Aurelia Butler

The S&P Global/CIPS UK Purchasing Managers’ Index’s headline measure of the construction industry improved to 48.8 in January from 46.8 in December, its highest since August 2023 although still in no-growth territory. Economists polled by Reuters had forecast a smaller rise to 47.3.Tim Moore, Economics Director at S&P Global Market Intelligence, said customer demand appeared close to turning a corner as the economy picked up after a weak end to 2023.”UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon,” Moore said. Construction firms said higher shipping costs pushed up prices paid for raw materials for the first time since last September.There have been signs in other surveys that disruption to shipping in the Red Sea has delayed deliveries to British manufacturers.Tuesday’s PMI survey chimed with data from the Royal Institution of Chartered Surveyors, published last week, that showed a brighter outlook for the construction sector.S&P Global said residential house-building continued to be the biggest drag on activity although the pace of decline was the softest since March last year.Output in civil engineering was close to stabilisation and commercial building also shrank by less than in December, S&P Global said. Overall new orders growth showed the slowest rate of decline since they started to contract in August 2023 and employment fell only slightly.The wider all-sector PMI, which includes previously released services and manufacturing figures, rose to its highest in eight months at 52.6 from December’s 51.7. More

LONDON (Reuters) – British living standards will start to rise again this year but it will be 2027 before poorer households recover their pre-pandemic spending power, putting an onus on the next government to boost the country’s slow economic growth, a think tank said.Politicians should resist the temptation to offer voters tax cuts ahead of an election expected in 2024 and invest the money instead in ways to inject more speed into the economy, the National Institute or Economic and Social Research (NIESR) said.With the ruling Conservatives lagging the opposition Labour Party in opinion polls, Prime Minister Rishi Sunak and finance minister Jeremy Hunt have said they want to cut taxes, probably as soon as March 6 when Hunt will announce a budget plan.Stephen Millard, a NIESR deputy director, said the good news for 2024 was that wages would continue to rise while inflation fell quickly towards the BoE’s 2% target, probably allowing the central bank to start cutting interest rates in May.”The bad news is that trend growth remains low at around 1%,” Millard said in a statement alongside NIESR’s latest forecasts. “There is a desperate need for increased public and private investment if higher growth is to be restored.”While overall living standards look set to grow by 1.9% in the 2024/25 financial year starting in April, households in the bottom half of the income range will be between 7 and 20% worse off than immediately before the COVID-19 pandemic, NIESR said.Britain’s next government could speed up the slow recovery in household disposable income by prioritising public investment in areas such as transport infrastructure, housing and skills training over pre-election give-away tax cuts, it said.More resources should also be provided for local authorities, many of which have had to cut public services.NIESR’s latest forecasts showed it expected Britain’s economy entered a shallow recession in the second half of 2023 but would grow by 0.9% in 2024 – up from a previous forecast of 0.5% – and by 1.2% in 2025, before getting stuck at about 1% in each of the next three years. Consumer price inflation would average 2.2% in 2024, down from 7.4% in 2023, helped by lower energy prices, and remain around that level until 2028.The BoE was likely to cut Bank Rate to 3.25% by 2026, two years earlier than NIESR had previously forecast.The think tank urged the British central bank to be clearer about its plans for lowering borrowing costs, something the European Central Bank and the U.S. Federal Reserve had been more explicit about, helping financial markets and businesses. More

The BoE bought some 875 billion pounds ($1.10 trillion) of gilts over more than a decade after the 2008-09 financial crisis, using freshly created reserves to stimulate Britain’s economy, a process known as quantitative easing (QE).It is now in the process of selling down its holdings of gilts through a combination of active sales and allowing bonds to mature – also known as quantitative tightening (QT) – and its stock now stands at 737 billion pounds.”With more public money at stake than was ever envisaged when QE was launched, the Bank and Treasury should take our advice and explore whether the usual value for money considerations can be factored in when deciding the pace and level of QT they implement,” Harriett Baldwin, chair of the Treasury Committee in parliament’s lower house, said.The committee said the accounting system around the central bank’s balance sheet should be revamped if the BoE were ever to reintroduce QE.”The way in which profits and losses are accounted for should be revisited, in particular the 2012 decision to remit cashflows quarterly between the Bank and the Treasury,” the report said.These cashflows have come under increasing scrutiny. Rising bond prices and ultra-low interest rates through the 2010s made QE profitable for the BoE, which remitted these profits – worth 124 billion pounds at their peak – to the finance ministry.Now the BoE’s stock of bonds have turned into a big loss-maker for the public finances, thanks to rising interest rates and the falling value of gilts over the last couple of years. In turn the finance ministry is required to finance the BoE’s losses – thereby limiting the government’s fiscal space at a time of already stretched budgets.The BoE now expects these losses will exceed the profits made during the 2010s, resulting in a net loss of around 50 billion pounds by the mid-2030s.”We welcome the committee’s report and will consider its findings carefully before responding. We continue to encourage active debate about our monetary policy decisions and their implementation,” the BoE said in a statement.($1 = 0.7950 pounds) More

BENGALURU (Reuters) – A resurgent dollar is more likely to stay strong than not over the coming months, according to foreign exchange strategists polled by Reuters, as markets reassess how soon the Federal Reserve may cut interest rates.Bucking a brief downward trend that started late last year, the dollar index gained nearly 2.0% in January alone. Various Fed officials pushed back on rampant market speculation for a rate cut in March, with the probability now down to less than 20% from a peak of around 90%, according to rate futures.A blowout U.S. jobs report for January, clear hints from the U.S. central bank after the end of a policy meeting last week, and a follow-up television interview with Fed Chair Jerome Powell have quashed most remaining hopes of early rate cuts.The latest data from the Commodity Futures Trading Commission already showed currency speculators paring their short dollar bets for a third week in a row, a trend that is likely to continue.A near 80% majority of foreign exchange (FX) strategists, 52 of 67, in a Reuters Feb. 1-6 poll said the greater risk to their six-month forecast was for the dollar to trade stronger than they predicted. The remaining 15 said the greater risk was for it to be weaker.”The race has started, with the market at first questioning whether the dollar would continue weakening at the beginning of this year. Now I think they’ve come to believe the strong dollar should be closer towards leading the pack,” said Paul Mackel, global head of FX at HSBC, adding that the speed at which central banks cut “will dictate currency performance.” “Overall, we believe in a strong dollar this year, but not an exceptional one like in 2021 and 2022.”With growth in most major economies expected to lag the U.S. and rate differentials favoring the greenback, most strategists say it will be an uphill task to dethrone the dollar in the short-term.However, the median forecast among 76 strategists surveyed showed the dollar would weaken from current levels against most major currencies in the next three, six and 12 months, an outlook analysts have held for about a year.”Does it make sense for the market to be pricing similar cumulative rate cuts from the Fed, ECB (European Central Bank) and many other central banks … we don’t think so,” noted George Saravelos, head of FX research at Deutsche Bank.”The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years. We continue to see the risks skewed towards less Fed easing and, therefore, in favor of the USD.”The euro, trading around $1.07 on Tuesday, was expected to gain more than 4.0% to change hands at $1.12 in 12 months. The Japanese yen was forecast to strengthen more than 9.0% from current levels to 135.50/dollar.Median views for most major currencies were little changed since December.(For other stories from the February Reuters foreign exchange poll:) More

(Reuters) – The Federal Reserve made the right choice last week to hold interest rates steady amid an outlook that likely heralds more inflation declines, Patrick Harker, president of the Philadelphia Fed, said on Tuesday. The policy decision last Wednesday “is one I support,” Harker said in the text of a speech prepared for an event in Glassboro, New Jersey. “The data point to continued disinflation, to labor markets coming into better balance, and to resilient consumer spending — three elements necessary for us to stick to the soft landing we remain optimistic to achieve,” said Harker, who is not a voter on the policy-setting Federal Open Market Committee this year. He said “real progress” is being made in getting inflation back to the Fed’s 2% target. Last week, officials kept their overnight target rate range steady at between 5.25% and 5.5% and signaled that with inflation moving down, the next step is likely to lower short-term borrowing costs. But Fed Chair Jerome Powell, speaking after the Fed meeting, pushed back on the idea of a rate cut at the March policy meeting. Other Fed officials have said it could take some time to determine whether it’s time to lower rates after what had been an aggressive campaign raising them to combat high levels of inflation.Harker did not say in his prepared remarks what he expects on the rate-cut front. But he said that Fed action “has put us on the path to a soft landing,” and given how the data has come in, “the runway at our destination is in sight.”Harker had been one of the first Fed officials to argue that the central bank was done with rate hikes. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK may have narrowly slipped into a technical recession at the end of 2023, according to estimates from a leading think-tank, underscoring the fragile health of the economy as the country heads towards a general election.Gross domestic product edged down by 0.1 per cent in the final three months of last year, following an equal decline in the previous quarter, according to the National Institute of Economic and Social Research.A technical recession is defined as two consecutive quarters of contracting GDP.The outlook should improve in 2024 as inflation slows and wages continue to rise, the think-tank added, but it warned that whoever wins the election expected this year will inherit an economy that is “bereft of significant growth”. “The overall picture of flatlining output in the United Kingdom, which we have seen now for almost two years, continues,” Niesr said in research published on Wednesday.The Office for National Statistics is due to report fourth-quarter GDP on February 15. The figures will be politically sensitive, as chancellor Jeremy Hunt prepares for a March Budget that the Conservatives hope will boost their re-election chances. Hunt has said 2024 should be the year when the country should “throw off our pessimism and declinism about the UK economy”. Prime Minister Rishi Sunak last year pledged to “grow the economy”.Other forecasters also expect the final set of official figures for 2023 to confirm it was a year with little economic growth.Last week the Bank of England estimated that the economy flatlined in the final quarter of the year and projected that GDP would expand by just 0.25 per cent in 2024. Niesr was more upbeat about 2024 and predicted the economy would expand by 0.9 per cent this year.It also said inflation would fall faster than the BoE expected, and predicted price growth would hit 1.5 per cent in April thanks to falling energy prices. Given the sharp slowdown in price growth, the think-tank expects the BoE to be in a position to start cutting interest rates from the current 5.25 per cent level in May.The combination of slower inflation and sustained wage growth should mean real household disposable incomes will rise by 1.9 per cent on average in 2024-25, Niesr predicted.But, for the bottom half of income distributions, living standards would be between 7 and 20 per cent lower in 2024-25 compared with 2019-20. They would not return to pre-pandemic levels until 2027, the think-tank added.Niesr also warned that the UK’s trend rate of growth, or the sustainable pace at which it can expand, remained low given depressed levels of investment and sluggish productivity figures. The think-tank estimated the UK’s trend growth rate was just 0.9 per cent, far less than the 2.3 per cent rate in the decades leading up to the global financial crisis, and 1.2 per cent from that point until the pandemic.“Raising this trend rate of growth should be at the top of the government’s priorities for economic policy,” Niesr said.  More

WELLINGTON (Reuters) -New Zealand labour pressures have eased slightly but the country’s job market remains tight despite some cooling of the broader economy, according to data released by Statistics New Zealand on Wednesday.New Zealand’s jobless rate rose to 4.0% in the fourth quarter, but was below expectations of a 4.2% unemployment rate, while employment increased 0.4%. At the same time, wage growth increased in the quarter with the private sector labour cost index (LCI) excluding overtime recording a 1.0% lift on the quarter, stronger than the expected 0.8% increase.“Fourth-quarter figures confirmed that the exceptionally tight NZ labour market is only slowly going off the boil,” ASB Bank senior economist Mark Smith said in a note. ASB Bank expects unemployment to continue its upward journey, but it may not rise by as much as earlier expected, while wage inflation may not moderate as quickly as earlier expected, he added.The New Zealand dollar rose to $0.6097 from $0.6079 as market reduced the chance of near term rate cuts following the data. Two-year swaps climbed to a seven-week high of 4.96% and is now up 26bps for the week, although this is largely due to the market pushing out the timing of U.S. cuts.Labour cost inflation has been a challenge for the Reserve Bank of New Zealand, which has hiked aggressively since October 2021 to try to temper rising prices. Inflation, although off three-decade highs, at 4.7% remains well outside the central bank’s target band of 1% to 3%.In November, the RBNZ held the cash rate at 5.5% while signalling further hikes might be needed if inflation did not continue to ease. Since then data has showed the economy is weaker than many had thought. The central bank is due to meet at the end of the month.Michael Gordon, senior economist at Westpac Bank said wage inflation has not receded as quickly as the RBNZ would have hoped will have a bearing on its forecasts of how quickly inflation will return to with the target range.“Overall, today’s results will probably reinforce the RBNZ’s stance that interest rate cuts are much further away than what the market is currently pricing in,” Gordon said. More

(Reuters) -Fox Corp, Walt Disney (NYSE:DIS)’s ESPN and Warner Bros Discovery (NASDAQ:WBD) said on Tuesday they will launch a sports streaming service later this autumn to capture younger viewers who are not tuned in to television.The media companies will form a joint venture to create a new service from their broad portfolio of professional and collegiate sports rights, which span the National Football League, the National Basketball Association, Major League Baseball, FIFA World Cup and college competitions.The yet-to-be-named service would offer an all-in-one package of programming that would include television channels, such as ESPN, TNT and FS1, as well as sports content that is streamed. Subscribers would also have the option of subscribing to it as part of a streaming bundle from Disney+, Hulu or Max.”This means the full suite of ESPN channels will be available to consumers alongside the sports programming of other leaders,” Disney CEO Bob Iger said in a statement.Media analyst Michael J. Wolf of Activate Consulting said the venture will appeal to the 40 million households in the U.S. that pay for high-speed internet access, but don’t subscribe to pay TV. An all-sports digital offering also is likely to appeal to Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Roku (NASDAQ:ROKU), which aggregate streaming video for millions of consumers.”It’s a smart defensive move with potentially huge upside,” former Disney executive Bernard Gershon said. The launch will come at a time when cable television continues to lose subscribers. Live sports continue to serve a powerful audience draw, whether on television or online, as NBCUniversal’s Peacock demonstrated last month with its live streaming of the NFL’s AFC wild card playoff game, he said. Still, that audience comes at a hefty price, reportedly $110 billion for media rights for the NFL.”Let’s figure out a way to split the costs of rights as they go up,” said Gershon, explaining the possible deal logic. “And let’s create a platform that people will go for a range of sports and capture some of the upside.”The CEOs have been discussing a collaboration for some time, according to two people with knowledge of the situation. The partners view this sports-centric service as providing consumers with more choice, not replacing Disney’s flagship ESPN television network or Fox’s FS1, which already reach an avid group of sports fans on TV, according to sources familiar with the matter. “We believe the service will provide passionate fans outside of the traditional bundle an array of amazing sports content all in one place,” said Fox Chief Executive Lachlan Murdoch.The new entity will be jointly owned by the three media companies, which will have equal board representation and agree to license their sports content on a non-exclusive basis. An independent management team will operate the new entity.The sports-centric service signals a recognition that there is a large market for sports outside of traditional TV. This platform is designed to capitalize on that opportunity. It also provides another way for these media companies to monetize increasingly costly sports rights.”This new sports service exemplifies our ability as an industry to drive innovation and provide consumers with more choice, enjoyment and value,” Warner Bros Discovery CEO David Zaslav said in a statement.Early last year, Iger had suggested that Walt Disney wants to keep ESPN and will look for strategic partners and investors, as he sought to take the network online.Activist investor Nelson Peltz believes Disney can achieve profitability in streaming by bundling its ESPN+ online service with a larger player interested in sports, according to media reports from last month. More