Just in: UK manufacturing slipped back into contraction last month as output and new orders decline and cost pressures rise, the latest poll of factory purchasing managers has found.
Data provider S&P Global’s manufacturing PMI has dropped to 49.1 in April, down from March’s 20-month high of 50.3.
Any reading below 50 shows a contraction; this ‘final reading’ is slightly higher than the ‘flash’ of 48.7
The survey has found that uncertain market conditions and client destocking hit manufacturers, who also suffered supply-chain disruption due to the Red Sea crisis.
Worryingly, new orders fell, with manufacturers reporting weaker demand from both domestic and overseas customers. New export orders have now fallen for the last 27 successive months, with reports of weaker intakes from Germany, Ireland, Asia and the US.
Average purchasing costs rose for the fourth successive month in April, with factories reporting higher costs for energy, polymers, steel, textiles, timber and transportation.
Rob Dobson, director at S&P Global Market Intelligence, said:
The sector is still besieged by weak market confidence, client destocking and disruptions caused by the ongoing Red Sea crisis, all of which are contributing to reduced inflows of new work from domestic and overseas customers, with specific reports of difficulty securing new contract wins from Europe, the US and Asia.
This downturn is making manufacturers cautious, less keen to take on staff or to build up their stocks, says Dobson, adding:
The news on the prices front is also worrisome for those looking for a sustainable path back to target (consumer price) inflation, with cost pressures growing in industry and feeding through to higher selling prices at the factory gate.
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Bosses at Barclays are swinging the job cutting axe, Reuters reports (and on Labour Day too!).
The bank is cutting a “a few hundred roles” in a round of redundancies aimed at tackling “underperformers” and reinvesting in new talent.
Barclays said in February it was planning to cut costs by £2bn.
Staff impacted by the job cuts are said to be based in the bank’s global markets, investment banking and research division.
A Barclays spokesperson has described the cuts as ‘difficult, but necessary’, saying:
“As previously reported, we regularly review our talent pool to ensure that we can invest in talent and deliver for clients.
“This is difficult, but necessary, to ensure we position ourselves for long-term success as we execute against our strategy.”
UK job creation remained strong last month, new data shows, despite the burden of higher interest rates.
Payroll operator ADP has reported that private company payrolls increased by 192,000 in April, more than the 175,000 which economists expected.
“Hiring was broad-based in April,” said Nela Richardson, chief economist, ADP, adding:
“Only the information sector – telecommunications, media, and information technology – showed weakness, posting job losses and the smallest pace of pay gains since August 2021.”
Services firms raised their payrolls by 145,000, while manufacturers took on 47,000 workers.
Pay rose by 5%, down from 5.1%.
Pay growth for job-changers fell from 10.1% in March to 9.3%, but remains higher than it was at the beginning of the year, ADP adds.
Johnson & Johnson is proposing a $6.5bn settlement to conclude tens of thousands of lawsuits alleging that its baby powder and other talc products contain asbestos and cause ovarian cancer.
J&J says the proposal would resolve 99.75% of the pending talc lawsuits, and bring its total payout to $11bn.
Erik Haas, worldwide vice president of litigation at Johnson & Johnson, says:
“The Plan is the culmination of our consensual resolution strategy that we announced last October.
Since then, the Company has worked with counsel representing the overwhelming majority of talc claimants to bring this litigation to a close, which we expect to do through this plan.”
Under the plan, J&J’s subsidiary, LLT Management, would file a consensual “prepackaged” Chapter 11 bankruptcy, if 75% of claimants vote in favor of the Plan.
J&J says the offer, which would be paid over 25 years, is “a far better recovery than the claimants stand to recover at trial”.
Last year, a US judge rejected a proposal under which J&J would have paid $8.9bn to settle lawsuits, premised on a bankruptcy court order that would have stopped future lawsuits from being filed against the company.
Mulberry, the luxury British brand best known for its leather handbags that can cost more than £1,600 each, has reported a 4% decline in annual sales, becoming the latest high-end company to warn of a slowdown in spending among the richest shoppers.
In a trading update, Thierry Andretta, the chief executive, said:
“While we achieved positive revenue growth in the first half, Mulberry has not been immune to the broader downturn in luxury spending experienced in recent months, particularly in the UK and Asia. This decline was partially offset by positive trading in the US, where we have benefited from increased brand awareness.
“Looking ahead, the trading environment in the UK and China remains challenging and we do not expect this to change in the short-term. We are therefore managing the business prudently, focusing on executing our strategy and vision to become a global sustainable luxury brand.”
Today is the 20th anniversary of Poland joining the European Union.
And Donald Tusk, Poland’s prime minister (and former president of the European Council) has said that EU membership has been good for Poles – and that within five years, they’ll be wealthier than their counterparts in Britain.
Tusk posted on X today:
As we celebrate 20 years in the EU, a fierce debate is taking place in Great Britain caused by the World Bank’s forecast that income per capita will be higher in Poland than in the UK in 2025. And I promise this: on the 25th anniversary, Poles will be wealthier than the British. It’s better to be in the EU!
Last year, Labour leader Keir Starmer warned that Britian was on a trajectory that will soon see it overtaken by Poland, citing World Bank data.
It [Labour] said UK GDP per capita grew at an average annual rate of 0.5% in real terms between 2010 and 2021, while Poland’s grew 3.6%, (based on World Bank data).
If those trends continued, by 2030 people in the UK would each be £500 ($600) poorer than Poland’s population, Labour said, and by 2040 would have fallen behind Hungary and Romania.
Britain is still adjusting to Brexit; yesterday, food importers warned that newly introduced checks could increase their costs by up to 60%, pushing up prices for customers and driving some shops out of business.
However, there is still rather a large cap in GDP per capita between the UK and Poland, although it is narrowing, according to this chart on the World Bank’s site today:
Over on Wall Street, Yum Brands – the company behind Pizza Hut, KFC and Taco Bell – has reported a drop in profits and like-for-like sales, highlighting the squeeze on consumers.
Yum Brands missed expectations by reporting a 3% drop in same-store sales in the first quarter of this year, with GAAP operating profit declining by 1%.
David Gibbs, CEO, said:
“Despite a difficult operating environment, we delivered 6% Core Operating Profit growth demonstrating the resilience of our business model.
As expected, same-store sales were pressured this quarter, but we are encouraged by strong 2-year same-store sales growth and positive momentum exiting the quarter.”
For the first time, more than half of Yum’s sales were digital, with almost $8bn of sales made electronically.
The fact that UK manufacturers are hiking prices (see 10.21am) should not necessarily delay an interest rate cut, argues Professor Costas Milas of the Management School at the University of Liverpool.
He tells us:
What escaped attention is fresh Divisia money data. Divisia money, as a measure of liquidity, is a powerful predictor of future inflation.
The latest data suggests that Divisia money contracted by 6.2% per annum in 2024Q1. Admittedly, the annual contraction has just started reversing faster than before. This should not be a problem for inflation since Divisia money growth is still in deep negative territory.
In my view, inflation is likely to drop well below the 2% target before divisia money growth turns positive.
Activists have taken to the streets in cities across Asia and Europe today to mark International Workers’ Day.
As is traditional, the first day of May is Labour Day – a time to call for improved rights for workers, and to protest over issues such as rising prices and government labour policies.
And in Istanbul, protesters have clashed with riot police
Newsflash: One of the London stock market’s major blue-chip members is shifting its primary listing across the Atlantic.
Sharesholders in Flutter have backed a proposal to move the primary listing of its shares from London to New York today, at its annual general meeting in Dublin.
The move comes after the world’s largest online betting company added a secondary listing in the United States.
The resolution to move to a primary U.S. listing was backed by 98% of shareholders, according to proxy votes tallied up at the company’s annual general meeting, Reuters reports. Flutter said in March that it expects the primary listing to become effective on May 31.
Flutter’s brands include Paddy Power, Betfair and PokerStars, as well as American gambling site FanDuel.
In January, it described the New York stock exchange as its “natural home”, with the stateside online sports betting boom meaning the US betting market is now Flutter’s largest by revenue.
Amid the furore over executive pay, particularly in the pharmaceutical industry – criticised as “excessive” by governance experts – GSK chief executive Emma Walmsley said today:
“Personally, I think I’m very well paid and I’m certainly not going to comment on the level of my own remuneration. That’s the responsibility of the board and they obviously set pay against published targets.
“The much more important thing for me to work on and comment on is how we make sure that GSK, the culture of our company, the prospects of our company, the career development opportunities at our company, are really as attractive and as globally competitive as they possibly can be. So that we can recruit and develop and retain the very, very best people and honestly, I am feeling really good about that, as I look at the ongoing strengthening of the leadership teams across the organisation.”
Walmsley’s pay package jumped by 50% to £12.7m last year, mainly because of a higher share bonus payout reflecting the British drugmaker’s improved performance.
Her counterpart at AstraZeneca, Pascal Soriot, was paid nearly £17m last year and is in line for a maximum of £18.7m this year, depending on the company’s performance. His pay package was approved recently despite a sizeable shareholder rebellion.
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