Rolling coverage of the latest economic and financial news, including new healthchecks on factories around the world

More than one in eight UK households fear they have no further way to make cuts to afford a sharp increase in annual energy bills this autumn.

Poorer families are most at risk, with over a quarter of households earning less than £20,000 worry they will be unable to cope with higher bills. Families in Yorkshire, the south-west and Northern Ireland the least confident about covering their costs, according to the latest rebuilding Britain index survey of 20,000 people by Legal & General.

Almost half of UK households are concerned about being able to keep up with rent or mortgage payments over the next 12 months as the majority realise they will have to make cuts elsewhere.

Nigel Wilson, the chief executive of Legal & General, said households across the UK are currently facing very tough financial choices.

For some, those choices seem impossible.

“However, what is most concerning is that the impact of the cost of living crisis is being felt more severely in some parts of the UK than in others. This threatens to widen the existing demographic and geographic inequalities that the levelling up agenda was designed to address.”

Retail chain JD Sports has agreed a £38m deal to sell Footasylum to the German asset management firm Aurelius Group, after it was finally forced to offload the trainer chain by the UK’s competition watchdog.

The deal will be completed in the coming weeks, putting an end to a saga that started with JD Sports’ £90m purchase of its rival in 2019 as the FTSE 100 group sought to strengthen its position on the UK high street. More here.

German retail sales have fallen at the largest annual pace since records began in 1994, as households cut back in the cost of living crisis.

Retail sales fell 8.8% in real terms in June compared with the same month last year.

This is the largest annual drop in nearly 30 years as rising consumer prices led consumers to rein in spending.

Germany’s National Office for Statistics reported that nominally, sales only fell by 0.8%, but tumbled once you adjust for rising prices, adding:

The difference between the nominal and real results reflects the high price increases in retail, which are having a noticeable impact on consumer confidence.

#Alemania German Retail Sales M/M Jun: -1.6% (est 0.3%, prevR 1.2%) - Retail Sales NSA Y/Y Jun: -8.8% (est -8.3%, prevR 1.1%) pic.twitter.com/wGXp1U30e3

Food sales were down 7.2% year-on-year in real terms, while internet and mail order sales sank 15% compared with June 2021.

Germany’s manufacturing sector also contracted last month, for the first time in two years.

Production weakened, as German factories were hit by a deepening decline in new orders, including export orders, which both fell at the fastest rate since since May 2020.

Firms were hit by heightened uncertainty, a drop in investment spending, elevated prices, high stock levels at customers and ongoing supply chain frictions.

Fears of gas shortages also haunt German industry, explains Phil Smith, Economics Associate Director at S&P Global Market Intelligence:

“The potential for a shortage in gas supplies has German manufacturers seriously worried about the outlook for production in the coming year.

Goods producers’ expectations turned negative back in March, and have deteriorated in almost every month since then as downside risks to the sector’s outlook continue to build.”

S&P Global’s final Purchasing Managers’ Index (PMI) for manufacturing, which covers roughly a fifth of Germany’s economy, fell to 49.3 from 52.0 in June, showing a contraction.

The latest factory reports from Europe are coming in, confirming that conditions weakened last month.

French manufacturing output fell in July at the fastest rate since the first Covid-19 wave in 2020.

Indeed, aside from declines seen during the pandemic era, French goods production fell at the sharpest rate since April 2013 as high inflation squeezed demand and persistent supply issues constrained output.

The downturn in new orders steepened, as inflationary pressures persisted, leaving business confidence at subdued level

Purchasing managers blamed the deterioration on slowing activity at clients, shortages of materials and weaker demand.

The Frnech manufacturing PMI came in at 49.5, down from 51.4 in June and at its lowest level in just over two years.

⚠️ France Manufacturing PMI Final (SA) (Jul): Act: 49.5 Prev: 51.4 Fcst: 49.6 Worst output performance outside pandemic era since 2013 New order downturn steepens as inflationary pressures persisthttps://t.co/YdBdORrAqa pic.twitter.com/1pGjc4x6Or

Here’s some reaction to the slowdown at China’s factories, from Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown....

“The latest National Bureau of Statistics of China manufacturing purchasing managers’ index unexpectedly fell to 49.0 in July, from 50.2 in the previous month and missing market forecasts of 50.4.

There was a very mixed bag hidden within the results, with core trends showing the negative effect of new lockdowns in key cities and general concerns over the global economy, following sharp monetary tightening efforts. Output, new orders, buying levels and export orders all shrank. This latest data set does very little to offset concerns around darkening global economic output, especially when put together with a further easing of sentiment.

... and Craig Erlam, analyst at OANDA

A mixed start to the week in Asia where Chinese PMIs dampened the mood as the reopening boost to activity quickly faded.

The country was already facing an uphill challenge, to put it mildly, with regards to its growth target this year and the fact that manufacturing activity is slowing again doesn’t bode well. While the non-manufacturing survey is much healthier, it also experienced a deceleration last month which further suggests the economy is struggling to get back to full strength.

Taiwan’s manufacturing sector has recorded the steepest downturn in two years, as firms were hit by a steeper fall in output and new business.

Factory bosses in Taiwan, a semi-conductor manufacturing powerhouse, reported that conditions deteriorated in July due to weaker global demand and rising costs.

This led to the sharpest drop in activity since early in the pandemic, with production volumes falling at a faster rate.

The S&P Global Taiwan manufacturing PMI sank from 49.8 in June to 44.6 in July, which shows the fastest downturn since May 2020 as activity weakened.

Annabel Fiddes, economics associated director at S&P Global Market Intelligence, said:

“Manufacturing companies in Taiwan painted an increasingly gloomy picture of conditions at the start of the third quarter. Output and new business both fell at the sharpest rates since the early stage of the pandemic in May 2020, with firms often linking this to weaker global economic conditions.

“Lower intakes of new work and increased caution towards the 12-month outlook drove marked falls in purchasing activity and inventories, while the sharpest fall in backlogs of work since late-2011 also adds to indications that current capacity exceeds demand.

Therefore, it seems likely that output could be cut further in the months ahead unless we see a marked improvement in client demand. “A brighter bit of news came from the price indices, which pointed to slower increases in both input costs and selling prices, while supply chains moved closer to stabilising. All this suggests inflationary pressures may have peaked, which will be welcome news for the central bank.”

#Taiwan Manufacturing PMI fell sharply to 44.6 in July (June: 49.8) to signal the quickest decline in operating conditions since May 2020. More positively, weaker demand pressures resulted in the softest rise in input costs for 23 months. Read more: https://t.co/hAWoKdJblY pic.twitter.com/HKXhQRbcWD

Sanctions continued to bite on Russia’s factories last month.

Production at Russian manufacturers fell at the fastest rate since April, as firms were hit by raw material shortages and subdued demand conditions.

New export orders contracted again, as overseas firms shunned Russian exports, but domestic demand was stronger.

Some firms also said they were struggling to hire and retain staff amid “salary competition”, S&P Global reports.

This pulled the Russian manufacturign PMI down to 50.3 in July, nearer stagnation, down from 50.9 in June.

🇷🇺#Russia July manufacturing PMI 50.3 (50.9). ”..sixth successive monthly contraction in production during July. Russian manufacturing firms registered the sharpest fall in output since April, as companies noted raw material shortages and relatively subdued demand conditions.” pic.twitter.com/rzLUKNnvAg

Japan hasn’t escaped the slowdown either, with its factory sector growing at the slowest pace since last September.

Manufacturers said new export sales continued to fall in July (for the fifth month in a row), as demand softened.

This helped to pull Japan’s factory PMI down from 52.7 in June to 52.1 in July, showing slower growth, with firms reporting:

Factories in South Korea also came under pressure in July, with activity dropping for the first time in nearly two years. Output volumes fell at the fastest pace for nine months, as manufacturers continued to be hit by rising costs and material shortages.

Worryingly, new orders shrank for the first time since September 2020. Export demand weakened at the quickest rate for three months amid concerns about the economic impact of the Ukraine war and COVID-19 policy in China.

That knocked South Korea’s factory PMI down to 49.8 in July from 51.3 in June, falling below 50 (stagnation) for the first time since September 2020.

Usamah Bhatti, economist at S&P Global Market Intelligence, who produced the report, explains:

“South Korean manufacturers reported that strong inflationary pressures and sustained supply chain disruption had hindered production and demand at the start of the third quarter,”

“Higher prices for inputs including fuel, metals and semiconductors meant that the disruption was broad-based across the manufacturing sector.”

Bellwether Blues. “South Korea’s July PMI slumped to 49.8 from 51.3 in June, September 2020 low. New orders contracted & weakened the most in nearly two years while output volumes slid at the fastest pace for nine months due to shortages of materials & rising costs”@business pic.twitter.com/DpMrZSlz2L

In contraction mode, #China’s official manufacturing PMI fell to below the consensus forecast. Non-manufacturing PMI also fell to below consensus, though not contracting. Together they speak to the largest economic areas in the world slowing at the same time (China, Eurozone. US) pic.twitter.com/QOxorQzWC8

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

The latest surveys of factory output across the globe are released today, likely to show that growth weakened in July as inflation gripped the world economy.

And the news from China is not encouraging; factory growth went into reverse in July as Covid-19 outbreaks continued to hamper output sector, as property sales slid.

The official China manufacturing PMI slipped unexpectedly into contraction last month, as new orders and output weakened as authorities continue to impose lockdowns and restrictions to fight Covid-19 outbreaks in cities such as Xi’an and Tianjin.

Alvin Tan of RBC Capital Markets says the slowdown highlights the ‘fragile state of the economy’, adding:

With growing indications that Beijing is not willing to unleash massive stimulus to attain the year’s growth target and instead seek a “best efforts” outcome, the People’s Bank of China may have to lean on exchange rate depreciation to support the economy as global growth and export demand weaken further in coming months.

Overnight, a rival survey from data provider Caixin has confirmed the weak picture, showing that output and total new work slowed due to subdued demand, as China’s factories continued to cut staff.

Supplier delays rose too, with many firms reporting that “stock and staff shortages, and disruption from COVID-19, had weighed on vendor performance.”

China Caixin Manufacturing PMI (Jul) indicated a slowdown in growth for manufacturing activities; 50.4 from 51.7 (Jun) below consensus of 51.5 pic.twitter.com/0N58PXZM3v

Home sales are slumping too, as a mortgage boycott by home-buyers spreads.

Combined contract sales at China’s top 100 developers plunged 39.7% in July, compared to a year earlier to 523.1 billion yuan (£63bn), according to preliminary data compiled by China Real Estate Information Corp.

The real estate data company warned that there is a lot of pressure on companies to sell properties:

“Overall market demand and purchasing power have been overdrawn, while the industry confidence is also at a low level,”

Developers are still facing heavy de-stocking pressure in the short term.”

Confidence in China’s property market has plunged this year, as developers have sunk into a deepening liquidity crisis, leading to more projects being stalled..... and more homebuyers refusing to pay their mortgages on unfinished properties.

That strike has put more pressure on developers, who are already facing acute liquidity problems and who rely on customers paying upfront for homes to keep cash flowing.

Analysts have warned that property sales in China could fall by one-third this year, as people lose faith in the market.

The economic cost could be extremely sizeable, as Bloomberg reports

In a worst-case scenario, S&P Global Ratings estimated that 2.4 trillion yuan ($356 billion), or 6.4% of mortgages, are at risk while Deutsche Bank AG is warning that at least 7% of home loans are in danger. So far, listed banks have reported just 2.1 billion yuan in delinquent mortgages as directly affected by the boycotts.