Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.
The UK’s supply chain shortage continues to weigh on the economy, with consumer-facing companies increasingly worried about the economic outlook as they struggle to find workers … and auto production collapses.
Businesses such as bars, restaurants and travel agencies became pessimistic about the economic outlook in August, according to a new CBI survey this morning. It faces a shortage of workers to fill the jobs, adding to rising costs and operational difficulties following the lockdown.
Optimism about the overall business picture among consumer services companies fell to minus 17% this month, from a positive reading of 47% in May.
Consumer services companies have also reported record concerns about labor shortages – and after the strongest growth since February 2018, expectations for the next quarter are “rather grim,” according to the survey.
These consumer-focused companies also expect lower profits in the next quarter and – despite these labor shortages – many are forecasting downsizing in the next quarter.
The CBI also identifies a split in the service economy. Business and professional services companies are reporting strong volume growth and expect this to continue over the three months.
Charlotte Dendy, CBI Senior Economist, says:
“It is clear that the service sector performed well in the three months to August, revealing strong volume and profit growth in our latest survey as the economy reopened over the summer. . However, the outlook across sub-sectors is expected to diverge in the coming quarter, with a worsening outlook expected in consumer services.
“Companies in industries such as hospitality, foodservice and travel do not expect this strength to persist into the next quarter, reflecting the pressure that consumer service companies continue to face.
This tight labor market should, however, empower workers. As a Labor MP Claudia Webbe pointed out on Twitter – companies struggling to fill critical positions need to pay appropriately:
Manufacturers are also struggling – with UK auto production falling to its lowest July level since 1956. The current global shortage of semiconductor chips has hit auto companies, with workers also having to self-isolate due to COVID-19.
SMMT General Manager Mike Hawes warns component shortages will continue:
“While the impact of ‘pingemia’ will diminish as the rules for self-isolation change, the global semiconductor shortage shows little sign of abating,” he added.
UK automakers produced 53,400 vehicles in July, a drop of 37.6% from the same month in 2020. More here:
As we covered yesterday, business leaders are urging the government to relax post-Brexit migration rules to allow EU truck drivers to bridge the gap, or risk Christmas disruptions.
But ministers stand firm, saying companies need to train domestic drivers.
A spokesperson for the Interior Ministry said:
“The British people have voted repeatedly to end free movement and regain control of our immigration system. Employers should invest in our domestic workforce instead of depending on foreign labor. ”
The Office for National Statistics is releasing its latest real-time indicators on the UK economy today, which will show how businesses are doing.
We’re also getting an updated estimate of U.S. economic growth and the latest jobless claims numbers, which will help set the stage ahead of the Jackson Hole Economic Symposium this week.
- 9:30 a.m. BST: The latest business news from the ONS and its impact on the UK economy
- 1:30 p.m. BST: U.S. Second Quarter GDP Report (Second Estimate)
- 1:30 p.m. BST: US weekly unemployment figures