(Alliance News) - The UK economy defied expectations and grew 0.5% monthly in May, while industrial production strengthened and the nation's trade deficit narrowed, official figures showed on Wednesday.
According to the Office for National Statistics, the UK's trade deficit narrowed slightly to GBP9.75 billion from GBP9.81 billion in May.
The last monthly trade surplus was the GBP1.40 billion recorded in May 2021.
Exports rose 4.1% monthly in May to GBP61.11 billion from GBP58.68 billion. Imports were 3.5% higher at GBP70.86 billion from GBP68.49 billion.
On an annual basis, exports were 9.4% higher, while imports were up 19%.
EU exports rose 2.6% monthly in May, while imports were 5.2% higher. Exports to non-EU nations surged 13% in May from April, while imports were 3.2% higher.
Industrial production, meanwhile, rose 0.9% on a monthly basis in May, following a 0.1% decline in April.
May's growth was the joint-strongest since a 1.0% climb in November 2021. The figure for May topped FXStreet cited consensus which had forecast production to register no monthly growth at all.
On an annual basis, industrial output rose 1.4% in May, defying FXStreet-cited forecasts of a 0.5% decline, but slowing from a 1.6% rise in April.
Figures from the ONS also showed the UK economy defied expectations and strengthened in May.
UK gross domestic product grew 0.5% monthly in May, following a 0.2% decline in April. April's figure was upwardly revised from an initially reported 0.3% fall.
"Monthly GDP is now estimated to be 1.7% above its pre-coronavirus pandemic levels," the ONS said.
UK GDP rose 3.5% in the 12 months to May, slowing a touch from 3.7% annual growth in April.
The ONS added: "Services output grew by 0.4% [monthly] in May 2022 as human health and social work activities grew by 2.1%, mainly because of a large rise in GP appointments, which offset the continued scaling down of the NHS Test & Trace and Covid-19 vaccination programmes."
The retail sector struggled, however.
"Output in consumer-facing services fell by 0.1% in May 2022, driven by a 0.5% fall in retail trade, and non-consumer facing services grew by 0.5% in May, following a fall of 0.8% in April," the ONS added.
Commenting on the figures, Dan Boardman-Weston, chief investment officer at BRI Wealth Management, said: "The worrying part of the data is that the consumer facing service sector continued to shrink, by 0.1%, driven by a 0.5% fall in retail trade. Production and construction growth came in relatively strongly at 0.9% and 1.5% respectively. The GDP figures are likely to get worse over the coming months as pressures continue to mount on consumers and businesses as inflation remains high and interest rates continue to rise."
The latest GDP reading comes as UK leadership hopefuls jostle for position in the race to replace Prime Minister Boris Johnson.
Eight contenders will be on the ballot paper when Tory members of Parliament begin voting on Wednesday, the chair of the 1922 Committee, Graham Brady, said.
Rishi Sunak, Liz Truss, Tom Tugendhat, Kemi Badenoch, Penny Mordaunt, Jeremy Hunt, Nadhim Zahawi and Suella Braverman all secured the 20 nominations from fellow MPs needed to enter the contest.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.9% at 7,145.85
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Hang Seng: marginally lower, down 1.94 points at 20,842.80
Nikkei 225: closed up 0.5% at 26,478.77
S&P/ASX 200: closed up 0.2% at 6,621.60
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DJIA: closed down 192.51 points, or 0.6%, at 30,981.33
S&P 500: closed down 35.63 points, or 0.9%, at 3,818.80
Nasdaq Composite: closed down 107.87 points, or 1.0%, at 11,264.73
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EUR: soft at USD1.0047 (USD1.0068)
GBP: up at USD1.1921 (USD1.1906)
USD: up at JPY137.20 (JPY136.66)
Gold: down at USD1,725.87 per ounce (USD1,732.30)
Oil (Brent): firm at USD100.73 a barrel (USD100.37)
(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
1100 CEST EU industrial production
1000 CEST France IEA oil market report
1230 BST UK NIESR monthly GDP tracker
0830 EDT US consumer price index
1030 EDT US EIA weekly petroleum status report
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Germany's annual inflation rate cooled in June, official figures confirmed. According to Destatis, Germany's annual inflation rate slowed to 7.6% in June from 7.9% in May. The annual rise in the consumer price index was in line with an earlier estimate published late last month. On a monthly basis, consumer prices rose 0.1% in June from May, also in line with the previous estimate. In May, consumer prices had surged 0.9% from April. On a harmonised basis, designed for EU-wide comparison, Germany's annual inflation rate cooled to 8.2% in June from 8.7% in May.
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China's export growth surged more than expected in June after its largest city eased lockdown rules, official data showed, but imports fell while lingering Covid controls kept consumers jittery. Business hub Shanghai reopened in June after being sealed off for two months to stamp out a coronavirus resurgence, helping to improve a backlog of goods. In June, exports rose more than expected at 18% year-on-year, accelerating from 17% the month before, customs data showed. "We are expecting some of the backlogs to be clearing since companies in Shanghai have been able to operate with lockdown measures lifted in June," Moody's Analytics economist Heron Lim told AFP.
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BROKER RATING CHANGES
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Barclays cuts abrdn to 'underweight' (equal weight) - price target 140 (210) pence
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Citigroup cuts Direct Line Insurance to 'neutral' (buy) - price target 251 (286) pence
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UBS cuts Beazley to 'neutral' (buy) - price target 530 (512) pence
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Jefferies starts Tyman with 'buy' - price target 340 pence
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COMPANIES - FTSE 100
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BT and ITV are among those being probed by a UK watchdog for breaking competition law in the field of sports broadcasting. The Competition & Markets Authority said the investigation relates to the purchase of freelance services to support production and broadcasting of sports content. "At this stage the CMA believes it has reasonable grounds to suspect one or more breaches of competition law. The CMA has not reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections to any party or parties," the CMA said. ITV noted the announcement and said it is "committed to complying with competition law and is cooperating with the CMA's inquiries".
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COMPANIES - FTSE 250
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Pub chain JD Wetherspoon said sales of cocktails, spirits and food are on the up so far in its fourth quarter, though sales of typical pub-drink stalwarts such as draught ales, lagers and ciders were below pre-virus levels. In the first 11 weeks of the fourth quarter ending July 31, like-for-like sales were 0.4% below pre-virus levels. This represented an improvement from the previous quarter, when sales were 4.0% lower. Sales of spirits, cocktails and food were all higher compared to pre-Covid levels, up 4.4%, 19% and 2.1%, respectively. "But sales of draught ales, lagers and ciders, historically the largest contributors to pub sales, were 8.0% below 2019," Wetherspoon added. "Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated," the company cautioned. The company warned its loss for the year will be chunkier than expected, at GBP30 million on a post-IFRS 16 basis. IFRS 16 is an accounting rule related to leases. "Although sales now match 2019, labour costs are far higher," Wetherspoon added, though it expects costs for financial 2023 to rise at a slower pace than the current inflation rate.
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Recruiter PageGroup hailed a "record quarter". Second-quarter gross profit surged 28% yearly to GBP280.9 million from GBP219.8 million. For the entirety of the first half, it rose by a third to GBP539.0 million. "We delivered a record quarter for the group, with record performances in 25 countries. We exited the quarter strongly, delivering a record month in June, our second month of gross profit in excess of GBP100 million," Chief Executive Steve Ingham commented. "We are pleased with the group's performance in the first half of the year and currently expect 2022 full-year operating profit to be in line with company-compiled consensus of GBP205 million." Operating profit was GBP168.5 million in 2021.
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Shipping services firm Clarkson expects to top expectations for 2022. It expects underlying pretax profit of GBP42 million for the six months ended June 30, up 53% from GBP27.5 million a year earlier. Clarkson added: "Performance has been strong across all divisions, with the Broking division, which has a market-leading position in nearly all the key shipping sectors, performing particularly well. While mindful of macroeconomic conditions, the Board nevertheless remains confident in the outlook for the business and expects results for the year ending 31 December 2022 to be materially ahead of its previous expectations."
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COMPANIES - SMALL CAP
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Bar and cafe owner Loungers reported an annual revenue surge, shaking off the effects of the Omicron variant and recruitment issues. Revenue in the financial year that ended April 17 jumped to GBP237.3 million from GBP78.3 million in the lockdown-hit prior year. Loungers swung to a pretax profit of GB21.6 million from a GBP14.7 million loss.
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COMPANIES - GLOBAL
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Swiss bank UBS has hired Naureen Hassan from the Federal Reserve Bank of New York to be the new president of UBS Americas. Hassan was chief operating officer of the lead regional branch of the US central bank and has served as an alternate voting member of the policy-setting Federal Open Market Committee. She will replace Tom Nartil, who is stepping down as co-president of Global Wealth Management and president of UBS Americas on October 3 after a 39-year career at UBS. Iqbal Khan will become the sole president of Global Wealth Management. He has been co-president with Nartil since joining UBS in 2019.
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Wednesday's shareholder meetings
Asiamet Resources Ltd - AGM
Esken Ltd - AGM
LondonMetric Property PLC - AGM
Mycelx Technologies Corp - AGM
Oilex Ltd - GM re name change to Synergia Energy
Steppe Cement Ltd - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2022 Alliance News Limited. All Rights Reserved.
Tyman (TYMN)
Beazley (BEZ)
Direct Line (DLG)
Abrdn (ABDN)