Time to clock-off for another day. Here’s a quick reminder of the key points…
• Britain’s economic recovery has picked up pace. Growth in the second quarter of 2013 has been estimated at 0.6%, twice as rapid as in the first three months of this year.
The Office for National Statistics reported that every section of the economy grew. However, the UK economy remains 3.3% smaller than before the financial crisis struck in 2008.
• Highlights start at 9.30am.
• Key charts from 10.02am
• City economists were encouraged by the data, with some predicting stronger growth later this year. Business leaders, though, warned that more needs to be done to guarantee the recovery (see 10.30am onwards)
• There are also a few photos of Osborne meeting nightshift workers at 8.50am
ª The International Monetary Fund warned that more needs to be done to nurse the eurozone back to health and avoid the crisis in the region flaring up again. See 3.03pm onwards.
• Greek MPs have approved legislation that should mean it receives its next aid tranche soon. See 4.25pm
• Spanish unemployment has fallen for the first time in two years. However, the jobless rate shows that more than one in four adults are still out of work, and analysts warned that seasonal factors and migration were behind the change. See 4.58pm.
Back tomorrow for more live-blogging action, probably more centred on the eurozone after today’s focus on the UK.
Until then, thanks and goodnight…. GW
Britain’s improved economic growth didn’t generate much cheer in the City, where shares ended lower – the FTSE 100 dropped 32 points to 6587.
This morning’s drop in Spanish unemployment has been welcomed by politicians and firms, although ministers admit that the jobless rate remain far too high:
Spain’s unemployment rate fell for the first time in two years and some of the country’s biggest firms said on Thursday business was looking up, boosting the government’s claim the economy is climbing out of recession.
The dip in the jobless figures – to 26.3% in the second quarter from 27.2% in the first – nonetheless highlighted how far the country still needs to travel on the road to full recovery. Economy minister Luis de Guindos called the figures “totally unacceptable”.
More here: Spain’s unemployment rate falls
While this analysis piece from Open Europe is also worth a read:
It points out that the drop in unemployment can be attributed to seasonal factors, an increase in people dropping out of the labour market, and migration out of the country.
Across to Cyprus, and Open Europe flags up that deposits in its banking sector appear to have fallen again last month.
It’s a slightly confusing picture, due to the ongoing restructuring of the Cypriot banking sector, but as Open Europe explains:
Ultimately, money continues to leak out despite the capital controls or people continue to rapidly wind down their savings. Neither presents a pleasant prognosis for the future of the Cypriot economy.
As we have said before the real test will come when the capital controls are finally removed, although that does not seem to be on the horizon in the near future.
The BBC has a good take on this afternoon’s warning from the International Monetary Fund (see 3.03pm onwards):
The International Monetary Fund has called for more action to end the crisis in the eurozone.
The IMF wants greater progress made on repairing the balance sheets of banks, so that lending can be kick-started
While the Daily Telegraph flags up that the IMF also worried that the eurozone could be hit when the US Federal Reserve starts slowing its stimulus package:
The report warned that the onset of a new tightening cycle in the US had already led to major spill-over effects in the eurozone, pushing up bond yields across the board.
Greek MPs approve civil service job cuts amendment
The Greek parliament has approved an amendment to its legislation bringing in job cuts across the public sector, which paves the way to unlocking its next aid tranche worth €2.5bn.
The move means Greece will hit its target of transferring 4,200 workers into its new labour pool, where they could be forced to accept a new job or be laid off.
Greece’s lenders had been concerned about certain ‘exemptions’ which meant some workers were able to avoid being transferred to the pool. Finance ministry insiders had said that this only affected around 80 people, mainly those with university quailfications or disabilities.
The legislation passed on Thursday overrides a law passed last week that protects civil servants with postgraduate degrees and those with disabilities or other social needs from being forced into a labor reserve, where they have eight months to find other jobs in the public sector or face dismissal.
Eurogroup finance ministers are now expected to approve the bailout payment on Friday. Yesterday, it said Greece had met 21 of the 22 pre-conditions on the aid tranche. Today’s vote should complete the set.
The IMF also pointed to the eurozone youth jobless crisis in today’s assessment of the region, saying that despite recent progress….
growth remains elusive and high unemployment persists, especially among youth.
And while politicians such as Francois Hollande are talking positively about Europe’s prospects (see 1.06pm), the IMF fears any deterioration in conditions could be serious. The eurozone, it said, has little slack to cope with new problems:
Because policy space is limited, public debt ratios are very high (and still rising), and economic slack is already substantial, further negative shocks—domestic or external shocks—could severely impact growth.
IMF issues eurozone crisis warning
The eurozone crisis isn’t over, and the European Central Bank needs to take fresh action now to prevent the situation deteriorating.
That’s the key message from the International Monetary Fund this afternoon, as it publishes its latet assessment of the eurozone areas.
The IMF predicted that austerity programmes being implemented across the region could wipe betwen 1% and 1.25% off annual growth this year, and recommended countries should slow down.
Fiscal adjustment should be paced to avoid an excessive drag on growth.
The IMF also called for the ECB to inject more liquidity into the financial system, though massive cheap loans to the banking sector. This would repeat the Long-Term Refinancing Operations (LTRO) conducted at the end of 2011 and early 2012, credited with staving off a more severe credit crunch.
The IMF said “additional unconventional monetary support” could help reverse the current situation where it is harder and more expensive for firms in Southern Europe to borrow than the North.
Taking its current approach forward, the ECB should ensure term funding needs for weak but solvent banks through an additional LTRO of sufficient tenor.
The eurozone’s stronger banks have actually been repaying their existing LTRO loans, which the ECB sees as an encouraging development….
Today’s winds of economic optimism haven’t reached Greece today, with two economic surveys showing that the country where the eurozone crisis began is still suffering.
Greek household disposable income has dropped by an alarming 6.2% year-on-year,, continuing a trend which began three years ago.
And Greek bank deposits have begun falling again, as consumers and companies dip into their reserves to keep afloat.
Data released by the Greek central bank showed a 0.5% drop in deposit levels to €162.65bn. Savings levels had been rising since last summer as confidence rose in Greece following the trauma of 2012, but that trend could be reversing….
Alexander: Don’t get too excited
Danny Alexander, chief secretary to the Treasury, has been touring the media studios discussing today’s growth data.
And the decent growth didn’t prevent Alexander from taking a pop at the previous government, when asked about the situation on Radio 4’s World At One:
Here’s the quotes:
These figures are encouraging.
It’s good news, not just that there’s been growth but in every sector we have seen improvement.
But I’d also say we shouldn’t get over-excited because this country has got a long way to go to not just to clear the financial mess that we inherited from the previous government but to rebuild our competitiveness and to make sure that we do have the conditions in this country for businesses to thrive.
He then scampered to repeat the message on Sky News, where business leaders were warning that the Treasury is failing to encourage and stimulate investment.
Alexander said he wasn’t aware of a report that the UK languishes in 159th place when countries are ranked by investment as a share of GDP, but would look into it.
We’re a helpful lot at Guardian Towers, so politely suggest the chief secretary checks out The Economist, who covered it here: Let’s try to catch up with Mali
Video: George Osborne on today’s data
Here’s a video clip of George Osborne discussing today’s economic growth figures, and Britain’s passage “from rescue to recovery”.
The chancellor says he is encouraged that all sectors of the economy grew in the last quarter (details at 9.43am onwards), and repeated the need to rebalance Britain away from the financial sector.
The clip also includes footage of Osborne touring factories and M6 motorway improvement work last night.
Hollande: Eurozone recession probably over
The UK isn’t the only place enjoying better economic data this week. Over in Europe, the president of France has declared that the eurozone recession is probably over.
Speaking in Slovenia, Francois Hollande said:
Indicators published in the last few days look as if we have reason to believe we have overcome the recession, but it is still fragile.
Hollande may have been thinking of yesterday’s survey of private sector firms in the euro area, which showed growth for the first time in 18 months.
He also said there was “no reason to sound the alarm” over Slovenia’s banks, whose bad loan problems have led to speculation that the country may require a bailout.
Hollande is in Slovenia for a meeting of Balkan leaders to discuss integration into the European Union, and unresolved issues from the conflict of the 1990s.
Larry Elliott: GDP growth is no great shakes
Our economics editor, Larry Elliott, argues that today’s GDP data is “tinged with disappointment”, as the UK has bounced back more Tiggerishly after previous slumps.
Compared to its miserable performance over the past few years, 0.6% growth looks impressive. But in the longer term it is no great shakes. Historically, the economy has grown by around 2.25%-2.5% a year on average, so the second quarter was smack in line with that trend.
But after recessions, national output has tended to rise strongly as it makes up for the ground lost during the downturn. Given that the level of GDP is still 3.3% below its previous peak, quarterly growth rates of 1% would be more normal for this stage of the cycle. The year-on-year growth rate of 1.4% is also below par.
The news that UK growth is accelerating will “shape the national conversation” about the economy, reckons Nick Robinson, the BBC’s Politics editor.
But with real wages lagging well behind inflation, attention may shift from headline growth to living standards.
There’ll be no more talk of dips – double let alone treble – as people speak of recovery and not recession.
That will have an impact on political psychology – giving Tory MPs another reason to smile on their sun loungers this summer and allowing George Osborne to believe that he has finally put that “omnishambles” Budget behind him.
However, Ed Balls and Labour will be quick to remind us that a recovery in one measure of national economic output is not the same as a recovery in living standards. Average real incomes fell by 3% last year and the independent Institute for Fiscal Studies believes they will fall again as wages are squeezed, benefits and tax credits cut and inflation increases.
The politics of ‘growth versus austerity’ will slowly transform into the politics of who will improve ‘living standards for all’.
Duncan Weldon, the TUC’s senior policy officer, makes a similar point:
The latest data shows that take-home pay is only up by around 1% year-on-year, while the retail prices index of inflation is running at 3.3%.
Britain is finally getting back on its feet, reckons Nida Ali, economic advisor to the EY ITEM Club, but issues such as youth unemployment must be addressed.
The headline GDP figures were bang in line with expectations, driven by private sector expansion, signalling underlying momentum in the economy. This is very encouraging and qualifies as the right kind of growth that we have been lacking over the past couple of years.
Ali predicts that Britain will achieve growth of “more than 1% this year”.
Although the consumer sector will probably play a major role in the recovery, we also expect momentum to build in business investment and exports, which should give way to stronger growth of over 2% in 2014. But with a number of weak areas in the economy, such as high youth unemployment, disappointing wage growth and low productivity, we still have a long way to go.
Today’s preliminary estimate of 0.6% growth is only the ONS’s first stab at calculating GDP in the last quarter, as it’s only based on data from April and May.
It may well be revised in the weeks ahead, as Ben Chu of the Independent flags up:
BCC: UK firms are more upbeat
Plenty of optimism over at the British Chambers of Commerce, which represents UK companies.
John Longworth, the BCC’s director general, reckons business confidence is rising, with many bosses planning to hire more staff later this year.
Firms are feeling upbeat and are capable of expanding. More and more are adopting a ‘have a go’ attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still.
But strong, sustained growth requires efforts from the government too, as businesses need an enterprise-friendly environment for the economic to go from good to great. New and existing exporters need more support to help them diversify into fast-growing markets, and access to finance for dynamic, growing businesses must be made more available.
IoD: Headwinds and tailwinds
The Institute of Directors predicts that UK growth could pick up pace in the current quarter, but warns that inflation and the eurozone crisis could scupper the recovery.
Graeme Leach, the IoD’s chief economist, commented:
The GDP figures are encouraging and will help to further build business and consumer confidence. For the first time since the financial crisis the economy looks and feels as if there is a tailwind behind it. We are optimistic that the current rate of quarterly growth can be maintained through the second half of 2013 and into 2014. Indeed, if one looks to the current broad money supply (the amount of cash and bank deposits) as a leading indicator of economic activity, quarterly growth might actually accelerate slightly over the next 6 months.
Second quarter GDP growth of 0.6% is in line with trend growth but not above it. Consequently there is little reason to expect an imminent change in monetary policy by the MPC. The figures won’t have changed views on the size of the output gap and the amount of spare capacity in the economy. The MPC will also be aware that despite the tailwind to growth from the money supply, significant headwinds remain. Key headwinds include the squeeze on household income from inflation running ahead of earnings, bank balance sheet reduction and the ever present threat of a return of the euro crisis.
David Cameron tweets that today’s data shows Britain is moving in the right direction:
Surely it’s the hardworking people who are building the economy, prime minister?
BNP Paribas: well balanced growth
David Tinsley of BNP Paribas says today’s data shows “relatively well balanced growth” in the last three months:
Within services, distribution, hotels and restaurants rose a very solid 1.5%. That was the stand-out area of strength, most other sub-sectors averaged around 0.5/0.6%.
Overall this is a decent but not spectacular performance for the UK economy. The level of output remains 3.3% below its previous peak, which highlights there is still much work to do.
Here’s a round-up of the best comment and reaction from economists and City experts on Twitter:
Balls: It’s still a slow recovery
Ed Balls, shadow chancellor, has responded to the news that Britain’s recovery picked up speed last quarter:
After three wasted and damaging years of flatlining, this economic growth is both welcome and long overdue. But families on middle and low incomes are still not seeing any recovery in their living standards. While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages.
“This is also the slowest recovery for over 100 years. In America, where President Obama has acted to support rather than strangle the recovery, their economy has grown nearly three times faster than the UK since autumn 2010. Simply to catch up all the ground we have lost under David Cameron and George Osborne we would need growth of 1.3 per cent each quarter over the next two years.
Real risks remain. So instead of more complacency from the Chancellor, we need action to catch up all the lost ground and secure a strong and sustained recovery that everybody can benefit from.
My colleague Heather Stewart writes:
Britain’s recovery picked up pace in the second quarter, official figures have confirmed, with GDP expanding by 0.6%.
George Osborne, the chancellor, welcomed the fresh evidence that the economy has moved, as he has put it, “out of intensive care”.
“Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend,” he said, “but there is still a long way to go and I know things are still tough for families.
Chart: Service sector lead the way
As suspected, most of the growth in the last three months has come from the service sector:
This reflects the fact that services still makes up around three-quarters of the overall economy.
A recap on the individual growth rates:
• Services: +0.6%
• Production: +0.6%, including +0.4% for manufacturing
• Construction: +0.9%
• Agriculture: +1.1%
Chart: GDP over the last decade
Chief statistician Joe Grice made the point earlier that UK GDP is still 3.3% below its alltime peak in 2008.
This chart shows why — a massive tumble in output when the financail crisis struck, followed by patchy growth from the start of 2010.
Osborne: We’re holding our nerve
Chancellor George Osborne, doubtless invigorated by his adventures last night (photos), has welcomed the GDP data.
Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend – but there is still a long way to go and I know things are still tough for families.
So I will not let up in my determination to make sure we put right all that went wrong in our economy.
Unlike the unbalanced economy before the crisis, we are going to make sure that everyone benefits from this recovery.
And on a year-on-year basis, UK GDP is 1.4% higher than after the second quarter of last year.
However, we need to be cautious — as Q2 2012 contained an extra bank holiday for the Queen’s Diamond Jubilee, hitting output.
Firing on all cylinders
All four main industrial groupings within the UK economy – agriculture, production, construction and services – grew in the second quarter of 2013. That means the economy is firing on ‘all cylinders’, in City jargon.
Download the report
You can see the the data yourself on the Office for National Statistics website, here: Gross Domestic Product Preliminary Estimate, Q2 2013
Good news, but nothing special
Britain’s growth of 0.6% over the last three months is in line with City forecasts. It’s twice as strong as the 0.3% rise in GDP recorded in the first three months, and is likely to cheer the government.
Our economics editor, Larry Elliott, comments that it’s “good but unspectacular”. If it continued over a whole year then it would mean annual growth of just under 2.5% — which would have been unspectacular in ther years before the financial crisis struck.
Questions – why has the construction sector grown so well, 0.9%, in the last three months?
Joe Grice won’t speculate, but agrees that it’s a stronger performance for the industry after a difficult time.
Joe Grice of the ONS explains that Britain’s economy is still 3.3% below its pre-recession peak.
UK GDP DATA RELEASED
BREAKING: Britain’s economy grew by 0.6% in the second quarter of 2013. That’s in line with estimates.
The service sector grew by 0.6%,
Manufacturing grew by 0.4%
Construction grew by 0.9%.
Tension is building as the Office for National Statistics prepares to announce its first estimate of GDP growth, in just a few moment time.
Joe Grice, the ONS’s chief economist, is sat at the press conference in London ready to deliver the big news….
Just over 15 minutes to go until we get the first estimate of UK growth for the last three months….
A 0.6% rise in GDP (the consensus view in the City) would mean that the economy has expanded by 1.4% over the last year (unless previous data is revised). That’s a lacklustre annual growth rate.
Kit Juckes of Societe Generale reckons it won’t be enough to persuade the Bank of England to start tightening monetary policy:
Year-on year growth of 1.4% is only good when we comapre it to the recent past or to the Euro Zone. And bear in mnd, we saw quarters with 0.6 or 0.7% growth in both 2012 and 2011, but we also saw quarterly falls. This may be marginally better than stagnation but won’t alter the prospect of super-easy money being in place for a super-long time.
Photos: Osborne meets the night shift
Chancellor George Osborne prepared for this morning’s GDP data by spending last night visiting some of Britain’s army of night workers in and around Birmingham.
He visited a Warburton’s bakery, met with construction workers toiling on the M6 motorway, and toured Tesco’s National Distribution Centre near Rugby, apparently to learn about how the UK economy runs at night.
Service sector leads the way?
Where is Britain’s growth coming from? The UK government has made plenty of noise about creating the ‘March of the Makers”, but economists reckon that the dominant services sector is driving the recovery.
Marc Ostwald of Monument Securities predicts:
Retail spending is seen contributing just 0.1 ppt to today’s report, and construction output has been sluggish, with Services presumably assumed to have done most of the ‘heavy lifting’.
Dr Gerard Lyons, economic adviser to Boris Johnson, the Mayor of London, cautions against getting too excited about today’s UK GDP figures.
Spanish jobless rate finally falls
There are signs of recovery in Spain, too, this morning.
Its unemployment rate has fallen for the first time since it entered recession almost two years ago, but remains alarmingly high. The jobless rate dropped to 26.3% in the second quarter of this year, from 27.2% in January-March.
The total number of people out of work dropped to 5.98m, from 6.20m, while the employment total increase by 149,000 to 16.8m.
The south of the country continues to suffer the greatest unemployment rates, as this image shows:
UK growth figures awaited
Good morning, and welcome to our coverage of the latest events across the eurozone, the financial markets and the global economy.
Are things looking up for the British economy? We’ll find out this morning, when growth figures for the second quarter of 2013 are released.
City economists expect to see a rise in GDP, of perhaps 0.6%, which would be twice as strong as the growth in the first three months of this year, when Britain avoided falling back into recession.
That would be welcome news to a country that’s suffered weak growth, or worse, over the last few years. A strong performance is certain to be hailed by the government as vindication for its economic strategy.
The Treasury will try to maintain a cautious posture, but start to put the political squeeze on the shadow Treasury team by claiming its dire predictions of mass unemployment have been proved untrue.
The shadow chancellor, Ed Balls, in the US for talks with the Obama administration, has already prepared the ground for the change of economic gear by highlighting the continued squeeze on living standards.
The UK will be the first major economy to estimate growth for the April-June period. In GDP forecasting (as in sport), Britain typically beats most other countries so the data will be a handy – if perhaps inaccurate – guide to economic conditions:
A healthy rise in UK GDP could add to the optimism created yesterday by the latest survey of European firms, which suggested the eurozone may finally be leaving recession.
The GDP data is released by the Office for National Statistics at 9.30am BST sharp, followed by a press conference in London.
I’ll be covering the news and reaction in the liveblog, along with other key developments in the UK, the eurozone, and beyond through the day.
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