Good evening,
While not official data, the global nature of IHS Markit’s purchasing managers’ index offers us some useful comparisons on how business is recovering from the pandemic.
Today’s “flash” initial readings for October paint a common picture of manufacturing growth being held back by rising input costs, supply chain problems and labour shortages, but balanced by improvements in the services sector.
The most startling example of the slowdown in business activity came in the eurozone, where costs for manufacturing and services companies rose at their fastest ever rate, with much of this being passed on to customers. While any reading above 50 indicates growth, the fall in the composite PMI index from 56.2 last month to 54.3 this month shows momentum faltering.
Particularly badly hit were carmakers and their suppliers, which are now facing the additional problem of shortages of magnesium, a key component of aluminium. About 95 per cent of European consumption comes from China, which has cut output sharply to save power.
The survey results were “a warning signal” for the eurozone, according to Ralph Solveen, an economist at Commerzbank. “An end to the sharp rise in prices caused by supply bottlenecks is not in sight in the short term, and the economy should continue to lose momentum in the fourth quarter,” he said. The jump in selling prices also adds to pressure on the European Central Bank to tackle inflation when it meets next week to discuss monetary policy.
More promising was the PMI reading for the UK, which jumped to a three-month high of 56.8, up from 54.9 in September, suggesting the economic recovery could be picking up speed again. It also strengthens the hand of those calling for a rise in interest rates, something hinted at by the new Bank of England chief economist Huw Pill in his first media interview. Pill said November’s interest rate-setting meeting would make a “live” decision, while suggesting inflation could hit 5 per cent early next year.
The increase in the composite PMI index was driven by the services sector, which accounts for about 80 per cent of the UK economy, although this growth could yet slow if the recent jump in new coronavirus infections continues.
There was progress in the US too, where the composite PMI reading rose to 57.3 from 55.0 last month. The increase was driven by a resurgent services sector, which rose from 54.9 to 58.2 as infections fell.
Manufacturing however dipped to a seven-month low of 59.2 from 60.7 last month, as supply bottlenecks and staff shortages hit companies’ ability to meet demand, leading to the steepest rise in prices yet recorded by the survey.
Latest news
UK prime minister Boris Johnson said there was “nothing to indicate” that a full lockdown with a “stay at home” order was on the cards this winter (BBC)
The BioNTech/Pfizer vaccine is 90 per cent effective at preventing symptomatic infection from Covid-19 in 5-11 year olds when given in smaller ‘kid-sized’ doses, according to new data
Europe’s second-largest vehicle parts maker, Continental, cut its sales and profit forecasts for the year after the semiconductor shortage and other supply chain pressures intensified in the third quarter (Reuters)
For the latest updates, visit our live blog
Need to know: the economy
New developments in the energy crisis include Russian president Vladimir Putin’s declaration that Kremlin monopoly Gazprom could deliver 10 per cent more gas to Europe as soon as Germany approves the Nord Stream 2 pipeline. Moldova, a small former Soviet state that is totally dependent on Gazprom, declared a state of emergency as its supplies were cut. And the head of ScottishPower, one of Britain’s biggest utilities, has warned of an “absolute massacre” among UK retail suppliers unless the government reviewed its energy price cap.
Latest for the UK/Europe
Although today’s PMI survey for the UK was generally positive, other indicators struck a more gloomy note. UK retail sales fell unexpectedly in September for the fifth month in a row — the longest period of consecutive declines since records began in 1996 — as shoppers tightened their belts amid warnings of a cost of living crisis. The pessimistic outlook was also captured by the GfK consumer confidence index, which hit its lowest level since February, when most of the country was in its third lockdown.
The Turkish lira hit a fresh all-time low today after yesterday’s interest rate cut of 2 percentage points to 16 per cent — a far deeper drop than markets had expected. The move follows president Recep Tayyip Erdogan’s firing of three members of the country’s nominally independent central bank.
Russia’s central bank has increased interest rates for the sixth time this year by 75 basis points to 7.5 per cent, as it battles to contain surging inflation, which is now forecast to hit up to 7.9 per cent by year-end. Inflation is particularly politically sensitive in Russia, where the government has organised social support payments to mitigate soaring food prices.
Global latest
The resignation of four senior Treasury officials in Brazil has raised concerns among investors that the country is going to bend its fiscal rules to boost welfare payments. President Jair Bolsonaro, who faces elections next year, wants to expand cash transfers for the poorest families in Latin America’s most populous nation. A highly critical probe into his handling of the pandemic has called for Bolsanaro to face criminal charges.
Labour shortages continue to bite across richer economies. In the UK, there are signs that businesses may increase wages in response, but in the US the idea that workers are now in a much stronger bargaining position may have been exaggerated, writes Taylor Nicole Rogers.
Worries about inflation are driving gold investors towards bitcoin and other cryptocurrencies. If you’re new to the world of digital assets, check out our collection of explainers.
Need to know: business
Renault doubled its estimate for lost production due to the global semiconductor shortage. The French carmaker said today it would make 500,000 fewer vehicles this year, as it reported a 13.4 per cent fall in third-quarter revenues to €9bn.
The stellar run of earnings from financial services companies continued with record earnings at private equity group Blackstone as well as a doubling of quarterly profits at Barclays to £1.45bn. This week’s “On Wall Street” column from Laura Noonan looks at the future of bank regulation after capital buffers for lenders failed to work as well as expected under the stress of the pandemic.
The pandemic has also forced a rethink from the hospitality industry on how it attracts, retains and treats its staff. Staffing problems are most acute in post-Brexit UK, where restaurants are no longer able to attract a steady stream of young European workers.
Science round up
Pandemic control: AY.4.2, a subvariant of Delta, has only recently been recognised but already accounts for 10 per cent of UK cases. Although early evidence suggests it may be the most infectious strain of coronavirus since the pandemic began, it is not yet clear whether its prevalence in the UK is a chance demographic event.
In contrast with the rest of Europe, infections, hospital admissions and deaths in the UK remain at high levels, with data today showing infections in England at their highest number since January.
However, ministers are resisting pressure from doctors and health leaders to activate “Plan B” and reintroduce pandemic restrictions, leaving the NHS facing an “extremely challenging” winter. The government’s scientific advisers have called for preparatory work on anti-Covid measures to begin immediately so that they can “be ready for rapid deployment if required”.
India has now administered more than 1bn vaccines, with about 22 per cent of Indians now fully inoculated and 53 per cent having had at least one dose. The landmark was hailed as a major achievement, although independent epidemiologists believe the country’s toll from the pandemic is much higher than the official figures of 34m infections and 450,000 deaths.
Jabs and boosters: French biotech Valneva’s vaccine was found to produce a stronger immune response than the directly comparable AstraZeneca jab, one month after the UK government terminated its supply contract with the company. The reasons for the cancellation are not yet clear.
Early results from the first randomised, controlled trial on boosters showed BioNTech/Pfizer’s jab to be 95.6 per cent effective. The duration of protection is however not yet known.
The US Food and Drug Administration has approved booster shots from Moderna and J&J, following earlier approval for the BioNTech/Pfizer jab. Americans will be allowed to “mix and match” the three shots. BioNTech/Pfizer and Moderna will dominate the Covid-19 vaccine market next year, bringing in some $93.2bn in combined sales, according to new forecasts — almost double the amount in 2021.
Treatments: The UK said it had secured deals with Merck and Pfizer for Covid-19 antiviral drugs for elderly and vulnerable groups to help ease pressure on the NHS over the winter.
American biotech Regeneron said its Covid-19 antibody drugs might have saved ex-US secretary of state Colin Powell, who died this week. Experts warned that the comments from the company’s co-founder and chief scientific officer risked overstating the benefits of monoclonal antibodies and in turn risked understating the importance of being vaccinated.
Get the latest worldwide picture with our vaccine tracker
And finally…
Watch this fantastic short collaboration between musician Nitin Sawhney, the Royal Albert Hall and the FT. After the Brexit referendum, concern over immigration dropped, but — with the number of EU workers in the UK falling and labour shortages rising — the film asks: ‘Will you miss us when we’re gone?’
Source: Economy - ft.com
