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Today’s top stories
China’s leaders vowed to spur consumer spending, tackle unemployment and give more support to the ailing property sector as the world’s second-largest economy makes a “tortuous” recovery from the pandemic. However, promises of more stimulus in the second half of the year were light on details.
Spain was plunged into political uncertainty as the right and left failed to get enough votes to form a government after Sunday’s general election. Conservative mistakes helped incumbent prime minister Pedro Sánchez, who had warned that conservatives and rightwing nationalists would drag the country backwards. The FT editorial board said the poor result for hard-right Vox was positive for the country’s democracy.
Twitter boss Elon Musk rebranded the social media platform as X and dispensed with its famous bird logo. The FT Lex column said rebranding generally annoyed and confused customers but as new names go, X was better than most.
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New data today highlighted the growing strains on the global economy as central banks contemplate their next move on interest rates to contain inflation.
The flash estimate for the eurozone indicated that the economic downturn deepened at the start of the third quarter, fuelling calls for the European Central Bank to halt its programme of interest rate rises after this week.
The purchasing managers’ index score of 48.9, where 50 marks the divide between business activity expanding and shrinking, was an eight-month low, driven by worse than forecast declines in both manufacturing and services, which recorded its first fall in new orders for seven months. Business confidence also dropped but inflationary pressures eased. The euro fell following release of the data.
Country-level information showed the German economy shrinking as the manufacturing outlook darkened, coinciding with a slowdown in services activity. France experienced its sharpest contraction in business activity since November 2020.
In the UK, the PMI data showed a determined slowdown in business growth as rising interest rates hit consumer spending and manufacturing problems deepened. The headline PMI score fell from 52.8 in June to 50.7 in July, while services output hit a six-month low of 51.3 and manufacturing fell into contraction with a reading of 46.5. The data drove the pound to a two-week low against the dollar.
Chris Williamson, chief business economist at S&P Global Market Intelligence, which publishes the index with the Chartered Institute of Procurement and Supply, said the data showed the UK economy had “come close to stalling”. Rising interest rates and the higher cost of living “appear to be taking an increased toll on households” as manufacturers cut production in response to a “worryingly severe downturn in orders” in both domestic and export markets, Williamson said.
The PMI reading complicates the task for Bank of England officials contemplating their next move on interest rates next week after recent official data had suggested stronger than expected economic resilience.
In the US, the headline PMI score of 52.0 showed business activity still rising but down on last month’s reading of 53.2. The services sector continued to drive growth but at a slower rate. Business optimism about the year ahead also fell.
Williamson said: “The darkening picture adds downside risks to output growth in the coming months, which, alongside the slowing in the pace of expansion in July, will keep alive fear that the US economy may yet succumb to another downturn before the year is out.”
The Federal Reserve is widely expected to raise interest rates by another quarter of a percentage point on Wednesday but investors will be watching for clues from chair Jay Powell as to whether the rise would be the last in its 16-month monetary policy tightening campaign.
Need to know: UK and Europe economy
UK prime minister Rishi Sunak indicated he was ready to soften his Tory party’s green policies to create a dividing line with the opposition Labour party. An FT Big Read examines how warming temperatures are reshaping global economies.
Airlines and travel operators put on special flights for tourists stranded by wildfires on the Greek island of Rhodes, while blazes also spread on Corfu. Travel industry executives, however, played down the long-term impact of the fires and extreme weather in Europe this summer. Workers at London Gatwick airport have called off some of their strikes.
Germany has become Europe’s ground zero for gangs blowing up cash machines. The Dutch-dominated groups have exploited a fragmented banking system and decentralised police force — and Germans’ preference for cash over cards or digital payments.
UK care home operators are under severe pressure from rising mortgage rates on top of rising food and fuel prices and funding shortfalls.
Need to know: global economy
China is stepping up efforts to soothe foreign investors’ concerns over slowing growth and business uncertainty. Its finance regulator has been trying to entice some of the world’s biggest private equity groups while its commerce ministry has pledged to cut business disruption. Work is drying up for US consultancies in the country after recent national security raids.
The lack of detailed explanations of revisions to Chinese economic data is also frustrating global investors at a time when the country’s revival is seen as vital to global economic growth.
Israel’s benchmark stock index sold off and the shekel fell against the US dollar after the country’s parliament passed into law a measure limiting the power of the Supreme Court. Some of Israel’s biggest businesses said they would begin strike action in protest.
Argentina is set to introduce tax and currency measures to weaken the peso as part of a deal with the IMF to release delayed tranches of a $44bn loan programme. The government hopes the opening of a long-awaited gas pipeline from Patagonia to Buenos Aires will herald a lucrative future for international energy sales.
Rich Americans have been driving a rebound in consumer spending, in particular on hotels and airfares, but inflation is beginning to take its toll on a previously resilient group.
Need to know: business
Barbie and Oppenheimer delivered the strongest opening weekend at US cinema box offices this year as fans rushed to experience the “Barbenheimer” phenomenon. Columnist Rana Foroohar says the Barbie brand is a rare winner in the country’s corporate culture wars.
Ryanair’s profits almost quadrupled to €663mn in the second quarter, lifted by higher ticket prices and booming demand. The low-cost airline was forced, however, to trim passenger forecasts because of Boeing delivery delays and warned of an uncertain winter ahead.
Group 14, a US battery start-up, aims to start producing silicon in Germany as motor industry demand grows for technologies less reliant on China.
British berry growers accused supermarkets of pocketing the profits of higher soft fruit prices and failing to properly compensate producers suffering from increased business costs.
UK banks are beating global rivals when it comes to passing on interest rate benefits to savers. Ministers are set to introduce new rules to stop institutions “de-banking” after a dispute about free speech.
The world of work
Are tattoos now so thoroughly mainstream that even the most buttoned-up employers no longer police them? Columnist Pilita Clark says it’s clear there has been a tats turning point at work.
Some good news
Sydney, once at the centre of the Australian Aids epidemic, has almost eliminated HIV transmission, raising hopes of beating a disease that has killed more than 40mn people worldwide. The fall in diagnoses is on a scale never seen before in a former hotspot and adds to evidence that prevention strategies are working.
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