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(Alliance News) - The UK economy shrank in the first three months of the year, led by a sharp fall in March, data from the Office for National Statistics showed on Wednesday.
UK gross domestic product fell 2.0% sequentially in the first quarter after a flat reading for the fourth quarter of 2019. Annually, first quarter GDP fell by 1.6%.
Though dire, the latest figures were better than expected by the market. Consensus, according to FXStreet, had seen a quarter-on-quarter decline of 2.5% and an annual fall of 2.1%.
In the month of March alone, the economy contracted 5.8% month-on-month, having fallen 0.2% in February and advanced 0.1% in January.
Wednesday's release captures the first direct effects of the Covid-19 pandemic and government measures taken to reduce stem the spread of the virus, the ONS said. The "most significant" was the introduction of restrictions in movement across the UK, which began on March 23.
"With the arrival of the pandemic nearly every aspect of the economy was hit in March, dragging growth to a record monthly fall," said Jonathan Athow, deputy national statistician for Economic Statistics.
"Services and construction saw record declines on the month with education, car sales and restaurants all falling substantially. Although very few industries saw growth, there were some that did including IT support and the manufacture of pharmaceuticals, soaps and cleaning products," he added.
The ONS noted that the GDP estimates for March and the first quarter are "subject to more uncertainty than usual" due to challenges faced collecting data under the government's public health restrictions.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.0% at 5,935.97
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Hang Seng: up 0.1% at 24,280.43
Nikkei 225: closed down 0.5% at 20,267.05
DJIA: closed down 457.21 points, 1.9%, at 23,764.78
S&P 500: closed down 2.1% at 2,870.12
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GBP: soft at USD1.2293 (USD1.2310)
EUR: soft at USD1.0849 (USD1.0870)
Gold: soft at USD1,703.42 per ounce (USD1,707.15)
Oil (Brent): soft at USD29.58 a barrel (USD29.80)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
1230 BST UK NIESR monthly GDP tracker
1100 CEST EU industrial production
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US producer price index
1030 EDT US EIA weekly petroleum status report
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UK retail sales slumped at the fastest pace on record in April, with lockdowns bashing the sector and turning the crucial Easter period into a "more modest affair". The British Retail Consortium-KPMG sales monitor showed April sales sank by 19% year-on-year, compared to a 2.4% rise a year before. "This is the worst decline recorded since our monitor began in January 1995, reflecting the effect of lockdown measures. It is below the 3-month and 12-month average declines of 7.5% and 2.3% respectively, both record declines in themselves," BRC noted. During the three months to April, non-food sales plummeted by 36%, way below the 12-month average fall of 12%. Food sales however, were 6.0% higher during the three-month period, which saw a period of consumer stockpiling amid fears of shortages due to the pandemic. The 12-month average rise in food sales stands at 1.6%. For April alone however, food sales declined year-on-year on a like-for-like basis.
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The European Commission reckons EU countries could reopen borders with other member states for the tourist season if they have Covid-19 infections under control and well-prepared health-care systems, according to a draft document seen by dpa. "Handled correctly, safely and in a coordinated manner, the months to come could offer Europeans the chance to get some well-needed rest, relaxation and fresh air," the guidelines, due to be presented later on Wednesday, read. However, removing restrictions on movement brings a risk of a second spike in infections, the commission warns. The EU's external borders will stay sealed until June 15, if its 27 member states stick to the commission's advice from last week. But within the bloc, capitals such as Paris and Berlin are conferring on reopening shared frontiers. While the decision to soften border controls is in the hands of each country in the EU, the bloc's executive believes the peak tourism season of June to August could be partially clawed back.
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BROKER RATING CHANGES
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GOLDMAN SACHS RAISES INFORMA TO 'BUY' ('NEUTRAL') - TARGET 515 (499) PENCE
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DZ BANK RAISES VODAFONE TO 'BUY' (HOLD) - FAIR VALUE 150 (160) PENCE
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UBS CUTS MORRISON SUPERMARKETS TO 'NEUTRAL' ('BUY') - TARGET 190 (250) PENCE
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UBS INITIATES OCADO WITH 'NEUTRAL' - TARGET 1900 PENCE
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COMPANIES - FTSE 100
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Taylor Wimpey said its sales rates have remained stable since its last update. During the UK lockdown period, the housebuilder has sold 408 homes net of cancellations, averaging a net private sales rate of 0.30 homes per outlet per week. It will be reopening sales offices and show homes from May 22 for pre-booked appointments. It expects to recall the majority of its sales staff from furlough by May 18 and most other staff by the end of the month.
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Spirax-Sarco Engineering said trading has "held up well" despite the unprecedented backdrop, though it thinks the worst of the Covid-19 downturn will be seen in the second and third quarters. Demand from MRO - Maintenance, Repair and Overhaul - and small improvement project activities, which traditionally make up around 85% of revenue, experienced only a mild decline in the four months to April 30 compared to a very strong comparable period in 2019. "While trading in the first four months of the year has held up well, we currently believe the worst of the downturn will occur in the second and third quarters of 2020. Absent a resurgence of the Covid-19 pandemic in the second half of the year, we currently expect trading conditions to improve in the last quarter of 2020, resulting in a lower contraction of organic sales in the second half of 2020 than in the first half," said Spirax-Sarco. It confirmed the payment of its 2019 final dividend will be made on May 22.
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Plumbing and heating supplies firm Ferguson said strong momentum in February and March was brought to a halt in April due to Covid-19. Third-quarter revenue growth, from continuing operations, was 0.9%. This was due to combined growth of 7.3% in February and March, partially offset by a 11% slump in April. "We have taken steps to manage our cost base and protect cash flow given the uncertain outlook both in the short-term during the crisis phase but also to ensure the business is appropriately sized for the post Covid-19 environment. We are confident these actions coupled with the strength of our balance sheet will serve us well in the coming months and years," said Chief Executive Kevin Murphy.
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COMPANIES - FTSE 250
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Aston Martin Lagonda Global Holdings saw its quarterly loss widen as revenue slumped. Andy Palmer, president & CEO, said Covid-19 and the resulting global economic shutdown had a "material impact" on the auto maker's performance in the quarter. First-quarter wholesale volumes were down 45% year-on-year to 578 with revenue down 60% to GBP78.6 million. The luxury car maker's pretax loss widened to GBP118.9 million from GBP17.3 million. The uncertainty surrounding the duration and impact of the Covid-19 pandemic makes it "not possible to provide a clear view on the full year outlook", the company said, and as a result Aston Martin has withdrawn its guidance for the year. "The company is proceeding on the assumption that trading remains challenging and is therefore implementing measures to take further actions on operating costs and focus on controlling cash," Aston Martin added.
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Wednesday's Shareholder Meetings
Ultra Electronics
Vesuvius
Sanne Group
Dialight
Gym Group
Tritax Big Box REIT
Robert Walters
Foxtons Group
Spirax-Sarco Engineering
Greggs
TP ICAP
Rentokil Initial
Cineworld Group
Marshalls
Xeros Technology (re bid offer)
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
