The eurozone’s central bank has halved the pace of its money-printing programme, and extended it for another nine months
- Latest: Draghi’s press conference is underway now
- NEWSFLASH: ECB has cuts its stimulus programme
- QE will run for another nine months, to September 2018
- NEWSFLASH: UK retail sales balance tumbles
- 50% of retailers report falling sales, vs just 15% with rising sales
- UK car production tumbled in September
- Fourth piece of bad auto news this month
- SMMT: No-deal Brexit would be our worst outcome
Q: Did you discuss alternative courses of action, before deciding to cut the pace of the APP to €30bn per month?
No, says Draghi. The “atmosphere was pretty positive” at today’s meeting, thanks to the increase in employment across the eurozone and rising wages.
Q: Did the ECB discuss changing the composition of the assets bought under your stimulus programme?
Mario Draghi then issues his tradition call on eurozone politicians to do better.
In order to reap the full benefits from our monetary policy, other parties must also act, he says.
Economic growth in the eurozone continued “unabated”, declares Draghi proudly.
He says there has been an upswing in business investment. Construction investment has also improved, and eurozone exports are benefitting from the improved picture in the global economy.
Draghi says eurozone growth has continued “unabated.” New word in his vocabulary.
Draghi talking about the eurozone economic recovery like a proud dad
Draghi is talking about how the ECB has ‘recalibrated’ its bond-purchase programme.
Turning to the economic picture, Draghi says that domestic prices pressures are still muted.
Thus, “continued monetary policy support” is needed to underpin the economic outlook and keep inflation on track.
Mario Draghi begins by telling reporters that his governing council conducted a “thorough” analysis of the outlook for inflation in the eurozone today.
Draghi confirms that the ECB decided to leave interest rates at their current record low, and expects to leave borrowing costs at these levels for an extended period.
Today’s monetary policy decisions were taken to preserve the very favourable financing conditions that are still needed for a sustained return of inflation to levels that are close to, but below 2%.
Over in Frankfurt, ECB president Mario Draghi is explaining today’s decisions to the press pack.
You can watch it live here:
Anna Stupnytska, global economist at Fidelity International, reckons the ECB was right to maintain its QE programme for another nine months.
“The Euro area recovery is certainly becoming more entrenched, with broad-based growth across countries and sectors of the economy. The euro strength seen so far is unlikely to derail the growth story or pave way for a return of deflationary worries.
At the same time, however, given the remaining slack in the labour market, inflation is far below the target and is likely to rise only at a very sluggish pace.
German conservative MEP Markus Ferber has heavily criticised the ECB’s decision to extend its stimulus programme.
Ferber argues that there’s no justification for buying tens of billions of government and corporate bonds each month, with newly created money.
“The Eurozone is growing strongly, inflation is picking up, and downside risks are minimal. It seems like the textbook case for the right time to phase out quantitative easing and start a normalisation of monetary policy.
Instead the ECB locks in their flawed monetary policy approach for the months to come and defers normalisation indefinitely. I am disappointed that the ECB missed yet another chance to initialise a normalisation of monetary policy. The asset purchasing program will keep distorting the market and lays the foundations for the next crisis.”
The euro has dropped by half a cent against the US dollar since the ECB announcement, to $1.176.
That suggests that some traders had expected a more dramatic cut to the Bank’s stimulus programme.
My colleague Richard Partington tweets:
ECB says it plans to cut asset purchases from €60bn to €30bn from Jan. Keeping €30bn until Sept 2018. Slow withdrawal from QE.
BREAKING: The European Central Bank has slowed the pace of its stimulus programme.
From January 2018, the ECB will buy €30bn of new bonds each month — that’s down from €60bn per month at present.
From January 2018 the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP [Asset Purchase Programme] in terms of size and/or duration.
After a busy morning, City traders are now turning their attention to Frankfurt.
The European Central Bank is poised to announce the decisions taken at today’s governing council meeting. We’re expecting the ECB to leave interest rates at their record lows, but also outline how it could slow its bond-buying programme (our opening blogpost has more details).
Labour MP Anneliese Dodds, who represents Oxford East, tweets:
.@CBItweets monthly survey: Retail sales have suffered sharpest monthly decline since fin crisis. Symptom of falling real pay under Tories.
In other bad news…the Unite union in Northern Ireland has warned that aerospace company Bombardier is planning to cut 280 jobs at its Belfast plant.
“The jobs to be lost are functional as opposed to operational meaning losses will be concentrated outside the main production lines but this will be devastating news for the workers concerned and their families in the run-up to the end of the year.
Unite is calling on management to review this decision.
Laith Khalaf, senior analyst at Hargreaves Lansdown, says UK retailers will be hoping the Bank of England doesn’t raise interest rates at its November meeting:
These latest numbers from the CBI will only add to the mixed economic signals to be digested by the Bank of England next week when it decides whether to increase interest rates for the first time in over a decade. Retailers will breathe a sigh of relief if the bank chooses not to increase rates and further burden consumers with additional mortgage costs, at a time when they are already feeling a bit of a pinch.
As we enter the key Christmas trading period, the retail industry is desperately in need of some festive cheer.
If you’re just tuning in, here’s our news story on the retail sales figures:
The fastest monthly fall in high street sales since the height of the recession in 2009 has raised fears for the retail sector ahead of the crucial Christmas trading period.
A survey by the the CBI found that 50% of retailers suffered declining sales in September while only 15% benefited from an increase, leaving a rounded balance of -36%, the lowest since March 2009.
Debenhams, the UK department store chain, has added to the uncertainty in the UK retail sector today.
It reported a 44% slide in pre-tax profits at the company over the last 12 months, and warned that the retail environment is challenging.
The environment remains uncertain and we face tough comparatives over the key Christmas weeks.
Hannah Maundrell, editor in chief of money.co.uk, says Britain’s cost of living squeeze is hurting the retail sector:
“These results are definitely worrying for retailers as they are clearly starting to feel the impact of inflation.
“This survey doesn’t cover the whole market, however it could be a good indication that consumers are being more wary in the run up to Christmas and aren’t willing to part with the shiny new pounds in their pocket quite as quickly as before. Wages aren’t rising in line with the inflation which could be one reason why sales are down.
The news that UK retailers suffered an October sales slide could weigh on sterling.
The pound has lost almost half a cent today, to $1.322.
Shocker in the CBI retail sales survey today: -36%, worst since ’09. Squeaky bum time if you’re a BOE ratesetter on the fence about a hike. pic.twitter.com/PqSx2OFWvF
‘Non-specialist’ goods shops, such as department stores, suffered the brunt of the spending slowdown this month.
Britons also cut back on furniture and carpets, in another sign that consumers are reining in their spending.
Sales volumes expanded in other normal goods (74%), recreational goods (+64%) and hardware & DIY (43%). Meanwhile, sales volumes decreased in specialist food & drink (-32%) and non-specialised goods (i.e. department stores (-45%).
Economist Sam Tombs of Pantheon has been forced to redraw his graph to capture the tumble in retail sales this month!
The CBI’s reported sales bal. was so weak in Oct I had to adjust my chart’s scales – never a good sign. Thankfully the bal. often misleads pic.twitter.com/2ylzo7qmzI
The decline in UK retail sales shows that consumers are cutting back, says Howard Archer of the EY Item Club. It’s a bad sign for growth….
Today’s CBI retail sales report is much weaker than the City expected.
Analysts had expected a majority of firms to report rising sales. So the news that only 15% of retailers are seeing a pick-up in demand, while 50% are suffering a decline, is a worry.
Here’s the details of the retail sales slump:
UK CBI Retailing Reported Sales Oct: -36 (est 23; prev 42) pic.twitter.com/b672wsOnQv
BREAKING: UK retail sales have suffered their sharpest monthly decline since the financial crisis.
That’s according to the CBI’s monthly survey of the UK retail sector.
“It’s clear retailers are beginning to really feel the pinch from higher inflation.
While retail sales can be volatile from month to month, the steep drop in sales in October echoes other recent data pointing to a marked softening in consumer demand.
UK cbi retail sales index just fell off a cliff pic.twitter.com/q98qsGbGWk
Deep cuts in inward migration from other EU countries after Brexit would seriously hit Scotland’s economy, the Scottish government has warned, after new projections showed it would lead to a fall in the country’s working age population.
New data from the National Records of Scotland published on Thursday shows all future population growth depends on continued inward migration from the rest of the UK and overseas, because birthrates are projected to fall while numbers of pensionable adults to increase by 25% by 2041.
“The stark reality outlined in today’s figures is that projected growth in Scotland’s population will slow significantly if levels of EU migration are reduced. And in that scenario the population is also predicted to start declining again within the next 25 years.
“That would have a significant negative impact on Scotland’s economy and our ability to fund the public services we will need for an ageing population.”
Britain’s gender pay gap remains too high, and is falling too slowly, says TUC General Secretary Frances O’Grady.
Here’s her take on today’s pay figures:
“The full-time gender pay gap has inched a bit smaller. But there is still a chasm between men and women’s earnings.
“At this rate it’ll take decades for women to get paid the same as men.
That’s the length of a whole career. Another whole generation of women getting paid less than men. Unacceptable.
Good news! Britain’s gender pay gap has hit its lowest level in at least two decades.
Bad news! Women are still being paid over 9% less than men.
Nuanced but broadly positive gender pay gap picture. Overall gap up, but due to falling (+’ve) FT and (-‘ve) PT gaps & shift towards FT work pic.twitter.com/5Ohz2N2mJB
Brexit is a particular worry to the UK auto industry because components typically cross the channel several times before a car finally rolls off the production line.
The Financial Times did a good piece on this last year, pointing out that the bumper for a new Bentley could be made in Europe, checked in Crewe, painted in Germany, and then assembled in Britain.
This part uses steel from Europe which is machined in the UK before going to Germany for special heat treatment. The injector is then assembled at Delphi’s UK plant in Stonehouse, Gloucestershire, before being sold on to truckmakers based in Sweden, France or Germany.
If the resulting truck is sold into the UK market, the component or materials used in it will have crossed the Channel five times before the lorry is ever driven by the customer. If tariffs are applied at each stage, the cost could be substantial.
Getting back to cars, here’s a table showing how Britain’s factories churned out 4% fewer vehicles in September.
Barclays CEO Jes Staley won’t enjoy today’s share price fall…. and he won’t get much relief from browsing through today’s analyst notes either.
Investment bank Keefe, Bruyette & Woods are particularly cutting, following the drop in Barclay’s investment bank income.
‘we had thought #Barclays would struggle to disappoint low Q3 expectations. It looks like they have succeeded’ punchy from KBW
Litigation still remains a risk for Barclays, with more than 20 separate investigations ongoing, not least one relating to CEO Jes Staley’s attempt to uncover a whisteblower in his own ranks…..
After making some good progress, Barclays appears to be stalling somewhat and it’s now touch and go whether the bank will break even in 2017. With the bank’s restructuring complete, Jes Staley will want to recover some momentum as we move forward into next year.’
Markets revenues down 30% yoy for Barclays. Only 5.1% ROE – hardly encouraging figures for investors https://t.co/XtDcAuIq2b
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Shares in Barclays have slumped to the bottom of the FTSE 100 this morning, after its latest financial results disappointed traders.
The third quarter was clearly a difficult one for our Markets business within Barclays International. A lack of volume and volatility in FICC [Fixed Income, Currencies and Commodities] hit Markets revenues hard across the industry, and we were no exception to this trend.
Today’s drop in UK car production is the fourth blow to the auto industry in recent weeks.
We’ve also seen that:
Inchcape, the new and used car dealer, has also warned that Britain’s car sector is deteriorating.
In its latest financial results, released this morning, it says:
UK market slowing, as expected, resulting in continuing margin pressure on vehicles.
The storm clouds gathering over Britain’s car industry have darkened this morning, after manufacturers suffered a sharp fall in production.
Output shrank by 4.1% in September, new figures from the motor industry show.
“With UK car manufacturing falling for a fifth month this year, it’s clear that declining consumer and business confidence is affecting domestic demand and hence production volumes. Uncertainty regarding the national air quality plans also didn’t help the domestic market for diesel cars, despite the fact that these new vehicles will face no extra charges or restrictions across theUK.
Brexit is the greatest challenge of our times and yet we still don’t have any clarity on what our future relationship with our biggest trading partner will look like, nor detail of the transitional deal being sought. Leaving the EU with no deal would be the worst outcome for our sector so we urge government to deliver on its commitments and safeguard the competitiveness of the industry.”
Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.
Good Taper Day morning from Frankfurt. #ECB
We expect a reduction in monthly asset purchases to perhaps €45 billion euros in January from the current €60 billion. The ECB will probably refrain from a firm commitment to an end-date for its program at tomorrow’s decision; we expect purchases to continue until at least the third quarter of 2018.
Following the numerous signals from President Draghi and colleagues over recent months, the market is well primed for some form of taper announcement. But there is still a delicate balance to strike.
Taper too quickly and the markets might worry that the ECB’s historically hawkish instincts – typified by the premature (and subsequently reversed) interest rate hikes of 2011 – may be resurfacing. One obvious consequence could be an undesirable rise in the euro. But too tentative a move could fuel concerns that the ECB has little confidence in the economic outlook and the effectiveness of its previous policy measures.