Photo: Andy Rain / EPA
Good morning and welcome to our ongoing coverage of the global economy, financial markets, euro area and business.
The UK supply chain shortage continues to hold the economy under control as consumer-facing companies become increasingly concerned about the economic outlook as they struggle to find workers … and auto production collapses.
Businesses like bars, restaurants and travel companies have become pessimistic about the economic outlook in August, according to a new CBI poll this morning. It blames a shortage of manpower for filling jobs, leading to rising costs and operational difficulties after the lockdown.
Optimism about the general health of consumer service companies fell to minus 17% that month, from a positive 47% in May.
Consumer service providers also reported record concerns about labor shortages – and after the strongest growth since February 2018, the expectations for the next quarter are “rather bleak,” according to the survey.
These consumer-centric companies expect earnings to decline in the next quarter as well, and despite this labor shortage, many are anticipating downsizing in the next quarter.
The CBI also identifies a split within the service economy. Corporate and service companies are reporting strong volume growth and expect this to continue into the three months.
Charlotte Dendy, CBI Chief Economist says:
“It is clear that the service sector did well in the three months to August and showed strong volume and earnings growth in our latest survey as the economy reopened in the summer. However, the outlook across the subsectors will diverge in the coming quarter, with the outlook for consumer services expected to deteriorate.
“Companies in sectors such as hotels, restaurants and travel do not expect this strength to continue into the next quarter, reflecting the pressures consumer services companies continue to face.
🇬🇧 UK labor shortage is making consumer businesses grim, says CBI – Bloomberghttps: //t.co/HApfyun31A
August 26, 2021
However, this tight labor market should put more power in the hands of workers. As a Labor MP Claudia Webbe Advised on Twitter – Companies struggling to fill key positions must pay appropriately:
Claudia Webbe MP
Labor shortage? No.
August 25, 2021
Manufacturers are also struggling UK auto production fell to its July lowest level since 1956. The ongoing global shortage of semiconductor chips hit auto companies, with workers also having to self-isolate due to COVID-19.
SMMT CEO Mike Hawes warns the component shortage will continue:
“While the effects of the ‘pingdemic’ will subside with the change in self-isolation rules, the global shortage of semiconductors shows little sign of weakening,”
UK automakers produced 53,400 vehicles in July, a 37.6% decrease compared to the same month in 2020. More here:
As we discussed yesterday, business leaders are calling on the government to relax post-Brexit migration rules so EU truckers can fill the gap or risk Christmas disruptions.
Ministers stand firm, however, arguing that companies need to train local drivers.
A Home Office spokesman said:
“The British people have repeatedly voted to end free movement and take back control of our immigration system. Employers should invest in our local workforce rather than relying on foreign workers. ”
The Office for National Statistics released its latest real-time indicators on the UK economy today, showing how businesses are doing.
We’ll also get an updated U.S. economic growth estimate and the latest unemployment claims figures that will help set the stage for this week’s Jackson Hole Business Symposium.
- 9.30am BST: ONS’s Latest Business Insights and Impact on UK Economic Report
- 1:30 p.m. BST: U.S. Q2 GDP Report (Second Estimate)
- 1:30 p.m. BST: US weekly unemployment figures