Reeves: I am not satisfied with these numbers
Chancellor Rachel Reeves says she is “not satisfied” with today’s GDP figures showing the economy slowed over the summer with just 0.1% growth (and a shock contraction in September).
Reeves says:
“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.
“At my Budget, I took the difficult choices to fix the foundations and stabilise our public finances.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal.”
Key events
Just in: US retail sales rose by more than expected last month.
Sales at American retailers and food service outlets rose by 0.4% month-on-month in October, beating forecasts of 0.3% growth, and were 2.8% higher than a year ago.
Spending at motor vehicle & parts dealers jumped 1.6% in the month, while electronics & appliance store sales were 2.3% higher.
Clothes sales dipped by 0.2% in the month, though, while grocery store sales only rose 0.1%.
Analysts at brokerage Jefferies have pointed out that RFK Jr told NBC in an interview that he would not “take away” available vaccines.
They added, though, that the overall prospects for biotech development ventures were seen as dimmed by his nomination, saying:
“The point is around sentiment, stance and perspective – that impacts biotech investors’ view of how FDA [the U.S. Food and Drug Administration regulator] and other HHS issues will evolve (ie not accelerating drugs and pro-biotech).”
The pound has dipped against the euro today, as traders have digested the worse-than-expected UK growth figures.
Sterling is down 0.3% at €1.199.
Joseph Dahrieh, managing principal at trading platform Tickmill, says the pound continues to face downward pressure:
Concerns and speculation surrounding the Bank of England’s (BoE) future rate decisions increased, as market participants question whether the BoE will slow its rate-cutting cycle, thereby dampening investor sentiment.
The pound’s trajectory will largely depend on the effectiveness of the UK’s new expansionary budget, which aims to stimulate growth but also risks reigniting inflation, adding further uncertainty to the outlook for UK monetary policy.
The UK hospitality industry are hoping that the summer slowdown might encourage the government to rethink their plans to raise employers’ national insurance contributions.
Kate Nicholls, Chief Executive of UKHospitality, says:
“These lacklustre growth figures make it clear that the UK economy is still in a very fragile place. How the Government approaches the economy and consumer confidence going forwards, in both its policy and its language, will matter enormously.
“Its policy to inflict £3.4 billion in costs on hospitality businesses in April is already having a negative impact on decision-making on investment and jobs, which will no doubt stifle economic growth once again.
The UK’s weak growth over the summer shows the scale of the challenge facing the new government, says Sam Miley, managing economist at the CEBR think tank:
“UK GDP has surprised to the downside, recording growth of just 0.1% in Q3. Though inheriting an economy struggling for momentum, this will still come as a blow to the new Labour government.
This reading means that the economy will likely record growth below 1.0% for a second consecutive year, in line with Cebr’s forecasts.
Looking ahead, growth is also expected to be weaker as a result of the policies outlined in last month’s Budget, which are expected to curtail private sector activity, particularly through the investment channel, while also impacting earnings growth and inflation.”
Retail group Frasers is inching closer to the point where it would need to make a takeover offer for clothing retailer Boohoo.
Boohoo has reported to the City that Frasers has lifted its stake to 28%, from 27% before.
Under stock market rules, if you control 30% or more of a company’s shares you must make a mandatory takeover offer.
Last month, Frasers tried to install its founder, the retail tycoon Mike Ashley, as chief executive of Boohoo, accusing the board of having “lost its ability to manage” the online fashion company.
The Trump Trade rally that has been driving Wall Street higher appears to have fizzled out.
US stock index futures are falling today, with the S&P 500 share index on track to drop over 0.5% at the open.
Investors are getting edgy after top US central banker Jerome Powell said the Federal Reserve doesnt need to be “in a hurry” to cut interest rates, given the strong economy.
Today’s news that the UK economy shrank by 0.1% in September does not bode well for growth in the final quarter of this year, warns Gabriella Dickens, G7 economist at AXA Investment Managers.
AXA have revised down our forecast for Q4 marginally to 0.2%, from 0.3% previously.
Dickens says:
Indeed, with both business and consumer surveys edging lower in October as people waited for the new Chancellor’s inaugural Budget, we now see the economy increasing by 0.2% quarter-on-quarter in Q4, leaving growth up 0.9% across 2024, broadly in line with the Bank of England’s forecast.
EC: German economy to contract this year
The European Commission has also warned that Germany’s economy will shrink this year.
Its latest economic forecasts, just released, predict that economic activity in Germany will decline by 0.1% in 2024.
In 2025, Germany’s economy is forecast to grow by 0.7% – the weakest in the EU – followed by 1.3% growth in 2026.
Growth forecast for 2025 (%):
🇲🇹 4.3
🇮🇪 4.0
🇵🇱 3.6
🇭🇷 3.3
🇱🇹 3.0
🇧🇬 2.9
🇨🇾 2.8
🇷🇴 2.5
🇩🇰 2.5
🇸🇮 2.5
🇨🇿 2.4
🇬🇷 2.3
🇱🇺 2.3
🇸🇰 2.3
🇪🇸 2.3
🇵🇹 1.9
🇭🇺 1.8
🇸🇪 1.8
🇳🇱 1.6
🇪🇺 1.5
🇫🇮 1.5
🇧🇪 1.2
🇪🇪 1.1
🇱🇻 1.0
🇮🇹 1.0
🇦🇹 1.0
🇫🇷 0.8
🇩🇪 0.7Autumn #ECForecast → https://t.co/2Fw58Zupjn
— European Commission (@EU_Commission) November 15, 2024
On Germany, the EC says:
High uncertainty has been weighing on consumption and investment, and the trade outlook has worsened as global demand for industrial goods weakened. Going forward, domestic demand is set to pick up, driven by increases in real wages.
EU warns of rising risks to free trade
Back in Europe, the European Commission has warned that an increase in trade protectionist measures could “upend global trade” and hurt the EU’s economy.
In a sign that Europe is worried about Donald Trump imposing new tariffs, European Economic Commissioner Paolo Gentiloni told reporters:
“The level of integration between our economies is such that EU-U.S. trade relations are a stabilising economic and political force.
“Despite trade disputes and regulatory divergences, both regions maintain a shared interest in upholding high standards, fair competition and stability in global markets.”
Gentiloni was speaking after the EU released its latest economic forecasts. They predict eurozone growth will pick up, from 0.8% this year to 1.3% in 2025 and 1.6% in 2026.
The EU warns, though, that uncertainty and downside risks to the outlook have increased, saying:
Russia’s protracted war of aggression against Ukraine and the intensified conflict in the Middle East fuel geopolitical risks and risks to energy security. A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU’s highly open economy.
The prospect of Robert Kennedy Jr’s role in the next administration has alarmed public health officials who warned in recent days about the risks of curtailing vaccination efforts, Bloomberg reports, adding:
Vaccines are crucial to protecting children from deadly diseases, Centers for Disease Control and Prevention director Mandy Cohen said Wednesday at the Milken Institute Future of Health Summit in Washington.
“I don’t want to have to see us go backward in order to remind ourselves that vaccines work,” she said.
Vaccine maker stocks fall as Trump chooses RFK Jr. to lead health service
From one RFK to another….
Shares in pharmaceuticals companies across the globe are sliding after Donald Trump nominated Robert F Kennedy Jr. to lead the US Department of Health and Human Services.
RFK Jr is an anti-vaccine activist who has embraced a range of health-related conspiracy theories, including that vaccines are tied to autism in children, that HIV is not the cause of Aids and that certain antidepressants are linked to a rise in school shootings.
Kennedy has also called for bans on hundreds of food additives and chemicals, and wants to cut ultra-processed foods out of school lunches as part of a goal to reduce the incidence of diet-related chronic diseases.
Announcing his choice, Trump posted:
“The Safety and Health of all Americans is the most important role of any Administration, and HHS will play a big role in helping ensure that everybody will be protected from harmful chemicals, pollutants, pesticides, pharmaceutical products, and food additives that have contributed to the overwhelming Health Crisis in this Country.”
But the decision has been quickly criticised.
California’s Democratic representative Robert Garcia called the nomination “fucking insane”, writing on X:
“He’s a vaccine denier and a tin foil hat conspiracy theorist. He will destroy our public health infrastructure and our vaccine distribution systems. This is going to cost lives.”
Shares in pharmaceutical firm Moderna, which produces mRNA vaccines, fell over 5% last night, and are down another 1.8% in premarket trading. BioNTech, the German drugmaker that helped develop a Covid vaccine with Pfizer, fell 7%.
In London, AstraZeneca (-2.8%) and GSK (-2.75%) are among the big fallers on the FTSE 100 this morning.
AJ Bell investment director Russ Mould says:
“Pharmaceutical stocks left the FTSE 100 looking sickly on Friday morning as AstraZeneca and GSK shares came under pressure.
“The announcement of vaccine-sceptic Robert F. Kennedy Junior as health secretary pick for the incoming Trump administration has spooked investors in the sector, with US drug companies also seeing their shares come under significant pressure overnight. The impact on the sector is hard to judge fully at this stage but, at the very least, it will cause a good deal of uncertainty.
Chemicals firm Croda, which makes ingredients for food products, are down 4.1% in London.
Germany’s Roche are down 2%, while Denmark’s Novo Nordisk (the firm behind Wegovy and Ozempic, which also makes vaccines) are down 2.5%.
We shouldn’t forget that GDP is a somewhat flawed measure of what’s actually happening in the world.
It’s calculated by assessing how much is produced, spent and earned in the economy over a particular time. The problem with that approach is that it is assessing transactions, rather than the social and environmental impact of the economic activity.
Famously, Bobby Kennedy said GDP: ‘measures everything except that which is worthwhile’ in a landmark speech in 1968, saying:
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.
Heather Stewart: GDP figures will worry Treasury
Heather Stewart
It was hardly surprising that the chancellor, Rachel Reeves, declared herself “not satisfied” with the news that GDP expanded by a measly 0.1% in the three months to September, our (new) economics editor Heather Stewart writes.
Few could have expected Labour to kickstart an economic renaissance from day one, despite its “mission” to deliver the highest sustained growth in the G7.
But the data will worry the Treasury for two reasons: first, it shows the scale of the challenge ahead; and second, it raises the question of whether the grim mood deliberately created over the summer dented confidence and held back growth.
The figures, released on Friday, show that since Labour swept into government in July, the economy has barely expanded. The 0.1% growth in output over the quarter was weaker than the 0.2% expected by market analysts….
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