UK and US manufacturing sectors shrink as new orders fall and prices rise – as it happened

That’s all for today. Our US colleagues will be covering the Federal Reserve decision in a couple of hours…

Here’s today’s main stories:

America’s factories have mirrored their UK counterparts, by shrinking last month.

Economic activity in the US manufacturing sector contracted in April, the latest survey from the Institute of Supply Management (ISM) shows. That reverses the expansion recorded in March, which followed a 16-month slump.

The ISM’s manufacturing PMI dropped to 49.2 percent in April, down 1.1 percentage points from the 50.3 percent recorded in March – and below the 50-point mark showing stagnation.

Firms reported a drop in new orders last month.

There are also signs that inflation pressures are building.

The Prices Index component of the index jumped to 60.9 percent, up from 55.8 percent in March, driven by a rise in costs for commodity prices such as crude oil, aluminum, steel and plastic.

The survey shows that US manufacturing is “struggling for momentum”, says Stephen Brown, deputy chief North America economist at Capital Economics.

Brown told clients:

The fall in the ISM manufacturing index back below the theoretical 50.0 no-change level in April suggests that the nascent recovery in the manufacturing sector may already have gone into reverse.

While the further rise in the prices paid index to a 22-month high looks concerning, that largely reflects the rise in oil prices at the start of the month, which has since been fully reversed.

US job openings were little changed in March compared with February, new data shows, suggesting demand for workers is stabilizing at an elevated level.

There were 8.5 million job openings on the last business day of March, the U.S. Bureau of Labor Statistics reported today. That’s slightly lower than a month earlier, when there were 8.8m vacancies.

The number of hires “changed little”, according to the latest JOLTS report, at 5.5 million while the number of total separations decreased to 5.2m.

Around 3.3 million workers quit their jobs, down from 3.5 million in February, while while 1.5 million were laid off or discharged, down from 1.68 million a month earlier.

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.

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.

The BBC reported at the time:

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:

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.

The Bank of England may be concerned that today’s PMI report shows that manufacturers lifted their selling prices last month.

Output charge inflation hit an 11-month high, as factores passed on their rising costs to customers.

James Brougham, senior economist at Make UK, says:

“This is a reminder that growth prospects for manufacturers teeter on a knife’s edge.

More ominously there are indications that businesses are hiking their prices again at the fastest rate in over a year, outpacing any decision to soften the base rate from the Bank of England and highlighting that inflation can occur despite tightening monetary policy. The sector seems to be returning to the situation it found itself in only a year ago with low demand, high inflation and no clear route back to prosperity.

If supply-side inflation continues, it’s almost certain the Bank will delay any decision to lower rates, or even return to raising them in the extreme.”

Boudewijn Driedonks, partner at McKinsey & Company, is also concerned that price pressures are increasing:

The UK’s manufacturing sector experienced a modest pullback in April, breaking the trend of recovery and slipping back into contraction. Growth was hampered by lower output levels linked to weaker market conditions overall, which is also showing in a weaker labour market. The drop down to 49.1 is still only slightly below the magic 50 mark. The next few months will tell us if this flatlining is a true reversal of the recent recovery trend or not.

“Zooming out to the wider economy, we are seeing a story of two halves. The service sector remains strong, and April saw service sector firms accelerate growth to the strongest level for 11 months. This month’s PMI again emphasises that manufacturing is the weak link in the economy. There are also signs of possible price pressures building for the future - wage bills are growing, and input prices are increasing.

Dave Atkinson, SME & Mid Corporates head of manufacturing at Lloyds Bank, says:

“Manufacturers’ output falling back into contraction after a month of growth in March suggests the economic headwinds that have been affecting the sector this year are still bearing down on firms.

“Despite this fall, there is still cause for optimism. Inflation is slowly falling, which should help to boost demand and consumer confidence this year, and firms are benefitting from deepening their relationships with UK suppliers to minimise the impact of any future global supply chain shocks.

“Manufacturers have seen how global events can affect their output in recent years, so they’ll be keeping a close eye on further geopolitical tensions that could offset the sector’s positive outlook in the months ahead.”

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.

Property experts have been digesting Nationwide’s data showing a 0.4% drop in house prices last month.

Tom Bill, head of UK residential research at Knight Frank, agrees that rising mortgage costs are to blame:

“The house price growth seen in the first two months of this year is going into reverse as higher mortgage rates take their toll on demand. Borrowing costs have risen as a strong labour market means the prospect of a rate cut has become more remote.

There are added financial pressures in the system as a wave of owners roll off sub-2% mortgages agreed in early 2022.

We believe demand and house price growth will pick up later this year as a rate cut moves onto the horizon.”

Emma Fildes, property agent at Brickweaver, says the backtracking from lenders who have recently raised mortgage rates has hit the confidence of buyers:

Matt Thompson, head of sales at Chestertons, reports that the usual spring pick-up in activity came later this year (as did spring itself! Brrrrr).

Thompson says:

“The uplift in market activity typically associated with spring was slightly delayed this year but became more evident over the course of April. Compared to March, we saw an increase in the number of London house hunters which also led to sellers feeling more confident about putting their property up for sale.

Still, demand continued to outweigh supply in April which gave the majority of sellers the upper hand during price negotiations.”

And, of course, this house price data are volatile. And Peter Arnold, EY UK’s chief economist, argues we shouldn’t read too much into April’s drop:

The lenders’ house price series can be volatile from month-to-month, particularly in times when transaction levels are relatively low, making it harder to mix-adjust the data.

Just as the apparent strength in January/February looked out-of-keeping with fundamentals, the latest data is unlikely to mark the start of a renewed fall in property prices.

GSK has raised its 2024 profit forecast, with strong demand for its RSV and shingles vaccines.

Britain’s second-biggest drugmaker said it now expects a rise of 8% to 10% in annual adjusted earnings per share, up from the 6%-9% growth it had previously forecast. It expects its sales this year to rise in the upper end of its 5% to 7% forecast range.

Last year GSK launched its vaccine Arexvy for RSV (respiratory syncytial virus), an infection with cold-like symptoms that can lead to hospitalisation and death in elderly people, and uptake has been strong.

More than a fifth of adults in the US have received an RSV vaccine, either from GSK or Pfizer.

Under chief executive Emma Walmsley, the drugmaker has focused on vaccines and infectious diseases, cancer drugs and long-acting HIV therapies.

The company reported a 6% rise in sales to £7.4bn in the first three months of the year, better than the City had expected, and a profit before tax of £1.4bn, down from £1.9bn. Its core earnings per share of 43.1p came in above analysts’ expectations. Sales of the Shingrix jab for shingles climbed 18% to £900m.

Nigel Railton has an impressive roster of experience to turn to, as he slides into the chairman’s seat at the Post Office, on an interim basis at least.

He’s currently the chair of Argentex, the currency management services business, after stepping down from Camelot after 24 years.

In 2018, he told The Times that as a boy in Crewe, there were three options after leaving school – working for Rolls-Royce, joining the railways or going on the dole. Railton took the second option, working as a “box lad” in the Crewe signal box at the age of 16.

Railton explained:

My job entailed booking a train. When a train left the station, you had to write it down in the book so that you could monitor the timeliness of the trains. I had to phone the station announcer and tell them the train was coming. Plus I had to make the tea and clean the signal box. That gives you a decent grounding in life.

He went on to become a railway accountant, followed by jobs at Black & Decker and Daewoo, before he joining Camelot.

Railton said the most important event of his working life was “moving from my home town of Crewe to Watford to study to be an accountant.

As well as running Argentex, he is also a trustee of the Social Mobility Foundation, which works to help young people who face structural barriers in education and work because of their socioeconomic background.

Nigel Railton, the former boss of National Lottery operator Camelot, has been named as the interim chairman of the Post Office.

Railton will succeed Henry Staunton, who was fired from his role in January, after barely a year in the job.

The Department for Business and Trade says Railton has “a wealth of experience in transforming organisations” – which he’ll need, as the inquiry into the Horizon scandal continues.

Railton will lead the Board of Directors and be invited to give Ministers his views on the future direction of the Post Office. But has he’s been named as ‘interim chair’, he may not be planning to do the job on a long-term basis.

Business secretary Kemi Badenoch says:

Nigel has the necessary experience to lead an organisation as large and complex as the Post Office and I’m confident he will work well with the leadership team to implement the change that is required in the organisation.

The Government is committed to delivering justice for the postmasters, but also fulfil our duties to Post Office staff. I want to thank Nigel for stepping up to public service at a time of need, and I know he can help fix the issues of the past whilst transforming the company for the future.

In February, Badenoch told the House of Commons that Staunton was being investigated over bullying allegations ahead of his dismissal; a week later, Staunton hit back, saying the victim of a “smear campaign”,

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK house prices dipped again in April, as rising borrowing costs made it harder for buyers to afford a mortgage.

Lender Nationwide has reported that prices fell by 0.4%, on a seasonally-adjusted basis, in April – following the 0.2% month-on-month drop in March.

That pulled the annual rate of house price growth down to 0.6% in April, from 1.6% the previous month, with the average house now costing £261,962.

Economists had expected a small monthly rise, of 0.2%.

Robert Gardner, Nationwide’s chief economist, said:

“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year. House prices are now around 4% below the all-time highs recorded in the summer of 2022, after taking account of seasonal effects.

At the start of this year, mortgage lenders were engaged in a price war as they slashed rates to attract buyers. But the market has changed, as City investors have reduced their forecasts for interest rate cuts this year.

With just two Bank of England cuts now expected in 2024, several lenders have recently raised rates – adding to pressure on homebuyers and those looking to remortgage.

Recent research carried out for Nationwide found that the biggest factors holding potential buyers back are that house prices, and mortgage costs, are simply too high.

Gardner adds:

Coupled with this, 84% of prospective first-time buyers said that the cost of living has affected their plans to buy, for example through having less money each month to save for a deposit.

Around two thirds (67%) of respondents currently have between £0 and £10,000 saved towards a deposit. With a 10% deposit on a typical first-time buyer property currently around £22,000, it is not surprising to find that c.60% of prospective buyers have yet to save more than a quarter of their target deposit.

The agenda

• 7am BST: Nationwide house price index for April

• 9.30am BST: UK manufacturing PMI for April

• 3pm BST: US JOLTS survey of job vacancies

• 7pm BST: US Federal Reserve sets interest rates