Germany on brink of recession after GDP shrinks; France and Spain grow faster than forecast – business live | Business


Germany’s economy shrinks unexpectedly

Newsflash: Germany’s economy is back on the brink of recession.

Germany’s GDP shrank by 0.1% in the second quarter of this year, new data from statistics body Destatis shows.

That’s a blow to Berlin’s government, which has been hit by an ailing train network, the surge in energy prices after Russia’s invasion of Ukraine, protests by farmers, weaker demand from China, and a rise in support for far-right politicians.

Economists had expected growth of 0.1% in the quarter.

The decline in activity was due to a fall in manufacturing and construction investments.

Destatis reports that “investments in equipment and buildings, adjusted for price, seasonal and calendar effects, in particular decreased” in the last quarter.

The drop in GDP in the last quarter follows 0.2% growth in the first quarter of 2024.

A technical recession is defined as two quartery contractions in a row.

This takes the shine off a decent start to today’s eurozone growth data, with both Spain and France beating expectations…..

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Key events

Here’s our news story on BP’s latest profits:

French finance minister says growth could beat forecasts

France’s finance minister, Bruno le Maire, has predicted that growth could beat the outgoing government’s forecast this year.

He welcomed the better-than-expected 0.3% rise in GDP reported this morning, telling reporters:

“We will probably have growth after all that is better than the 1% forecast in February.

“For two years, France has outperformed; our economic policies work and are giving tangible results.”

France’s stronger-than-expected growth could help the country close the budget deficit, says caretaker Finance Minister Bruno Le Maire https://t.co/V5KKLGRbdN

— Bloomberg (@business) July 30, 2024

How cruise ship boosted French GDP

We flagged earlier that a ship delivery boosted France’s exports in the last quarter.

Reuters is now reporting that the vessel in question is the Utopia of the Seas cruise ship, which was delivered to Royal Caribbean. The ship, which cost over £1bn, helped to lift France’s transport equipment exports by +1.8%, and overall exports by 0.6%.

The Daily Mail recently took a trip on Utopia of the Seas – they report it includes five pools, a zip line, an aqua park, a surf simulator, and an on-board train.

😂🤣 Love this – A cruise ship saved the French GDP data.

“Foreign trade added 0.2 percentage points to GDP as the delivery of the Utopia of the Seas cruise ship to Royal Caribbean helped exports grow 0.6% while imports stagnated.” https://t.co/VMwzf9OVwu

— PiQ (@PiQSuite) July 30, 2024

Greggs raises prices of some items in face of higher staff wage bill

Photograph: Michael McNerney/SOPA Images/REX/Shutterstock

High street bakery chain Greggs is putting up some of its prices, after its pay bill was pushed up by the rise in the minimum wage this year.

Greggs’s CEO Roisin Currie has told the PA news agency that the company has increased the prices of some items on its menu by 5p and 10p in recent weeks, but has kept meal deal prices unchanged.

Currie – who said in March that price rises weren’t planned – says prices were raised to offset higher pay for its 32,000-strong workforce, having raised salaries earlier this year ahead of the increase in the National Living Wage.

She said:

“The biggest inflation cost right now is the increase in the National Living Wage and making sure our employees get the wage increases that are appropriate.

“That puts pressure on the cost increases within the business.”

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Estate agent Foxtons has reported that this month’s general election has had little impact on customer behaviour or market dynamics.

Foxtons says trading in July is in line with expectations, after revenues rose by 11% in the first six months of 2024. Pre-tax profits jumped by almost a quarter, to £7.5m.

Foxtons makes a dramatic 2024 comeback with double-digit revenue and earnings growth driven by the volume of new lettings business, the acquisition of Ludlow Thompson paying off, and sales mkt gains.

Over the first half of the year revenue inc’d 11% across all 3 businesses.
·… pic.twitter.com/UisJcnUWIr

— Emma Fildes (@emmafildes) July 30, 2024

CEO Guy Gittins says:

“The strong momentum we started the year with has continued, with double-digit revenue and earnings growth and our position as London’s largest Lettings and Sales agency reinforced.

“Despite macro headwinds and the election interruption, we continued to outperform the market, delivering strong Sales revenue growth of 28% and market share growth of 30%. Growth was also delivered in Lettings, with a double-digit increase in new business volumes, further bolstered by the acquisitions we made in 2023.

Standard Chartered welcomes “serious” Labour government

Kalyeena Makortoff

Kalyeena Makortoff

Bank CEOs have largely welcomed prime minister Kier Starmer’s government with open arms, cheering the country’s economic trajectory and political stability after years of uncertainty.

And the boss of the London-headquartered but emerging markets-focused lender, Standard Chartered, is no exception.

Bill Winters told journalists this morning that Labour appeared to be a “serious government” that was supportive of business and ready to tackle fiscal challenges that have dogged the UK economy.

He said:

The new Labour Government is a serious government and they’ve set out a series of serious statements and platforms, including what the chancellor said yesterday in terms of addressing some of the fiscal challenges that we know are very present in the country.

The rhetoric during the election period and in the early days of the government has been supportive of business. I think it’s been tempered by realism about the economic challenges and the fiscal challenges that the UK faces.

But I have every confidence that the Chancellor and the rest of the government will pursue their policies in a very thoughtful, open and transparent way. And that’s as much as we could ask.

Winters added that he was “happy” to be headquartered in the UK, which he described as having a robust regulatory environment, a “very stable political environment” and “extraordinarily good rule of law” and corporate governance, adding:

“So there’s certainly nothing that has changed in terms of our views on the attractiveness of the Labour government”.

His comments came as the bank raised its earnings outlook, and announced its largest-ever share buyback worth $1.5bn.

It sent Standard Chartered’s FTSE 100-listed shares up 5.3% at the start of trading.

Diageo’s headquarters in Edinburgh. Photograph: Andrew Milligan/PA

Shares in drinks giant Diageo have sunk to the bottom of the FTSE 100 leaderboard, down 8%, after reporting a drop in sales and profits.

Diageo, whose brands include Johnnie Walker, Captain Morgan, Guinness, Smirnoff and Baileys, posted a 1.4% drop in reported net sales in the year to the end of June, to $20.3bn.

Pre-tax profits dropped to £5.46bn, from £5.64bn a year earlier.

CEO Debra Crew told shareholders that the last financial year had been a challenging one for Diageo and the wider industry, due to “continued macroeconomic and geopolitical volatility”.

Crew added:

Fiscal 24 was impacted by materially weaker performance in LAC [the Latin America and Caribbean region].

Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions. This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year.

Great Britain was a highlights for Diageo, though – net sales here grew by 5%, thanks to stronger demand for Guinness – including the zero-alcohol Guinness 0.0 drink.

Diageo’s shares are at a four-year low, hitting levels last seen in March 2020, when the Covid-19 pandemic forced pubs, bars and restaurants to close.

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Shares in BP have jumped by 2.6% in early trading, after its profits beat forecasts this morning.

It’s the second-highest riser on the FTSE 100 index, after Standard Chartered bank (+4.8%), which announced its largest-ever share buyback programme this morning after a rise in profits.

Austria has bucked the trend, though, by reporting no growth in the last quarter:

⚠️ AUSTRIAN Q2 PRELIMINARY GDP -0.0% Q/Q VS REVISED +0.2% IN Q1 – WIFO

— PiQ (@PiQSuite) July 30, 2024

Spain grows by 0.8%

Newsflash: Spain’s economy has also grown faster than expected in the last quarter.

Spanish GDP expanded by a pacy 0.8% in Q2, the National Statistics Institute reports, comfortably beating forecasts of 0.5% growth.

That matches Spain’s growth in January-March.

On an annual basis, Spain’s economy grew 2.9% over the last year.

Anger over BP’s profits

Campaign groups are angered by BP’s latest multi-billion dollar profits.

Global Witness has calculated that BP had paid “a staggering” £11.7bn to shareholders since June 2023 – when the world began a 12-month stint of temperatures 1.5C above the pre-fossil fuel era.

After BP reported an underlying profit of $2.76bn this morning, Alice Harrison, head of Fossil Fuel Campaigns at Global Witness, says:

“As the world faces record-breaking heat, most of us are desperate to see urgent action on the climate crisis. Unfortunately, it’s clear that BP couldn’t care less. While millions of us struggle with high temperatures and high bills, BP are raking in billions of profits, paying out massive dividends, and doubling down on dirty new oil and gas projects.

Big oil companies like BP know their fossil fuel products are behind more deadly heatwaves, storms, and wildfires around the world, but instead of investing in clean energy, they are continuing to profit from people’s misery.

Fossil fuel companies like BP are turning a blind eye to climate breakdown, so now governments must act. Rather than propping up the climate-wrecking fossil fuel industry, we need them to make polluters pay for the damage they have already caused, and steer us towards a cleaner, greener future.”

Warm This Winter spokesperson Fiona Waters points out that BP has recently rowed back on some of its green energy plans:

“BP’s obscene profits today and the fact they have made £38.4bn since the start of the energy crisis shows they’re not interested in turning off their oil and gas cash cow. They have rolled-back on their green pledges that would mean lower bills, an end to energy price shocks and would also help save the planet.”

Chiara Liguori, Oxfam GB’s Senior Climate Justice Policy Advisor, says low-income countries desperately need help to handle the impact of the climate crisis:

“It is inexcusable that BP, one of the world’s most polluting and profitable fossil fuel companies, continues to rake in billions of pounds while low-income countries are in urgent need of funds to tackle the devastating impacts of the climate crisis despite doing the least to cause it.

“The world can no longer afford fossil fuel companies putting short-term profits above people and planet. The costs of inaction are already here with deadly heat waves, wildfires, flooding and drought but it is people living in poverty who are left paying the highest price.

On this morning’s growth figures from France, economist Claus Vistesen of Pantheon Macroeconomics points out that French food consumption fell in the last quarter, while consumption of gas and electricity, and cars, rose.

French Q2 GDP growth coming in above consensus, as we expected, though not really for the reasons we anticipated. The net boost from foreign trade ex inventories looks vulnerable to a reversal and/or revisions. 1/2

— Claus Vistesen (@ClausVistesen) July 30, 2024

Domestically, meanwhile, solid growth in services spending and capex are working hard to keep the ship steady. Autos and energy spending up on the quarter; food spending down sharply, again. Get in them Carrefours and Auchans my French friends! 2/2

— Claus Vistesen (@ClausVistesen) July 30, 2024

WPP appoints former BT boss Philip Jansen as its new chair

Mark Sweney

Mark Sweney

Philip Jansen, the former chief executive of BT, has been appointed as the new chairman of advertising giant WPP.

Jansen, who stood down as chief executive of BT in February after almost five years in the role, will join the board of the FTSE-listed WPP in September and formally take over as chair from January.

“Philip brings a valuable blend of experience, from leading technology and consumer goods companies to transforming large, complex organisations and creating significant value for shareholders,” said Angela Ahrendts, senior independent director at WPP.

Jansen, who began his career at Gillette to Ariel maker Procter and Gamble before moving into marketing director roles at Dunlop Slazenger and Telewest, led a BT turnaround strategy that included cutting 55,000 jobs by 2030 and investing £15bn in the nationwide roll out of full fibre broadband and 5G mobile networks.

Earlier this month, Jansen, who took home a bumper £3.7m in pay and bonuses in his lat year at the telecoms company, was linked with a private equity backed takeover bid of British pest control firm Rentokil.

“Technology is changing the face of commerce, media and communications, and I am very excited to join a company at the forefront of this change,” said Jansen.

Over the first half of this year, though, BP’s profits are lower than a year ago.

The oil giant made $5.479bn in January-June, down from $7.552bn in the first six months of 2023.

That follows a drop in Q1 – when earnings shrank to $2.7bn from $5bn a year ago (as we covered in May).

BP raises dividend as second-quarter profit beats expectations

In the energy sector, BP has lifted its dividend after beating profit forecasts for the last quarter.

BP has reported an underlying profit of $2.756bn for the second quarter of the financial year, up from $2.589bn in the same quarter in 2023, and slightly higher than the $2.723bn it earned in Q1.

That beat analyst expectations of $2.6bn.

BP said the profit was due to “an average” performance in gas marketing and trading, lower refining margins, stronger fuels margins and “lower taxation”.

It adds:

The underlying effective tax rate (ETR)* in the quarter was 33% which reflects the impact of the reassessment of the recognition of deferred tax assets.

BP is raising its dividend to eight cents per share, up from 7.27/share.

The oil giant has also announced another share buyback, worth $1.75bn, for the last quarter, as it continues to use spare cash to buy back equity.

Kate Thomson, BP’s chief financial officer, says:

We generated strong operating cash flow in the quarter, which helped reduce net debt to $22.6 billion.

Our decision to increase our dividend by 10%, and extend our buyback programme commitment to 4Q 2024, reflects the confidence we have in our performance and outlook for cash generation.

We are maintaining a disciplined financial frame and remain committed to growing value and returns for bp.

Introduction: France gets Eurozone GDP Day off to a good start

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s eurozone GDP day, when we learn how the countries which share the single currency are faring economically.

And the early news is that France’s economic growth was stronger than expected in the second quarter of this year.

French GDP expanded by 0.3% in the April-June quarter, new data from statistics body INSEE shows, beating expectations for 0.2% growth.

That matches the 0.3% growth recorded across the eurozone’s second-largest economy in the first quarter of the year.

It suggests France’s economy was stronger than expected this spring – before Emmanuel Macron stunned Europe by calling snap parliamentary elections last month.

INSEE reports that domestic demand “picked up slightly”, and added to growth. There was also a “slight rebound” in investment (or gross fixed capital formation).

Household consumption was stable in the quarter, while foreign trade also made a positive contribution to growth.

Exports grew by 0.6%, driven by a rise in transport equipment – which INSEE attributes to the “delivery of a new ship”.

“delivery of a ship” klaxon in the French GDP data … had a lot of fun with that last time.

— Claus Vistesen (@ClausVistesen) July 30, 2024

INSEE has previously predicted that the Olympic Games’ will lift France’s economic growth in the third quarter of this year

Economists predict that the wider eurozone also grew in the last quarter, by an estimated 0.2%. We’ll find out if they’re right at 10am, after getting growth figures from Italy, Spain and Germany too.

The agenda

  • 8am BST: Spain’s Q2 2024 GDP report

  • 9am BST: Germany’s Q2 2024 GDP report

  • 9am BST: Italy’s Q2 2024 GDP report

  • 10am BST: Eurozone GDP report for Q2 2024

  • 1pm BST: Germany’s inflation rate for July

  • 2pm BST: US house price index for May

  • 3pm BST: US consumer confidence index for July

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