10.59 Neil Prothero of the Economist Intelligence Unit is sceptical about Mark Carney’s claims that forward guidance will act as a boost to GDP growth:
It has been apparent since 2010 that ultra-loose monetary policy would persist for many years, as the government deems it a necessary counterbalance to its protracted fiscal consolidation programme, which remains well behind schedule. Mark Carney is a strong believer in forward guidance, having previously deployed it during his governorship at the Bank of Canada.
However, we do not expect much substantive impact from its adoption in the UK, and the conditionality of the “knock-outs” accompanying the policy would suggest that some members of the MPC are also a little sceptical.
10.50 While China’s trade data impressed this morning, Germany’s has disappointed. Exports did rise in June, but at 0.6pc the month-on-month increase was lower than expectations of 1pc. Meanwhile, imports fell 0.8pc, more than consensus estimates of a 0.5pc fall.
10.29 That strong imports data from China – the biggest consumer of industrial metals – has lifted London’s mining shares, which are dominating the FTSE 100 leaderboard this morning. Antofagasta has surged 3.5pc, Glencore Xstrata has advanced 3.4pc and Anglo American is up 3pc.
10.28 Denise Roland reports on Aviva, which has nearly doubled half year profits after a major restructuring.
Shares in Britain’s number two insurer rose 6.69pc to hit a two-year high of 395.6p in early trade as Aviva posted a 95.8pc rise in pre-tax profits to £605m, despite a 3pc slide in revenues to £11.45bn. The company’s preferred measure of operating profit, which excludes short-term investment gains and losses, rose 5pc to £1bn.
The improved margins were largely driven by determined cost-cutting as part of a massive turnaround effort launched last July. Back then, the company was languishing in the wake of a major shareholder rebellion over executive pay and company performance, which saw Andrew Moss ousted as chief executive.
Since then, Aviva has sold of a raft of businesses including its US life and annuities arm, which had been bought in 2006 on ambitions of building a leading position in the world’s largest savings market.
10.16 Are we on the cusp of a new baby boom? Births in the UK hit their highest level for 40 years in the 12 months to the middle of 2012, according to figures just released by the Office for National Statistics. 813,200 births was the highest level since 1972. With 558,500 deaths and net migration of 156,500, Britain’s population rose to 63.7m in mid 2012.
10.00 In Spain, new figures reveal that industrial production contracted for its 22nd consecutive month in June on an adjusted basis.
Industrial production (Year on year change)
Image: Spain’s National Statistics Institute
09.49 More on those Chinese trade figures, which appear to show the economy is stabilising, from Szu Ping Chan:
Exports rose 5.1pc compared with the same period a year earlier while imports leaped 10.9pc, official data showed on Thursday. Economists had expected export growth of 2pc. The expansion comes after trade fell in June, when exports contracted by 3.1pc while imports shrank 0.7pc.
The rise in both imports and exports meant China’s trade surplus narrowed to $ 17.8bn (£11.5bn). The data showed that European demand remained subdued in July. Exports to America rose 2.3pc, while exports to Europe contracted 2.8pc.
Image: Rex Features
09.44 Ofcom, the communications regulator, is proposing new measures to ramp up competition in the telecoms market. It plans to give providers extra responsibility by putting the onus on them to handle a switch, meaning consumers will not have to contact their current provider to cancel a contract.
Consumers currently face a number of different switching processes depending on which provider they are moving from and to, or the type of service being switched. Not only do complex switching processes cause confusion, they also increase the perception that switching is difficult, which can prevent consumers from moving to a better deal.
Such a process can give too much control to the existing provider, which has an incentive to delay or disrupt the transfer. This can also result in unwanted pressure on customers not to change provider. To resolve these problems, Ofcom has today decided that consumers only need follow a single switching process in future, in which the new provider leads the transfer process on behalf of the consumer.
09.30 After yesterday’s Inflation Report, the European Central Bank has issued its monthly bulletin this morning. ECB President Mario Draghi says “underlying price pressures in the euro area are expected to remain subdued over the medium term”.
However, a survey of economist and academics released by the central bank has cut inflation forecasts. The Survey of Professional Forecasters, which polls 51 experts, says inflation will be 1.5pc in 2014 and 1.8pc the year after – undershooting the ECB’s 2pc target. It has also cut eurozone growth forecasts for this year from -0.4pc to -0.6pc, and reduced next year’s expectations from 1pc to 0.9pc.
ECB President Mario Draghi. Image: Reuters
09.20 Shares in Schroders have taken the biggest fall in the FTSE 100 this morning after the asset manager reported half-year results. Numis analyst David McCann says the £236bn of assets under management posted by Schroders was 1pc behind consensus estimates of £238bn and missed his own £247bn forecast by 4pc. Schroders shares are currently down 5.1pc.
09.12 Our reporter Natalie Thomas has the full story on Ladbrokes’ disappointing results here:
Ladbrokes led the way in rolling out controversial gaming machines to high street betting shops but has seen increased competition from rivals, while the Government also this year introduced a new tax on profits generated from the devices.
Richard Glynn, chief executive of Ladbrokes, delivered the warning on gaming machine revenue as the bookie reported a worse-than-expected 48.5pc decline in pre-tax profits to £55.1m for the six months to June 30, down from £106.9m at the same point last year.
Prior to the results, analysts had forecast pre-tax profits of around £74m. Ladbrokes said the poor result also reflected the fact there have been no major football tournaments in 2013. Ladbrokes said the poor result also reflected the fact there have been no major football tournaments in 2013.
Read more here
09.05 Finally, Mr Carney was asked about the all-male composition of the Monetary Policy Committee. He said it is “anomalous and striking on a personal level” and that although it is the Government’s job to set the committee, he wanted to encourage more female economists at the bank “to add to diversity”.
09.00 On the banking culture, Mr Carney said it is “fundamentally important that there has to be a change” and that the mis-selling scandals have undercut the effectiveness of banks. He praised his predecessor, Lord Mervyn King, who Mr Carney said made “tremendous progress” towards making banks shore up their balance sheets, and said it was his own priority to “finish the job”.
The cultural issue is fundamentally important, there has to be a change. I think finance can absolutely play a socially useful and economically useful role, it has to be on the real economy, it’s the loss of that focus [that’s become the problem]. We have to strip out that type of behaviour.
08.50 Mr Carney before going on air:
08.45 Not everyone was happy with the Bank’s guidance yesterday, in particular savers who worried that continued low interest rates and above 2pc inflation will hit their wealth. Mr Carney said: “I recognise it’s difficult for savers, we have tremendous sympathy for savers,” but he said the new policy is the best way of returning inflation and interest rates to optimal level, and pointed to Japan’s “lost decade”.
The best way to get interest rates back is to have a strong economy. After I lived in the UK [in the 1980s] I lived in Japan and they made two mistakes: First, they didn’t fix and we are. And they pulled back on stimulus and as a consequence interest rates are still at rock bottom, we don’t want to make those mistakes.
08.40 Mr Carney said that although it is difficult to predict where the economy will go, the new guidance is expected to add half a percentage point to GDP. “In the end whats going to guide policy is not forecasts but what happens on the ground, we are pointing to the employment rate because we can track it” he said.
08.35 Back in the markets, some of the biggest fallers in London today have been hit by disappointing earnings. Amec, the oil services company, is down 1.9pc in the FTSE 100 after cutting its revenue growth forecast and saying underlying revenue will be flat on last year. Bookmaker Ladbrokes has tumbled 4.7pc in the FTSE 250 on news operating profit during the first six months of the year tumbled 19.8pc to £85.7m.
08.30 The Governor added that he was not tying his successor’s or other members’ hands with the new regime, which he referred to as “tactics”. “We are not binding our successors, they will be informed by the guidance and that will influence what they do. This is a tactic it’s a way of operating the inflation target regime.”
08.26 Mr Carney said that “without question” the Bank’s 2pc inflation target remains the primary objective. “The issue is how quickly we get back there, we’re providing the maximum transparency of what we do to get back there”. He also denied that 2pc was now a minimum inflation target rather than a middle point. “We care as much about it being below as above,” he said.
08.20 Bank of England Governor Mark Carney has just been on Radio 4, when he was asked about inflation expectations, the welfare of savers and his opinion on the culture in banks, saying things have to change. More coming soon.
08.05 The FTSE 100 has started the day in better form than it finished the last. After slumping 1.4pc yesterday, the benchmark index has stabilised and advanced 17 points, or 0.3pc, to 6,528 in early deals today. Insurer Aviva, which has impressed with its half-year numbers, is leading the FTSE 100 higher with a gain of 6.5pc.
07.55 However, economists highlighted that when the figures were adjusted for inflation, the picture wasn’t as pretty. Wei Yao at Societe Generale, said:
The base effect helped a lot, as exports unusually declined month-over-month in July last year and resulted in a 10.3ppt fall in the yoy rate. Moreover, if measured in the yuan, export growth was far less impressive at merely +1.2% yoy (-6.8% yoy in June). Hence, the latest export data in our view only indicated some stabilisation in external demand, at best – not yet a solid recovery.
07.51 Meanwhile, Chinese exports rose 5.1pc in July, following June’s 3.3pc contraction. The rebound was much larger than the 2pc annual rise expected by economists.
European demand remained subdued. Exports to America rose 2.3pc, while exports to Europe contracted 2.8pc.
Imports also grew 10.9pc in July.
07.50 We’ll bring you more Carney reaction throughout the day.
07.49 One name dominates this morning’s business headlines: Mark Carney, the Governor of the Bank of England.
• The Telegraph reports that Mr Carney has “torn up the Bank of England rulebook” with a clear signal that interest rates will remain at their record low of 0.5pc for three years.
• The Times (£) says that the Bank’s low rate pledge is a fresh blow to savers.
• The Financial Times (£) writes that the commitment to keep rates low until the unemployment rate falls to at least 7pc is an attempt to boost Britain’s nascent recovery.
• The Guardian reports that the move was welcomed by Chancellor George Osborne.
07.45 Good morning and welcome to our daily business and markets live blog, your one stop shop for all the breaking business stories of the day.