“The global economy is increasingly at risk of sliding into recession, surveys showed on Tuesday, as consumers faced with generation-high inflation rein in spending while central banks are tightening policy aggressively just when support is needed.
“And supply chains yet to recover from the coronavirus pandemic have been further damaged by Russia’s invasion of Ukraine and China’s strict COVID-19 lockdowns, hurting the manufacturing industry.
“A myriad of purchasing managers’ surveys published on Tuesday from Asia to Europe to the United States showed business activity contracting and pointed to little hope of a turnaround anytime soon.”
[Photo by Cas Oorthuys from the Dutch Hunger Winter, 1944 – the past the developed world allowed itself to believe it had left behind forever…]
“The world’s most powerful central bankers are jetting in for crisis talks as inflation spirals out of control.
“US Federal Reserve chief Jerome Powell and Bank of England Governor Andrew Bailey are among those due to attend the three-day event in Jackson Hole in the US. Top of the agenda will be how far to raise interest rates…”
“Record profits for grain firms amid food crisis prompt calls for windfall tax.
“Companies at the centre of the global grain trade have enjoyed a record bonanza amid soaring food prices around the world, raising concerns of profiteering and speculation in global food markets that could put staples beyond the reach of the poorest, and prompting calls for a windfall tax.”
“OPEC Nations Line Up Behind Saudi Call to Act [ie cut output] If Necessary…
“Within 48 hours of comments from Saudi Arabian Energy Minister Prince Abdulaziz bin Salman that OPEC might have to curtail production, fellow members Iraq, Algeria, Kuwait, Equatorial Guinea and Venezuela released statements expressing their support.”
“OPEC’s production cuts could push oil prices to $150 a barrel, energy analyst says… The cuts would worsen the energy supply shortage, which threatens many western nations as winter nears.
““The global supply picture is a mess. The Saudis themselves are telling you: there’s nothing left,” Sankey told CNBC, referring to the cartel’s warning it may lower oil production soon.”
[Picture of Ghawar, world’s largest oil field, being discovered in 1948.]
“Soaring electricity prices amid the global energy crunch have led to 20 million American households falling behind on their utility bills.
“According to the National Energy Assistance Directors Association, 20 million US households have fallen behind on their utility bills, creating the worst crisis the group has ever seen. And those past due payments have led some to getting their electricity shut off amid summer heat waves.”
“Texas Consumers On Hook For [at least] $10 Billion In Debt Incurred During Winter Storm Uri.
“During the storm, wide swaths of Texas were hit by blackouts. Prices for both electricity and natural gas soared during the crisis. Dozens of lawsuits have been filed against gas and electricity providers and against ERCOT, the state’s electric grid operator.”
“Fuel shortages may threaten [Irish] State’s capacity to ‘maintain societal function and civil order’.
“Officials fear that a long-lasting major disruption to fuel supplies would place the State’s capacity “to maintain societal function and civil order” at risk and would require the “curtailment of normal societal functions”.”
“Fears new CO2 crisis will lead to food shortages [UK] after closure of major production plant…
“CF Industries… which was offered a £30million state bailout last year, supplies roughly 40 per cent of the country’s CO2. The gas is used for everything from the humane slaughter of chickens and pigs, to putting the fizz in soft drinks and creating packaging that keeps foods fresh.”
“Finland Braces For Rolling Blackouts This Winter.
“In Finland’s case, Gazprom stopped in May all gas deliveries to Russia’s neighbor to the West, making Finland the third EU member state with Russian pipeline supply cut off after Poland and Bulgaria… Finland gets up to 70 percent of the gas it uses from Russia…”
https://oilprice.com/Energy/Energy-General/Finland-Braces-For-Rolling-Blackouts-This-Winter.html
“Germany approves energy-saving measures for winter.
“Starting from September, public buildings apart from institutions like hospitals, are to be heated to a maximum of 19C and the heating may be turned off completely in entrances, corridors and foyers. Public monuments and buildings will also not be lit up for aesthetic reasons and businesses could be banned from keeping their shops illuminated at night.”
https://www.bbc.co.uk/news/business-62659247
“Macron warns France of ‘the end of abundance’ and tough times ahead… [A curious thing for a leader to say. Is he talking about the short-term or is there a creeping acknowledgement in the halls of power that we are on a permanent downswing?]
“”I believe that we are in the process of living through a tipping point or great upheaval. Firstly because we are living through… what could seem like the end of abundance,” said Macron, 44. The speech appeared designed to prepare the country for… a difficult winter ahead…”
“Hedge funds build biggest bet against Italian debt since 2008…
“The rush by investors to wager against Italy comes as the country faces rising economic headwinds from the surge in European natural gas prices prompted by Russia’s supply cuts and a fraught political climate with elections looming in September.”
https://www.ft.com/content/5cef309f-9daf-4337-bdc6-f6b2ef8ffe02
“Analysis: ‘New shock’ for European markets as gas price spike fuels inflation fears.
“Another dramatic spike in natural gas prices appears to have ended any hopes that Europe’s inflation battle is set to ease, with financial markets now bracing for higher prices, a faster pace of interest rate hikes and a deeper economic downturn.”
“European Union energy ministers may hold an emergency meeting to discuss the spike in power markets as leaders strike a more urgent tone on the unfolding crisis…
“Europe is grappling with the worst energy crisis in decades, with spiking costs of gas and electricity driving inflation and threatening to drag economies into recession.”
“Next winter’s energy crisis will be even worse, warns forecaster…
“Chris Wheaton, managing director, suggested that European Union (EU) gas cuts are insufficient to balance the market, and that the troubled continent will have to compete with Asian economies for an increasingly limited supply of liquefied natural gas (LNG) next year.”
https://www.cityam.com/exclusive-next-winters-energy-crisis-will-be-even-worse-warns-forecaster/
“South Korea warns of action over won’s plunge.
“A senior South Korean official warned of action on Thursday if the won moved on speculative bets, local media reported… The won fell as low as 1,346.6 per dollar on Tuesday, hitting its weakest since late April 2009 and posting a 12% loss so far this year.”
https://financialpost.com/pmn/business-pmn/south-korea-warns-of-action-over-wons-plunge
“South Korea risks a major population crash as the country marks its second consecutive year with the world’s lowest fertility rate…
“Last year, South Korean Netflix series Squid Game took the world by storm… Its themes resonated worldwide, but particularly for young South Koreans, whose chances at moving up the country’s socioeconomic ladder have plummeted in recent years. Job competition has intensified, home prices have skyrocketed…”
“China tears down tower blocks in effort to boost stalling economy…
“Analysts have warned Beijing has adopted a “build, pause, demolish, repeat” strategy as Chinese officials seek to restrict supply to avoid a plunge in house prices and boost economic activity through more construction.”
“Yangtze part-closed to cargo while power outage hits Shanghai…
“The situation on the Yangtze, which is used for more than 3 billion tonnes of shipping annually, is very similar to what’s been happening on the Rhine in Germany. The river has, effectively, dried up without water flowing down to it from mountain areas and with extreme temperatures seen across China.”
“China’s Power Crisis Could Reach a Himalayan Scale. The drought triggering power cuts along the Yangtze heralds a far bigger problem that may doom hydro projects across much of Asia.
“Hydro power, however, has a unique ability to underperform for a whole season… The scale of backup needed to close that shortfall is immense. China has mined about half a billion tons more coal so far this year than it did at the same point in 2019.”
“Bangladesh: global economic crisis hammers south Asia’s export powerhouse.
“… now, along with most of its south Asian neighbours, the country of 160mn people is being rocked by soaring prices of energy and food following the Covid-19 pandemic and Russia’s invasion of Ukraine. These have led to energy shortages and rising import bills…”
https://www.ft.com/content/a9b8d051-a126-469c-b1ad-b0d29a8d53eb
“Sri Lanka bans import of chocolate, shampoo & 300 other items to cut losses [Nepal has done something similar]…
“Items such as chocolate, condensed milk, coconuts, perfumes, deodorants, shampoos, trunks, suitcases, and make-up products amongst myriad other things have been banned. Meanwhile, the import of electrical goods, ships and aircraft has been put on halt as well.”
“Soaring Gas Prices In Latin America Herald Widespread Food Crisis.
“Soaring gas prices have led to economic upheaval in Latin American countries, such as Argentina, Ecuador, and Panama, which are already suffering from high poverty rates and rocketing inflation. Protests are storming across these countries over the rising pump prices and the multiplying effect they have on the economy.”
https://theowp.org/soaring-gas-prices-in-latin-america-herald-widespread-food-crisis
“Covid and the Ukraine war are squeezing Africa’s power companies to death.
“…the pandemic and the war in Ukraine are making the situation worse, pushing many utilities in Africa—which have long been strapped for cash regardless—close to financial collapse, according to an Aug. 23 research paper by Energy for Growth Hub, a Washington think tank.”
https://qz.com/covid-and-the-ukraine-war-are-squeezing-africas-power-c-1849445100
“Hundreds of South Africans protested in the executive and legislative capitals of Pretoria and Cape Town on Wednesday, against inflation that has soared to a 13-year high.
“The protests were led by the trade union group Congress of South African Trade Unions (COSATU), a longtime ally of the governing African National Congress.”
“Ebola re-emerges in DR Congo as deadly anti-UN protests threaten efforts to curb outbreak…
“The news comes at a critical time for humanitarian responders in the war-torn east of the vast mineral-rich nation. Eastern DR Congo was wracked by deadly anti-UN protests earlier this month, which killed at least a dozen protestors and three blue helmets.”
“Regulators worry that hedge funds could spark the next financial crisis. “The riskiest loans are currently outside the banking system,” Christina Padgett, head of leveraged finance research at Moody’s Investors Service, told MarketWatch.”
…”“Our concern is that you find pockets of risk buildup that is outside the view of regulators and isn’t even observable by many market participants until it is too late,” said Mark Wasden, Padgett’s colleague at Moody’s.
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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