UK service sector growth ‘slows’

Restaurant

Growth in the UK’s dominant service sector slowed last month, according to a closely watched survey, while price pressures “remained intense”.

The (PMI) recorded its first slowdown in the services sector for four months.

The index fell to 54.5 in January from the previous month’s reading of 56.2.

However, a reading above 50 still indicates the sector is expanding, and Markit said the economy was on track for a “buoyant” start to 2017.

Similar surveys from Markit/CIPS released earlier in the week suggested a slight slowdown in activity in both the manufacturing and construction sectors.

But Markit said the surveys together suggested the UK economy would grow by a “robust” 0.5% in the first quarter of the year, if current trends continued.

On Thursday, the Bank of England for the UK economy this year, and now expects it to grow by 2%.


The health of the UK’s service sector is monitored closely as it accounts for more than three-quarters of the economy.

Markit said the main positive finding from its latest survey of the sector was an increase in confidence about future prospects, which was at its highest since May last year.

However, once again firms reported inflationary pressures. Price inflation for goods bought by the companies hit the highest since March 2011, while inflation in prices charged rose at the same rate as December’s record high.

Firms are facing much higher prices for imported goods since the fall in the value of the pound since the Brexit referendum vote in June last year.

“Service sector growth eased after a strong end to 2016, but the January surveys still point to a buoyant start to 2017 for the UK economy,” said Chris Williamson, chief business economist at IHS Markit.

“Encouragingly, optimism about the coming year has risen to its highest in one-and-a-half years, improving across the board in all sectors to suggest that January’s slowdown may only be temporary.

“The main area of concern is the extent to which companies’ costs are rising across the economy, with the rate of inflation accelerating to a pace not seen since before the global financial crisis,” he added.

“Higher costs are feeding through to increased selling prices, which will inevitably put upward pressure on consumer prices.”

Latest official figures showed the annual rate inflation rose to 1.6% last month, up from 1.2% in November.

The Bank expects the weakness in the pound to push inflation to 2.7% next year, above its target rate of 2%.

Bank of England governor Mark Carney has said the Bank is prepared to tolerate inflation running above its target, but in the , members of the Monetary Policy Committee said they had moved “a little closer” to the limit of that toleration.

Apple to start making iPhones in India, says state government

iPhone

Apple is to start making iPhones in the southern Indian state of Karnataka, the state’s government has said.

It said it welcomed a proposal from the tech giant to begin initial manufacturing operations in the state, whose capital is the tech hub Bangalore.

Apple has 2% of India’s mobile phone market, well behind rival Samsung.

However, although Apple said this week it is keen to “invest significantly” in India, it has not confirmed any plans.

Despite the low percentage of sales, Apple has almost half of the market for premium phones, which start at around $450 an item, and its sales are growing fast.


Apple has held a series of meetings with government representatives at both state and national level and is understood to be pressing for concessions before going ahead with such a move.

Priyank Kharge, minister of information technology and biotechnology in Karnataka, told the AFP news agency: “We have an understanding with Apple and we expect them to start manufacturing in Karnataka by the end of April.”

Reports said the plant is being set up by Taiwanese manufacturing company Wistron Corp.

Apple’s biggest manufacturing partner is Taiwanese giant Foxconn, which runs the biggest iPhone factory in the world in China.

Apple is currently unable to set up its own branded stores in India, which has a raft of rules to curb the activities of foreign companies.

For it to be able to sell direct to customers in India, Apple would have to source 30% of the components of its products locally.

Earlier this week, Apple reported its first rise in sales in nine months after strong Christmas sales of the iPhone 7.

The firm had suffered three quarters in a row of falling revenues as mounting competition, particularly from Chinese rivals, hit sales of the iPhone.

Snapchat owner worth up to $25bn despite making losses

Putting Snapchat to the test

Snap, the parent company of messaging app Snapchat, has publicly filed plans to list on the US stock market.

The California-based firm is seeking to raise $3bn (£2.4bn) from the share sale, according to reports.

Based on investments so far, the tech firm would be worth between $20bn and $25bn, making it the biggest US flotation in recent years.

The company was first reported in November to have filed a confidential application for the listing.

The company began in 2012 as a mobile app that allowed users to send photos that vanish within seconds.

It now has nearly 160 million daily users, which is more than Twitter.


Snapchat is seen as an appealing way for advertisers to reach young people, with almost two-thirds of its users aged between 13 and 24.

The firm grew revenue by nearly 600% last year to $404m, largely due to increased income from adverts, according to the listing plans.

However, heavy costs, including from marketing and research, dragged Snap to a net loss of $515m.

Snap’s co-founder, 26-year-old Evan Spiegel, turned down an offer from Facebook founder Mark Zuckerberg to buy Snapchat for $3bn just over three years ago.

Iceberg lettuces and broccoli rationed as vegetable crisis hits supermarkets

Iceberg lettuce

Supermarket giant Tesco has rationed customers to three iceberg lettuces per visit – blaming poor growing conditions in Europe for a shortage in UK stores.

It said bad weather in Spain had caused “availability issues” but suppliers were working to resolve the problem.

Morrisons has also limited shoppers to three heads of broccoli and three iceberg lettuces, .

It follows a UK courgette shortage last month, after wet and cold weather in southern Europe devastated crops.

Customers have posted photographs on social media sites of empty lettuce shelves in Tesco stores, alongside signs asking them to limit lettuce purchases.

One notice read: “Due to continued weather problems in Spain there is a shortage of iceberg lettuce.

“To protect the availability to all our customers, we are limiting bulk purchases to three per person. We apologise for any inconvenience caused.”

A Tesco spokesperson said it had introduced the limit to ensure its stores did not run out of some products.

A Morrisons spokesman told the Daily Mail it had introduced a cap to stop local businesses and restaurateurs buying up all of its stock.

“As a result of the fact that the Spanish harvest has been very difficult this year, we have just about enough coming in to supply our customers,” he said.

Meanwhile, Sainsbury’s told the paper it was working with suppliers “to maintain supply for our customers”.

Last month, UK suppliers told the BBC produce from the continent was being “treated like gold”

Dieter Lloyd, from the British Leafy Salads Association, told the BBC that flooding in Spain before Christmas had damaged crops and grounds were then too wet to grow a fresh batch.

The problem was compounded by a cold snap of weather in January.

He said iceberg lettuces currently being stocked in UK supermarkets had been probably grown in California, rather than Europe.

Last month fruit and vegetable wholesaler Nick Padley told BBC News that more than 90% of Europe’s iceberg lettuce came from Murcia, a small region in south-east Spain.

He said: “There’s a gap of about six weeks on iceberg lettuce, nothing is coming from Spain for six to eight weeks.

“Our supplier is now going to be bringing in iceberg from America which is obviously costing more. It’s a tough time.”

The supply of other vegetables – including aubergines, tomatoes, broccoli and peppers – grown in Europe is also down.


The , FEPEX, said it expected the shortage of leafy vegetables grown outdoors, including lettuce and spinach, to continue until early April.

It said EU-wide production was down by about 40% and warned that increased availability would depend on the climate in southern Europe in February and March.

Experts say a combination of flooding, cold weather and poor light levels in southern Europe created a “perfect storm” for bad growing conditions.

Spain’s Murcia region supplies 80% of Europe’s fresh produce during the winter.

However, after suffering its heaviest rainfall in 30 years, only 30% of Murcia’s growing fields have been useable.

The effects of shortages are particularly pronounced in Britain, which imports an estimated 50% of its vegetables and 90% of its fruit.

Npower to increase electricity and gas prices

gas boiler

Npower has announced one of the largest single price rises ever implemented by a “Big Six” supplier.

will raise standard tariff electricity prices by 15% from 16 March, and gas prices by 4.8%.

A typical dual fuel annual energy bill will rise by an average of 9.8%, or £109.

Npower said the changes would affect about half of its customers, as the other half are on fixed term deals. They will see no price rise.

However, 1.4 million customers on existing standard tariffs will be offered a four year-fixed price tariff with a 4.8% discount.

The announcement comes after three other suppliers – British Gas, E.on and SSE – announced they would keep prices on hold until the end of March.

EDF cut its gas prices by 5.2% last month, but will raise electricity charges by 8.4% from 1 March.

Npower said it was the first time it had raised prices for three years.

“This is a hugely difficult decision, and we’ve delayed the date this takes effect until after one of the coldest months of the year,” said Simon Stacey, Npower’s managing director of domestic markets.

It blamed increases in wholesale energy costs, and the cost of delivering government policies like smart meters and the renewables obligation.

Trump effect ‘has been good for UK’ says central banker

Ben Broadbent

A boost to financial markets since Donald Trump’s election has helped the UK economy, a central banker has said.

Ben Broadbent, the deputy governor for monetary policy at the Bank of England, told the BBC that some of the Trump administration’s economic plans could also be good for the UK.

However, he said it was too early to know the effect of Mr Trump’s policies.

Mr Trump has promised to cut taxes and boost US infrastructure spending, but also erect trade barriers.

“It’s true that financial markets have taken a relatively optimistic view so far of what it means,” Mr Broadbent told BBC Breakfast.

“You’ve seen business confidence rise, particularly in the US, you’ve seen financial markets get more optimistic, and I think that has had some impact on us,” he said.


Global markets were boosted by the so-called “Trump effect” after investors bet on Mr Trump’s policies of infrastructure spending and lower corporate taxation coming to fruition and boosting the US economy.

That economic plan would probably help global growth, Mr Broadbent said.

The US Dow Jones share index broke through the 20,000 point barrier in late January for the first time ever as investor confidence built.

However, US markets have eased back this week amid growing uncertainty.

Mr Broadbent sounded a note of caution about some of Mr Trump’s policies.

“There are other things the US administration has said that people may worry more about, or have done in some markets,” he said.

“And I should say overall that… there’s a lot we have yet to see about the detailed plans, including those for fiscal policy, for government spending and taxes and so forth, so we’ll have to wait and see.

“But so far, at the margin, yes, it’s been positive for global sentiment, and for that reason, and to that extent, for us as well.”

Why is Asia demanding so much baby formula?

UK consumer goods giant Reckitt Benckiser is betting big on Asia’s growing thirst for infant formula.

Getting more sales in that region was a major reason it gave for Thursday’s $16.7bn (£13.3bn) bid for US firm Mead Johnson – the world’s second-biggest maker of the product.

Baby milk formula is big business. Globally sales were worth $41bn in 2014, according to Euromonitor.

And Asia is comfortably the fastest-growing market. But why?


China’s 2015 decision to has huge implications not just for demographics, but for consumer-oriented businesses.

Couples are now allowed to have two children after concerns about China’s ageing population led the government to reverse the decades-long rule.

Last year China’s birth rate was the highest this century, with the number of newborns rising by 7.9% to 1.31 million.

As a result of this baby boom, analysts expect demand for food, formula, clothes and medicines to skyrocket.

However changes to import rules will require the industry to adjust – with


Aside from China, there has also been a spurt in demand for infant formula from South East Asia.

Countries like Indonesia and Vietnam are rapidly industrialising and have young populations that will see millions of mothers enter the workforce in the coming years. As that occurs, breastfeeding is likely to get displaced by formula feeding.

In a study published last year in the Public Health Nutrition Journal, lead researcher Dr Phillip Baker from Australian National University described the trend as “potentially the largest shift in infant and young child nutrition on record”.

He added: “Paid employment is a very good thing for families, especially those living on the bread line. The problem is that without paid parental leave or family friendly workplaces, breastfeeding can be very difficult or even impossible.”

It’s been nearly a decade since . But the fears linger on.

Six infants died and hundreds of thousands fell ill in 2008 after drinking formula containing melamine.

That incident, combined with a regular stream of subsequent food safety crises, have led Western brands to be perceived as safer than locally produced products.

Since then, there have been regular reports about Chinese buyers regularly buying up huge amounts of infant formula from abroad. It also spurred the rise of parallel traders and .

The situation got so serious global restrictions were even put in place, with retailers in the UK and elsewhere rationing the sales of baby milk formula in in 2013.

The winner in all of this? Producers like Mead Johnson – who garner about half of their sales in Asia.

Iceberg lettuces rationed as vegetable crisis hits supermarkets

Iceberg lettuce

Supermarket giant Tesco has rationed customers to three iceberg lettuces per visit – blaming poor growing conditions in Europe for a shortage in UK stores.

It said bad weather in Spain had caused “availability issues” but suppliers were working to resolve the problem.

Morrisons has also limited shoppers to three heads of broccoli and three iceberg lettuces, .

It follows a UK courgette shortage last month, after wet and cold weather in southern Europe devastated crops.

Customers have posted photographs on social media sites of empty lettuce shelves in Tesco stores, alongside signs asking them to limit lettuce purchases.

One notice read: “Due to continued weather problems in Spain there is a shortage of iceberg lettuce.

“To protect the availability to all our customers, we are limiting bulk purchases to three per person. We apologise for any inconvenience caused.”

A Tesco spokesperson said it had introduced the limit to ensure its stores did not run out of some products.

A Morrisons spokesman told the Daily Mail it had introduced a cap to stop local businesses and restaurateurs buying up all of its stock.

“As a result of the fact that the Spanish harvest has been very difficult this year, we have just about enough coming in to supply our customers,” he said.

Meanwhile, Sainsbury’s told the paper it was working with suppliers “to maintain supply for our customers”.

Last month, UK suppliers told the BBC produce from the continent was being “treated like gold”

Dieter Lloyd, from the British Leafy Salads Association, told the BBC that flooding in Spain before Christmas had damaged crops and grounds were then too wet to grow a fresh batch.

The problem was compounded by a cold snap of weather in January.

He said iceberg lettuces currently being stocked in UK supermarkets had been probably grown in California, rather than Europe.

Last month fruit and vegetable wholesaler Nick Padley told BBC News that more than 90% of Europe’s iceberg lettuce came from Murcia, a small region in south-east Spain.

He said: “There’s a gap of about six weeks on iceberg lettuce, nothing is coming from Spain for six to eight weeks.

“Our supplier is now going to be bringing in iceberg from America which is obviously costing more. It’s a tough time.”

The supply of other vegetables – including aubergines, tomatoes, broccoli and peppers – grown in Europe is also down.


The , FEPEX, said it expected the shortage of leafy vegetables grown outdoors, including lettuce and spinach, to continue until early April.

It said EU-wide production was down by about 40% and warned that increased availability would depend on the climate in southern Europe in February and March.

Experts say a combination of flooding, cold weather and poor light levels in southern Europe created a “perfect storm” for bad growing conditions.

Spain’s Murcia region supplies 80% of Europe’s fresh produce during the winter.

However, after suffering its heaviest rainfall in 30 years, only 30% of Murcia’s growing fields have been useable.

The effects of shortages are particularly pronounced in Britain, which imports an estimated 50% of its vegetables and 90% of its fruit.

Amazon forecasts unexpected profit dip

Amazon logo on phone

Online retailer Amazon has narrowly missed sales expectations for the fourth quarter after revenue rose 22% to $43.7bn (£34.9bn).

It had been forecast by analysts to report larger sales of $44.7bn during the busy holiday period of the three months to 31 December 2016.

Net profit rose from $482m in the final quarter of 2015 to $749m.

For the full-year, sales increased 27% to $136bn and income soared from $596m to $2.4bn.

Amazon said last month that the 2016 holiday was its best-ever shopping season, when it shipped 50% more items than the prior year.

Snapchat reveals plans for US stock market listing

Putting Snapchat to the test

Snap, the parent company of messaging app Snapchat, has publicly filed plans to list on the US stock market.

The California-based firm is seeking to raise $3bn (£2.4bn) from the share sale, according to reports.

Based on investments so far, the tech firm would be worth between $20bn and $25bn, making it the biggest US flotation in recent years.

The company was first reported in November to have filed a confidential application for the listing.

The company began in 2012 as a mobile app that allowed users to send photos that vanish within seconds.

It now has nearly 160 million daily users, which is more than Twitter.


Snapchat is seen as an appealing way for advertisers to reach young people, with almost two-thirds of its users aged between 13 and 24.

The firm grew revenue by nearly 600% last year to $404m, largely due to increased income from adverts, according to the listing plans.

However, heavy costs, including from marketing and research, dragged Snap to a net loss of $515m.

Snap’s co-founder, 26-year-old Evan Spiegel, turned down an offer from Facebook founder Mark Zuckerberg to buy Snapchat for $3bn just over three years ago.