Articles from April 2015

FTSE 100 flat despite strong UK shop sales

Shares in the Next shop group rose after the retailer reported stronger than expected sales- but the FTSE was held back by falling mining stocks.

FTSE 100 flat despite strong UK shop salesNext said that full-price sales for the 13 weeks to 25 April climbed 3.2%, helped by April’s warm weather, and its shares rose more than 3%.

But after a mixed morning, the FTSE 100 was down 3.36 points at 7,027.17.

Mining shares pulled the index lower after Antofagasta cut its copper output forecast.

Shares in Antofagasta fell 3.4% and other miners also dropped, with BHP Billiton down 2.6% and Rio Tinto 1.6% lower.

Shares in Barclays slipped 0.75% after the bank announced it was setting aside a further £800m to cover the cost of settling an investigation into foreign exchange rate-rigging. Barclays also took a further £150m hit to cover payment protection insurance (PPI) mis-selling.

The top riser in the FTSE 100 was Weir Group. The company said first quarter orders from its oil and gas business were down 23%, but this was not as bad as expected and its shares rose 4.1%.

Weir also said it cut costs at its oil and gas business by a further £10m.

In the FTSE 250, shares in Greggs rose 3.3% after the bakery chain announced a £20m special dividend.

Greggs said the dividend would replace a previously-proposed share buyback.

The firm also reported a 5.9% increase in same-store sales in the 16 weeks to 25 April, beating expectations.

On the currency markets, the Pound rose 0.19% against the dollar to $1.5368 and slipped 0.04% against the euro to €1.3968.

UK economic growth slows to 0.3pc

The rate of economic UK growth has halved in the three months to the end of March- marking the slowest quarterly growth for two years.

UK economic growth slows to 0.3pcThe UK economy grew by 0.3% in the quarter according to the Office for National Statistics (ONS) said.

That compares with 0.6% in the last three months of 2014.

The figures, which come nine days before the general election, suggest a “temporary” slowdown in the economy, analysts said.

The ONS said the economy was 2.4% larger than the same period a year earlier.

Growth of 0.5% in the services industry was offset by a 1.6% fall in the pace of economic output in construction.

The UK services sector accounts for around three quarters of economic growth, with construction, manufacturing and production accounting for the remaining quarter.

The Chancellor, George Osborne, said: “It’s good news that the economy has continued to grow, but we have reached a critical moment. Today is a reminder that you can’t take the recovery for granted and the future of our economy is on the ballot paper at this election.”

Liberal Democrat Chief Secretary to the Treasury Danny Alexander, said the figures were still progress but a warning too.

He added it was vital his party were part of the next government to ensure the “fair and balanced approach needed to secure this recovery”.

For reasons no one can quite explain, construction in Britain has been lousy for six months.

The production industries have been especially hurt by the oil price collapse, which has led to something of a crisis in the North Sea. Excluding oil and gas, quarter-on-quarter growth would have been 0.1 of a percentage point higher at 0.4%.

But nor has manufacturing been sparkling: it showed growth of just 0.1%. And perhaps because of the strengthening pound, the growth rate of our manufacturers has progressively decelerated in a straight line from 1.4% a year ago

More unexpectedly, some service industries in which the UK is a world leader – finance, engineering and architecture – have had a poor few months.

One possible explanation of their slowing growth is that demand for our services and goods in important export markets – especially China and the US – may be a bit worse than official figures show. That could be a sign of trouble ahead.

So thank goodness for our domestic facing services.

Or to put it another way, if we weren’t a nation of shoppers and restaurant eaters, there would be very little growth at all. The output of distribution, hotels and restaurants increased by 1.2% in the quarter – only slightly slower than at the end of last year.

The figures represent a first estimate of economic growth and are based on less than half of the total data required for the final output estimate.

But the ONS said that while estimates are subject to revision as more data become available, the revisions are typically small between the preliminary and third estimates.

Annuity rates at record low after pension changes

The average annual income from a standard annuity has fallen to a record low within only weeks of a major overhaul of the pension system.

Annuity rates at record low after pension changesThe popularity of annuities- bought from a pension pot and guaranteeing a fixed, regular income for life – fell after the the shake up was announced last year.

However since 6 April retirees have been able to do what they wish with their pension pot, but it may be taxed.

Financial data service Moneyfacts said new retirees would be hit by low rates.

Before the pension changes came in those who were retiring could cash in up to 25% of their pension pot as a tax-free lump sum.

They then had two options: reinvest their pension pot – or keep their current investments – and take an income from their funds as they needed. The second option open to them was to take out an annuity.

The changes that have now come into force mean those due to retire now can do whatever they like with 100% of their pension pot, for example invest in property, although they still only receive the first 25% tax free.

After this plan was announced in the 2014 Budget, the sale of annuities plunged. This drop in demand was part of the reason for a 5.7% fall in the average annual income payable from a standard annuity in 2014, according to Moneyfacts.

This year, a further drop has taken the income from standard annuities without guarantees to a record low.

A healthy 65-year-old with a pension pot of £10,000 would be able to swap it for a standard annuity income of £476 a year, down 5.9% since the beginning of the year.

The equivalent person with a £50,000 pension pot would get £2,550, a fall of 6.4% over the same period.

UK pension changes 2015

  • People aged 55 and over can withdraw any amount from a Defined Contribution (DC) scheme, subject to income tax
  • Tax changes make it easier to pass pension savings on to descendants
  • Many people with Defined Benefits (DB) schemes will be allowed to transfer to DC plans
  • All retirees will have access to free guidance from the government’s Pension Wise service
  • Existing annuity holders unaffected for the time being, but there are plans for them to be able to sell their annuity

UK inflation rate remains zero in March

The UK’s inflation rate remained at it’s record low of 0pc in March- according to the Office for National Statistics.

UK inflation rate remains zero in MarchCheaper clothing and footwear, offset by a rise in petrol prices, helped to maintain the rate at 0% for a second month according to the official figures by the ONS.

The figure was the lowest rate of Consumer Prices Index (CPI) inflation since estimates of the measure began in the late 1980s.

It means the cost of living is broadly the same as it was a year earlier.

However, the ONS said that if the rate of inflation was calculated to two decimal places, prices were 0.01% lower than a year before – the first fall on record for the CPI measure.

One of the main reasons the CPI rate remained broadly unchanged was rising petrol and diesel prices between February and March, the ONS said.

But an overall fall in fuel prices over the past year has been a major contributor to low inflation, it added.

The CPI figure leaves inflation well below the Bank of England’s 2% target.

There had been speculation that the CPI rate – as measured to one decimal place – would fall below zero in March, and there remains a possibility that the rate could fall in the coming months.

However, few economists think the UK is at risk of the type of entrenched deflation that Japan has suffered from.

In March, inflation as measured by the Retail Prices Index (RPI) fell to 0.9% from 1.0% the previous month, the Office for National Statistics said.

Like CPI, RPI inflation is calculated from a sample of retail goods and services. However, RPI is calculated differently and includes data such as mortgage repayments.