Time to wrap up....here are today’s main stories:

Have a lovely weekend! We’ll be back on Monday. GW

Over in the US, prices at the factory gate and those charged by services firms continued to rise last month, as supply chain disruption kept pushing up costs.

The Producer Price Index for final demand (which measures what producers charged for their goods and services) increased by 0.7% in August, ahead of forecasts.

That’s a slowdown on July and June, when prices rose 1% each month.

Services prices rose 0.7% in the month, while goods were up 1%.

On an annual basis, producer prices jumped by 8.3% over the 12 months to August, the biggest rise since the survey began in November 2010.

That’s an illustration that inflationary pressures remain strong in the US economy (where consumer price inflation is a 13-year high).

Core PPI (stripping out food and energy) jumped 0.6% during August, and was 6.7% higher than a year ago.

Britain’s trade with the EU fell sharply in July, with Brexit and the global pandemic driving exports £1.7bn lower than in July 2018 and imports falling by £3bn, according to official data.

The Office for National Statistics (ONS) said the fall was largely driven by declines in medicinal and pharmaceutical products, which have been particularly hit by the need for separate regulatory approval post Brexit.

Experts said the latest ONS figures could be a sign that the UK is losing its overall competitiveness.

Compared with 2018, which the ONS describes as the most recent “stable” period in UK trade, the change in trading levels is stark.

In July, total exports of goods, excluding precious metals, fell by £300m because of a £900m (6.5%) fall in exports to the EU, the ONS said.

At the same time, exports to non-EU countries increased by £700m, not enough to compensate for the overall fall....

More here:

Economic thinktank NIESR predicts that UK growth will have picked up in August and September, after rather fizzling out in July.

They forecast growth of 0.7% in August, thanks to the domestic tourism and hospitality industries.

And this month, growth is seen picking up to 0.8%, with the return of many office workers, particularly in London, boosting both the transport and hospitality sectors.

That would give growth of 1.6% in the third quarter overall, much lower than the 4.8% seen in April-June.

Rory Macqueen, Principal Economist - Macroeconomic Modelling and Forecasting, said:

“GDP growth of under 0.1 per cent in July would have been negative had it not been for the reopening of an oil field previously closed for temporary maintenance.

There was also relatively good news for the arts and recreation sector, thanks to the lifting of restrictions on 19th July, but clearly the boost to GDP from reopening had slowed by the summer.

The Delta variant and supply issues – some but not all of which are linked to Covid-19 – have also provided headwinds to growth in the third quarter but there remains potential for ‘catch-up’ in transport, hospitality and arts, which remained between 7 and 19 per cent below their February 2020 levels.”

Global supply chains have already been shaken by Covid-19, and the Suez canal blockage this year.

Now, a typhoon is threatening further disruption, possibly jolting the pre-Christmas shipping rush.

Bloomberg explains:

Two of China’s main ports are preparing for the arrival of Typhoon Chanthu, which was dumping heavy rain on the north of the Philippines Friday as it headed toward Taiwan and the Chinese coast.

China’s Maritime Safety Administration has issued a warning for Fujian province, where Xiamen Port is located, asking ships to adjust navigation plans and leave typhoon-affected waters. The Ningbo Maritime Safety Administration, which covers Ningbo-Zhoushan Port, said Thursday it had started a level-four emergency response.

Taiwan’s weather bureau issued a sea warning Friday for the area south of the island. However the port of Kaohsiung port is operating normally, a port spokesman said Friday afternoon when contacted by phone.

Ports in Asia have emerged as one of the bottlenecks for global trade, as European and U.S. demand for goods overwhelms the capacity of docks and ships. Covid has also affected the ability of shipping companies to operate smoothly, with crews being stricken and China closing two separate ports in recent months after outbreaks among dock workers.

Any shutdown due to weather, even a temporary one, would likely further slow supply chains which are already stretched as exporters attempt to ship more ahead of the holiday season.

The latest trade data shows that UK exports to the European Union fell in July.

The ONS reports that total exports of goods, excluding precious metals, fell by around £300m in July 2021 because of a £900m (6.5%) fall in exports to the EU.

That was due to weaker sales of medicinal and pharmaceutical products, including a drop in Covid-19 vaccination components to Belgium.

The ONS says labour shortages may be a factor:

Growing numbers of people were asked by the NHS Test and Trace app to self-isolate in July which led to staff shortages across all industries.

Self-isolation, coupled with loss of EU drivers in the workforce after Brexit, has caused a significant shortage of HGV drivers potentially attributing to falling exports.

This drop in EU exports more than wiped out an increase in exports to non-EU countries, thanks to stronger demand for UK-made machinery and transport equipment, and fuel.

UK imports (again, stripping out precious metals) dipped by £100m -- entirely due to fall in imports from EU countries -- mainly ‘miscellaneous’ items like clothing and footwear, machinery, transport equipment, and food and live animals

James Sproule, Chief Economist of Handelsbanken in the UK, says:

There has been growing evidence that UK exports have not been doing as well as might have been hoped in joining the upswing in global trade. This is undoubtedly in part a longer term Brexit effect, in part an indication that trade deals, whilst welcome, do not mean trade automatically flows as a result.”

The British Chambers of Commerce is also concerned -- pointing out that trade between the UK and the European Union is weaker than three years ago (before Brexit or the pandemic disrupted trade patterns).

The BCC’s head of trade Policy William Bain said:

“Exports to the EU fell in July, largely driven by falls in medicinal and pharmaceutical sales. Although there was evidence of an increase in exports to the EU in the second quarter of the year compared with the first, the most striking comparisons are with three years ago, before pandemic and Brexit factors took hold.

“This provides a less favourable comparison, with EU imports £3bn lower and exports to the EU £1.7bn lower in July 2021 than in July 2018.

“The data also points to the effects labour shortages, particularly among HGV drivers, are having on exports. We will be keeping a close eye on the next set of data, in October, to assess the impact this is having on food imports.

“Overall, the figures remain concerning. Taken in conjunction with German trade data from earlier this week, the UK is clearly doing less trade with the EU than 3 years ago. SMEs and other businesses will want to see steps being taken by the UK Government and the EU to help improve this situation in the coming months.”

Britain’s economic recovery from the winter lockdown virtually stalled in July despite the removal of most pandemic restrictions, amid a fall in retail sales and the impact of ‘pingdemic’ shortages in the workforce.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by only 0.1% in July from a month earlier, as the government’s end to most restrictions in England failed to offset the fallout from the coronavirus Delta variant.

It was lower than the 0.6% growth forecast by City economists, and a sharp slowdown compared with June when the economy grew by 1%.

Service sector activity, which accounts for 80% of the economy, recorded no growth overall on the month, as the return of music festivals and sport was outweighed by a sharp drop in high street spending and a decline in the legal sector linked to the end of the stamp duty holiday.

Rising costs and shortages of raw materials triggered a fall in the construction sector, while manufacturing remained broadly flat as firms struggled to fill staff vacancies in July amid a lack of suitable applicants and a reduced number of EU workers.

The figures come as business leaders sound the alarm over the economic recovery as shortages of workers and materials fuels the worst supply chain meltdown since the 1970s, threatening to delay the UK’s economic recovery from Covid-19.

Here’s the full story:

Bridget Phillipson MP, Labour’s Shadow Chief Secretary to the Treasury, says the government is complacent about the UK’s economic recovery.

She warns that the imminent £20-per-week cut to universal credit payments will hurt consumer spending, and that increasing national insurance contributions to raise £12bn for the NHS and social care will be a tax on jobs.

“People are working incredibly hard to build the recovery but Conservative complacency is holding our country back. The concerning figures today show that just as the UK economy ought to be getting back to normal, disruption to supply chains and other shortages mean our recovery is hitting the brakes.

“The Government has no plan, other than to plough ahead with a tax on jobs as well as a devastating cut to Universal Credit, taking money out of our high streets just when it is needed most.

“Labour believes we must take the chance to make our economy more secure through our plan to Buy, Make and Sell more here in the UK. The Conservatives are simply not ambitious enough about the future of our economic recovery.”

Despite growth slowing to a near-standstill in July, chancellor of the exchequer, Rishi Sunak, insists the recovery is “well underway”:

“Our recovery is well underway thanks to the success of the vaccination rollout and the roadmap, with more employees on payrolls that at any point since last March.

“I am confident that – supported by our Plan for Jobs – we’ll continue to recover from the pandemic, we’ll see more new jobs, and we will Build Back Better.”

Reaction to the UK’s worrying economic slowdown is pouring in - and it is not a cheery picture.

Paul Dales of Capital Economics says the recovery has stalled, as rising cases of Covid-19 and shortages of supply and labour hit growth.

More timely evidence suggests August may not have been much better, he warns.

For the first time since February, services output didn’t rise and instead stagnated with a 0.0% change in July. Not all of this is due to increased consumer caution due to the recent rise in virus cases – arts & entertainment output rose by 9.0% m/m as the easing of COVID-19 restrictions on 19^th July meant people flooded back to sports events, theme parks and festivals.

But accommodation & food output rose by only 1.1% m/m and we already knew that retail sales fell by 2.5% m/m.

Shortages are probably also to blame, Dales adds:

Admittedly, industrial production rose by a decent 1.2% m/m. But that was mainly due to a 21.9% m/m leap in mining output due to the reopening of an oil field that was previously closed for maintenance. Without that, there was no change in manufacturing output at all. The 11.4% m/m rise in car production, however, does suggest that the drag on output from the semiconductor shortage may be starting to ease.

There’s no such glimmer of hope for construction, where the 1.6% m/m fall in output in July was the largest of four falls in four months. Part of that is surely due to shortages.

And with growth slowing, and inflation expected to rise sharply, there is “a whiff of stagflation in the air” he adds.

Britain’s services sector, which makes up roughly three quarters of the economy, failed to grow at all in July.

That’s mainly due to a 2.5% fall in retail trade, the ONS says, which was only partially offset by a 72.5% growth in travel agency, tour operator and other related reservation services

Manufacturing also failed to grow during the month, with the ONS pointing to staff shortages (partly due to self-isolation) as one factor:

The manufacturing sector remained broadly flat in July 2021, after five consecutive months of growth, with anecdotal evidence from businesses responding to the Monthly Business Survey suggesting staff shortages (including COVID-19 self-isolation requirements) as a challenge to production.

Industrial output grew by 1.2%, boosted by the return to production of an oil field which had been temporarily closed for planned maintenance.

And construction output fell by 1.6%, with firms reporting delays in the availability and sourcing of construction products (notably steel, concrete, timber and glass).

Growth in July was the weakest since January (when GDP fell as the UK economy was in lockdown).

It suggests that the sharp increase in Covid-19 cases, as the Delta variant of the coronavirus spread, had a sharp impact on growth during July.

The UK economy has now expanded for six months in a row, as pandemic restrictions have been eased.

BREAKING! UK economic growth came to a near-standstill in July, as supply chain problems and the pingdemic hit activity.

GDP rose by only 0.1% in the month, much weaker than expected, the Office for National Statistics reports, and a sharp slowdown on June’s 1% growth.

That leaves the UK economy still 2.1% below its pre-coronavirus pandemic level in February 2020, and will fuel concerns that the recovery is faltering.

Growth slowed sharply during the month, in which firms reported staff shortages as some employees were forced to self-isolate.

Companies also faced supply chain disruption, from the shortage of lorry drivers to ongoing problems obtaining raw materials and components such as computer chips.

The ONS reports that:

• Production output increased by 1.2% in July 2021 and was the main contributor to GDP growth; boosted by the reopening of an oil field production site, which was previously temporarily closed for planned maintenance.
• Construction contracted for a fourth consecutive month, with output down by 1.6% in July 2021, and is now 1.8% below its pre-pandemic level (February 2020).
• Services output remained broadly flat in July 2021, and remains 2.1% below its pre-pandemic level (February 2020).
• Arts, entertainment and recreation activities grew by 9.0%, boosted by sports clubs, amusement parks and festivals, and reflecting the easing of restrictions on social distancing from 19 July 2021.
• Output in consumer-facing services fell by 0.3% in July 2021, its first fall since January 2021 mainly because of a 2.5% fall in retail sales.

More to follow.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we learn how the UK economy fared in July as Covid-19 infections rose, and the burst of activity following the easing of lockdown restrictions faded.

And the latest GDP report, due at 7am, could show the economy cooling -- as labour shortages and ongoing disruption caused by the pandemic weigh on companies.

Growth is expected to have slowed to around +0.6%, following the more rapid 1% expansion in June when hospitality firms were seeing strong demand.

As Alvin Tan of RBC Capital Markets explains:

The major gains from the UK economy’s reopening have been realised.

Growth is likely to continue to ‘normalise’ through Q3, though for the quarter as a whole we still look for GDP growth of 2.7% q/q beginning with a 0.6% m/m expansion in the July monthly GDP.

A major uncertainty over the near-term outlook is what constraints raw material and labour shortages are placing on the recovery. The UK’s rules on self-isolation weren’t changed until mid-August, so what effect there was from the ‘pingdemic’ is likely to have been felt in July.

Growth fears have been weighing on the City this week, after jobs growth at US companies sharply slowed in August.

European markets are expected to open a little higher today, though, after the European Central Bank felt confident enough to slow its bond-buying stimulus programme yesterday.

Investors are also awaiting the latest US producer prices data, which will show how prices at the factory gate in America changed last month.

The agenda

• 7am BST: UK GDP report for July
• 7am BST: UK trade balance for July
• 1.30pm BST: US producer price inflation report for August
• 1.30pm BST: Canadian jobs report for August