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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

ExxonMobil and Chevron shatter profit records; eurozone inflation hits record 8.9% – business live

European Union GDP France Recession eurozone United States Economy Inflation Amazon Apple
An Exxon gas station in Washington, DC.
An Exxon gas station in Washington, DC. Photograph: Stefani Reynolds/AFP/Getty Images

Full story: Oil company profits boom as Americans reel from high fuel prices

The US’s biggest oil companies pumped out record profits over the last few months as Americans struggled to pay for gasoline, food and other basic necessities.

On Friday, ExxonMobil reported an unprecedented $17.85bn (£14.77bn) profit for the second quarter, nearly four times as much as the same period a year ago, and Chevron made a record $11.62bn (£9.61bn). The sky-high profits come one day after the UK’s Shell shattered its own profit record.

Soaring energy prices have rattled consumers and become a political flashpoint. “We’re going to make sure everybody knows Exxon’s profits,” Joe Biden said in June.

“Exxon made more money than God this year.”

The record profits came after similarly outsized gains in the first quarter when the largest oil companies made close to $100bn in profits.

High energy prices are one of the major factors driving inflation to a four-decade high in the US. Gas prices have fallen slightly in recent weeks but are now averaging $4.25 a gallon across the US, more than $1 a gallon higher than a year ago.

Consumers are facing high fuel prices not just at the pump. Soaring energy prices are being baked into delivery costs, which is driving up the cost of everything from apples to toilet paper.

Here’s the full story:

Closing summary

Time for a recap...

Two more oil giants have smashed profit records for the last quarter, thanks to the surge in energy prices following the Ukraine war.

ExxonMobil made a net profit of $17.8bn, beating forecasts, while Chevron’s quadrupled its earnings to $11.6bn.

That follows record results at Shell yesterday, just as UK families are warned that average bills will soar this winter.

Charities have warned that some of the most vulnerable households could miss out on the £400 to help with soaring energy bills this autumn:

Energy costs have helped to push inflation in the euro area to a new record high of 8.9% this month.

The eurozone did grow faster than forecast, though, with GDP rising 0.7% in Q2 thanks to a strong recovery in Spain, Italy and France.

Germany stagnated, though, leading to warnings of a winter recession.... as energy-saving measures are brought in.

Portugal’s economy shrank, though, after a strong start to the year. GDP also fell in Latvia and Lithuania as the Ukraine war caused economic disruption.

Struggling UK families have turned to credit to pay their bills, with credit card borrowing jumping at the fastest rate since 2005.

Jane Tully, the director of external affairs and partnerships at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said the figures were “a warning sign that for some the pressure is already beginning to tell”.

The UK’s summer of industrial unrest continues, with workers at BT holding their first strike in 35 years.

Rail services will be severely disrupted on Saturday because of a strike by train drivers.

Global stock markets are on track for their best month since late 2020, as investors shake off fears over rising interest rates.

In London, the FTSE 100 index is up 83 points, or 1.1%, at a seven-week high.

In other news...

Suppliers to the online fashion retailer Missguided are expected to be paid less than 2% of the £30m owed to them by its main trading entity after the company collapsed in May.

The UK government is in line for a £1bn payout from its near-50% stake in NatWest Group despite a dip in the bank’s second-quarter profits and “uncertainty” over the UK’s economic outlook.

The Competition and Markets Authority has launched an investigation into whether eco-friendly and sustainability claims made by the fast fashion chains Asos, Boohoo and George at Asda constitute greenwashing.

Aston Martin, James Bond’s carmaker, saw pre-tax losses crash to £285.4m for the first half of this year as supply chain shortages hit production, leaving hundreds of its supercars unfinished.

TikTok has said it refused an attempt by the Chinese government to open a disguised account on the platform for the purpose of spreading propaganda.

And British Airways has returned to profit for the first time since the start of the pandemic, with its owner International Airlines Group saying demand was strong despite “historic challenges” still facing the industry.

Have a lovely weekend, we’ll be back on Monday. GW

Updated

Wall Street is ending July on a strong note.

The S&P 500 index of US stocks is up almost 1%, or 39 points, at 4111, taking its gains this month to around 7%.

The Dow Jones industrial average is 0.35% higher, while the tech-focused Nasdaq Composite has jumped 1.3%.

Apple is 3% higher, while Amazon has surged 11%, after their results cheered investors last night.

Fiona Cincotta of City Index explains:

Amazon trades 11% higher after posting its second consecutive quarterly loss but posted strong earnings.

Sales rose 7% in the three months to June to $121 billion, which marked one of the slowest growth periods in history, although it was still better than forecast.

Amazon reported a quarterly loss of $2 billion against a profit of $7.8 billion in the same period a year earlier. Amazon’s strong revenue guidance also reassured Wall Street.Apple is also rising pre-market after beating on revenue and profits. Apple recorded revenue of $83 billion despite high inflation.

Exxon’s shares have jumped 3.4% in early Wall Street trading, while Chevron has soared 7%.

Five western oil supermajors on track for $50bn profits last quarter

The five western oil supermajors are together on track to generate well over $50bn in profits, in just the last quarter.

Exxon and Chevron’s record earnings, of $17.8bn and $11.6bn each, come a day after Shell recorded earnings of $11.5bn in April-June.

France’s TotalEnergies nearly trebled its adjusted net income in the quarter, to $9.8bn, yesterday.

BP reports its Q2 results next Tuesday, with analysts predicting it made underlying profits of $6.8bn, more than double a year ago.

UK rail passengers are being warned that services will be severely disrupted on Saturday because of a strike by train drivers in the latest outbreak of industrial unrest in the industry.

Members of the drivers union Aslef at seven train operators will walk out for 24 hours over pay.

The Rail Delivery Group said the industrial action has been timed to coincide with the Commonwealth Games in Birmingham and the start of the new season for most English football league clubs.

There will be disruption to parts of the rail network on Saturday and into the morning of Sunday.

The strike is hitting Arriva Rail London, Greater Anglia, Great Western, Hull Trains, LNER, Southeastern and West Midlands Trains.

While stocks had a good July, shipping companies saw their prices fall amid weaker demand as economies slowed.

The Baltic Exchange’s main sea freight index logged its worst month since January on Friday as rates across its component vessel segments saw double-digit monthly declines.

The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, shed 50 points, or 2.6%, to 1,895 points, its lowest in over five months, Reuters flags.

Paint technicians inspecting the first production DBX 707 as it prepared to leave the Aston Martin St Athan factory in Barry, Wales, back in May
Paint technicians inspecting the first production DBX 707 as it prepared to leave the Aston Martin St Athan factory in Barry, Wales, back in May Photograph: Ben Birchall/PA

Back in the City, luxury carmaker Aston Martin is among the fallers (down 1.7%) after shortages of parts pushed into a loss.

Aston Martin, James Bond’s carmaker, saw pre-tax losses crash to £285.4m for the first half of this year as supply chain shortages hit production, leaving hundreds of its supercars unfinished, my colleague Joe Middleton explains:

The company said it had difficulty meeting high levels of demand for new cars and has been hit by wider supply chain shortages, such as the global shortage of semiconductors, and logistics issues.

More than 350 of Aston Martin’s latest SUV, the DBX707, were not delivered to customers as they waited for final parts at the end of June, which cost the company more than £80m.

It comes amid a tumultuous few years for the company that is best known as the maker of the flash sports cars driven by 007 in the popular Bond films.

The company said it expects its finances to improve in the second half of the year despite posting a widening deficit compared with a loss of £90.7m in the same six-month period a year earlier.

Over in the US, an inflation measure closely followed by the Federal Reserve has hit a new 40-year high.

The personal consumption expenditures price index rose 6.8% from a year ago in June, the Bureau of Economic Analysis reports, up from 6.3% in May.

Core PCE, which strips out volatile components, kept rising too - to 4.8% from 4.7%.

They may persuade Fed policymakers that further interest rate hikes are needed, after they voted for their second 75-basis point rise in a row this week.

But... consumer spending and personal incomes were hotter than forecast too:

US Personal Incomes jumped by 0.6% in June, while spending was 1.1% higher as inflation pushed up prices.

French finance minister Bruno Le Maire has welcomed France’s return to growth, with a 0.5% rise in GDP in the last quarter.

Le Mesaid this morning’s GDP figures for the second quarter were a form of “victory for the French economy”, adding that France will meet its target of economic growth of 2.5% this year (via Reuters).

Back in the eurozone, Portugal’s economy shrank a little in the last quarter, as inflation weighed on private consumption.

Portuguese GDP fell by 0.2% in the second quarter of the year, the National Statistics Institute (INE) said, due to weaker domestic demand.

That followed strong growth of 2.5% in Q1, when Portugal bounced back from its Covid-19 winter lockdowns.

Still, net exports of services, including the key tourism sector that represented almost 15% of GDP before the pandemic, increased in Q2.

Quite...

ExxonMobil and Chevron shatter profit records

An Exxon gas station.

The soaring energy prices that are driving up inflation worldwide have helped US oil giants Exxon amd Chevron to smash profit records.

Exxon Mobil has reported a record $17.85bn in net income during the second quarter, a period in which Americans struggled with painfully high prices at the pump.

Revenue jumped to $115.68bn, up from $67.74bn a year ago, as Russia’s invasion of Ukraine drove up crude oil and natural gas prices.

Chevron reported earnings of $11.62bn, also a record, during the three-month period, up from $3.08bn in the second quarter of 2021.

Updated

Global stocks on course for best month since November 2020

Britain’s blue-chip FTSE 100 index is firmly on track for its best month of 2022, despite anxiety over the global economy.

The index of leading shares has gained 3% in July, its best result since last December, as it clawed back around half of June’s losses.

Investors have been cheered by some forecast-beating results, including record profits of nearly £10bn at Shell in just the last quarter amid the energy crisis.

Global shares have also had a strong month, with technology companies strengthening after a rough first half of the year.

The FTSE All World index of developed and emerging market shares has gained 5.8% in July, which would be its best month since November 2020 (hat-tip to Naomi Rovnick of the FT).

European stocks have rallied too, even though fears of winter gas shortages have mounted, with the Stoxx 500 up over 7% in July.

Victoria Scholar, head of investment at Interactive Investor, tells us risk appetite is growing, after the worst first half of the year since 1970.

The S&P 500 lost 20% through the end of June, slumping from an all-time high at the start of the year. But so far the second half has kicked off in a much more bullish mood.

A lot of the negativity around rising interest rates and inflation was baked in by the end of June, prompting some investors to go bargain hunting for stocks. On top of that, there have been tentative signs that the pace of tightening, particularly from the Fed could ease, given that the FOMC has now carried out two consecutive 75 basis point aggressive hikes and given concerns about an economic slowdown with the US now in a technical recession.

The market is now anticipating that the Fed will cut interest rates at some point next year to try to offset an economic slowdown, but first inflation needs to come back down closer to target. Earnings season has helped propel US stock markets ahead of month-end with results from Amazon in particular, which sent the stock up double digits after-hours last night. US futures are pointing to an ebullient Friday when markets open at lunchtime with the tech-heavy Nasdaq on track to gain more than 1%, thanks to results from Apple as well as Amazon.

Inflation in the eurozone could hit double-digit levels later this year, warns Moody’s Analytics’ senior economist Kamil Kovar:

“The preliminary estimate of euro zone inflation surpassed our expectations, hitting a new record of 8.9% y/y in July.

Energy prices surprised with another monthly increase despite significant easing in petrol prices, suggesting large jump in consumer gas and electricity prices. Meanwhile, food prices recorded another monthly increase that was close to record levels, while goods and services continued with their recent robust price dynamics.

The fact that overall index increased despite significant easing in petrol prices and favourable government policies means that the eurozone is unlikely avoid double digit inflation in the autumn. Together with strong GDP growth in second quarter this will lead the ECB to implement quick tightening.”

Updated

Lloyd’s insurer and broker provide insurance cover for Ukraine sea corridor

A new insurance facility that will help grain and other foods to be shipped out of Ukraine has been agreed.

It will provide cover for vital grain and food products moved through safe corridors established by the treaty agreed between Russia and Ukraine last week.

The Lloyd’s of London facility, provided by insurer Ascot and broker Marsh, will provide up to $50m of cover in marine cargo and war insurance for vessels transporting grain, and other designated food products from Ukrainian ports.

Chris McGill, Head of Cargo at Ascot, explains:

This bespoke, mission focused facility allows the insurance market to play its part in enabling the vital transportation of grain and food products out of Ukraine to the wider world.

Under the terms of the treaty, ships can transit designated Ukrainian ports through safe access corridors.

The Black Sea is infested with hundreds of mines, which had disrupted global shipping.

David Roe, Head of Cargo, UK, Marsh, says the facility will help cargo clients manage the risks associated with operating in the Black Sea “during this terrible time of war”.

Roe adds:

Not only will it help unlock supply chains, it will alleviate mounting pressures on global food security, which will benefit nations and communities around the world.”

With inflation hitting 8.9% this month, the eurozone faces some difficult months ahead despite growing faster than expected in April to June.

Janet Mui, head of market analysis at wealth manager Brewin Dolphin, explains:

“Despite the better Q2 reading the data is backward looking. More high-frequency data such as business surveys suggest private sector activity was in contraction in July and business confidence slumped to levels not seen since the global financial crisis.

Outlook is set to weaken with the IMF downgrading Eurozone growth again in its July forecasts driven by concerns on high inflation and energy supply risk.

“Meanwhile, inflation has not seen a peak yet with the latest CPI rising to 8.9% from 8.6%. Aside from surging energy costs, underlying prices (core CPI) also accelerated.

The spike in natural gas prices in recent weeks, or potentially beyond, means energy prices will remain a big challenge for consumers and businesses as winter looms.”

Bert Colijn, senior eurozone economist at ING, says record inflation could spur the ECB into another large interest rate rise in September.

Food and core inflation continue to trend higher while the gas crisis is keeping energy inflation elevated. Supply, rather than demand, remains the main driving force behind rising inflation.

Don’t rule out another 50 basis point hike from the ECB in September.

This latest surge in eurozone inflation will worry the European Central Bank, which has just raised interest rates by the most in two decades.

Hussain Mehdi, macro & investment Strategist, HSBC Asset Management, says:

“Another upside inflation surprise will make uncomfortable reading in Frankfurt and exacerbates the household income squeeze. Underlying price pressures are emanating from a strong labour market, while further gas supply disruptions pose significant upside risks going forward.

Recent declines in the euro exchange rate mean imported inflation is also a problem.

This will keep the ECB on a hawkish trajectory this year even in the face of likely recession.”

Eurozone inflation hits new record of 8.9%

Inflation across the eurozone has hit a new alltime high this month as energy prices continue to hammer its economy.

Consumer prices have surged by 8.9% in the last year, Eurostat reports, up from 8.6% in June, as the cost of living squeeze intensifies.

Energy is expected to have the highest annual rate in July (39.7%, compared with 42.0% in June), following the jump in gas prices following the Ukraine war.

But inflation was broader -- food, alcohol & tobacco prices have soared by 9.8% in the year to July (up from 8.9% in June) Non-energy industrial goods cost 4.5% more (up from 4.3%), while services inflation jumped to 3.7% (from 3.4% in June).

Today’s GDP data could be revised, but for now it shows the eurozone economy was more resilient than expected.

The last quarter was tough for Europe, as inflation soared, energy costs for industry spiraled, and the Russian invasion of Ukraine continued to disrupt supply chains and create geopolitical uncertainty.

Eurozone beats forecasts with 0.7% growth

Just in: the eurozone economy expanded by 0.7% in the second quarter of the year, much stronger than the 0.2% which economists expected.

Growth across the euro area accelerated from the 0.5% growth recorded in Q1 (revised down from +0.6%), despite the economic shock from the Ukraine war.

Although Germany stagnated, a stronger performance from Spain, Italy and France helped to spur growth. Tourism and the reopening of businesses after pandemic lockdowns last winter helped.

Eurostat adds:

Among the Member States for which data are available for the second quarter 2022, Sweden (+1.4%) recorded the highest increase compared to the previous quarter, followed by Spain (+1.1%) and Italy (+1.0%).

Declines were recorded in Latvia (-1.4%), in Lithuania (-0.4%) and in Portugal (-0.2%). The year on year growth rates were positive for all countries.

Updated

Credit card borrowing rising at fastest in 17 years

UK consumer credit growth has accelerated at the fastest rate in three years, as households struggle to cope as inflation hits a 40-year high.

People borrowed an additional £1.8bn in consumer credit in June, up from a £900m increase in May, the latest Bank of England statistics show.

Around £1bn extra went onto credit cards, with another £800m on car dealership finance, personal loans, and other consumer credit.

The annual growth rate for all consumer credit increased to 6.5% in June; the highest rate since May 2019, while credit card borrowing surged 12.5%, the highest rates since November 2005.

Economist Shaun Richards explains it’s a sign that the cost of living is hitting households:

Tomer Aboody, director of property lender MT Finance, says:

Going forward, one would expect higher inflation and living costs to mean many will have to dip into savings in order to manage, with those who don’t have that buffer finding life increasingly difficult.’

The BoE also reports that approvals for house purchases, an indicator of future borrowing, fell to 63,700 in June, from 65,700 in May, below the 12-month pre-pandemic average.

Updated

A union representing Spanish-based pilots of low-cost airline easyJet say its members will go on strike for nine days in August to demand better working conditions, Reuters reports.

The SEPLA union is demanding that the airline reestablish pilots’ working conditions from before the COVID-19 pandemic and provide its pilots with a new multi-year contract deal.

A technical recession, incidentally, is two consecutive quarters of negative growth.

But as we saw yesterday when the United States’ GDP fell in Q2, some economists insist it’s too blunt a measure.

Paul Donovan of UBS is firmly in this camp, telling clients:

Yesterday, a group of people with English literature degrees tried to tell a group of people with economic degrees what the economy was doing. A group of people with economic degrees tried to teach a group of people with English literature degrees about the meaning of words. The recurring fight between journalists and economists over what “recession” means has begun.

Economists do not consider two quarters negative growth a recession.

Countries with falling populations are more likely to have negative growth, there is no recognition of capacity, and the labor market is ignored. The danger in using “recession” to describe the US economy today is that it invites fake comparisons to genuine recessions in the past.

The US may slump in the future, but currently it is in a slowdown.

At least one US President has recognised the definition before, though....

ING: German technical recession looks like a done deal

On an optimistic note, at least Germany avoided a contraction in the second quarter of the year.

But with high energy and commodity prices continue undermining purchasing power and profit margins, a technical recession in the second half looks like a done deal, writes Carsten Brzeski of ING:

The just released flash estimate of 2Q German GDP shows that the economy stagnated, from a significantly upwardly revised 0.8% quarter-on-quarter in the first quarter. On the year, the economy grew by 1.5%. GDP components will only be released at the end of August but according to available monthly data up to May and the statistical agency’s press release, public and private consumption supported economic activity, while construction and trade were a drag.

Supportive factors for the economy such as post-lockdown reopenings and filled order books have been losing momentum rapidly. Weaker global demand, supply chain frictions, and high inflation denting consumption are hitting the German economy. In fact, consumer confidence is already in clear recession territory and it looks as if the rest of the economy is quickly following suit.

The economy avoided contraction but the only positive element of today’s data is probably the upward revision of first quarter growth.

German economy stagnates

Newflash: Germany’s economy failed to grow in the last quarter, as Europe’s largest economy was hit by soaring prices, a trade slowdown, and supply chain disruption following the Ukraine war.

German GDP was unchanged in Q2 compared to Q1, a little worse than expected, and just 1.5% higher than a year ago.

Statistics body Destatis says weak trade hit growth.

The economy was mainly supported by private and government consumer spending, while the trade balance dampened economic growth.

The difficult global economic conditions with the ongoing corona pandemic, disrupted supply chains, rising prices and the war in Ukraine are clearly reflected in economic development.

But....Germany’s growth in the first quarter has been revised to +0.8%, compared with 0.2% previously, so it started 2022 stronger than we thought.

Updated

Italy has smashed forecasts, bringing some relief as the country tries to navigate its political crisis amid the energy crunch.

The Italian economy grew by 1% in April-June, around three times faster than expected.

In the City, shares in NatWest have soared 8% after the bank announced a special dividend for shareholders and raised its full-year guidance.

That payment means the UK government is in line for £1bn thanks to from its near-50% stake in the group, which also reports a dip in second quarter profits and “uncertainty” over the UK’s economic outlook.

NatWest revealed on Friday it was poised to issue dividends worth 20.3p a share, after reporting “strong growth” in lending and deposits across the business, thanks in part to rising interest rates that meant it could charge borrowers more for loans and mortgages.

Nearly half of the dividends – about £1bn – will be handed to the Treasury, which still owns 48% of the bank’s shares after its £46bn state bailout at the height of the 2008 banking crisis. More here.

France’s encouraging return to growth hasn’t squashed all fears of a recession, says Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:

“The French economy has showed since of progress, growing 0.5% in the second quarter, reversing a previous contraction and beating market estimates of 0.2% growth. Growth has been supported by increased exports, however, the underlying picture is less positive.

Household consumption fell in the quarter, likely a result of increased fiscal prudence, while government spending also came off the boil. The overall data set is of course a relief but this has done little to completely erode recessionary fears.

Inflation kept climbing in Austria too.

Consumer prices have jumped by 9.2% in the last year (or 9.3% on an EU-harmonised basis), the highest in decades.

Statistics Austria director General Tobias Thomas says:

“In July 2022, life in Austria has become even more expensive: According to a first estimate, the inflation rate for July is 9.2 %. This is the highest value since March 1975.

While there are further price increases for household energy and in restaurants, the prices for food and fuel remain at a high level”

French inflation has hit a record high, taking the shine off this morning’s stronger-than-expected GDP figures.

French inflation climbed even further in July to 6.8%, on an EU-harmonised basis, up from June’s record high of 6.5%.

Inflation was driven up by the acceleration of service prices “linked to the summer period” says INSEE, along with higher price for food and manufactured goods.

Austria grew 0.5% in Q2

Austria’s economy continued to grow in the last quarter too.

Austrian GDP increased 0.5% in April-June, as it continued to recover from last winter’s national lockdown when it was battling a severe outbreak of Covid-19.

Spain beats forecasts with 1.1% growth

Next up... Spain.

And the Spanish economy has expanded by a faster-than-expected 1.1% in the second quarter of the year.

That’s up from 0.2% in the previous three months, and much faster than the 0.4% which economists expected.

Claus Vistesen, macroeconomist for Pantheon Macroeconomics, says France’s growth in Q2 was “solid”, but cautions that the boost from net trade and inventory-building could unwind later this year.

German cities impose cold showers and turn off lights amid Russian gas crisis

Cities in Germany are switching off spotlights on public monuments, turning off fountains, and imposing cold showers on municipal swimming pools and sports halls, as the country races to reduce its energy consumption in the face of a looming Russian gas crisis.

Hanover in north-west Germany on Wednesday became the first large city to announce energy-saving measures, including turning off hot water in the showers and bathrooms of city-run buildings and leisure centres.

Municipal buildings in the Lower Saxony state capital will only be heated from 1 October to 31 March, at no more than 20C (68F) room temperature, and ban the use of mobile air conditioning units and fan heaters. Nurseries, schools, care homes and hospitals are to be exempt from the saving measures.

Here’s the full story:

ASOS, Boohoo and Asda face greenwashing probe

Fashion retailers ASOS and Boohoo, and UK supermarket group Asda, are being investigated over their fashion ‘green’ claims.

The Competition and Markets Authority will scrutinise their eco-friendly and sustainability claims, concerned that products are being wrongly marketed to customers as eco-friendly.

The investigation will include whether:

  • the statements and language used by the businesses are too broad and vague, and may create the impression that clothing collections – such as the ‘Responsible edit’ from ASOS, Boohoo’s current ‘Ready for the Future’ range, and ‘George for Good’ – are more environmentally sustainable than they actually are

  • the criteria used by some of these businesses to decide which products to include in these collections may be lower than customers might reasonably expect from their descriptions and overall presentation – for example, some products may contain as little as 20% recycled fabric

  • some items have been included in these collections when they do not meet the criteria

Updated

British Airways’ owner, International Consolidated Airlines Group, has returned to profit for the first time since the start of the coronavirus pandemic.

IAG made a pre-tax profit of €73m in the second quarter of the year, up from a loss of €1.12bn in Q2 2021 when pandemic travel restrictions were in force.

Passenger revenues jumped to almost €5bn in April-June, up from €682m a year ago, despite the travel chaos at UK airports this summer that led IAG to cancel thousands of flights.

IAG also made an operating profit during the quarter, of €293m after an operating loss of €967m a year ago.

IAG chief executive Luis Gallego said:

“In the second quarter we returned to profit for the first time since the start of the pandemic following a strong recovery in demand across all our airlines.

“This result supports our outlook for a full-year operating profit.

“Our performance reflected a significant increase in capacity, load factor and yield compared to the first quarter.

“Premium leisure remains strong, while business travel continues a steady recovery in all airlines.”

Bloomberg: France faces an electricity ‘Waterloo' this winter

Worryingly for France, Paris could be the first European city to suffer a blackout as temperatures drop toward the end of the year, rather than Berlin.

So warns Bloomberg’s energy expert Javier Blas, who explains that France’s nuclear industry is struggling badly.

As winter approaches, the outlook in France is increasingly dire. Electricite de France SA, the state-owned utility, is running only 26 of its 57 reactors, with more than half of its chain undergoing emergency maintenance after the discovery of cracked pipes. With atomic reactors generating the lowest share of the country’s power in 30 years, France faces an electricity ‘Waterloo.’

The slump in nuclear availability is forcing France to rely more than ever on gas-fired plants, intermittent wind and hydro as well as imports. That’s pushing up the cost of electricity in the wholesale market for the whole of Europe, with French forward prices surging to almost 1,000% more than their decade-long average through 2020.

In the middle of the summer, when French electricity demand hovers around 45 gigawatts per hour, that’s not an insurmountable problem. But on a cold winter evening, when French households can push consumption above 80 or 90 gigawatts, it could be catastrophically expensive.

More here.

The reopening of French hospitality businesses after last winter’s wave of Covid-19 also lifted growth, points out Gilles Moëc, AXA Group chief economist.

But he also flags that consumer spending remained weak, as cost-of-living pressures hit households.

France’s strong-than-expected return to growth puts it on a firmer footing as surging inflation and the risk of a Russian energy cuttoff threaten to tip Europe into a recession.

So says Bloomberg:

After a surprise contraction at the start of 2022, gross domestic product rose by 0.5% in the three months through June, more than the 0.2% median estimate in a Bloomberg survey of analysts.

But trade accounted for most of the surprise, with consumer spending falling for a second straight quarter.

Although France has avoided recession today, economist Charlotte de Montpellier of ING fears its economy will be in a downturn this winter (when Europe could face energy shortages).

Tourism helped France to return to growth in April-June too.

Spending by foreign travellers in France rose by 8.6% in the last quarter, after +5.0% in Q1.

Introduction: France avoids recession with 0.5% growth

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

Today we discover how the eurozone economy fared in the first full quarter since the Ukraine war drove up energy prices and disrupted supply chains, slowing global growth.

And the breaking news is that France has avoided recession, by returning to growth in April-June as stronger exports helped offset weak domestic demand.

French GDP rose by 0.5% in Q2, figures just released show, having shrunk by 0.2% in January-March as rising inflation hit the eurozone’s second-largest economy.

That’s stronger than expected, and means France has avoided two quarters of falling growth in a row.

France’s statistics body INSEE says “GDP in volume terms strongly recovered after the decline in the previous quarter”.

Foreign trade lifted growth, with exports rising 0.8% and imports falling by 0.6%.

But household consumption expenditure fell again, as French consumers were squeezed by rising prices.

We also get growth figures from across the eurozone through the morning, which are likely to show a generally weak quarter of economic activity, and continued high inflation.

Michael Hewson of CMC Markets says:

On the broad EU basis Q2 GDP is expected to slow to 0.2% from 0.6% in Q1. In Germany we will be lucky to see any expansion at all and given the current geopolitical and economic backdrop this could be as good as it gets for a while.

We also get a quick snapshot of flash CPI inflation for July after the numbers from Germany jumped higher to 8.5% in numbers released yesterday.

And with the US economy shrinking for two quarters in a row, the outlook for the world economy in the months ahead looks uncertain.

Also coming up today

UK bank NatWest is reporting results, while staff at telecoms group BT are holding their first national strike in decades.

Energy groups Shell and Centrica are facing heavy criticism after reporting a surge in profits, and hefty payouts to shareholders yesterday:

Overnight, tech giants Apple and Amazon have beaten Wall Street expectations.

  • Amazon reported its second quarterly loss in a row on Thursday but the company’s also beat revenue expectations and gave an upbeat forecast for the remainder of the year; shares jumped over 10% in after-hours trading
  • Apple reported higher-than-expected profit and sales as demand for iPhones held firm, despite the slowing US economy and rising inflation

The agenda

  • 6.30am BST: French GDP report for Q2
  • 8am BST: Spanish GDP report for Q2
  • 8am BST: Austria GDP report for Q2
  • 9am BST: German GDP report for Q2
  • 9am BST: Italian GDP report for Q2
  • 9,30am BST: UK mortgage approvals and consumer credit report
  • 10am BST: Eurozone GDP report for Q2
  • 10am BST: Eurozone inflation report for July
  • 1.30pm BST: US personal income and spending report

Updated

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