UK GDP grew a record 15.5pc in third quarter
Big rebound leaves output well below pre-virus levels
September growth of just 1.1pc disappoints
FTSE 100’s eight-day rally fizzles out as global rally cools
09:17 AM
Money round-up
Here are some of the day’s top stories from the Telegraph Money team:
09:03 AM
Sunak mulls second ‘Eat Out to Help Out’
Rishi Sunak’s been doing a media round in the wake of this morning’s GDP figures. One interesting line from his interview with Sky news is on a possible return for Eat Out to Help Out.
The Chancellor says the popular meal-voucher scheme, which ran through August, may make a return, saying the Treasury will take a look at the economic situation when England comes out of lockdown.
08:45 AM
GVC renames itself ‘Entain’, trading stays strong
GVC Holdings – the FTSE 100-listed owner of betting brands including Ladbrokes Coral – has announced plans to name itself ‘Entain’, to reflect its “ambition to be the world-leader in sports betting and gaming entertainment”.
The name change is part of a new strategy, laid out today, that includes an ambition to operate fully in nationally-regulated markets by the end of 2023.
The group, which is is holding a capital markets day today said its online trading had remained strong since last month’s update. Its guidance for full-year underlying profit (EBITDA) remains in the £770m to £790m range, but it said web strength will add about £50m to its expectations for online underlying profit for next year.
08:25 AM
Travel closures knock WH Smith to £280m loss
WH Smith swung £280m into the red for its full year, as trading at its stores in airports and train stations was hammered by Covid restrictions.
My colleague Simon Foy reports:
The retailer posted a £280m pre-tax loss for the year to Aug 31, including exceptionals, compared to a £135m profit for the same period last year. Revenues declined by a third to £1.02bn.
While its high street stores experienced a robust recovery after the initial lockdown was lifted, its shops at travel hubs performed poorly as workers stayed at home and fewer Britons went abroad.
Last month, trading at its high street shops had recovered to more than 90pc of 2019 levels, while travel revenues had only recovered to 39pc.
The FTSE 250 company said it received £22m during the six months to August from the Government’s furlough scheme.
08:08 AM
European stocks drop as rally cools
European stocks have opened in the red as the vaccine-driven rally of recent days runs out of legs. Rising Covid-19 case numbers may be adding to nerves.
08:00 AM
GDP reaction: The recovery is ‘already over’
Thomas Pugh from Capital Economics says September’s meagre growth reading “shows that the recovery was rapidly running out of steam at the end of Q3 even before tighter restrictions and the second lockdown were imposed.”
He predicts a 3.5pc contraction during the fourth quarter, adding:
In any case, September and Q3 feel not just like old news but like ancient news! We already know that GDP will struggle to rise in October as tighter restrictions were imposed and that it will take a hammering in November as the effects of the second Covid-19 lockdown are felt…
But the recent news of a potentially effective vaccine means that the outlook beyond the next six months could be much rosier than we have previously anticipated.
Ouch. Breakdown of disappointing UK #GDP data show large chunks of the economy ground to a halt completely in September 🙄
Only a few sectors showed any growth, incl. professional services (hat tip to #homeworking), transport (home deliveries), education and health... pic.twitter.com/i5wjjql3wV— Julian Jessop (@julianHjessop) November 12, 2020
UBS economist Dean Turner said that the Bank of England’s asset purchase expansion should help shield the UK economy:
The Bank of England has been ahead of the data with its announcement of QE which, along with the current fiscal stance, will support the economy during the latest phase of Covid restrictions. We think that this will be enough to enable the recovery to resume when restrictions begin to ease.
UK GDP bounces back by over 15 percent in Q3 but is set to fall back in Q4 due to the current lockdown. Even in Q3 output was nearly 10 percent below a year ago. So the economy faces a long haul back to the pre-pandemic level of activity over the next two years.
— Andrew Sentance (@asentance) November 12, 2020
Ed Monk from Fidelity International noted that the current lockdown is significant more lenient than the one launched in late March:
The current lockdown will be a significant headwind to growth in the fourth quarter but restrictions are slightly less stringent this time, allowing sectors like construction and housing to remain open. Output is therefore unlikely to plunge to the depths seen in the first lockdown.
07:51 AM
Trade surplus narrows
The UK’s total trade surplus narrowed in the third quarter, falling by £3.4bn to £4.2bn (excluding precious metals).
The drop was driven by an increase in the trade in goods deficit, which widened by £2.4bn to £24.9bn in the third quarter.
The ONS said:
The trade in services surplus narrowed by £1.0bn to £29.1bn in Quarter 3 2020. Services exports decreased by £0.3bn, while services imports rose by £0.7bn. The main drivers of the change in exports and imports were travel, other business services and intellectual property.
The underlying trade in goods deficit widened by £2.4bn to £24.9bn in Quarter 3 2020. Goods exports increased by £14.1bn, while goods imports increased by £16.6bn. The increase in goods exports and imports was driven mostly by increases in machinery and transport equipment, particularly road vehicles such as cars, and lesser increases in miscellaneous manufactures and material manufactures.
07:38 AM
Growth plateaus in September
Looking at the breakdown of September’s output figures, it’s apparent that growth had severely slowed down by the end of the third quarter:
The ONS said:
The services sector grew by 1.0pc, production by 0.5pc and construction by 2.9pc in September 2020, however, it is important to note that since the peak monthly growth in June, growth in GDP and its main sectors has slowed.
07:27 AM
Going down?
Here’s how today’s GDP figures map onto the Bank of England’s latest forecasts, released last week:
The Monetary Policy Committee expects a drop during the fourth quarter, before a steady recovery from early 2021 onwards. Growth in the fourth quarter was slightly lower than the BoE’s expectation.
07:21 AM
Rishi Sunak: Growth is likely to get worse
Responding to this morning’s GDP figures, Chancellor Rishi Sunak said:
Today’s figures show that our economy was recovering over the Summer, but started to slow going into Autumn. The steps we’ve had to take since to halt the spread of the virus mean growth has likely slowed further since then.
But there are reasons to be cautiously optimistic on the health side – including promising news on tests and vaccines. My economic priority continues to be jobs – that’s why we extended furlough through to March and I welcome the news today that nearly 20,000 new roles for young people have been created through our Kickstart scheme.
There are still hard times ahead, but we will continue to support people through this and ensure nobody is left without hope or opportunity.
07:19 AM
UK is world’s biggest economic loser
The ONS’s latest stats release includes an international comparison, which shows UK GDP had dipped harder than most other major economies by the end of the third quarter.
The stats body released this graph, in which fourth-quarter GDP for the various countries has been index as 100:
As you can see, the UK and Spain has taken the biggest knock, which can partially be ascribed to both countries’ reliance on consumer spending.
The ONS said:
The UK economy is still 9.7pc lower in Quarter 3 2020 compared with the end of 2019. This is more than twice as large as the cumulative drop in GDP observed in Italy, Germany and France and nearly three times the size of the cumulative drop of 3.5pc in the US.
07:12 AM
Record growth, with caveats
Presenting today’s data, the Office for National Statistics said:
This is the largest quarterly expansion in the UK economy since ONS quarterly records began in 1955. However, it is worth noting that this reflects the continued easing of lockdown restrictions in the third quarter as well as some recovery of activity from the steep contraction in April.
The level of GDP in the UK is still 9.7pc below where it was prior to the pandemic at the end of 2019. Compared with the same quarter a year ago, the UK economy fell by 9.6pc.
The stats body warned of a loss of momentum through the third quarter:
The monthly path of GDP in Quarter 3 2020 reveals that there has been a slowdown of growth in August and September as momentum has eased through the quarter. GDP increased by 6.3pc in July, driven by accommodation and food services as lockdown restrictions were eased.
07:07 AM
GDP at 2014 levels
Looking at overall GDP, September’s rise puts output back at 2014 levels, 8.2pc below the February 2020 level.
The ONS says:
The levels of expenditure remain considerably below their levels before the effects of the coronavirus, as the pickup in business investment has been much weaker than private consumption.
07:04 AM
September expansion falls short
Growth in September fell slightly short of expectations, with GDP up just 1.1pc month-on-month – economists had hoped for 1.5pc.
07:01 AM
UK economy grew 15.5pc in third quarter
Just in: Britain’s GDP rose 15.5pc in the third quarter, falling slightly short of expectations but still striking a record.
06:58 AM
The number to beat
According to historic data released by the Bank of England, the UK’s previous best-ever quarter for growth was the second three months of 1921, as the UK economy bounced back from its post-WW1 doldrums with a 13.7pc expansion. Anything higher than that today will set a record.
06:49 AM
A rise – then a risk
The 15.8pc quarterly growth predicted by economists for the July–September period would still leave GDP down 9.4pc year-on-year, meaning output remains well below pre-virus levels.
A positive reading (as is certain) would take the UK out of its worst-ever technical recession, but beyond that there won’t be much to celebrate in the ‘rubber band’ recovery.
The prospect of a complete recovery in the near term looks unlikely: the fourth quarter (October–December) is likely to show renewed weakness, or comparatively tepid growth, due to increased restrictions and the current lockdown.
Purchasing managers’ index surveys suggested activity growth has slowed since the summer rebound boom, with a decline in services activity meaning the UK was hovering above a new contraction before this month:
Earlier this week, my colleagues Toms Rees and Tim Wallace took a look at what recent developments – including hopes for a vaccine – could mean for GDP’s trajectory:
06:40 AM
Agenda: Focus on growth
Good morning. All eyes are on the UK’s latest GDP figures, out at 7am, which are expected to show the biggest quarterly rise in output ever recorded.
Monthly figures for September will round out the third quarter, which saw the British economy rebound from the severe effects of lockdown – which prompted a 19.8pc drop in second-quarter output. Economists expect a 1.5pc monthly increase in September, and 15.8pc quarterly rise overall.
Elsewhere, the FTSE 100’s stellar eight-day rally appears to have finally run out of legs, with the index set to cool off slightly and drop at the open today.
5 things to start your day
1) Christmas presents at risk as online orders rocket: Retailers are bracing for chaos as supply chain mayhem threatens to deprive millions of presents and wreck hopes of a profitable Christmas.
2) Don’t bank on a swift recovery, warns UBS chairman: Bank shares soared this week but UBS chairman Axel Weber warns that the positive vaccine news does not mean a swift recovery.
3) Youth unemployment scheme suffers slow start amid second wave: A fraction of the hundreds of thousands of expected placements have been made since launching Sunak's £2bn youth unemployment scheme.
4) Biggest tax hikes since 1990s needed to fix public finances: An economic Think Tank warns hikes on millions of workers earning more than £20,000 will be needed to repair the battered public finances.
5) Competition chief attacks new foreign takeover regime: Former top competition watchdog hits out at an “intrusive” crackdown, as dealmakers say new rules could tip crisis-hit firms over the edge.
What happened overnight
Asian markets struggled on Thursday as a week-long rally sputters, with sentiment split between vaccine hopes and Joe Biden's election win on one side and fears over a surge in virus cases that threatens any economic recovery.
In early trade, most markets were lower with traders taking the opportunity to cash in profits.
Hong Kong, Shanghai, Sydney, Singapore, Seoul, Taipei and Jakarta were all in the red, though Tokyo ended the morning slightly higher and Wellington edged up.
Coming up today
Corporate: 3i, Burberry, National Grid, QinetiQ Group, Young & Co's Brewery (Interim results); WH Smith (Full year); Hill & Smith, ITV, OneSavings Bank, Premier Oil, Spirent Communications, Vesuvius, Vistry (Trading statements)
Economics: GDP (UK); industrial production (eurozone); inflation, jobless claims (US)