UK builders suffer worst slump on record amid Covid-19 lockdown – business live

It’s been another day of dire economic data, as the coronovirus pandemic hits firms across the globe.

• American companies laid off more than 20 million workers in April — a record-breaking amount that dwarfs the previous record of 835k set in 2008. More than 16m jobs were lost at service sector companies, with hospitality and leisure worst hit.

  Economists warned that the US jobless rate has rocketed towards 15% since the pandemic began, wiping out all the jobs created since the financial crisis.

• Britain’s construction sector is also in a deep rut, with activity almost wiped out last month.

  Builders reported that new orders evaporated last month as sites were forced to shut down, with materials and parts in short supply too.

• Cash-strapped small UK businesses have secured more than 69,000 government-backed loans worth in excess of £2bn in the first 24 hours of the scheme’s launch.

• German factories have posted their biggest ever slump in orders for March, with demand cratering by 15%. Capital goods orders crashed by over 20%, as domestic and overseas customers hunkered down.
• Private sector activity across the eurozone fell at a record rate, data firm Markit reported.
• The European Commissioned warned that Europe faces its worst slump since the Great Depression. It predicted GDP would shrink by 7.75% across the eurozone, with Greece, Italy and Spain the worst hit.

Goodnight. GW

The Financial Times says America is facing an unemployment crisis of historic proportions, judging by today’s slump in private sector payrolls.

The US private sector shed a record 20m jobs in April as coronavirus lockdowns and the resulting closure of non-essential businesses led to historic unemployment.

Non-farm private employers cut 20.2m jobs last month, according to payroll processor ADP. That compared with economists’ expectations for 20m and easily surpassed the previous record of about 835,000 in February 2009 during the financial crisis.

Bloomberg fears the US government’s own jobs report, due on Friday, will be a shocker too:

The report is a harbinger of the government’s April jobs report on Friday and adds to evidence of the pandemic’s widespread economic devastation. The Labor Department’s figures are projected to show a record 21 million decline in total nonfarm payrolls and a jobless rate surging to 16%.

Marketwatch suspects that ADP’s grim report actually underestimates the true toll of joblessness (something ADP also acknowledged):

More than 30 million people have applied for jobless benefits in the past six weeks, though not all of them are still unemployed. Another 3 million probably applied in the past week.

In all likelihood, total job losses probably exceed the 23 million new jobs created from the end of the last recession in 2009 until the pandemic took hold in mid-March.

Whatever the case, the labor market has suffered an enormous blow that will make it harder for the economy to recovery once the COVID-19 pandemic begins to fade.

Washington has stepped in with massive subsidies to encourage companies to keep workers on payrolls until the economy reopens, but even that might not be enough. What were viewed as temporary job losses are increasingly becoming permanent.

Just in: Uber is adding to America’s unemployment misery, by cutting 3,700 jobs in response to the Covid-19 pandemic.

As part of the cost-cutting drive, chief executive officer Dara Khosrowshahi is waiving his base salary for the remainder of the year.

In a regulatory filing, the ride-hailing and food delivery firm blamed “the economic challenges and uncertainty resulting from the COVID-19 pandemic”.

Due to lower trip volumes in its Rides segment and the Company’s current hiring freeze, the Company is reducing its customer support and recruiting teams by approximately 3,700 full-time employee roles.

In connection with these actions, the Company estimates that it will incur approximately million related to severance and other termination benefits.

Heather Long of the Washington Post points out that America’s labor market has lost all the job creation gains of the last decade:

Greg Daco of Oxford Economics points out that service sector companies bore the brunt – especially leisure and hospitality firms (such as restaurants, theme parks, sports companies and travel firms).

Bloomberg’s Michael McDonough has plotted the job losses by company size:

MacroPolicy Perspectives’s Julia Coronado sums up what the data means to families across America:

Newsflash: More than 20 million Americans lost their jobs at companies across the country last month.

ADP, which processes payrolls for companies across America, has just reported that private sector employment decreased by 20,236,000 jobs from March to April.

That’s obviously a huge increase, out of a total US labor force of around 162m, and highlights the awful economic damage caused by Covid-19.

It’s the worst monthly job losses ever recorded by ADP, explains Ahu Yildirmaz, co-head of the ADP Research Institute:

Job losses of this scale are unprecedented. The total number of job losses for the month of April alone was more than double the total jobs lost during the Great Recession.

The job axe fell sharply across American firms. ADP reports that small firms cut 6 million jobs, medium-sized firms lost 5.2m workers, and large companies said goodbye to 8.9m staff.

The ADP also cautions that its report uses data through the 12th of the month, so won’t catch job losses in the last couple of weeks. It says:

As such, the April NER does not reflect the full impact of COVID-19 on the overall employment situation.

Despite the surge in UK government borrowing, there’s no shortage of willing buyers for British gilts.

Reuters has spotted that the UK borrowed for thirty years at a cheaper rate than ever before:

Britain’s government paid investors an interest rate of under 0.5% to borrow for more than 30 years on Wednesday, the lowest-ever yield at an auction for a conventional British government bond with a maturity of more than 10 years.

Investors bid for 2.6 times the 1.75 billion pounds (.17 billion) on offer of the 1.625% 2054 gilt, similar to the last sale of the bond on April 21, and the average successful bidder will receive an annual yield of 0.495%.

In March the Bank of England cut its main interest rate to a record low 0.1%, and announced a record 200 billion pounds in extra bond purchases that has kept a firm lid on bond yields and government borrowing costs.

Since then Britain has massively stepped up its borrowing plans to fund government efforts to lessen the impact of the coronavirus, but its cost of borrowing has fallen, not risen.

The lowest-ever yield at a conventional gilt auction came at a sale of 3.25 billion pounds of five-year gilts on Tuesday, when the average bidder received a yield of 0.017%.

Both sterling and the euro have fallen, after this morning’s dire PMI surveys.

The pound has shed half a cent against the US dollar to .238, its lowest in seven sessions, as traders digested the unprecedented drop in construction activity.

The euro is also down half a cent to .078, its lowest in eight sessions, after private sector across the eurozone slumped and German factory orders tumbled.

Joshua Mahony, senior market analyst at IG, says this morning’s surveys of purchasing managers have hurt both currencies:

“The euro and sterling are in the firing line this morning, with a host of economic releases highlighting just how dire the economic picture is irrespective on continued gains seen throughout stock markets.

“From a PMI perspective, final readings are typically perceived as a somewhat drab affair as minimal adjustments are made to previous estimates.

“However, with the economic picture changing so dramatically throughout the month of April, today has seen huge downward revisions to eurozone and UK PMI surveys to the detriment of the pound and euro.

From a eurozone perspective, we have now seen the sharpest contraction in activity throughout the region since its inception, with the composite eurozone PMI coming in at a record low of 13.6. In the UK, the construction sector saw the worst decline on record, with the PMI reading slumping to a record low of 8.2 in April.”

Europe will experience a recession this year of a depth unmatched since the Great Depression and the UK will be one of the hardest hit, the European Commission has just warned.

Economic forecasts published by the Commission on Wednesday suggest that the UK will experience an 8.3% contraction by the end of the year, with investment down by 14% and a doubling of unemployment.

In terms of the drop in GDP – the total value of goods and services produced in a country in a year – only Italy, Greece, Spain and Croatia among the EU member states will endure a bigger shrinking of the economy.

The commission said that the coming recession will be of historic proportion. The EU economy is forecast to contract by 7.5% in 2020 and grow by around 6% in 2021. But countries will be impacted and find they are able to recover to greater and lesser degrees.

Valdis Dombrovskis, commissioner for the economy, said:

“At this stage, we can only tentatively map out the scale and gravity of the coronavirus shock to our economies.

“While the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter. “This is a symmetric shock: all EU countries are affected and all are expected to have a recession this year.”

The UK’s GDP is predicted to bounce back by 6% by the end of 2021, according to the commission’s predictions, although this presumes the continuation of the status quo between Britain and the EU in its trading relationship.

About 70% of the country’s 10,500 fish and chips shops have reopened as owners find new ways of doing business under lockdown.

Six weeks ago 80% closed their doors as they moved to protect staff and customers from the spread of coronavirus, according to the National Fish Fryers Federation.

But now chippies are using innovative ideas such as online or app-based ordering systems which give customers a time slot to pick up their freshly-fried dinners and help maintain physical distancing.

Newsflash: Britain’s construction industry has suffered its worst ever monthly contraction, as builders downed tools to comply with the Covid-19 lockdown.

The UK construction PMI has slumped to just 8.2 for April, down from 39.3 in March, and far (far!) below the 50-point mark showing stagnation.

It’s the worst reading since Markit started surveying purchasing managers across UK building firms.

Markit says:

The vast majority of survey respondents (86%) reported a reduction in business activity since March, reflecting widespread site closures and shutdowns across the supply chain in response to the public health emergency.

All three main categories of construction work experienced a survey-record fall during April, with declines in house building (7.3) and commercial activity (7.7) exceeding that for civil engineering (14.6), Markit reports.

As well as site closures, construction firms also reported supply chain problems – with long delays to obtain raw materials and a shortage of safety products.

Just in: The eurozone’s private sector shrank at an unprecedented rate last month, led by Spain and Italy.

Data firm Markit’s eurozone composite PMI, which tracks activity across its private sector, has slumped to 13.6 for April, down from 29.7 in March.

That’s a record low, showing the worst ever slump in growth.

Purchasing managers at companies across the eurozone reported that exports and new business fell very sharply, while job losses accelerated.

Chris Williamson, Chief Business Economist at IHS Markit, says the decline is ‘shocking’, and warns that countries will struggle to recover quickly:

“The extent of the euro area economic downturn was laid bare by record downturns in every country surveyed in April, with output falling at unprecedented rates across the region’s manufacturing and services sectors.

With a large part of the region’s economy shut down while COVID-19 infections spiked higher, the economic data for April were inevitably going to be bad, but the scale of the decline is still shocking. The survey data are indicative of GDP falling at a quarterly rate of around 7.5%, far surpassing the worst decline seen in the global financial crisis. Jobs are also being lost at a rate never previously seen.

Hopefully, with coronavirus curves flattening and governments making moves to ease lockdown restrictions, many sectors should start to see output and demand pick up. The process will be only very gradual, however, as governments juggle between reviving economies and preventing a second wave of infections. Most companies will inevitably need to work at levels well below full capacity and sectors such as retail, travel, tourism and recreation – already the hardest hit – will continue to be badly affected by social distancing.

India’s service sector is shrinking at an unprecedented rate, due to its Covid-19 lockdown.

The Indian service sector PMI, which measures activity across the sector, has taken an almighty tumble — dropping to just 5.4 from 49.3 in March. An extraordinary plunge, on an index where 50 points shows stagnation.

Markit, which compiles the data, says it’s the worst plunge since it started measuring India’s economy 14 years ago, as businesses were closed and citizens ordered to stay at home.

Joe Hayes of Markit says it shows India’s economy is suffering a severe contraction:

Historical comparisons with GDP data suggest that India’s economy contracted at an annual rate of 15% in April.

It is clear that the economic damage of the COVID-19 pandemic has so far been deep and far-reaching in India, but the hope is that the economy has endured the worst and things will begin to improve as lockdown measures are gradually lifted.

A single-digit PMI is quite remarkable – its hard to believe any country has posted a worse reading before:

ITV has revealed the scale of the impact of the coronavirus, by furloughing 800 staff as advertising slumped 42% last month.

The broadcaster said it will reduce overhead costs by £60m this year, an increase in its previously announced £30m, and has withdrawn its final dividend for 2019.

Other actions include furloughing 800 staff, about 15% of ITV’s UK workforce, mostly in ITV Studios after TV and film production was shutdown nationwide in mid-March.

The broadcaster has also reached an agreement with its pension trustees and tax authorities to delay at least £150m of payments due by June, to the second half and into 2021.

ITV, which earlier this week announced that its flagship summer programme Love Island will be cancelled this year, said that it is working on a “phased approach to office re-entry” and a “return to production protocol” to re-start programme production.

Carolyn McCall, chief executive of ITV says:

“We are now very focused on emerging from this crisis in a strong position, continuing to offer advertisers effective marketing opportunities and making preparations to restart productions safely.”

ITV said that total viewing hours were up 2% in the year to the end of March, while viewing of shows on streaming service ITV Hub was up 75% year-on-year to 169m hours.

German carmaker BMW has also highlighted the economic cost of Covid-19 this morning.

BMW has reported a 20% tumble in vehicle deliveries in the first quarter of 2020, including a 30% slump in China.

It points out that the international motor market crumbled this year:

The worldwide spread of coronavirus has left international automobile markets in an extremely weak overall condition after the first three months of the year. Initially, events were dominated by a slump in registrations in China in February and March.

However, all other major automobile markets subsequently reported declines, some of them drastic, especially from March 2020 onwards.

BMW also issued a profit warning last night, saying the pandemic was causing more damage than it expected. It explained:

“The decisive factor for the adjustment is that the measures to contain the coronavirus pandemic are lasting longer in several markets and are thus leading to a broader negative impact than was foreseeable in mid-March.

It is therefore apparent that delivery volumes in these markets will not – as was previously assumed – return to normal within a few weeks. The highest negative impact is expected in the second quarter of 2020.”

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

The economic gloom in Germany has deepened this morning, with the biggest slump in factory orders since reunification.

German factory orders plunged by 15.6% in March alone, new figures show, as its economy started to lock down to handle the coronavirus pandemic. This appears to be the worst slump since the data series began in 1991.

On an annual basis, orders were 16% lower than in March 2019 – with a slump in demand from other German companies, and from customers abroad.

Statistics firm Destatis explains:

Domestic orders decreased by 14.8% and foreign orders fell by 16.1% in March 2020 on the previous month.

New orders from the euro area went down 17.9%, and new orders from other countries decreased by 15.0% compared with February 2020.

This is even worse than expected – economists had forecast a 10% drop in German factory orders. Another sign that Europe’s economy is suffering its worst downturn in decades.

More details to follow…

Also coming up today

We get new surveys of Eurozone service sector companies, and UK building firms, this morning — likely to confirm that output slumped at unprecedented rates in April.

Later today, US payroll operator ADP will publish its monthly estimate of how many private sector jobs were created last month – and it’s likely to be horrific. Economists predict that more than 20 million jobs were lost across America last month during the pandemic.

The agenda

• 9am BST: Eurozone service sector PMI for April
• 9.30am BST: UK construction PMI for April
• 1.15pm BST: ADP survey of job creation in the United States last month
• 3.30pm BST: Weekly oil inventory figures