Introduction: German factory orders are sinking
Good morning and welcome to our ongoing coverage of business, the global economy and financial markets.
Germany’s manufacturing sector is a European power plant, so the surprise drop in factory orders this morning has raised concerns about the economic outlook.
German factory orders fell 2.7% in April, new data show huge hopes for 0.3% growth after falling 4.7% in March.
This is the third consecutive monthly decline in factory orders. On an annual basis, factory orders are 6.2% lower than in the previous year.
The war in Ukraine, supply chain problems, the blocking of Covid-19 in China and soaring energy prices are hitting Europe’s largest economy.
The German statistical office says:
“Increased insecurity caused by the Russian invasion of Ukraine continues to lead to weak demand, especially from abroad.
However, companies still have well-stocked order books. ”
OU! # Germany in April the factory ordered a crater -2.7% in April month on month – 3rd consecutive decline – mainly due to a decline in foreign orders. This reduces the annual number by 6.2%. Economists forecast a monthly profit of 0.3%. The economy is facing uncertainty, rising energy costs, supply constraints. pic.twitter.com/KpFQf8oJIb
– Holger Zschaepitz (@Schuldensuehner) June 7, 2022
Naim Aslam of Avatrade says the figures confirm that “economic conditions are getting terrible” for the eurozone’s largest economy.
Markets are also tense after Australia’s central bank announced its biggest rate hike 22 years earlier today as it struggles to keep up with inflation.
The Reserve Bank of Australia raised its cash interest rate by 50 basis points to 0.85% after energy squeezes and supply chain problems pushed prices. He also signaled that further increases would follow, the latest sign that central bankers are serious about crushing inflationary pressures.
Consumer price inflation in Australia was 5.1% in the March quarter – lower than in many other countries – but too high for the RBA.
RBA Governor Philip Lowe said inflation in Australia had risen sharply, adding:
Although inflation is lower than in most other developed economies, it is higher than previously expected.
The board expects to take further steps in the process of normalizing monetary conditions in Australia in the coming months.
The Australian stock market fell 1.5% and we expect a weak start in Europe.
Later today we will receive a health check of the construction companies from the eurozone, the British service company and the World Bank’s assessment of the global economy.
The agenda
- 8.30 am BST: PMI construction report for the euro area in May
- 9.30 am BST: UK PMI report for May
- 10.15 am BST: The Committee on Business, Energy and Industrial Strategy launches an investigation into the UK semiconductor industry.
- 10.30 am BST: South Africa’s GDP report for the first quarter
- 13.30 BST: US Trade Report for April
- Afternoon: World Bank Global Economic Outlook Report.
Construction activity in the euro area is declining as demand weakens and costs rise
Construction activity in the eurozone fell for the first time in nine months, another sign that the European economy is weakening.
S&P Global’s construction PMI in the eurozone, which tracks sector activity, has shrunk as contractions in the supply chain due to the war in Ukraine have led to shortages of raw materials and higher prices.
The index fell from 50.4 in April to 49.2 in May, indicating that the sector contracted last month, for the first time since last August.
Housing construction, trade and construction fell last month, and new orders also fell.
Here are the key points:
- The fastest reduction in production and new orders from February 2021
- Price pressures and supply chain pressures are easing, but generally remain strong
- Business confidence is weakening to a 19-month low
Usamah Bhatti, an economist at S&P Global Market Intelligence, adds:
The construction companies in the bloc were increasingly pessimistic about the prospects for next year’s activity, with confidence at its lowest level since October 2020.
At the national level, German companies reported the strongest decline in production in nine months, while Italian builders signaled further expansion in May, which was still the softest in the current 16-month growth sequence. Business in France grew slightly, the fastest since January. ”
PwC fines £ 5 million for construction audits
Photo: Andy Raine / EPA
PricewaterhouseCoopers was fined almost £ 5 million ($ 6.22 million) for carrying out bad audits of two construction companies in the UK
PwC will pay £ 3 million for failures in the Galliford Try audits and £ 1.96 million for the review of Kier Group Plc, the Financial Reporting Council said on Tuesday.
It has also been ordered to report on its state-of-the-art audits, which deal with long-term contracts, the FRC said as the regulator continued its crackdown on Big Four auditors.
Claudia Mortimore, deputy executive adviser to the FRC, said the violations “involved an incorrect audit of revenue recognized under specific complex long-term contracts”.
PwC said:
We regret that some aspects of our work do not meet the required standard.
The company added that it has invested in improving the quality of the audit after the audits of Kier and Galliford Try.
Julia Coleue
JD Sports and Elite Sports, along with Rangers Football Club, violated competition law by fixing the prices of some Rangers-branded clothing to keep them high at the expense of fans, the British Competition Authority found.
The Competition and Markets Authority (CMA), which has been investigating the issue since December 2020, said sports retailers Elite and JD have set retail prices for a number of replica sets of Rangers and other clothing products since September 2018. until at least July 2019.
Rangers FC also took part in the alleged collusion, setting the retail price of short-sleeved shirts for adults from September 2018 to at least mid-November of that year. The three companies are said to have agreed to stop JD from undercutting the retail price of the shirt at Elite Gers’ online store, the security guard said.
More here.
Expected fluctuations in the British pound for a week and a month have risen today, according to Reuters, reflecting greater political uncertainty about the future of Boris Johnson.
Frederick Carrier, Head of Investment Strategy for the British Isles and Asia at RBC Wealth Management, says:
“The prime minister survived the no-confidence vote, but the number of Conservative MPs who voted against him is significant enough to further weaken his position.
“This is unlikely to be the end of the turmoil and the victory is not clear enough to draw a line under the last few months.
There is talk of two takeovers in City this morning.
Biffa, a waste management company, has received a possible takeover bid from subsidiaries of private equity firm Energy Capital Partners (ECP), worth £ 1.36 billion or 445 pence a share.
Shares of the High Wycombe-based Biffa jumped 30% to 420 points, leading the rise in the FTSE 250 index.
But the Ted fashion chain Bakers hopes of gaining ground have been dashed. His favorite suitor decided not to make an offer to take over – news that reduced his shares by 20%.
Ted Baker went on sale in April and said last month that he had chosen a preferred participant to continue the process.
Full story: UK spending bubble bursts with cost of living cuts
British consumers cut spending sharply last month as rising living costs hit budgets hard.
Retail sales fell 1.1% year-on-year in May, worse than the 0.3% drop in April and the worst since January last year.
This is shown by the latest data on the industry of the British consortium for retail and KPMG, which increases the pressure on the pound.
BRC CEO Helen Dickinson said sales had fallen again, “as the cost of living crisis pushed consumer demand”.
“Clearly, the post-pandemic spending bubble has burst, with retailers facing tighter trading conditions, declining consumer confidence and rising inflation affecting consumer purchasing power.
Problems with the supply chain, including rising commodity and transport costs, a tight labor market and higher energy bills, are forcing retailers to raise their prices, contributing to higher inflation.
Dickinson added that items with big tickets, such as furniture and electronics, have suffered the most, as “buyers are rethinking big purchases during this difficult time.”
Sales data have not been adjusted for inflation, so the decline in sales “masks a much larger decline in volumes once inflation is reported”.
However, retailers received a platinum anniversary as there was a sharp increase in consumer traffic on the main streets during the long holiday weekend.
Investors are focusing on the UK’s economic woes as the cost of living crisis hits growth, Bloomberg said.
The pound fell against the dollar in the European session, erasing a knee blow on Monday fueled by Prime Minister Boris Johnson, who won a vote of confidence in his leadership. The looming slowdown in growth keeps long-term sterling sentiment measures close to the lowest levels since 2020, while political turmoil is expected to continue even after the vote.
The battle for the Conservative Party’s leadership comes amid a cost-of-living crisis that threatens to plunge the economy into recession.
This is pressure on the Bank of England to support growth and curb the highest inflation in four decades, while keeping pace with the Federal Reserve and other global partners – a process that pound traders will be watching very closely.
A sigh of relief for UK investors after Boris Johnson’s leadership victory may be temporary as the focus shifts to the deteriorating economy – and the pound https://t.co/rwwjQJbwLc
– Bloomberg (@business) June 7, 2022
There is some good news for the pound gain, warns Jeffrey Halle, an analyst at OANDA:
The United Kingdom has a railway line after the anniversary …
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