UK house price inflation at seven-year high; supply chain problems mount – as it happened

Graeme Wearden

from on 2021-06-07 16:47 (#5JR1Q)

Rolling coverage of the latest economic and financial news

Latest: Bank of England on stablecoin' regulation
UK House price growth fastest since 2014
Wales sees largest increase in house prices
Halifax: Prices could keep rising after stamp duty holiday ends

Earlier:

Introduction: China's export growth slowed in May
Experts blame chip shortage and Covid-19 outbreaks
Imports surge, partly due to rising commodity prices
German factory orders dipped in April

5.45pm BST

Time to wrap up, with a quick summary.

UK house prices are rising at their fastest rate in almost seven years, as the stamp duty holiday and pressure for more space drives the market. Halifax, which released the data, thinks prices could easily keep rising.

While it all sounds good, the road to implementation (of the tax deal) is full of rocks and potholes.

I would not react by becoming a seller in any of these names on this headline just yet."

5.07pm BST

European stock markets have closed at a fresh record high tonight.

The Stoxx 600 gained 0.2% to close at 453.56 points, as optimism for Europe's recovery from the pandemic continues to support shares.

5.04pm BST

Back on Wall Street, tech firms continue to shrug off the G7 tax deal. Amazon are just 0.4% lower, while Facebook has gained 1.5%.

Analysts are pointing out that the deal doesn't have global agreement yet, so could be diluted to get low-tax states onside [plus, a minimum corporation tax rate of 15% isn't desperately aggressive].

The details of the implementation are still to be ironed out and potentially further watered down."

4.52pm BST

Perhaps lulled into a stupor by the warm weather, London's stock market has ended a rather slow day with some very small gains.

The FTSE 100 index of blue-chip shares has closed eight points higher at 7077 points, up 0.12%.

Despite the rise in cases, hospitalisations have been broadly flat. The majority of people in hospital with Covid appear to be those who haven't had the vaccine at all.

4.04pm BST

Hipgnosis, the firm that offers investors the chance to make money from the royalties of songs by famous artists from Neil Young to Beyonce, has reported a jump in annual revenues of two-thirds thanks to a $1bn music catalogue buying spree and a boom in streaming during the pandemic.

The London-listed company, which earns royalties every time one of the 65,000 songs to which it owns the rights is played, said that revenues climbed 66% from $83m (59m) to $138m in the year to the end of March.

With all our catalogues chosen due to their extraordinary success and cultural importance, extra high levels of streaming demand are a natural feature."

3.43pm BST

Space expert Charles Fishman has written a very interesting Twitter thread about Jeff Bezos's trip on New Shepard next month, and how it could kickstart the space tourism industry:

What's the significance of Jeff Bezos going to space, on his own Blue Origin rocket, with his brother Mark?

Flight scheduled for Tue, July 20 - anniversary of the first Moon landing. Not a coincidence.

Bezos is the richest person in the world, and one of the most powerful.

2/ That launch of Blue Origin's New Shepard rocket & capsule was guaranteed to get a lot of attention - it is the first time Blue Origin is launching people, after 15 test flights.

But now?

Jeff Bezos as passenger / crew - in flight suit - guarantees wild, worldwide publicity.

3/ This is an 11 minute flight, just to the edge of space. Three minutes of weightlessness.

It's a pop-fly trajectory - arcing up & back down.

The first US crewed flight?

-> Alan Shepard, Mercury Freedom 7, May 5, 1961

Shepard got a 15-minute ride. 5 minutes weightless.

4/ So Bezos, his brother Mark, & the person who wins the auction for another seat (current top bid: $2.8 million! - money to charity) will get a little less of a ride than the very first US spaceflight.

But much more comfortable on New Shepard.

Great views compared to Shepard.

5/ Repeating this point:

Blue Origin has tested this rocket 15 times. They haven't been particularly forthcoming with technical data - but no obvious problems of any kind with rocket or capsule on those flights.

It's pretty darn safe.

6/ So Bezos-whose Blue Origin is going into the tourists-in-space business, to get the hang of flying people-will create an unbeatable worldwide sensation to promote that business, assuming he & Mark emerge after 15 minutes, grinning.

Still-a risk. To Amazon. To Blue Origin.

7/ And also to the Washington Post, which Bezos also owns.

If things go well, Bezos will have kicked off Blue Origin's 'human spaceflight' phase in a way no one else could have.

If possible, it might raise Bezos's worldwide profile.

8/ And, no matter what, Amazon and the Washington Post are fine. Deep leadership benches at both.

But the other - admittedly small risk - is, If there's a catastrophic problem, Blue Origin itself won't survive.

Bezos is the driving force of Blue, as he has been for Amazon.

9/ But nothing demonstrates confidence - swagger combined with safety - like, 'I own the rocket company. And I'm the first customer. That's how much I trust it.'

I spent 3 hours with Bezos at the Kent, WA, HQ of Blue Origin a couple years ago.https://t.co/G9ggR6wW7c

10/ Bezos is wicked smart-that's well known.

He's a graduate of my very own high school - Miami-Palmetto Senior High. And then Princeton University.

-->

11/ At one point in my interview, Bezos wandered over to a workbench of engine components, picked up a rocket turbopump, and plunged into a discussion of flow dynamics & turbulence across the surface of the turbine blades-and why they had the particular shape they had.

Bravura.

12/ Bezos has an engineering degree-but it's electrical engineering. Shorthand in the 80s for computer science & programming.

I've been writing about rocketry since the shuttle disaster in 1986. But Bezos had clearly made himself a deep, serious student of aerospace engineering.

13/ He knows what he's doing.

He will certainly have his own staff keyed up - but the first human flight of any new rocket has everyone on edge.

This is going to give the July 20 Blue Origin flight a real frisson of extra excitement.

14/ A reminder: Elon Musk hasn't gone to space himself, but he is far ahead of Bezos.

Musk routinely sends rockets to the International Space Station, 240 miles in orbit. Automated docking in orbit. Safe return.

And now multiple flights with astronauts in Crew Dragon-to ISS.

15/ In some ways, for ordinary people, the absolute routine operation of SpaceX-and Musk's on-Earth antics with twitter and cryptocurrency-obscure the genius & reliability of his rocket company.

SpaceX is a monumental achievement.

Blue Origin may turned out to be the same.

16/ Musk & SpaceX are rapidly becoming the United Airlines of space travel.

Bezos is swooping in-after 2 decades of slow, careful work-aiming to be the Southwest Airlines.

But this is a small step.

26% shorter than the flight of its namesake, Alan Shepard.

Small but splashy.

17/ CNBC anchor David Faber makes a great point:

Preparation & training for the Blue Origin flight July 20 require 3 days at Blue's W. Texas launch facility.

So if you're bidding to fly with Bezos (you need $2.81 million as of now) - you're also buying 3 days with Bezos.

18/ Bezos has said he aims, shortly, to be launching rockets once a week to space - first these up-and-down flights, eventually to orbit.

50 flights a year, just from Blue.

Right now, we're at ~ 100 launches a year for all purposes, all nations, worldwide.

19/ Musk and Bezos aim to change the economics of going to space completely.

If there's availability of flights, if the flights are frequent, scheduled, safe, and affordable - they both think the market will explode. Not really for tourists - for business.

A new space economy.

3.09pm BST

Speaking of tech firms....France's competition watchdog has fined Google 220m for abusing its market power in the online advertising industry.

The French Competition Authority said Google had unfairly sent business to its own services and discriminated against the competition.

The investigation found that Google gave preferential treatment to its DFP advertising server, which allows publishers of sites and applications to sell their advertising space, and its SSP AdX listing platform, which organizes auction processes and allows publishers to sell their impressions" or advertising inventory to advertisers. Google's rivals and publishers suffered as a result, the regulator said.

Isabelle de Silva, president of the French Competition Authority, said in a statement that the decision is the first in the world to look at the complex algorithmic auction processes by which online advertising display' operates."

France fines Google $267M for abusing 'dominant position' in online advertising. https://t.co/MHrmj1U2KX

Google used its vertically integrated business model in display advertising to gain an advantage over other competitors," said Isabelle de Silva, the president of France's Competition Authority, at a briefing on Monday.

This is the first investigation in the world that examines the display advertising space where Google is dominant, and the first time Google has agreed to a settlement with engagements. This case will be of interest to other regulators who are looking at the online ad market and technologies."

2.56pm BST

Shares in the US tech giants are pretty calm in early trading too, shrugging off the G7 tax deal agreed on Saturday.

Amazon are down 0.2% (as we report today, it might not even be caught by the new clampdown).

2.36pm BST

Wall Street has opened rather quietly, with the main indices little-changed in at the start of the new trading week:

US Opening Bell

Nasdaq Comp down 9.59 points, or 0.07%, at 13,804.90

S&P500 up 1.27 points, or 0.03%, at 4,231.16

Dow up 52.84 points, or 0.15%, at 34,809.23 pic.twitter.com/kzifpiKvT1

2.17pm BST

Bloomberg is reporting that De Beers has raised some rough-diamond prices by about 10% this week, after seeing strong demand from buyers.

The diamond industry roared back to life in the past six months, after stalling at the start of the pandemic last year. Cutting centers in India and Antwerp have been replenishing supplies after they'd been unable to buy during the worst of the crisis. At the same time, demand jumped amid surprisingly good festive sales.

That's created an opportunity for the biggest producers to rapidly escalate prices. De Beers has been increasing since the end of last year and was already back to pre-coronavirus levels. It sold more than $1.6 billion in rough gems in its first three sales of 2021, the most since 2018.

*DE BEERS RAISED DIAMOND PRICES AT SALE THIS WEEK, SOURCES SAY
*#DEBEERS RAISED SOME LARGER DIAMOND PRICES BY ABOUT 10%
(Bloomberg)#AngloAmerican pic.twitter.com/M5LadwaZwE

2.08pm BST

The jump in UK house prices is helping to drive consumer confidence into rosier territory....

...although not if you're priced out of buying a property, of course.

The growth is yet again driven by confidence in house value as property prices climb to a seven year high, but is also supplemented by huge increases in optimism for job security over the coming twelve months likely due to labour shortages.

With not a single metric decreasing this month, business activity for the past 30 days and outlook for household finances over the next 12 months are the only metrics to show little change. Despite this the metrics are still firmly in the positive showing more Britons are feeling confident than not."

1.17pm BST

1.04pm BST

Jeff Bezos is heading where no tech billionaire has gone before, with his brother alongside.

The Amazon.com founder, and his brother Mark, will both travel to the edge of space next month on the first human flight operated by his rocket company Blue Origin.

On July 20th, I will take that journey with my brother. The greatest adventure, with my best friend.

To see the earth from space it changes you - it changes your relationship with this planet, with humanity. It's one Earth.

Jeff Bezos, founder & CEO of @blueorigin, states in a post to his Instagram account that he will fly aboard the first #NewShepard crewed spaceflight mission along with his brother. The launch is targeting NET July 20. pic.twitter.com/FS0Hpen7up

Mark Bezos: "I wasn't even expecting him to say that he was going to be on the first flight ... What a remarkable opportunity, not only to have this adventure but to do it with my best friend."https://t.co/BGldFnPFn7 pic.twitter.com/S9NybHjQQZ

Here's a link to Jeff Bezos's Instagram post regarding the announcement today that he and his brother Mark will join the auction winner on New Shepard's first human flight on July 20th. https://t.co/2yfIEmTvv4

12.28pm BST

Lunchtime update: The London stock market is holding its gains, thanks to a strong performance by the housebuilders.

The FTSE 100 index is up 20 points, or 0.3%, at 7089 points, with Persimmon (+2.8%), Barratt Development (+2.3%) and Taylor Wimpey (+2%) among the top risers.

While miners are trading lower, housebuilders are boosting the index after a stronger-than-expected increase in house prices. The Halifax house price index recorded a 1.3% MoM rise, ahead of the 1.2% forecast.

12.07pm BST

Campaign group Positive Money have welcomed the Bank of England's statement that stablecoins should face closer regulation if they become widely used in the UK.

Simon Youel, head of policy & advocacy at Positive Money, says users need to be protected from the risks of private money, but would benefit from a BoE-backed digital currency.

With the decline of cash and emergence of private digital currencies, we urgently need a new form of public money in the form of a central bank digital currency, to ensure that we aren't surrendering the future of money to unaccountable private interests.

A central bank digital currency would open up access to our central bank to everyone, taking away the unique privileges enjoyed by private banks, and ending our reliance on them to manage our money and make payments."

'Stablecoins are only as stable as their reserves. Operator Tether has clarified that its reserves include less than 3 per cent in cash. Most is in commercial paper - although it is not clear who the issuers are.' https://t.co/bcM6XmFVwA pic.twitter.com/ot8fS8XiDQ

FT's coverage of Tether and its reserves"

I believe what is needed is global coordination for auditing all stablecoins irrespective of their jurisdiction.

The question is whether 100% of a stablecoin would be readily convertible to fiat currency upon demand.

June 3, p.16 pic.twitter.com/YYkDIFRHXp

11.37am BST

The Bank of England has launched a discussion paper examining the complex, but fascinating, question of central bank digital money and the wider issues surrounding digital currency.

And in it, the BoE says that stablecoins" (digital tokens pegged to a traditional currency, but issued by private firms) should be regulated like payments handled by banks if they start to become widely used.

New forms of digital money could be preferred by the public to commercial bank deposits, but they will endure only if they can be trusted as a store of value and as an accepted means of payment.

This means that stablecoins must promise, credibly and consistently, to be fully interchangeable with existing forms of money. In other words, they must be anchored. This is essential for ensuring that users have the same confidence in stablecoins as commercial bank money.

BoE: opportunities can only be realised if new forms of digital money are safe. They could be privately provided - in form of stablecoins'. Or they could be publicly provided - in the form of a central bank digital currency"..precautionary arrangements may therefore be needed"

new forms of digital money are assumed to be denominated in sterling. Unlike cryptoassets such as Bitcoin, which do not have an anchor, they are also assumed to be backed by assets that make them stable in value..."

stablecoins must promise, credibly and consistently, to be fully interchangeable with existing forms of money. In other words, they must be anchored. This is essential for ensuring that users have the same confidence in stablecoins as commercial bank money"

Bank of England say that stablecoins will lead to more credit coming from non bank sector, could increase cost of credit in banked sector, it may therefore have a transition period where it could limit migration" to new forms of digital money

Digital money could increase the speed of bank runs in a crisis too, BoE suggests.

To be used as money" stablecoins would need to abide by certain regulatory norms: legal claim, capital requirements, central bank support during stress, & a backstop to compensate depositors"

We live in an increasingly digitalised world where the way we make payments and use money is changing rapidly. The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues that central banks, governments, and society as a whole, need to carefully consider and address.

It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money."

11.08am BST

Serviced office provider IWG has already been battered by the pandemic, and the latest Covid-19 variants will mean more pain this year.

The company, formerly known as Regus, reported a 620m annual loss for 2020, when its finances were hit by social distancing rules and work from home orders resulted in empty offices.

The UK-listed company, which is headquartered in Switzerland, reported strong recovery in some markets including the US. However, occupancy levels across the whole group were lower than expected due to the prolonged impact of Covid-19, including continuing lockdown restrictions and the emergence of new variants of the virus in some markets".

10.52am BST

House prices are likely to continue rising for some time despite hitting a new record high in May, one of Britain's biggest mortgage lenders has said.

The monthly snapshot of the property market from Halifax showed a 1.3% jump in the cost of a home in May, taking the average selling price to a record 261,743 as homebuyers raced to complete purchases before the stamp duty holiday begins to run down at the end of this month.

10.26am BST

The average UK house price has jumped by more than 22,000 over the past 12 months, and by 3,000 in May alone, Halifax's data shows.

That puts the housing ladder further out of reach for many first-time buyers -- undermining the new 95% mortgage guarantee scheme launched this spring.

Cheap borrowing and affordability is giving buyers more purchase power, which is pushing up prices. Lenders remain keen to lend and have plenty of cash to do so, resulting in ever-lower mortgage rates from sub-1 per cent.

However, lenders aren't only targeting those with big deposits or similar levels of equity in their homes, with options also increasing for first-time buyers at 95 per cent loan-to-value and the first properties being sold under the government's First Homes initiative. This is just as well given that rising property prices are not good news for first-time buyers, and will make getting on the housing ladder even more of a struggle.'

10.12am BST

"Greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing" - Halifax isn't seeing an end to the stamp duty/WFH surge in UK house prices any time soon.....https://t.co/nMvHsA4MPy

9.56am BST

Here's Bloomberg's take on the UK housing boom:

U.K. house prices grew at their strongest pace in almost seven years as consumers unleashed pent-up savings to gain more space after coronavirus lockdowns, Halifax Building Society said.

Prices grew 1.3% in May, driving the annual pace of growth to 9.5%, the mortgage lender said in a statement on Monday. That put the average cost of a home at 261,743 ($369,895).

U.K. #House Prices Grew at Strongest in Seven Years, Halifax Says - Bloomberg
*Link: https://t.co/uKg4McsoKw pic.twitter.com/SWtTJWhB68

9.53am BST

Covid-19 travel restrictions might also keep house prices hot this summer, reckons Lucy Pendleton, property expert at independent estate agents James Pendleton.

The housing market usually takes a breather over the summer months, as some potential buyers head off on holiday.

The inability of Britons to go on holiday means there's no distraction now from executing that ambitious move to a larger home. We're entering a time of year when school holidays and foreign trips normally force the market to drop to a slightly slower pace.

That's not necessarily going to happen this year and sustained, strong demand over the next few months could have ramifications when the market cools in the autumn, delivering on paper what might look like a more rapid slow down.

House price growth in the capital is not exceptional as a whole, but it is still being powered by the same race for space that is driving the national market. Many buyers just can't get what they want within budget after a relatively strong decade of gains. Location has become less important and space more so.

9.39am BST

Instant Info - Halifax UK House Price Index pic.twitter.com/a3bAo06joB

9.31am BST

UK estate agents predict that the housing market might cool slightly after May's boom, as the stamp duty freeze is being reduced at the end of the month (from 500k to 250k).

Guy Gittins, CEO of Chestertons saw exceptional transaction volume" in May with three times more buyers than usual, and viewings running at a 5-year high for the past three months.

As the Stamp Duty Holiday threshold drops to 250,000 from 30 June to 30 September and then returns back to normal levels from 1 October, we predict new buyer registrations to slightly decrease."

May was a month of two halves. The first half was extremely busy as there was still a chance to purchase before the June Stamp Duty deadline. The second half of May and first week of June have been quieter, perhaps due to sunny weather, half term or everyone fleeing to Portugal. More likely, though, it is because there is no urgency as people have resigned themselves to missing the Stamp Duty deadline.

Buyers now appear to be waiting to see what happens to the market after the end of June, possibly in the hope that prices will start to fall. This is especially the case in the sub-800k bracket. It might take a few months to see how things pan out from July onwards. It will not be as simple as reducing asking prices, or indeed offers, by 15,000, as the Stamp Duty holiday was about sentiment as much as money and the fundamentals remain strong.

We notice too from connected chains that activity is even stronger in areas outside London where affordability is greater.

'Those who have little chance of making the stamp duty deadline are already considering ways of negotiating their way to completing transactions. We expect activity to settle but not drastically change in the next few months.'

9.19am BST

House prices reach another record high in May according to the @Halifax House Price Index as the race for outside and #WFH space joins forces with the #StampDutyHoliday stampede. Hold on to your hats for a busy June housing market pic.twitter.com/h9GUzkKTEt

9.13am BST

The UK housing boom is running particularly hot in Wales, and parts of the North of England.

Halifax's data shows that Wales has seen the biggest surge in house prices, with the average property costing 11.9% more than a year ago.

This likely reflects a weakness in city prices given the shift in preference for properties with more space, whilst recent surcharges on stamp duty for non-UK residents and Brexit concerns will also have weighed on the capital's market.

8.54am BST

UK house prices have risen to a new peak, as the stamp duty holiday and the stampede for larger houses following the pandemic continues to fuel the market.

Halifax reports that the average property now costs 261,743, with annual house price inflation at its strongest level in almost seven years (on its index).

Heading into the traditionally busy summer period, market activity continues to be boosted by the government's stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June's deadline, after which there will be a phased return to full rates. For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher.

Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles - as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing.

These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale."

8.42am BST

In London, mining stocks are under pressure following the slowdown in China's exports.

Commodities giant Anglo American (-2%), copper producer Antofagasta (-1.5%) and precious metal producer Fresnillo (-1.4%) are the top fallers.

The FTSE 100 is the only early riser as European equity markets opened the week broadly in the red as Chinese trade data maybe just weighed a touch with exports lower than forecast despite imports growing at the fastest clip in 10 years.

In London, housebuilders led gains while basic resources stocks fell. Asian shares were mixed, US futures are slightly weaker this morning. It's a light data docket today - all eyes on the inflation data from the US later in the week alongside the upcoming ECB meeting.

Friday's jobs report was something Goldilocks-like: not too cold to douse confidence in the economic recovery in the US, but also not so hot as to make the Fed take its feet off the gas too early....

Inflation remains squarely in focus and the largest potential source of investors angst and market volatility this week. April's CPI print jumped to 4.2%, the highest since 2008. The month-on-month increase in the core reading of 0.9% was the strongest since 1982. Given this, the monthly core reading will be the main focus as it will offer a guide on just how transitory or otherwise the pop in inflation is likely to be.

8.33am BST

European stock markets have begun the new week in the red.

The pan-European Stoxx 600 has dropped by 0.3%, away from last week's record high.

8.28am BST

The bad news for manufacturers, and consumers, is that the global shortage of semiconductors won't end soon.

A rapid rebound in vehicle sales combined with a lockdown-driven boom in games consoles, laptops and televisions has left the world's chipmakers overwhelmed by the sharp increase in demand.

Singapore-based Flex has more than 100 sites in 30 countries and manufactures devices and electronics for companies including Ford, British household appliances designer Dyson, UK online grocer Ocado and US computer and printer maker HP. Its position in the supply chain makes it a large buyer of chips.

Chip shortage to last until at least mid-2022, warns manufacturer https://t.co/pXfinSfNms

8.17am BST

The German factory orders report also shows that real turnover in manufacturing fell by 2.6% in April, compared with March.

German factory orders disappointed a little in April on the back of weak domestic & big-ticket orders, while the continued uptrend in foreign orders shows the underlying strength in global demand. 1/2 https://t.co/w7emnmZONr pic.twitter.com/NIe0oFdPnJ

But the reported plunge in turnover (-2.6% m/m) points to a large drop in tmr's industrial production data(Consensus: 0.7%; OE: -1.5%). Along with weak-ish trucking data in May, this implies that industry will struggle to add to Q2 GDP growth given all the supply bottlenecks. 2/2

8.03am BST

Big miss on German industrial orders -0.2% in April vs 1% expected. After revised 3.9% in March. Ongoing #COVID19 effect or demand starting to weaken?

8.03am BST

German factories have reported a drop in orders - another sign that supply shortages are causing ructions.

Manufacturing has been a stronghold in Europe's largest economy over the past months, benefiting from earlier recoveries in places such as China and the U.S.

Lately though, businesses have run into unprecedented supply-chain issues amid shortages of parts and raw materials.

German manufacturers unexpectedly see a drop in demand after mounting supply shortages. Orders fall 0.2% in April, compared to estimated 0.5% gain. April decline driven by weakness in demand from within the country. https://t.co/7EdYUS5zCK pic.twitter.com/Qern33WSlt

7.54am BST

Reuters also highlights how China's export growth may have been hit by disruption at some major ports:

Exports surprised a bit on the downside, maybe due to the COVID cases in Guangdong province which slowed down the turnover in Shenzhen and Guangzhou ports," said Zhiwei Zhang, chief economist at Pinpoint Asset Management, adding that turnover at ports in Guangdong will likely remain slow in June.

Major shipping companies warned clients of worsening congestion at Shenzhen's Yantian port in Guangdong province after the discovery of several cases among port staff.

7.46am BST

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

The global chip shortage, rising raw material costs and creaking supply chains are all weighing on the global economy as it tries to recover from the shock of the Covid-19 pandemic.

#Exports in dollar terms rose by 27.9 percent year on year in May to $263.9 billion, slower than the year-on-year growth of 32.3 percent seen in April, and missed the predictions of 32.1 percent by Reuters. #China pic.twitter.com/T5Gbh9vGCP

China's exports grew by 27.9 per cent in May compared with a year earlier, while imports grew by 51.1 per cent last month #China #china #Trade #trade #import #export #imports #exports pic.twitter.com/JSPexizLqa

The main reason for the shortfall is that all export items related to semiconductor chips have slowed.

Auto processing products and parts, the biggest export item, fell 4%YoY in terms of export value. This is most likely the result of the semiconductor chip shortage.

Since the end of May, there have been around 10 Covid cases daily in Guangdong, where most electronics factories are located.

Shipments from the port in Shenzhen that process most of the electronic throughput have been affected by Covid. Port workers now have to have Covid tests and port operations have been disrupted. Some factories in Guangdong were also affected by Covid, mostly caused by workers queuing up for testing.

Once again, supply constraints are partly to blame - inbound shipments of semiconductors continued to drop back.

So too did imports of industrial metals."

This could turn out to be a false hope unless they get the detail right."

European Opening Calls:#FTSE 7071 +0.02%#DAX 15663 -0.19%#CAC 6503 -0.19%#AEX 720 +0.03%#MIB 25553 -0.07%#IBEX 9077 -0.12%#OMX 2270 -0.04%#STOXX 4086 -0.09%#IGOpeningCall

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