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UK construction sector rebounds in February despite weak housebuilding
Just in: the UK’s construction sector rebounded back into growth last month as fears of a recession fade.
The S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI), which tracks activity in the building sector, jumped to 54.6 in February, up from 48.4 in January.
That shows the fastest growth since May 2022, and well above expectations of a reading around 49.1. Anything over 50 shows a rise in activity.
There was a “robust increase” in overall business activity across the UK construction sector last month, S&P Global reports, after two months of decline.
The rate of growth was the strongest since May 2022, supported by a marked rebound in commercial work and a positive contribution from civil engineering activity.
But, activity in the house-building sector decreased for the third month running.
Many housebuilders have been cutting back following a drop in demand, as house prices fall.
Tim Moore, economics Director at S&P Global Market Intelligence, says that housebuilding was the ‘weak spot’ in the sector:
Some firms noted that fading recession fears and an improving global economic outlook had boosted client confidence in the commercial segment. At the same time, work on major infrastructure projects such as HS2 contributed to the expansion of civil engineering activity in February.
Cutbacks to new house building projects remained the weak spot for construction sector activity, with total residential work falling for the third month running in February. Survey respondents often commented on subdued demand and a headwind from elevated interest rates.
Construction companies appear increasingly confident about the year ahead business outlook, with optimism rebounding strongly from the lows seen in the final quarter of 2022. Softer inflationary pressures and the least widespread supplier delays for just over three years were factors supporting business expectations in February.”
Key events
Closing post
Time to wrap up… here are today’s main stories:
The UK’s construction sector rebounded back into growth last month as fears of a recession fade.
The latest PMI survey found there was a “robust increase” in overall business activity across the UK construction sector last month, driven by in commercial work and civil engineering activity, although housebuilding continued to contract.
UK firefighters have accepted a pay offer aimed at averting strike action.
Mining stocks have dropped in London, after China set a conservative growth target of around 5% this year.
The number of cars sold in the UK increased by 26% year on year in February, the seventh successive month of growth as the industry recovers from the depths of the global computer chips shortage.
Luxury car maker Aston Martin is on track for first place on the leaderboard of top-performing shares in London this morning, a day after a very credible performance in the first Formula One race of the season.
Aston Martin is leading the FTSE 250 leaderboard, up 15%, having been up 25% at one stage this morning.
Last week, the company reported that pre-tax losses doubled last year, to £495m in 2022, but did predict “significant improvements in profitability” in the second half of this year.
Today’s rally comes after Fernando Alonso finished third in the Bahrain Grand Prix after a sparkling drive, (shrugging off an early bump from behind from teammate Lance Stroll, the team boss’s son).
So what’s going on?
Anthony Dick, an auto analyst at Oddo BHF, reckons the F1 result could be a factor, although investors who have bet against Aston Martin could be caught in a short squeeze.
He says, via Bloomberg:
“Could be some shorts covering or generally improved perception on the back of reassuring FY22 results.
It’s also possible the F1 performance could have something to do with it.”
Investment bank Jefferies raised its price target for Aston Martin this morning, from 120p to 160p – today’s rally, though, has taken them from 240p to 275p today.
Jefferies said last week’s results were “interesting”, with a mix of “more confident qualitative comments from management and worsening 2023 financials”.
While we acknowledge progress on product and pricing, the path to organic de-leveraging is unclear. We think shares have run ahead of themselves and we would seek better entry points
British firefighters accept new pay deal, averting strikes
Just in: UK firefighters have accepted a pay offer aimed at averting strike action.
About 96% of Fire Brigades Union (FBU) members who took part in a ballot voted in favour of the new pay offer, the union said. The turnout for the ballot was 84%.
The pay offer includes a 7% rise backdated to last July and another 5% increase from July this year.
This revised offer was made after a previous offer of 2% last summer was rejected as ‘utterly inadequate’
🚨BREAKING: Firefighters have overwhelmingly accepted an improved pay offer following a vote for strike action. 96% of @fbunational members accept on 84% turnout.
Offer is 7% backdated to July ’22+ additional 5% from July this year.
Initial offer was 2% (increased to 5% in Nov)
— Taj Ali (@Taj_Ali1) March 6, 2023
The FBU had recommended that members accept the new offer, in a ballot which opened on February 20 and closed today Monday.
FBU general secretary Matt Wrack told BBC Radio 4’s Today programme:
“It’s a step forward but it would not be the end of our campaigning on pay.
“We think there is significant under-investment in the fire service and that needs to be addressed.”
Steve Gooding, director of the RAC Foundation, is concerned that the UK is not moving towards electric cars fast enough.
Following this morning’s news that new car registrations jumped 26% year-on-year in February, Gooding says:
“Looked at as a barometer for the economy, this rise in overall sales looks like good news.
“But in terms of the cars we are choosing to buy, the battery-electric share of the market is disappointing given the role electric vehicles are set to play in meeting our climate change objectives.
“Unless we choose to drive less, by the end of 2030 we estimate that well over a third of all miles driven by cars must be zero emission from the exhaust.
“At the moment it is under 2%, which suggests a far more rapid take-up of pure electric models is needed.”
Jasper Jolly
Starbucks has revealed plans to invest £30m in the UK and open 100 new cafes, a year after it was reported to be considering selling the British arm of the coffee chain.
The investment plan came as the company reported it paid lower tax on its UK operations in 2022, even as gross profits surged, as royalty payments to other group companies expanded rapidly.
The coffee chain paid £4.6m in corporation tax in the year to 2 October 2022, compared with £5.4m the year before, according to its latest accounts.
Wall Street’s main indexes have opened higher, as investors await testimonies from Federal Reserve chair Jerome Powell to Congress later this week.
The Dow Jones Industrial Average, which tracks 30 large US companies, has gained 57 points or 0.17% to 33,448 points.
The broader S&P 500 gained 0.25% while the tech-focused Nasdaq Composite rose 0.4% at the start of trading.
The main event of this week may be Friday’s Non-Farm Payroll report, showing how many new jobs were created in America in February.
January’s NFP smashed forecasts, with a 517,000 increase in employment, and another strong report could prompt further interest rate increases.
Craig Erlam,senior market analyst at OANDA, says:
The jobs report on Friday will tell us whether the January data was a blip or something to be more concerned about. No one is expecting a repeat of last month but any indication that the labour market is still red-hot could see a fourth 25 basis point hike be more priced in.
Transport Secretary Mark Harper is urging the RMT union to let its members consider the pay offer on the table from train operating companies, insisting it is a “good” deal.
Last month, members of the TSSA union have voted to accept the pay offers on the table, which are worth 9% over two years, ending their part in the long-running national rail dispute.
The RMT, though, says the offers are inadequate and are planning strikes on 16 March across Network Rail and train operators, and on 18 and 30 March and 1 April at train operators.
Speaking in Northumberland today, where a rail line from Ashington to Newcastle is due to reopen next year, Harper said (via PA Media):
“I was very pleased that the members of the TSSA, one of the rail unions, accepted the offers from both the train operating companies and Network Rail.
“That’s good to see, they are fair and reasonable offers that have been delivered. They’re the best and final offers.
“I would urge the RMT to put the offers that they’ve had to their members and let their members make the decision, and I think they’re good offers.
“And I think that their members ought to accept them and I hope the rail union RMT reconsiders their decision not even to put those offers to their members.
“And if we get those offers delivered, we can all work together to deliver a better railway for passengers.”
Northumberland Line services between Newcastle and Ashington are expected to begin in summer 2024, Secretary of State for Transport Mark Harper has confirmed https://t.co/5aF3Uk9eOC
— Rail Business UK (@RailBusinessUK) March 6, 2023
Russia’s budget deficit has jumped so far this year, as Moscow continues to spend heavily on the Ukraine war and energy revenues fall.
Russia’s federal budget deficit widened to 2.58 trillion roubles (£28bn) in the first two months of the year, the finance ministry reports, as expenditure rose sharply as slumping oil and gas takings hit income.
Reuters has the details:
Russia’s economy proved unexpectedly resilient in the face of Western sanctions last year, but a return to pre-conflict levels of prosperity may be far off as more government spending is directed towards the military and price caps squeeze Russia’s crucial energy export earnings.
Oil and gas revenues were 46.4% lower at 947 billion roubles in Jan-Feb than in the same period last year, the finance ministry’s preliminary data showed, with overall budget revenues for the month down 24.8%.
Spending was 51.5% higher in the first two months of 2023, at 5.74 trillion roubles. In the same period last year, Russia had recorded a surplus of 415 billion roubles.
Tony Danker has said it is “mortifying to hear that I have caused offense or anxiety to any colleague,” following the investigation into complaints about the CBI chief’s conduct.
Danker also says he will cooperate fully with the investigation, launched after the Guardian last week raised several allegations about Danker’s behaviour.
Costa Coffee has unveiled plans to hike salaries for more than 16,000 UK workers, ahead of increases in the minimum wage next month.
The coffee chain, which is owned by the Coca-Cola Company, said it will raise the base rate of pay for workers across its 1,520 company-owned stores in the UK from £10 an hour to £10.70 an hour from April 1.
More experienced baristas will see their base pay rise from £10.53 to at least £11.23 an hour, depending on location and role.
The rises will see pay increase by between 6.1% and 7.3%, excluding bonuses – working out at 6.7% on average.
It follows an announcement by rival Pret A Manger last week that it would increase the base salaries of its workers from the start of next month by 2.9%, from £10.30 an hour to £10.60 an hour.
From 1 April, the UK’s national living wage – the minimum amount that companies are allowed to pay people over 23 – rises 9.7% to £10.42 an hour.
Gwyn Topham
Mayors in the north of England are meeting to demand the government “get a grip” on appalling rail services, with TransPennine Express (TEP) on track to cancel more than 20,000 trains this year.
The operator has already cancelled about a quarter of services in 2023, with 40% scrapped in one week in January due to a lack of staff.
Commuters are also facing higher costs after rail fares in England and Wales increased by an average of 5.9% on Sunday.
Tracy Brabin, the Labour mayor of West Yorkshire, who will meet counterparts in Newcastle on Monday, said the north could no longer “stagger on”, with TPE alone likely to cancel 23,000 services in 2023 at the current rate.
Brabin said:
“Government have to get involved, they have to understand we need to invest in transport across the north.I don’t think people in the south and across the country really understand the service we’re being forced to endure from TransPennine.”
She told BBC Radio 4’s Today programme:
“If things don’t improve, by the end of the year 23,000 services will have been cancelled. This is totally unacceptable, and ministers must get a grip.”
The chief economist of the European Central Bank has hinted that it will continue to raise interest rates beyond the hike expected this month.
In a speech this morning, Philip Lane said the ECB must take “robust” action if underlying inflation dynamics are at odds with its inflation forecasts.
Data last week showed a surprise rise in core inflation, up to 5.6%, well above expectations for a rise of 5.3%, and further from the ECB’s headline inflation target of 2%.
Headline inflation was also higher than expected, at 8.5% in February.
In a lecture at Trinity College Dublin, Lane suggested that further rate increases will be needed:
The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting, while the exact calibration beyond March should reflect the information contained in the upcoming macroeconomic projections, together with the incoming data on inflation and the operation of the monetary transmission mechanism.
Lane added that lifting interest rates to a “sufficiently restrictive level”, to dampen demand and growth, will “counter-act above-target medium-term inflation pressures” and avoid inflation expectations becoming de-anchored.
It will also deter ‘excessive’ pay rises and price hikes, he added:
In particular, the dampening of demand through the tightening of monetary policy means that price setters and wage setters are on notice that excessive price and wage increases will not be sustainable.
Reuters reported last week that the ECB’s governing council has been shown evidence that European companies have been lifting their profit margins, amid fears over ‘greedflation’:
Drax strike over after power station workers secure pay increase
Strike action at the Drax power station in Yorkshire has ended after workers secured a “dramatically improved” pay offer, the Unite union has announced.
Unite says that fresh negotiations have been held after 180 workes held a day’s strike action on Monday 20 February after rejecting an 8% pay increase, below the headline rate of inflation.
Drax has now made a improved pay offer, including back pay, which Unite says is worth 16% to the lowest paid workers.
Workers have accepted this offer in a ballot. Strikes had been scheduled for later this month, and in April.
Unite general secretary Sharon Graham said:
“This was an excellent increase for Unite members at Drax, who by showing unity and standing up to their employer secured a vastly improved pay increase.
“The pay increase at Drax demonstrates how Unite’s absolute commitment to focus on jobs, pay and conditions is delivering for members.”
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