Aurelia Butler

Good eveningWhat can we learn from the latest data and company results about the state of the retail industry and changes in consumer behaviour as the economic mood darkens?Although the big US retailers have ditched talk of a “Roaring Twenties,” there are still signs that the sector can weather the downturn. Positive results from Walmart, the world’s largest retailer and a bellwether for US consumer demand, confirm that Americans still love a bargain, even after the company issued a profit warning over a glut of inventory just three weeks ago. Fellow retail giant Home Depot was also buoyant, reporting its highest quarterly sales and earnings on record and that consumers were still spending on home improvements despite rising prices. Target, another US bellwether, provided a counterbalance to the optimism, with its discounting efforts leading to a larger than forecast drop in profits. Official data on Wednesday meanwhile showed US retail sales holding up while consumer sentiment appears to be recovering from historically low levels. The picture is much bleaker across the Atlantic with two new sets of data today showing the impact of the cost of living crisis on UK households and their shopping habits. Consumer confidence has fallen to its lowest level since records began 50 years ago, according to GfK’s monthly survey, while official retail sales data showed people are shopping less.GfK said its survey pointed to a “sense of capitulation, of financial events moving far beyond the control of ordinary people” which would likely lead to “changing buying behaviour, both of which will impact the high street and wider economy”. Weakening consumer demand has also been a key feature in UK retailers’ results including yesterday’s from AO World and Made.com. Footfall on London’s Oxford Street, one of Europe’s busiest shopping thoroughfares, is down 60 per cent compared with pre-pandemic times in 2019 and the road is plagued by empty retail space, tatty souvenir stores and mysterious sellers of American sweets.The growth in ecommerce that was turbocharged during the pandemic also appears to be slowing, as evidenced in results from companies such as Zalando, Europe’s largest online fashion retailer, and data from countries such as Japan. Retail hopes are now pinned on innovations such as livestream ecommerce, a modern version of QVC or the Home Shopping Network, but with social media influencers plugging products. The plumbing that enables ecommerce has also taken a hit. Shopify, the Canadian platform providing an alternative to selling through Amazon, announced it would axe 10 per cent of its workforce as its bet that the pandemic shopping boom would continue turned sour. Innovation editor John Thornhill says the direct-to-consumer retail trend is faltering as companies face higher advertising costs on Facebook and obstacles thrown up by Apple complicating customer tracking, on top of the problems faced by traditional retailers.The bigger picture, suggests US investment and industries editor Brooke Masters, is that “consumers have soured on stuff”. As western economies rebalance back towards services and away from goods, big companies have been left struggling to adjust, she argues.“Either way, the chance that some companies will get caught out is rapidly rising. There is after all a reason why economists call it discretionary spending,” she concludes.Latest newsItaly election frontrunner Giorgia Meloni says she will not put Covid funds at riskGeneral Motors reinstates dividend and resumes share buybacksCineworld shares dive on reports of bankruptcy For up-to-the-minute news updates, visit our live blogNeed to know: the economyThe FT revealed prime ministerial frontrunner Liz Truss planned to shake up the UK’s financial regulators, merging the Financial Conduct Authority, Prudential Regulation Authority and Payments Systems Regulator into a new body. The FT’s Cat Rutter Pooley says resurrecting a form of the old Financial Services Authority is a terrible idea. The FT editorial board concurs.Latest for the UK and EuropeThe UK’s public finances improved in July but the country still borrowed more than forecast. Short-term borrowing costs are set for the biggest weekly rise in more than a decade as investors bet on firmer action from the Bank of England to curb inflation. UK energy groups called for an “immediate” increase in the £400 rebate on energy bills as the scale of the hit on households became clearer. A director of regulator Ofgem quit in protest at the way changes to the energy price give “too much benefit to companies at expense of consumers”. German producer prices rose at a record 37.2 per cent in July, driven by a doubling of energy costs for industrial groups. The government is slashing VAT on household gas bills to offset the impact of a new gas levy that starts in October.Turkey surprised markets with an interest-rate cut of 100 basis points even as inflation inches towards 80 per cent. Norway raised borrowing costs by 50 basis points for the second time this year and warned of more to come.Global latestMiddle East states are set for a $1.3tn windfall in extra oil revenues over the next four years, according to the IMF, seriously bolstering the power of their sovereign wealth funds.Minutes from the US Federal Reserve’s recent policy meeting suggest interest rates will need to be kept at restrictive levels “for some time” as it battles surging inflation.Ghana raised interest rates to 22 per cent in an attempt to tame inflation, now running at 31.7 per cent, and a fast-depreciating local currency. Columnist Helen Thomas looks at the threat to global supply chains as climate change leads to drought and the drying up of key waterways.Need to know: businessMore European smelters are likely to follow the closures of two large operations in Slovakia and the Netherlands this week because of soaring energy costs. This could force large manufacturers, which rely on the smelters for metals such as aluminium and zinc, to turn to overseas producers, helping China and Russia cement their grip on global markets.DP World, the Dubai-based parent of P&O Ferries, which attracted opprobrium for its mass sacking of crew members, hit record profits of $721mn in the first half of the year, thanks to a strong performance from its cargo business.US junk bonds have made a startling recovery as investors bet that the Fed’s efforts to curtail inflation will avoid sparking a deep recession. Quant funds, which look for trends in the market and then attempt to ride the momentum, are increasing their bets on US stocks, helping fuel the recent market rally.The UK financial regulator warned businesses that offer buy now, pay later products against misleading advertising. The EU is bracing for legal challenges to its new legislation setting standards for Big Tech.Country Garden, China’s largest real estate group, warned that half-year profits could dive 70 per cent, highlighting the continuing crisis in the country’s property market. Profits more than halved at Geely, the country’s leading Chinese carmaker, thanks to chip shortages and pandemic restrictions hitting demand and disrupting production.Britons are likely to continue the pandemic trend of drinking from home, according to Australia’s largest listed wine producer, with a penchant for the lower-end £6-£8 a bottle price point. In Japan meanwhile, the government is promoting boozing among the young as its finance ministry frets over disappearing tax revenues.Science round-upThe first detailed study of Covid-19’s persistent neurological and psychiatric effects showed a significant increased risk that people could develop dementia, psychosis and brain fog two years after infection. The impact was most marked in over 65s, among whom 4.5 per cent developed dementia over the subsequent two years, compared with 3.3 per cent of the control group.The UK became the first country to approve an Omicron-specific booster. Moderna’s shot targets the original strain of the virus and the BA.1 variant and is expected to be authorised in other countries shortly.Top US health official Rochelle Walensky said the Centers for Disease Control had made “dramatic mistakes” in tackling Covid as she announced a shake-up to improve the CDC’s response to emergencies.Although much of the world has reduced or ended Covid restrictions, the picture is very different in Japan and much of Asia with tourism still badly affected. Fears of being caught in a Covid lockdown in China are also threatening consumer confidence and any revival in tourism.And just in case all this, as well as monkeypox and the possible comeback of polio were not worrying enough, a new strain of avian flu is decimating wild birds. Tightening biosecurity and widening surveillance is needed to protect both animals and people, says science commentator Anjana Ahuja. Get the latest worldwide picture with our vaccine trackerSome good news…Scotland this week became the first country in the world to give people the right to free period products.

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BERLIN (Reuters) -German Chancellor Olaf Scholz is to testify in front of lawmakers on Friday over his role as Hamburg mayor in tackling a multibillion-euro tax fraud in a case that threatens to tarnish him even as he battles multiple crises.In the scheme of “cum-ex” or dividend stripping, banks and investors would swiftly trade shares of companies around their dividend payout day, blurring stock ownership and allowing multiple parties to falsely reclaim tax rebates on dividends.The loophole, now closed, took on a political dimension in the northern port of Hamburg due to authorities’ sluggishness under the mayorship of Scholz at demanding repayment of millions of euros gained under the scheme by local bank Warburg.Warburg, which plays a big role in Germany’s second largest city, eventually paid its tax bill of around 50 million euros ($50.31 million) after the federal finance ministry intervened.The case threatens to undermine the chancellor even as he is trying to hold his fractious coalition together in the face of public discontent over soaring energy inflation.His popularity is already lagging that of his economy and foreign ministers, while just 58% of Germans think he is doing a good job compared to an average of around 70% for his predecessor Angela Merkel during her 16 years in office. His Social Democrat Party (SPD) meanwhile has slipped into third place in polls behind the opposition conservatives and junior coalition partners the Greens.”It all stinks to high heaven and simply cannot have happened without political influence,” Richard Seelmaecker, representative of the opposition conservatives on the committee, told broadcaster NTV.Scholz, who has dismissed suggestions of any impropriety in his handling of the affair, is due to face a Hamburg parliamentary committee of inquiry investigating the matter in a hearing on Friday from 1400 CET (1200 GMT). “This has been an issue for two and a half years now,” Scholz recently told reporters. “Countless files have been studied, countless people have been heard. The result is always: There has been no political influence.”200,000 EUROS IN A SAFEFinance Minister Christian Lindner, from the junior coalition party, the pro-business Free Democrats, which is also lagging in polls, lent the chancellor his support.”I have always understood Olaf Scholz to be a person of integrity, whether I was in the opposition or as now in government – and I have no reason to doubt that now,” Lindner told the Rheinische Post newspaper.Prominent Greens have kept quiet on the affair after criticising Scholz about it while in opposition.Recent headlines that prosecutors probing the scheme in Hamburg discovered 200,000 euros in the safe of a local politician from Scholz’s ruling Social Democrats reignited suspicions of political intervention on the bank’s behalf.Scholz has denied any knowledge of this cash or its origin and said he no longer has contact with the lawmaker involved. The lawmaker did not respond to a request for comment.The chancellor already faced Hamburg lawmakers last year and acknowledged then having a series of meetings with the then chairman of Warburg but said he could not recall details.”He only admits what can be proven,” said Seelmaecker.One of the prosecutors’ recent findings is a discrepancy between the many calendar entries of Hamburg authorities mentioning the Warburg bank and “cum-ex” and the few emails on the topic, Der Spiegel magazine wrote, citing the prosecutors report.”This suggests a targeted deletion(of emails),” Spiegel cited the report as saying.A representative for corruption watchdog Transparency International Stephan Ohme said it was simply implausible that Scholz could not remember his discussions with the Warburg chairman. “Scholz should moreover show what he actively did to tackle Warburg’s involvement in Cum-Ex transactions” he told the Funke media group. “It is his political responsibility.” ($1 = 0.9939 euros) More

LONDON (Reuters) – Britain’s slide towards a recession has gathered momentum after data this week showed inflation jumping above 10%, wages lagging far behind price growth and consumer confidence sinking to a record low.The deteriorating picture for the world’s fifth-biggest economy comes after the Bank of England warned this month of a 15-month contraction from the end of this year, worse than the outlook for other big European economies and the United States. Higher-than-expected public borrowing figures on Friday underlined the hard decisions facing the next prime minister about how to expand help for the poorest households, which has so far fallen short of support given by most other European governments.The stakes were laid bare by a warning from public healthcare providers that Britain faced a “humanitarian crisis” as soaring energy prices put many poorer Britons at risk of physical and mental illness.”Many people could face the awful choice between skipping meals to heat their homes and having to live in cold, damp and very unpleasant conditions,” Matthew Taylor, chief executive of the NHS Confederation, said.The scale of the hit to households from their energy bills will become clearer next Friday when regulators announce the latest leap in the cap on electricity and gas tariffs, which have surged since Russia’s invasion of Ukraine.Already almost double their levels of a year ago, the tariffs could double again by early next year. Next week’s announcement comes against the backdrop of a record fall in wages, excluding bonuses and adjusted for the jump in inflation which has hit 10.1%, its highest level since 1982.Consumers provided some relief from the flow of bad economic news as data on Friday showed retail sales volumes unexpectedly edged up in July.However, the increase was largely driven by online discounts, and real-time figures on spending using debit and credit cards have shown a big drop in spending in early August.Retailers say they are already deep in crisis mode.”For many businesses, 2022 is proving to be every bit as challenging as the pandemic,” Helen Dickinson, chief executive of the British Retail Consortium, said.BANK OF ENGLAND IN A BINDSoaring inflation and the Bank of England’s forecast of a long – albeit relatively shallow recession – have heightened the dilemma facing the central bank.It has already raised interest rates six times since December, slowing momentum in the economy, but signs of broadening inflation pressures have prompted economists to raise their forecasts for further hikes in borrowing costs.Analysts at Investec said on Friday they now expect the BoE to raise rates by half a percentage point for a second time in a row in September followed by a final quarter-point increase in November, before it cuts rates in 2023 to ease the recession.Investors are also ramping up their bets on higher borrowing costs in Britain. Two-year British government bond yields on Friday hit their highest since November 2008, midway through the global financial crisis, and the spread over equivalent German bonds was the widest since March this year. With the BoE determined to show its critics that it will bring inflation under control by raising rates, the focus is turning to whoever wins the race to replace Boris Johnson as prime minister next month.The front-runner, Foreign Secretary Liz Truss, has said she will cut taxes. The other contender, former finance minister Rishi Sunak, says that risks fuelling inflation. He prefers more direct and more targeted support.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, estimates that if Truss wins, the budget deficit could hit 170 billion pounds ($201.18 billion) in the current financial year.That would be up from 144 billion pounds last year and triple its size before the pandemic, but smaller than borrowing of 309 billion pounds in the 2020/21 year during the depths of the coronavirus crisis.Significant extra borrowing looks likely whoever enters Downing Street.Andrew Goodwin, chief UK economist at Oxford Economics, said that provided support measures are temporary they would not hurt Britain’s long-term fiscal outlook.”There’s plenty of room for the next prime minister to offer that support and ultimately if they don’t, that’s a political choice,” Goodwin said. “It’s not something that’s forced on them by the public finances.”($1 = 0.8450 pounds) More