Blackfinch Spring VCT PLC has provided a market update, summarizing global events. In the UK, the government's net borrowing in July was reported at £4.3 billion, lower than economists' forecast of £5 billion. However, rising interest rates have increased borrowing costs for the government, resulting in the highest amount paid to cover interest bills since records began in 1997. UK retail sales volumes fell in August at the fastest level since the COVID-19 lockdowns in March 2021, with 44% of retailers reporting a sales decline. The UK composite Purchasing Managers' Index (PMI) dropped to 47.9 in August, indicating an unexpected contraction in business activity.
In North America, markets were uneasy ahead of the economic summit in Jackson Hole, Wyoming, but became calmer after US Federal Reserve Chair Jerome Powell's speech. Powell stated that the Fed was "prepared to raise rates further," aligning with market expectations. The University of Michigan's measure of consumer confidence fell in August, influenced by the recent rise in fuel prices, but sentiment was anchored by a strong labor market and easing inflation. Durable goods orders in the US plummeted 5.2% in July, primarily due to lower transportation orders.
In Europe, private sector activity across the Eurozone dropped to its lowest level since November 2020, with the composite PMI falling to 47.0 in August. Germany experienced the largest decline in business activity since May 2020, indicating pessimism among businesses regarding the impact of rising interest rates and inflation on demand for goods and services.
Overall, the market update provides a snapshot of the current economic conditions in the UK, North America, and Europe, highlighting key indicators such as government borrowing, retail sales, PMI, consumer confidence, and durable goods orders.