase prices rose at the fastest rate in 11 months in January, and to one of the greatest extents in its history. |
| More here: | More here: |
| Today’s manufacturing survey also shows that UK factories are being hit by rising prices. | Today’s manufacturing survey also shows that UK factories are being hit by rising prices. |
| Companies reported that chemicals, food products, metals, oil, paper and plastics are all becoming pricier. | Companies reported that chemicals, food products, metals, oil, paper and plastics are all becoming pricier. |
| Many factories are passing those costs onto their clients -- at the fastest pace since last April. That could be a blow to consumers, as inflation is already rising faster than wages. | Many factories are passing those costs onto their clients -- at the fastest pace since last April. That could be a blow to consumers, as inflation is already rising faster than wages. |
| Duncan Brock, of the Chartered Institute of Procurement & Supply, says: | Duncan Brock, of the Chartered Institute of Procurement & Supply, says: |
| “Purchasers reported that global demand impacted on their costs, with another sharp inflationary rise. Respondents mentioned forward buying as a way of controlling prices and securing supply to remain competitive, but firms also attempted to claw back some of their margins by raising their own prices to clients at a level not seen for nine months. | “Purchasers reported that global demand impacted on their costs, with another sharp inflationary rise. Respondents mentioned forward buying as a way of controlling prices and securing supply to remain competitive, but firms also attempted to claw back some of their margins by raising their own prices to clients at a level not seen for nine months. |
| As this charts shows, raw material costs also jumped after the UK referendum (due to the slump in the pound) | As this charts shows, raw material costs also jumped after the UK referendum (due to the slump in the pound) |
| Elsewhere in the markets, the pound has shrugged off the slowdown in UK factory growth last month. | Elsewhere in the markets, the pound has shrugged off the slowdown in UK factory growth last month. |
| Sterling is up 0.3 of a cent against the US dollar, at $1.422 - close to last month’s 18-month high. | Sterling is up 0.3 of a cent against the US dollar, at $1.422 - close to last month’s 18-month high. |
| Connor Campbell of SpreadEx says: | Connor Campbell of SpreadEx says: |
| The pound was nonplussed by the decline [in the UK manufacturing PMI], focusing on the positives to hold onto a half a percent climb against the dollar – it’s basically now recovered all of last week’s losses – and 0.3% increase against the euro. | The pound was nonplussed by the decline [in the UK manufacturing PMI], focusing on the positives to hold onto a half a percent climb against the dollar – it’s basically now recovered all of last week’s losses – and 0.3% increase against the euro. |
| There wasn’t much cheer for Capita in that urgent parliamentary question, with the government insisting it wouldn’t be bailed out and Labour MPs calling for public services to be taken back into public control. | There wasn’t much cheer for Capita in that urgent parliamentary question, with the government insisting it wouldn’t be bailed out and Labour MPs calling for public services to be taken back into public control. |
| There’s not much relief in the City either. Capita’s shares have shed another 6.8% today to just 170p. That looks like their lowest level since October 2002. | There’s not much relief in the City either. Capita’s shares have shed another 6.8% today to just 170p. That looks like their lowest level since October 2002. |
| Labour’s Diana Johnson suggests the government sounds like Corporal Jones over Capita (don’t panic! don’t panic!). | Labour’s Diana Johnson suggests the government sounds like Corporal Jones over Capita (don’t panic! don’t panic!). |
| Q: If everything’s so rosy, why did Barnet council, a flagship Tory council, put contingency plans into place in case Capita’s problems worsen? | Q: If everything’s so rosy, why did Barnet council, a flagship Tory council, put contingency plans into place in case Capita’s problems worsen? |
| Dowden denies that the government is complacent. He points out that the government’s contingency plans worked after Carillion collapsed. | Dowden denies that the government is complacent. He points out that the government’s contingency plans worked after Carillion collapsed. |
| Alan Brown, SNP MP, asks about Capita’s pension deficit. How big is it, and what will the government do to help? | Alan Brown, SNP MP, asks about Capita’s pension deficit. How big is it, and what will the government do to help? |
| Oliver Dowden says it’s a matter for Capita; suspending its dividend will help it to put extra funds into the pension pot. | Oliver Dowden says it’s a matter for Capita; suspending its dividend will help it to put extra funds into the pension pot. |