Closing summary: Bank calms UK rate speculation; jobless rate hits five-year low
Early finish today, given all the juicy economic news came in a rush this morning.
Here’s very brisk round-up:
The Bank of England has raised its growth forecasts for next year, but remains cautious on raising UK interest rates from their current record low. Governor Mark Carney told reporters today that there is still considerable slack in the British economy, and rate rise will be gradual.
The pound has fallen half a cent against the US dollar following Carney’s comments.
The governor also said Britain wouldn’t have won the big prize until a strong, sustainable recovery is secure – so far, we’ve just struggled through the qualifying round, he joked…..
The latest unemployment data showed the UK jobless rate has hit a new five-year low of 6.8%, with the number of people in work hitting a record high. Government ministers said the figures showed the recovery was on track.
But there was disappointment on average wages, which fell back in March – showing many people are still facing a cost of living squeeze.
And more than half of the increase in employment over the last year has been due to people going self-employed.
Pfizer boss Ian Read has admitted that some scientists will lose their jobs if a merger with AstraZeneca goes through.
The European Central Bank is preparing a raft of possible stimulus measures for June’s policy meeting — including interest rate cuts and a package to stimulate bank lending to SMEs.
Back tomorrow. Cheers, and thanks as ever for your views and insights in the comments section. GW
City analyst Louise Cooper has a good take on the Bank of England’s latest batch of forecasts (which she compares to Linus’s safety blanket).
Rather than all the complicated charts and diagrams so beloved of the Bank, let’s just look at some simple numbers.
Between 1998 and 2007, according to BofE, the average base rate was 5%. For that same period, UK GDP grew on average at 3.2% per year, with inflation averaging 1.6% and unemployment at 5.3%. So very similar to the conditions now – CPI is 1.6%, GDP growth of 3%, although unemployment is over 1% higher now at 6.8%. But the big difference is that now, base rates are 0.5% compared to 5% – ten times the level.
Has the UK economy changed so fundamentally from that period? So much so, that base rates of a tenth of 5%- the average in 1998-2007 – can be justified? Run for the hills and buy a crash hat when anyone in the financial world tells you “its different this time”. It never is.
It all boils down to quite how much damage was caused to the UK economy by the financial crisis, and how much spare capacity remains to be mopped up. The financial markets reckon rates will only have risen to 2.4% in three year’s time — Louise isn’t convinced, at all….
By Q2 2017, the UK economy is expected to have grown 3%pa for almost four years and yet the base rate will only be 2.4%? With targeted inflation at 2%, the base rate will only just be positive in real terms. Really? After four years of 3% growth. When has that ever happened in the UK? Is that believable?
The only way this can possibly occur is by assuming the UK has a massive output gap – its retained all its skills and capacity lost during crisis and added to them in meantime. And that 4yrs of 3%pa growth will not trigger inflation. The Queen in Alice in Wonderland may have “believed as many as six impossible things before breakfast” but I can’t believe just one from the MPC after lunch.
Peanuts and Lewis Carroll in one analyst note. Must be a first….
Small shareholders have vented their anger at ITV’s board today over the £8m-plus package handed to CEO Adam Crozier, at its annual general meeting today.
One investor was particularly irate that Crozier was treated to a £3.95m “golden hello” — and even chairman Archie Norman conceded that it appears “all his Christmases have come at once”.
On the other hand, as Norman pointed out, the current management team have grown ITV by £5.1bn.
George Osborne has continued to dismiss the idea that an independent Scotland could keep a link to the pound.
The chancellor also claimed there was “no way” the big financial organisations would be able to remain in Scotland if it used the pound without a currency union.
The pound remains lower against the US dollar, after Mark Carney poured cold water on the idea the UK economy was ready for higher borrowing costs:
Watch and fashion accessory firm Fossil is being hammered in early trading. Shares are down almost 8%, after it cut its profit forecast for the second quarter of 2014 last night.
A very subdued start to share trading on Wall Street, with the main indices shuffling a little lower at the open.
After a run of recent record highs, traders may have run out of reasons to push shares up further.
The Dow Jones industrial average has dropped by 34 points, or 0.2%.
Wall Street is also digesting a surprise surge in wholesale producer prices last month, up 0.6% compared with March. That’s the biggest monthly rise since September 2012.
Food inflation was particularly strong, with meat prices surging 8.4% in April.
USA Today blames “Drought, unusually cold winter weather, a shrunken cattle herd and a virus in the hog population”.
There was quite a nasty exchange over Pfizer’s bid to take over AstraZeneca at Prime Minister’s question’s today.
Labou leader Ed Miliband accused David Cameron of acting like Pfizer’s PR man. This prompted the PM to claim Miliband was incapable of acting in the national interest, and that opposition was guilty of an “abject surrender” to Kraft over the takeover of Cadbury.
All a bit unedifying, given the fears that crucial new drugs could be delayed by a takeover (Pfizer has denied that lives could be lost)
Here’s Nick Watt’s report:
Some newswire snaps from German chancellor Angela Merkel:
- 13:57 – GERMANY’S MERKEL SAYS COMPLETING REGULATIONS FOR INTERNATIONAL FINANCIAL MARKETS IS GETTING INCREASINGLY DIFFICULT
- 14:01 – MERKEL SAYS THERE MUST BE NO POLITICAL INFLUENCING OF BANK STRESS TESTS, OTHERWISE ECB REPUTATION AS SUPERVISORY BODY WILL BE DAMAGED
Over in parliament, chancellor George Osborne is testifying to MPs about the Scottish independence vote.
The chancellor is reiterating that he would not support a currency union with an independent Scotland, which allowed it to use the pound.
Our politics liveblogger Andrew Sparrow is tracking the session here. Here’s a flavour:
Ian Davidson, the Labour MP who chairs the committee, goes next.
Q: Do you accept you have painted yourself into a corner. You would be destroyed if you did a U-turn after September.
Osborne says there is no way the government would agree to a currency union. He wants people to know that.
He is not the one asking people to make this decision, he says.
John Cridland, CBI Director-General, likes what he heard from Mark Carney today:
“The Inflation Report provides positive signs that the UK recovery is advancing, with broad-based growth and business investment picking up. But it is evident that growth is still not back to normal, and there are a number of political risks on the horizon.
“Housing remains a concern and it is reassuring that the FPC has the mandate and a range of tools available to keep the housing market in check.
“It was good to hear the Governor confirm that a decision to increase interest rates would be based on the sustained strength of the wider economy, and there is still some way to go to reduce slack and boost productivity and wages.”
Bank of England dampens predictions of early rate rise – what the economists say
Samuel Tombs of Capital Economics reckons today’s report may cool expectations of a rate rise in the first quarter of 2015:
Under the assumption that interest rates rise in line with market expectations in the first half of 2015, the Bank expects CPI inflation to remain below the 2% target in two years’ time. This suggests that the markets might be wrong to anticipate an interest rate rise to come as early as Q1 2015. And while the forecasts for GDP growth were raised again (the forecast for 2015 has been raised from 2.7% to 2.9%), the Governor emphasised that the economy has “only just begun to head back towards normal”.
Meanwhile, the Committee’s collective judgment is that the amount of spare capacity in the economy has only reduced slightly since February’s Inflation Report and that it “remains in the region of 1% to 1.5% of GDP”. Finally, the Governor stated that monetary policy was not the right tool to use to cool the housing market and that the FPC would act first, if necessary. Accordingly, we continue to think that interest rates will remain on hold until the second half of next year, later than the markets and most economists expect.
Mike Franklin, chief investment strategist at Beaufort Securities, explains why Carney fears the UK labour market isn’t as strong as data suggests:
“Carney is concerned that there should be enough slack in the economy to cope with keeping interest rates low while he is also reliant on employment data which can be distorted by the inclusion of types of employment contract currently prevalent which do not necessarily result in strong gains in disposable income as economic activity picks up.”
Alex Edwards, head of the corporate desk at UKForex, says traders expecting an early rate hike were disappointed:
Growth and inflation forecast have not changed much from last time around. He referred to productivity still being low, and that there was still considerable slack in the labour market.
Carney went on to say that interest rates would only rise after the economy is back to “normal” and did not, as some commentators were expecting, directly signal when the first rate hike would occur.
Martin Beck, senior economic adviser to the EY ITEM Club, agrees that rates won’t rise until “well into 2015”:
The MPC’s latest Inflation Report struck a dovish tone, suggesting that those expecting an interest rate rise this year are likely to be disappointed.
“Despite the strength of the recovery and, in particular, the robustness of the labour market, the MPC stuck to its previous estimate that ‘slack’ in the economy amounts to 1- 1½% of GDP. Indeed, it expects that this slack will be used up more slowly over the next few years than in the recent past, with GDP growth cooling and productivity growth picking up.
The City got the message from Mark Carney — the pound has lost half a cent against the US dollar, to $1.677.
Here’s Larry Elliott and Angela Monaghan on the Bank of England’s attempts to squash talk of an imminent interest rate rise:
Policymakers at Threadneedle Street used the Bank’s latest quarterly inflation report to signal that it remained in no rush to raise rates, with the first rise expected around the time of the general election in the second quarter of 2015. Bank rate has been on hold at the all-time low of 0.5% since March 2009 and the governor Mark Carney said on Wednesday any rate rises would be “gradual and limited”.
The report said it was not yet clear whether the recovery was on a sustainable footing. The forecasts showed members of the rate-setting monetary policy committee still believe there is 1-1.5% of spare capacity in the economy to be used up, following the UK’s below-par performance at the onset of the crisis in 2008.
“At home, the main downside risk is that the pickup in growth proves to be unsustainable, either because productivity and real incomes continue to disappoint, or because business investment does not recover as expected.
Bank of England quarterly inflation report – a summary
So, what did we learn from the Bank of England from today’s quarterly inflation report, and press conference?
- The Bank of England has upgraded its UK growth forecast for next year, from 2.7% to 2.9%, as the UK’s strong recovery continues. It still expects GDP will grow by 3.4% this year.
- But the UK central bank remains reluctant to raise interest rates, despite signs that the UK economy is strengthening. Governor Mark Carney said the economy has edged closer to the point when bank rate will rise, but insisted that any increases will be gradual, and remain close to historic lows.
- Echoing his predecessor, Carney also said that returning the British economy to normality was akin to getting through the World Cup qualifying rounds. To raise the trophy, we need strong, sustainable growth.
- Carney denied that he, like England football teams through the ages, is too optimistic and will be returning with his tail between his legs before long.
- Carney insisted that the MPC would set monetary policy for the whole country, not just London. He also insisted that the capital’s economy isn’t as strong as it looks.
- And he said the Bank will use its macroprudential tools, rather than interest rates, to control the housing market.
Here’s a video clip of Mark Carney at today’s Quarterly Inflation report, discussing the UK economy and future interest rate rises:
Even David Smith, the Sunday Times economics editor, was left scratching his head somewhat after Mark Carney’s performance:
Pfizer/AstraZeneca hearing – science minister talks of ‘robust commitments’
Sean Farrell: Universities and science minister David Willetts was keen to say the government was taking a strong line with Pfizer.
“We want to see more R&D in the UK. That is what lies behind our life sciences strategy and… science more widely. It is one of the issues on which we press Pfizer in our discussions.”
Pressed on if he agreed with his boss, Vince Cable, that Pfizer’s commitment to have 20% of the combined group’s research in the UK was a starting point that could be improved on, Willetts eventually said: “Vince put it very well as always.”
Willetts said the argument that the government was powerless to influence Astra’s shareholders or to enforce Pfizer’s assurances, was “an excessively bleak view”.
“In my experience and in the conversations we are having there are various ways in which governments can make it clear both what we are doing for life sciences and what we expect life sciences companies to do, and they often respond to that.”
Willetts was reluctant to go into detail about what the role of the cabinet secretary, Jeremy Haywood, in talks with Pfizer. “He co-ordinates across government. It’s right we should have the cabinet office coordinating.”
Willetts refused to go into detail about negotiations with Pfizer. “You can’t reveal everything that is in your hand. You have to have some kind of scope.”
Lord Sainsbury’s attack on Pfizer’s as an asset stripper was “perhaps one of his more lurid utterances on science and commercial policy. It’s a bit pessimistic both about what governments can do” and the strength of UK science.
“We will want robust commitments they will stick to. We have a range of powers,” Willetts said.
Ian Sample, our science correspondent:
The panel pushed David Willetts to explain what government was doing to ensure any merger between these two large companies would not badly damage the UK science base. Willetts says he has taken scientists’ concerns to Pfizer and listened to their assurances. Their commitments are one type of guarantee he says. The second is that the UK has the right skills and financial incentives to make the UK a good place to do RnD. Ultimately though, WIlletts’ says, the decision lies with AZ’s shareholders.
Graham Stringer, a conservative MP, is deeply unimpressed by what he calls a “passive” stance. He is shocked that Britain could let a hostile takeover happen that could damage the UK science base without government intervening.
And that was the end of the press conference, after Carney ran amok with his sporting analogies by praising Spencer Dale, Charlie Bean and Paul Fisher – who are all leaving the Monetary Policy Committee (or in Bean’s case, the Bank altogether).
They notched up plenty of appearances in the national cause, Carney said — handily ignoring the fact that he, apparently, sent Fisher for an early bath.
Mark Carney: London can’t drive UK recovery on its own
Carney insists that the London economy is not as strong as people think, and can’t be expected to drive the recovery on its own.
He was asked how the Bank would prioritise between setting monetary policy for the capital, and the rest of the UK.
He insisted that the bank makes policy for the country as a whole – it will not set monetary policy for a region.
He then tries to puncture the belief that London was roaring away.
The economy in London appears stronger than it actually is – unemployment rate is higher than the national average, Carney says.
And as strong as the London economy looks, it cannot sustain an expansion in the UK, he added.
In answer to a question from the Telegraph’s Jeremy Warner about inequality, Carney says that the Bank of England does recognise that conventional monetary policy, and unconventional monetary policy, does have consequences on distribution.
But targeting specific asset prices is very much not the bank’s policy – it won’t set monetary policy to target house prices, or the stock market, or other financial assets.
Not the most explicable press conference in the BoE’s 300+ year history, with a series of long answers for Carney about slack, spare capacity, future interest rate paths….
Carney reiterates that the Monetary Policy Committee’s role is to “lean in against the headwinds” pushing on the UK economy and keep interest rates at historically low levels for an extended period of time.
What has the governor learned in his (almost) first year in the job?
Carney says it’s a privilege to serve in a country, and an institution, that is helping to lead the healing of the global economy and the fixing of the financial system.
How concerned is the Bank about borrowers who will struggle to repay their mortgages when rates rise?
It’s certainly an issue, Mark Carney says — which is factored into the Bank’s consumption forecasts.
And that’s also why the mortgage affordability tests are so important — to avoid more people being brought into the “unfortunate” group who will find borrowing costs unaffordable.
Back on the strong pound – Carney says the key is to differentiate between the impact that sterling’s strength has on inflation (pushing it down, by making imports cheaper), and on the real economy (hurting exports).
Sterling’s strength could have an impact on Britain’s ability to get net exports rising, he adds.
Sean Farrell: Pascal Soriot, AstraZeneca’s chief executive, talked about the company’s commitment to the UK, its unusually close links with academia and the potential disruption of a takeover by Pfizer.
Cambridge, as part of the “golden triangle” with London and Oxford, is the best place to conduct science in Europe and the only European competition for US centres Boston and San Francisco.
“We are not moving to Cambridge and spending all this money to … say we are reducing the science headcount in Cambridge. We plan moving forward to maintain or grow this in vestment in Cambridge.”
Soriot said it wasn’t just science that would be based in Cambridge – head office, his office, human resources etc would be there permanently. Distinguishes between that and Pfizer’s plan. “This is really going to be our decision-making core.”
Pressed on what is more important, getting the right price or saving lives by producing drugs, Soriot said the two went hand in hand. Astra shareholders would own shares in the new company and it would not be good for them if Astra’s potential was not fulfilled.
He dismissed Pfizer’s pledge to “ring fence” important drugs after a takeover. “A company is made of people. If they leave there is no ring fencing”. It would take months to find replacements if scientists left the company because they didn’t like the merger. “There is a risk some project will be delayed… If you make enormous savings in R&D… it is really hard to be sure we can protect these projects.”
Soriot said Astra was unusually collaborative when it worked with universities and didn’t behave like a secretive pharmaceuticals company. Relationships and way of working could be under threat if Pfizer bought the company.
Back to the UK housing market.
Carney reiterates that the Bank’s FPC will not target house prices, and it certainly won’t be building any of new houses itself (supply being a key factor).
The governor adds that he has very high confidence that the FPC’s macroprudential tools (such as forcing lenders to insist on larger deposits) will be effective in handling risk.
Carney says the Bank will “look through” the recent rise in sterling, but cautions that “persistent” sterling strength could make it harder to deliver a balanced recovery.
Larry Elliott, our economics editor, take up Carney’s comment that getting the UK economy back to normality is only the equivalent of getting through the World Cup qualifying rounds (see 10.45am)
Larry’s watched the UK economy, and the England football team, for long enough to know that hopes can turn to tears pretty quickly.
So often the squad looks promising, but within a month, the team usually comes back with its tail between its legs, Larry says. Is Carney heading the same way by being too optimistic about the inflation outlook?
Carney reckons not, and points out that the UK economy has only just clawed its way back the levels that France and Italy have achieved.
The Bank of England has very modest assumptions on productivity, he adds — pointing out that Britain hasn’t yet closed any of the gap with other major counties*
There’s also a “very benign global inflation outlook”, he adds.
* – the same has been said about the England team over the decades
Carney reiterates that interest rate rises, when they come, will be “limited and gradual”.
And he doesn’t accept that they are likely to peak at 2%.
The BOE isn’t prepared to give more details about its assessment of the output cap.
Deputy governor Charlie Bean says people shouldn’t get too “hung up” about it — assessing slack is very complicated; there could be a lot more spare capacity, or a lot less, than the central forecast.
Carney is asked about worries that the UK housing market is running too hot.
That’s a question for the Financial Policy Committee, he says – monetary policy isn’t the best way to tackle an incipient housing bubble.
In the Pfizer/AstraZeneca grilling, it was conservative MP Stephen Metcalfe who got to the heart of the matter, reckons Ian Sample:
The takeover bid, at £50 a share, or around £63bn, will cost Pfizer around four times the annual sales of AstraZeneca. How will Pfizer pay for that? “Surely you are going to need more salesmen than scientists?” Metcalfe asks.
Onto questions, and Mark Carney is refusing to be pinned down on when interest rates may rise.
We will adjust rates when the economy has got back to normal, he adds.
The Guardian’s science correspondent Ian Sample has been watching the Pfizer/AstraZeneca hearing. Here’s his take:
Ian Read made much of his commitment to keep 20% of research and development jobs in the UK. As he understands it, the pledge to keep that proportion of jobs in the UK is written into the takeover bid, and must be honoured for five years. If the company reneges on the deal, they can be referred to the High Court which has unlimited powers to intervene, he says.
And Carney sums up with a sporting analogy – a favourite theme of his predecessor, Mervyn King.
The UK economy is only now at a point where it is returning to normal, he says.
Securing the recovery is like getting through the qualifying rounds of the World Cup. It’s a start, but it’s not the overall goal — the prize is a strong, sustainable recovery.
Carney adds that the Bank won’t start unwinding its QE programme until interest rates are at a level when they could be cut, materially.
On interest rates, Carney says we have edged close to the point when bank rate would gradually need to rise.
That’s hardly a signal that a rise is close
Ands the decision on when to raise borrowing costs will depend on the amount of slack left in the economy, the prospect of it being mopped up, and the inflation outlook.
Mark Carney says the UK unemployment remains “significantly” above the Bank’s current estimate for the equilibrium rate.
He says there is still slack in the economy, which is likely to be used up more slowly than in the past.
Here’s the Reuters snaps:
14-May-2014 10:32 – BANK OF ENGLAND’S CARNEY – MPC SEES EXPANSION TO BE SUSTAINED BY BUSINESS INVESTMENT, RISING REAL WAGES, PRODUCTIVITY GROWTH
14-May-2014 10:32 – BANK OF ENGLAND’S CARNEY – UNEMPLOYMENT REMAINS SIGNIFICANTLY ABOVE OUR ESTIMATE OF CURRENT EQUILIBRIUM
14-May-2014 10:32 – BANK OF ENGLAND’S CARNEY – SLACK ESTIMATE IS IN SOME RESPECTS CAUTIOUS
14-May-2014 10:33 – BANK OF ENGLAND’S CARNEY – SPARE CAPACITY LIKELY TO BE USED UP MORE SLOWLY THAN IN RECENT PAST
14-May-2014 10:33 – BANK OF ENGLAND’S CARNEY – PRODUCTIVITY GROWTH WILL RECOVER TO PRE-CRISIS RATE ONLY IN 3 YEARS
Bank of England: UK economy is heading back to normal
Breaking: The Bank of England says that the UK economic recovery is continuing, as it releases its latest quarterly inflation report.
Mark Carney, governor, is explaining that the overall outlook is little changed since February. That means “the UK economy continues to grow strongly”, adding:
In short, the economy has started to head back to normal.
He is explaining that the Bank believes the UK is moving towards a recovery sustained by business investment, rather than consumer spending.
More to follow….
More details on the rise in UK self-employment:
Sean Farrell: MPs’ questions to Pfizer homed in on its pledges to invest in the UK science base and to keep a large research and development operation in Britain.
Chief executive Ian Read said he couldn’t give an estimate for the number of scientists the combined company would employ. But he admitted: “I would suspect there would be less scientists from a natural automatic combination of the two.”
He said it was possible that Pfizer would find potential drugs at AstraZeneca that are more valuable than Pfizer’s own, “in which case we will stop our projects”.
Read said the five-year period for Pfizer’s R&D commitment was because Pfizer had not kept a check on progress of its products. If you give scientists five years from discovery to proof of concept they have a clear target. Even after five years, “if the work is there and we think it should be invested in, we invest in it.”
Read is asked about criticism in Sweden of Pfizer’s behaviour after it bought Pharmacia. Sweden’s finance minister has said Pfizer didn’t keep its commitments.
Read said there were about 50 scientists left at Pharmacia after others had been spun out to another company. Pharmacia had already planned a reduction in headcount. Pfizer promised to build a factory if a Pharmacia product came to market but the product didn’t come to market and so the factory wasn’t built. “We felt we honoured all the commitments we made in Sweden.
Read told the committee Pfizer’s commitments would be legally binding because it would put them in its offer document. The Takeover Panel could then refer Pfizer to the High Court if it reneged on the pledges. He said Pfizer would give the committee its legal advice.
Ultimately, he said, it was a matter of honour.
“You want the legal advice, fine. The promise and commitment is from Pfizer. It’s from our board of directors [and] from me as CEO.”
Asked what circumstances would prompt Pfizer to opt out of the commitments, Read said if the UK government completely changed its patent box rules or radically changed the tax system that could make Pfizer reconsider.
AstraZeneca chief Pascal Soriot, meanwhile, is telling MPs that his priority is to deliver great science, based around the new Cambridge R&D site:
Back in the Thatcher Room, Pfizer boss Ian Read has admitted that a merger with Astra would probably mean fewer scientists employed to research and develop new drugs.
He’s also been fending off fresh accusations that Pfizer can’t be trusted:
The unemployment data is also another chance for the prime minister to plug his #longtermeconomicplan
Minister for Employment Esther McVey says today’s fall in the jobless rate shows the UK recovery is gathering pace:
“As the recovery takes hold, more people are able to get a job or set up their own business and become the employers of tomorrow.
“Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be.
“We will continue to support those in and out of work who want to get on and fulfil their ambitions for a more secure future.”
Britain’s army of self-employed workers continues to grow too – indeed, over the last 12 months it’s expanded faster than the number of people who’ve been taken on by others.
The ONS reports that
- the number of employees increased by 351,000 to reach 25.63 million,
- the number of self-employed people increased by 375,000 to reach 4.55 million,
New self-employed workers are more likely to be working part-time too:
Public sector pay continues to lag the private sector in Britain.
The Office for National Statistics reports that in the three months to March:
- For the private sector, total pay [including bonuses] rose by 1.8%, while regular pay rose by 1.6%.
- For the public sector, total pay rose by 0.7%, while regular pay rose by 1.1%.
- For the public sector excluding financial services, both total pay and regular pay rose by 1.5%.
So overall, total pay was 1.7% higher than a year earlier, with pay excluding bonuses 1.3% higher.
And this chart shows how total pay has inched above the inflation rate, but pay excluding bonuses has not:
Here’s the key points on today’s UK unemployment data:
- The number of people in work hit a new record high of 30.430 million in the three months to March, up by 283,000
- The number of people out of work fell by 133,000, to 2.209 million
- The jobless rate fell to 6.8%, from 6.9%.
- The claimant count (those receiving unemployment benefit) fell by 25,100 in April.
- Average weekly earnings rose by 1.7% annually in the three months to March…
- … but excluding bonuses average earnings only rose by 1.3% during the quarter, and by a mere 1.0% in March
Newsnight’s Duncan Weldon flags up that wage growth was stronger in the building and manufacturing data, and in parts of the service sector.
But there’s disappointing news on wages — average earnings (excluding bonuses) only rose by 1.3% in the first three months to March.
That’s below the inflation rate, meaning real wages still fell through the quarter. It looks like earnings stalled in March, when they only rose by 1.0% annually.
Including bonuses, earnings rose by 1.7% in the quarter — economists had expected a healthies reading of 2.1%.
UK unemployment rate falls to five-year low of 6.8%
BREAKING: The UK unemployment rate has fallen to 6.8% in the three months to March, the lowest level in more than five years.
Nearly time for the UK unemployment data….
GSK: Chinese bribery allegations are deeply concerning
GlaxoSmithKline has announced that it is “deeply concerned” about the allegations that its staff broke bribery laws in China.
This follows the news this morning that a British executive is accused of pressing his sales team to bribe doctors, hospital officials and health institutions.
Here’s the official statement:
“We have today met with the MPS [Ministry of Public Security] who updated us on their investigation into GSK China Ltd.
“We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK.
“We understand the MPS have issued the case to the Changsha People’s Procurator in Hunan Province. The Procurator is now reviewing the case.
“We will continue to fully co-operate with the authorities in this matter.
“We want to reach a resolution that will enable the company to continue to make an important contribution to the health and welfare of China and its citizens.”
Today’s AstraZeneca-Pfizer hearing is underway, in the Thatcher Room. Here’s a live stream.
Mikael Dolsten, Pfizer’s President of Worldwide Research and Development, is arguing that creating a science powerhouse would deliver better results for patients, and get drugs to market faster.
Here’s the Reuters story that helped drag down the euro against the pound today:
The number of UK houses selling for more than £1m is now comfortably over the previous pre-crisis peak, flags up Sky News’s Ed Conway:
A reason for the Bank of England to act? Perhaps, but Mark Carney could also point out that most of them are in London, where property prices have been rampant– that doesn’t mean the whole UK economy can sustain higher borrowing costs…
Pound hits 16-month high against the euro
The pound has just hit its highest level against the euro in 16 months, trading as high as €1.2297 (meaning one euro = 81.3p)
The move was partly driven by a Reuters report, claiming European Central Bank staff are preparing a “package of measures” for next month’s meeting.
This includes interest rate cuts – including imposing negative interest rates on bank deposits at the ECB. There could also be a new programme to buy packages of small business loans (to stimulate the flow of credit in the euro area).
A June rate cut is “more or less a done deal”, said one of the five sources who spoke to Reuters on condition of anonymity.
A second source echoed that sentiment, and added: “This will be the first major central bank to move to a negative deposit rate. That would move the exchange rate.”
No respite from the gloom at Sony – it posted a 138 billion yen (£800m) loss for the last quarter this morning, as cost of quitting the personal computer business piles up.
And the Japanese manufacturing giant also forecast a 50 billion yen loss for the current financial year – dashing hopes of a return to profitability after a string of recent profit warnings.
FastFT has a nice take here (including this chart).
Back to the Bank of England — and Kit Juckes of SocGen flags up that interest rates could potentially rise before Christmas.
AstraZeneca has fired yet another salvo in the battle against Pfizer this morning, releasing details of
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