- U.K. Economy Can’t Count on Consumer Momentum as Shoppers Flag
U.K. consumers are flagging, stripping the economy of its most consistent and important support over the past two years.
From a slowdown in spending growth to switching to cheaper brands to save money, the impact of faster inflation on households is clear to see. According to separate reports on Thursday, annual growth in retail sales the quarter through July dropped to 1.8 percent, the weakest in almost four years, while households are ramping up efforts to save money at the supermarket.
The weakness is a response to inflationary impact of the pound’s decline after Britain voted to leave the European Union. Prices are now rising faster than average wages, and real incomes fell 0.5 percent in the second quarter, eroding workers’ spending power. Even with unemployment at a four-decade low, the inflation squeeze and concern about Brexit mean consumer confidence has weakened this year.
“Consumers are watching and waiting for inflation to subside and for the post-Brexit situation to become clearer,” said Andrew Sentance, a former Bank of England policy maker who’s now an economic adviser at PwC. “Until there is some relief on these two key issues, subdued growth of retail sales looks set to continue through this year and into 2018.”
The Office for National Statistics said Thursday retail sales rose 0.3 percent in July, with the better-than-forecast reading due to a surge in food sales. That news was tempered by almost every other category posting a decline, and a downward revision to June data.
Separately, a Nielsen survey published Thursday showed shoppers have increased cost-cutting efforts to the highest proportion in two years. That tallies with BOE Governor Mark Carney’s comments earlier this month that consumers are in the “teeth” of a squeeze on their pockets, which they’re going to have to ride out for the rest of the year.
The tepid consumer performance is being felt by many of the stalwarts of the British high street. Kingfisher Plc, the owner of B&Q home-improvement stores, reported a third straight drop in quarterly sales on Thursday, citing the U.K. as the main source of disappointment. John Lewis Partnership Plc, which owns the Waitrose supermarket chain as well as department stores, has seen sales growth slow so far this year.
While the strain on household budgets is likely to continue for some months, it may not worsen. Inflation held at 2.6 percent in July and economists expect its peak at the end of the year to be a little lower than previously expected. The economy has felt the damage already, however, with growth this year and next forecast to slow, according to a Bloomberg survey published this week.
“The worst is probably over for the British consumer,” Dan Hanson and Jamie Murray, economists at Bloomberg Intelligence, wrote in a note on Thursday. “Rising inflation made for a torrid start to 2017, but the shock is already fading. While things are looking brighter for households, uncertainty is likely to mean companies remain cautious.”
South Africa’s iGas, PetroSA and Strategic Fuel Fund Merge to Create South African National Petroleum Company
The South African Department of Mineral Resources and Energy (DMRE) has announced the merger of Central Energy Fund (CEF) subsidiaries iGas, PetroSA and the Strategic Fuel Fund (SFF).
The merger will be effective from 1 April 2021 and the new company will be called the South African National Petroleum Company.
The merger, driven by the pursuit of implementing a new company that has a streamlined operating model via the development of a shared services system and a common information platform, comes a few months after cabinet approval and the confirmation that PetroSA had incurred losses of R20 billion since 2014.
Additional factors which prompted the move included the determination to strengthen PetroSA which had not had a permanent CEO in five years prior to the appointment of CEO Ishmael Poolo last and, had become majorly ungainful since its failure to secure gas for the gas-to-liquids refinery project in Mossel Bay.
While the merger deadline has been set, the portfolio committee expressed reservations to the department’s likelihood of meeting the deadline, considering the existing legislative regime, pending issues raised in the SFF and PetroSA forensic reports, as well as PetroSA’s current insolvency and liquidity challenges, the official press statement on the briefing revealed.
“South Africa’s energy sector is entering a new dawn,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With gas discoveries off the coast and the announcement of the REIPPP programme bid window 5 and 6 on the horizon, now is the most opportune time for the merger of the CEF subsidiaries. Of course, it is not an easy task and delays may be anticipated but, this move signals a real change towards a meaningful strategy that will not only be beneficial to the DMRE but to potential investors and local development as well.”
The African Energy Chamber welcomes this move and acknowledges that this is yet another step supporting the country’s determination to restarting the engines of sustainable growth and the transformation of energy policy and infrastructure.
Crude Oil Hits $71.34 After Saudi Largest Oil Facilities Were Attacked
Brent Crude Oil Rises to $71.34 Following Missile Attack on Saudi Largest Oil Facilities
Brent crude, against which Nigerian oil is priced, jumped to $71.34 a barrel on Monday during the Asian trading session following a report that Saudi Arabia’s largest oil facilities were attacked by missiles and drones fired on Sunday by Houthi military in Yemen.
On Monday, the Saudi energy ministry said one of the world’s largest offshore oil loading facilities at Ras Tanura was attacked and a ballistic missile targeted Saudi Aramco facilities.
“One of the petroleum tank areas at the Ras Tanura Port in the Eastern Region, one of the largest oil ports in the world, was attacked this morning by a drone, coming from the sea,” the ministry said in a statement released by the official Saudi Press Agency.
It also stated that shrapnel from a ballistic missile dropped near Aramco’s residential compound in Eastern Dhahran.
“Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” a ministry spokesman said in a statement on state media.
Oil price surged because the market interpreted the occurrence as supply sabotage given Saudi is the largest OPEC producer. A decline in supply is positive for the oil industry.
However, Brent crude oil pulled back to $69.49 per barrel at 12:34 pm Nigerian time because of the $1.9 trillion stimulus packed passed in the U.S.
Market experts are projecting that the stimulus will boost the United States economy and support U.S crude oil producers in the near-term, this they expect to boost crude oil production from share and disrupt OPEC strategy.
A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site
Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site
Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.
Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.
A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.
One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.
However, Saudi authorities are yet to confirm or respond to the story.
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