Issue 341 | 8 August 2022 - Turner & Townsend alinea

Economic Week In Review | Issue 341 | 8 August 2022

Materials and commodities

Shipping | Sea freight costs are still high, with the cost of shipping between Brazil and China 400% higher than two years ago. Maersk, however, has warned of weakening demand and that stock is beginning to fill up warehouses. It reported loading 7.4% fewer containers onto ships in Q2 2022 than in Q2 2021.

UK construction and property

Output | The latest construction PMI survey reported its first drop in a year and a half, falling below the crucial 50.0 marker for no change to 48.9 in July.
Infrastructure encouragement | The OECD has encouraged the UK government to stick to its investment plans to help keep the economy on a path towards “net zero”. The body also reiterated its forecast that the UK’s economy will stagnate next year.
Wages | Taylor Wimpey has increased its benefits package, giving £1,000 to all staff earning less than £70,000 to help with surging fuel bills. Whilst the company has seen construction price inflation of 9-10%, it admitted that it was offset by house price growth.
House prices fell for the first time since June 2021 according to Halifax, although the drop was just 0.1% between June and July. Prices still grew 11.8% annually.
Energy problems | A shortage of electricity in West London could mean that housing developments could be banned. 25 applications in Hillingdon, Ealing and Hounslow are already affected and it could take until 2035 to regain capacity.

UK economy

Corporate distress | Begbies Traynor’s latest report shows that nearly 2,000 companies were critically financially distressed at the end of June, an annual increase of 37%. However, the company acknowledges that some of the increase is due to a “catch-up effort” after pandemic-related relief and court backlogs.
Zombies | The Future Fund, a £1.1bn portfolio set up by the then Chancellor, Rishi Sunak, and managed by the new British Business Bank invested in nearly 1,200 businesses. However, meeting minutes seen by the FT reports concerns that these businesses had low chances of growth and could become “zombie businesses” and the probability of default by the companies that received Future Fund convertible debt from the government was 54%.

Global economy

US labour | The number of jobless claimants rose to a six-month high as labour market conditions cool. Economists at Oxford Economics have warned that the figure could “drift” higher but was not a cause for concern.
Inflation Reduction Bill | The US Senate passed a bill aimed at lowering inflation levels. It combines healthcare and climate bills and will reallocate $369bn of funding to reducing greenhouse gas emissions and investing in renewable energy sources, It brings in a number of taxes to cover the costs, raising $739bn. The bill’s authors claim that it will reduce carbon emissions by 40% by 2030.
Chinese exports | China recorded a record trade surplus as exports rose 18% year-on-year in July, above expectations, helped by unlocking China’s cities and resumption of port activity.
Ireland has levied a tax on the tech and pharmaceutical sectors which has resulted in an €8bn corporate tax windfall.

Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	7,439.72	0.22	4.45
FTSE 250	20,051.48	-0.56	-14.52
Nikkei	28,175.87	1.35	1.28
CSI 300	4,156.91	-0.32	-15.54
S&P 500	4,145.19	0.36	-6.57
Nasdaq	12,657.55	2.15	-14.68
CAC 40	6,532.02	1.30	-4.18
Dax	13,573.93	0.67	-13.88
$ per £	1.2058	-1.04	-13.07
€ per £	1.1859	-0.72	0.53
Gold £/oz	1,470.45	1.39	15.67
Brent Oil $/barrel	94.92	-13.72	34.26

Weekly Summary

The twin challenges of fragile company finances and energy insecurity are becoming more apparent and we are beginning to see them as a drag on the economy.

The Bank of England’s warning last week was stark, especially at a time of significant change within the government. However, the global nature of the problems means that there are global examples to draw from when the new leader is selected at the beginning of September.