Service sector

The FTSE 100 in the red despite growth in the services sector, as new car sales saw the worst March in 24 years

UK blue chip index slides into red after latest economic news as investors await developments in Ukraine

UK service providers saw an unusually strong increase in business activity in March and the rate of expansion accelerated to its highest level in 10 months, S&P Global/CIPS said.

The lifting of pandemic restrictions and the return to offices had led to a sharp rebound in customer demand.

But business expectations for the year ahead fell for the second consecutive month and were at their lowest since October 2020.

The lower optimism was – unsurprisingly – mainly related to the war in Ukraine and the resulting economic uncertainty.

Severe cost pressures also weighed on sentiment and led to a rapid increase in production charges. The rate of bill price inflation was the highest since the index began in July 1996.

The strong performance of the services sector was the main reason for the strength of the overall composite index, with manufacturing production increasing at the slowest pace since October 2021.

Tim Moore, Chief Economics Officer of S&P Global, said: “UK economic growth continued to surge in March after an Omicron-induced slowdown at the start of the year. Companies in the services sector led the way, with business activity growing at the fastest pace since the post-lockdown recovery seen last May. There have been numerous reports of increased business and consumer spending following the rollback of pandemic restrictions. Survey respondents commented on stronger demand resulting from the return to offices, alongside a resurgence in the travel, leisure and entertainment sectors.

“However, near-term growth prospects weakened in March as optimism fell to its lowest level since October 2020 as the war in Ukraine and global inflation concerns weighed heavily on business sentiment. .

“Service providers have seen the second fastest increase in business spending since this index began in 1996, driven by rising wages, energy bills and fuel prices. resulted in the largest increase in production loads for more than 25 years in March.

“Many survey respondents said the magnitude of the recent spike in their operating costs has yet to be passed on to customers.”

Earlier, the Eurozone also signaled an uptick in private sector activity, although, as in the UK, business confidence declined.

9:38 am: boost for the service sector in the United Kingdom

The UK services sector grew stronger than expected in March.

The S&P Global Services/CIPS PMI came in at 62.6, better than the initial reading of 61.

The composite PMI – manufacturing and services – was at its highest since June 2021 at 60.9.

The news did little for the FTSE 100, which was down 17.52 points or 0.23% at 7541.4.

9:19 a.m .: Weakest March in 24 years for new car sales

New car registrations recorded their weakest March since 1998, before the UK carried out two annual number plate changes, amid warnings that the Ukraine crisis could make matters worse.

Final figures for the month from the Society of Motor Manufacturers and Traders show a 14.3% drop to 243,479 units as supply chain shortages limited deliveries.

But as expected, it was the best month in battery electric vehicle history with growth of 78.7% to 39,315 units, as all electrified vehicles account for one in three registrations.

The March drop means first-quarter enrollment fell 1.9% despite the rollback of pandemic restrictions.

The SMMT said around 20% of total annual listings are typically recorded in March, so the result was extremely disappointing for the sector and underscored the long-term impact the pandemic is having on the industry.

Mike Hawes, Managing Director of SMMT, said: “March is typically the most important month of the year for the new car market, so this performance is deeply disappointing and lays bare the challenges ahead.

“While demand remains robust, this decline illustrates the severity of the global semiconductor shortage as manufacturers scramble to deliver the latest, lowest-emission vehicles to eagerly awaiting customers.

“Ordering now will benefit those looking to take advantage of incentives and lower running costs for electric vehicles, especially as the Ukraine crisis could further affect supply. With rising household costs and businesses, the government must do all it can to support consumers so that the growth of electric vehicles can be sustained and the UK’s ambitious net zero timetable is met.”

9:04 am: Homebuilders under pressure as Crest increases siding supply

Homebuilders, who were among the main risers on Monday, are now heading lower on the prospect of having to set aside new payments to repair the cladding of older buildings in the wake of the Grenfell tragedy.

Businesses now have a deadline to sign up for a Building Safety Pledge that commits them to new sanitation guidelines.

Crest Nicholson (LSE:CRST), down 1.45%, has just announced that he will sign the pledge.

It has already spent £47.8m to identify and repair legacy buildings that needed replacing materials. Now he said: “As a result of taking on these new commitments, the group will have to record a new exceptional charge in its financial statements.

“This is a complex and critical area, and the group will continue to work quickly to refine its latest estimate of these costs. As such, the board considers a charge in the region of £80m sterling at £120million is currently his best estimate of that added liability.

Elsewhere in the sector, Taylor Wimpey PLC (LSE:TW.) is down 1.48%, Berkeley Group Holdings PLC (LSE:BKG) is down 1.33% and Barratt Developments PLC (LSE:BDEV) is down 1.48%. 1.27%.

8:18 am: The markets start cautiously

Major stocks fell ahead of the latest overview of the global economy, and as investors keep a cautious eye on developments in Ukraine following the Russian atrocities reported to Bucha.

The FTSE 100 is down 13.38 points or 0.18% at 7545.54.

Richard Hunter, Head of Markets at Interactive Investor, said: “Investors remain cautious about growth prospects as the West looks to tighten its grip on the Russian economy.

“The latest episode of public outrage has strengthened the resolve of Western leaders to take further action. Even Germany, which is heavily dependent on the import of Russian gas, is seeking to refrain from further imports. Meanwhile, as countries consider actions to offset the loss of energy supplies, prices remain well supported, such as an oil price that has surged again and is now up 41% so far this year.”

Brent is currently up 1.46% at US$109.1 a barrel while West Texas Intermediate is up 1.49% at US$1.04.84.

Thus, Shell PLC (LSE:SHEL, NYSE:SHEL) bucked the downward trend, up 0.5%, while BP PLC (LSE:BP.) did better by 0.46% .

7:55 a.m .: Car sales drop but electric vehicles increase

Car sales in the UK fell by around 14% in March, due to the continuing shortage of semiconductors and the rising cost of living.

Preliminary figures to be confirmed later are also expected to show an increase in electric vehicle sales, with the monthly figure expected to exceed the number of electric vehicles sold in the whole of 2019.

March’s overall sales will be seen as particularly disappointing as the month sees the arrival of new license plates which usually give business a boost.

6:50 am: Footsie set to lose Monday’s gain

The FTSE 100 is expected to fall on Tuesday, ahead of industry data for auto sales and services due out later.

The blue-chip London index was slammed 21 points lower by traders on the IG spread betting platform, which would precisely erase the gains made on the first day of the week.

Overnight, Wall Street was lifted by Nasdaq growth and technology stocks, which jumped 1.9%, ahead of the S&P 500 at 0.8% and the Dow Jones at 0.3%. .

Data on UK new car registrations is due this morning and should reveal how the industry is being affected by supply bottlenecks and falling real incomes as the cost of living rises above wage growth.

At 9:30 am we will also have the final services and composite PMIs, after the manufacturing numbers at the end of last week where production was revised down to its second weakest level in over a year.

The preliminary services PMI revealed that the services activity index rose to 61.0 in March, the highest since June, as the easing of Covid restrictions, a return to offices and pent-up travel demand and hospitality gave a boost.