- Water levels in the Rhine threaten German industry
- China cuts medium-term lending rate
- UK property prices takes a dip in August
- Companies updates from Aramco, Treatt, Rio Tinto, etc
As if the energy crisis wasn’t enough, over the past week it has emerged that water levels in the Rhine, one of Europe’s principal commercial arteries, have reached critically low levels. At Kaub in the Rhein-Lahn-Kreis district, levels have fallen to around a third of the long-term average, imperilling major commercial links between Rotterdam and Antwerp to Germany's industrial heartland and landlocked Switzerland, leading to fears over bulk chemical and cuckoo clock shortages.
And if you can’t get coal barges through to power plants beyond the various choke points in the river, it will place further strain on Germany’s huge manufacturing sector, already feeling the pinch through faltering Russian gas supplies. The uncommonly dry spell has also thrown a spanner in the works regarding European Union plans to increase the movement of goods along waterways by 50 per cent over the next 30-years – “the best laid plans of mice and men...”
China cuts medium-term lending rate as economy sags
Cold comfort in news that the UK’s gross domestic product shrank by 0.1 per cent in the second quarter, a modest decline on top of the 0.8 per cent growth rate in the previous quarter and better than consensus expectations.
However, any measure of relief, or at least the desire to suspend worries momentarily, would have been quashed by disappointing economic news from China overnight. Retail sales remain uninspiring, while fixed asset investment and industrial output came up short of expectations. Analysts had anticipated a rather more vigorous and sustained bounce-back once more of the regional lockdown provisions had been pulled, but they were instead short-lived and somewhat anaemic.
So, the People’s Bank of China duly cut the medium-term lending rate, covering one-year loans to the banking system, by 10 basis points to 2.75 per cent, the first cut since January. It’s difficult to gauge the extent to which the country’s ill-advised zero-Covid policies are still weighing on factory output and consumer sentiment, but it would be rather more worrying if the country’s beleaguered property market was at the heart of its problems. After all, you can always learn to live with Covid-19, although you get the impression that the CCP is rather more interested in keeping a tight rein on the populace.
Beijing has signalled its willingness to intervene in the market as and when necessary, but given the size of China’s property market, an estimated £1.97 trillion, it would be fanciful to suggest that China’s central bank would be able to prop it up indefinitely, especially as increased liquidity only adds to inflationary pressures. Unfortunately, reports indicate that the populace is becoming increasingly frustrated by central government policy and Communist Party officials fear civil unrest above all else.
UK property prices on their summer break
At least the UK property market doesn’t seem as scatty by comparison. Online property aggregator Rightmove (RMV) reveals that the average price of a UK property dropped to £365,173 in August, marking a 1.3 per cent decline. However, the dip is broadly in line with summer price trends over the past decade, as UK residents decamp for their seasonal breaks and activity slows down temporarily.
Therefore, we should witness a step-up in activity from midway through September when holiday numbers decrease. Despite the recent increases, the UK base rate is still well below its long-term average. However, the fact that mortgage approvals have fallen steadily through 2022 points to tightened lending criteria and perhaps a growing realisation that the ratio of average house prices to median wages was unduly elevated, particularly now that inflation is eating into real wage growth. We are likely to see a more profound impact on the market if the fear of unemployment takes root through the economy.
