Confidence takes an austerity knock

Some 600,000 public sector workers are expected to lose their jobs in the next five years, 150,000 more than under Labour’s plans, while the higher rate of VAT will hit households in the wallet.
Some 86pc of respondents to the Markit/YouGov Household Finance Index expect the cost of living to rise in the next 12 months, a record high. At the same time, there has been the sharpest drop in confidence in job security in the private sector for 13 months, “suggesting the impact of Government spending cuts has reverberated beyond the public sector”, the report said. Respondents also estimated that the value of their properties fell in August, as the research scored its lowest reading for 13 months.
The lack of confidence came despite upbeat recent retail sales figures and forecasts that GDP growth this week will be left unrevised at a strong 1.1pc.
It also flew in the face of resilient business numbers. The ICAEW/Grant Thornton UK Business Confidence Monitor found that companies posted positive turnover and profit growth in the past three months for the first time since the start of 2009, and expect to increase staff numbers in the next year by 1.1pc. Staff numbers have been falling for 18 months.
Despite the good data, business confidence remains low. The monitor found that confidence declined from +25.5 to +21.5 in the quarter and that companies expect to increase prices by only 0.9pc in the next 12 months. Salary growth in the next year is only expected to be modest, at 1.5pc, below inflation of 2pc and 3pc – explaining workers’ fears about the rising cost of living.
Tim Moore, economist at Markit said: “Stronger growth in the UK economy has done little to put a floor under the downturn in household finances.”
Michael Izza, chief executive of ICAEW, said: “UK businesses that came through the recession are now facing the challenge of surviving the recovery.”
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Eurozone growth sluggish even before austerity measures

The concern is that measure to address the debt crisis could halt economic
recovery or cause a double-dip recession.

Britain, France, Greece, Spain and Portugal has launched unpopular measures
including a freeze of public sector salaries, tax rises and a higher
retirement age.

Howard Archer, chief European economist at financial analysis group IHS Global
Insight, said: “Worryingly, there are signs in the very latest survey
releases that the heightened eurozone debt crisis and an associated earlier
or more aggressive tightening of fiscal policy in a number of countries is
starting to weigh down on economic activity.”

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Sterling tumbles on decline in UK services

Sterling fell against the dollar today after new figures revealed Britain’s
dominant services sector expanded at a slower-than-expected pace in March
after reaching a three-year high in February.

The Purchasing Managers Index (PMI), the leading index of services activity
which covers everything from financial services through to restaurants, fell
from a reading of 58.4 in February to 56.5 in March, according to index
compilers Markit and the Chartered Institute of Purchasing and Supply,
suggesting the UK still faces a slow climb out of recession.

Britain’s services sector accounts for nearly three quarters of GDP and
today’s poor reading will add to concerns about the rate of the country’s
recovery from recession between January and March this year.

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UK manufacturing grows strongly

UK manufacturing activity grew at its fastest for 15 years in March, according to a closely-watched survey.The purchasing managers’ index (PMI) rose to 57.2 last month, from 56.5 in February, and was ahead of analysts’ forecasts. It was the best monthly growth figure since October 1994. The UK data was matched by the release of similar surveys showing faster manufacturing growth in the 16-country eurozone and China. The survey, from Markit and the Chartered Institute of Purchasing and Supply, also found that new order growth in the UK was near a six-peak. Hopes raisedRob Dobson, senior economist at Markit, said: “The rebound is coming from a broad base by sector and company size, raising hopes that this will prove sustainable.” The PMI is calculated from data on new orders, production, employment, and purchasing. An index reading above 50 indicates that activity is rising. Anything under 50 shows contraction. Export order growth fell from February’s high, but the survey found that sterling’s weakness was still benefiting UK exporters. On Tuesday, the Office for National Statistics revised up its forecast of economic growth for the final quarter of 2009, saying that the economy grew by 0.4%. Interest rate fearsPMI surveys released for other economies showed that manufacturing output within the eurozone grew at its fastest pace in over three years last month. The index leapt to 56.6 from 54.2 in February. Germany, the eurozone’s largest economy, saw its best manufacturing growth for almost 10 years in March, rising to 60.2 from 57.2 in February. France, the second-biggest economy in Europe, saw its manufacturing sector expand at a pace not seen since November 2006. China’s huge manufacturing industry also continues to grow. Its PMI rose to 55.1 in March, from 52.0 a month earlier, a sharp rise that is likely to heighten concerns that Beijing may be forced to raise interest rates over the coming months.

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UK service sector signals growth

The UK service sector grew unexpectedly in May, a survey has said, indicating the economic outlook may be improving.

The PMI services index hit 51.7 in May, up from 48.7 in April. A measure above 50 indicates growth, and this was the first reading over 50 since April 2008.

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UK job market weakening rapidly

The UK job market weakened rapidly in November as permanent placements declined at record levels, a new survey from Markit Economics suggests.

The drop in permanent and temporary jobs was faster than at any point in the survey’s 11-year history. Read more

US manufacturing hits 26-year low

US manufacturing activity fell in October to its lowest level for 26 years, according to a new report from the Institute for Supply Management.

The report cited “significant demand destruction”, for the third consecutive month in which the sector contracted. Read more