Closing post
Time for a recap.
Economic storm clouds are gathering over Germany again, after growth fell into reverse and inflation rose.
German GDP fell by 0.1% in the second quarter of this year, new economic data shows, putting Europe’s largest economy on the brink of recession.
Analysts warned that Germany is the growth laggard of the eurozone, although Latvia (-1.1%), Sweden (-0.8%) and Hungary (-0.2%) all shrank by more.
ABN Amro explains:
German Q1 GDP undershot expectations, contracting by 0.1% qoq (consensus and our forecast +0.1% qoq) after expanding by 0.2% qoq in Q1
The details will be published late August. For now, Destatis pointed to fixed investment, particularly in transport equipment and buildings as the main drag on GDP growth. Indeed, investment in Germany has been generally weak with the level of investment still lagging 2019 levels by about 4%; this is especially the case for investment in transport equipment such as cars.
Furthermore, investment in buildings declined after being a source of strength in the Q1 GDP reading. This is not a surprise given the continued high level of interest rates, which have depressed demand and activity in the construction sector, particularly housing.
German inflation, on a harmonised basis, rose to 2.6% this month.
The drop in Germany’s GDP took the shine of a solid, unspectacular, growth performance by the wider eurozone, which expanded by 0.3% in April-June.
Spain was a bright light, growing by 0.8%, while France expanded by 0.3% – helped by the sale of a massive cruise ship to Royal Caribbean.
Analysts at Nomura say:
Euro area Q2 2024 GDP grew by 0.3% q-o-q. Core/periphery divergence continues, worsening even, with Germany contracting and Spain materially outperforming.
In other news….
Climate activists have voiced anger after BP beat profit expectations, and hiked its dividend.
Drinks company Diageo has been hit by a slump in demand in Latin America, cancelling out a jump in demand for its no-alcohol Guinness 0.0%.
Bakery chain Greggs has raised some prices, as it passes on the cost of a higher wage bill.
Pfizer has raised its profit guidance, as it shrugged off a drop in revenues from its Covid produces.
London market closes
After falling sharply this morning, London’s blue-chip stocks have clawed their way back, mostly.
The FTSE 100 share index has ended the day down 18 points, or 0.2%, at 8274 points. Standard Chartered led the risers, after announcing its biggest ever share buyback this morning.
But medical device maker Convatec was the top faller, down 5.8%, after missing profit expectations.
The FTSE 250 index of medium-sized companies jumped 0.85%, led by wealth manager St James’s Place (+25%) after it outlined cost-cutting plans.
