Oil prices fall after disappointing trade figures from China, while UK house prices rise modestly in August
High energy prices are leaving their mark on German industry. Data just out shows that industrial production in Europe’s biggest economy fell 0.3% in July from the month before, compared with a 0.8% rise in June.
According to the statistical office, the relatively small number of school holidays and holiday leave prevented an even larger decline in production compared with July last year. Production in industry excluding energy and construction was down by 1%.
German industry is clearly suffering from disrupted supply chains on the back of the war in Ukraine, the aftermath of pre-summer lockdowns in China, low water levels in the main rivers and increasingly, higher energy prices. The statistical office released additional data showing that production in the energy-intensive industrial segments declined by more than the broader industry. Production in this area has dropped by 6.9% since February 2022.
For Germany’s industrial backbone, small and medium-sized enterprises, higher energy prices look like a ticking time bomb. With ongoing pressure on consumers’ disposable incomes, companies’ pricing power is fading. In this regard, it is remarkable that the government’s third relief package presented on Sunday provided only very limited support for this segment of the economy.
While house prices have so far proved to be resilient in the face of growing economic uncertainty, industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.
Firstly, there is the considerable hit to people’s incomes from the cost-of-living squeeze…While government policy intervention may counter some of these impacts, borrowing costs are also likely to continue to rise, as the Bank of England is widely expected to continue raising interest rates into next year.
