BETA filters Key Events (8) S&P Global Market Intelligence (4) China (3) United Kingdom (3) Germany (2) Northern Ireland (1)
UK household budgets at breaking point
Sarah Butler More than one in eight UK households fear they have no way to cut back to afford a sharp rise in their annual energy bills this autumn. Poorer families are most at risk, with over a quarter of households earning less than £20,000 worried they won’t be able to afford the higher bills. Families in Yorkshire, the South West and Northern Ireland are the least confident about meeting their expenses, according to the latest Rebuilding Britain Index poll of 20,000 people by Legal & General. Almost half of UK households are worried about being able to keep up with their rent or mortgage payments over the next 12 months, as the majority realize they will have to make cuts elsewhere. Nigel Wilson, managing director of Legal & General, said households across the UK are currently facing very difficult financial choices. For some, these options seem impossible. “However, what is more worrying is that the impact of the cost of living crisis is becoming more severe in some parts of the UK than others. This threatens to widen the existing demographic and geographic disparities that the equalization agenda was designed to address.” Jasper Jolly Photo: May James/Reuters Retail chain JD Sports has agreed a £38m deal to sell Footasylum to German asset manager Aurelius Group after it was finally forced to offload the coaching chain by the UK competition watchdog. The deal will be completed in the coming weeks, ending a saga that began with the £90m purchase of rival JD Sports in 2019 as the FTSE 100 group sought to strengthen its position on the UK high street. More here.
German retail sales fall sharply as inflation hits consumers
Retail sales in Germany fell by the steepest annual rate since records began in 1994 as households cut back on a cost-of-living crisis. Retail sales fell 8.8% in real terms in June compared to the same month last year. This is the biggest annual decline in nearly 30 years as rising consumer prices led consumers to cut back on spending. Germany’s National Statistics Office said that in nominal terms, sales fell by only 0.8%, but they fell once you adjust for rising prices, adding: The difference between nominal and actual results reflects high price increases in the retail trade, which significantly affect consumer confidence. Food sales fell 7.2% year-on-year in real terms, while online and mail-order sales fell 15% compared to June 2021.
German-made contracts as companies fear gas shortages
Germany’s manufacturing sector also contracted last month for the first time in two years. Output weakened as German factories were hit by a deeper drop in new orders, including export orders, which both fell at the fastest pace since May 2020. Businesses have been hit by increased uncertainty, falling investment spending, increased prices, high inventory levels at customers and continued friction in the supply chain. Fears of gas shortages are also haunting German industry, explains Phil Smith, Deputy Chief Financial Officer at S&P Global Market Intelligence: “The possibility of gas supply shortages has seriously worried German manufacturers about the outlook for production next year. Expectations for goods producers turned negative in March and have deteriorated almost every month since then as downside risks to the industry’s outlook continue to mount.” S&P Global’s final purchasing managers’ index (PMI) for manufacturing, which covers about a fifth of the German economy, fell to 49.3 from 52.0 in June, showing a contraction.
French manufacturing output is falling at the fastest pace since the first wave of Covid-19
The latest factory reports from Europe are coming in, confirming that conditions weakened last month. French manufacturing output fell in July at the fastest pace since the first wave of Covid-19 in 2020. Indeed, in addition to the declines seen during the pandemic, French goods production fell at the sharpest rate since April 2013 as high inflation squeezed demand and persistent supply problems constrained output. The slump in new orders intensified as inflationary pressures continued, leaving business confidence subdued Purchasing managers blamed the deterioration on slowing customer activity, material shortages and weaker demand. France’s manufacturing PMI came in at 49.5, down from 51.4 in June and its lowest level in just over two years. Here’s some reaction to China’s factory slowdown from Sophie Lund-Yates, chief equities analyst at Hargreaves Lansdown… “China’s latest National Bureau of Statistics PMI unexpectedly fell to 49.0 in July, from 50.2 the previous month and missing market forecasts of 50.4. There was a very mixed bag hidden in the results, with key trends showing the negative impact of new lockdowns in key cities and general concerns about the global economy, following intense monetary tightening efforts. Production, new orders, purchase levels and export orders shrank. This latest data set does very little to offset concerns about gloomy global economic output, especially when coupled with further climate easing. … and Craig Erlam, analyst at OANDA A mixed start to the week in Asia, where Chinese PMIs dampened sentiment as the boost that reopened activity quickly faded. The country was already facing a tough challenge, to put it mildly, in terms of its growth target this year and the fact that manufacturing activity is slowing again does not bode well. While the non-manufacturing survey is much healthier, it also slowed last month, further suggesting the economy is struggling to get back to full strength.
Taiwan’s factory activity falls at steepest pace since May 2020.
Taiwan’s manufacturing sector recorded its sharpest contraction in two years as businesses were hit by a sharp drop in output and new business. Factory bosses in Taiwan, a semiconductor powerhouse, said conditions worsened in July on weaker global demand and rising costs. This led to the biggest drop in activity since the start of the pandemic, with production volume falling at a faster pace. S&P Global Taiwan’s manufacturing PMI sank from 49.8 in June to 44.6 in July, showing the fastest decline since May 2020 as activity weakened. Annabel Fiddes, associate finance director at S&P Global Market Intelligence, said: “Manufacturing companies in Taiwan presented an increasingly gloomy picture of conditions at the start of the third quarter. Output and new business fell at the sharpest rates since the early stage of the pandemic in May 2020, with companies often linking it to weaker global economic conditions. “Lower new job intake and increased caution over the 12-month outlook led to a significant drop in buying activity and inventories, while the steepest decline in backlogs since late 2011 also reinforces signs that current capacity is outstripping demand . Therefore, it seems likely that production could fall further in the coming months unless we see a marked improvement in customer demand. “Brighter news came from price indices, which showed slower increases in both input costs and selling prices, while supply chains moved closer to stabilization. All of this suggests that inflationary pressures may have peaked, which will be welcome news for the central bank.” #Taiwan Manufacturing PMI fell sharply to 44.6 in July (June: 49.8) to mark the fastest decline in operating conditions since May 2020. On a positive note, lower demand pressures resulted in a milder rise in input costs for 23 months. Read more: pic.twitter.com/HKXhQRbcWD — S&P Global PMITM (@SPGlobalPMI) August 1, 2022 Sanctions continued to bite Russian factories last month. Output at Russian manufacturers fell at the fastest pace since April as businesses were hit by raw material shortages and subdued demand conditions. New export orders shrank again as overseas companies shied away from Russian exports, but domestic demand was stronger. Some companies also said they are struggling to recruit and retain staff amid “wage competition,” S&P Global said. This lowered the Russian manufacturer’s PMI to 50.3 in July, closer to stagnation, from 50.9 in June. 🇷🇺#Russia July manufacturing PMI 50.3 (50.9). “Sixth consecutive monthly output contraction in July. Russian manufacturing firms posted the biggest drop in output since April as firms noted shortages of raw materials and relatively subdued demand conditions. pic.twitter.com/rzLUKNnvAg — Iikka Korhonen (@IikkaKorhonen) August 1, 2022
Japan PMI falls to 10-month low in July
Japan has not been spared the slowdown either, with its factory sector growing at its slowest pace since last September. Manufacturers said new export sales continued to decline in July (for the fifth month in a row) as demand weakened. That helped Japan’s factory PMI fall from 52.7 in June to 52.1 in July, showing slower growth, with companies reporting:
Renewals reductions in production and new orders Softest rise in backlogs in 17 months amid weaker demand Rising prices and delivery delays lead to accelerated inventory build-up
Updated at 08.32 BST
South Korean production worsens for the first time since September 2020
Factories in South Korea also came under pressure in July, with activity falling for the first time in nearly two years. Production volumes fell at the fastest pace in nine months as manufacturers continued to be hit by rising costs and material shortages. Worryingly, new orders contracted for the first time since September 2020. Export demand weakened at the fastest pace in three months amid concerns about the economic impact of the war in Ukraine and…
