Time to recap.

Global factory growth has weakened as the slowing global economy, and high commodity and energy prices, hits manufacturers.

Purchasing managers from across Europe, Asia and the US have given the same message -- new business came under pressure in July, while material shortages continued to hinder growth.

In the UK, British manufacturers suffered their first drop in output in over two years in July, as new orders and fresh export business both continued to decline.

Factory bosses pointed the finger at several culprits -- from the cost of living crisis and weak domestic demand, to client uncertaint and even warmer-than-usual weather.

China’s factory sector posted a surprise contraction, while South Korea and Taiwan both saw the first fall in factory output since 2020.

In the eurozone, most countries were hit by the factory slowdown, increasing the risk of recession later this year.

The US manufacturing sector also softened last month, with two PMI surveys showing growth at a two-year low.

Germany also suffered a slump in consumer spending, with retail sales dropping at the fastest rate since at least 1994.

Elsewhere, a grain shipment has left the port of Odesa for the first time in months, testing the deal between Ukraine and Russia to unlock food supplies.

The IoD has reported that UK firms are cutting investment plans as soaring prices, Brexit trading difficulties and political uncertainty all leave bosses pessimistic about the economic outlook.

The cost of living crisis means more than one in eight UK households fear they have no further way to make cuts to afford a sharp increase in annual energy bills this autumn.

Waitrose is removing best-before dates from nearly 500 fresh food products in an effort to reduce food waste.

The Bank of England has scrapped a mortgage affortability test, meaning it will be easier for potential homebuyers to get onto the housing ladder (despite worries that rising interest rates could hit borrowers).

The UK’s long-awaited register of overseas entities, designed to crack down on oligarchs and criminals laundering money through UK property has come into effect -- prompting lawyers, tax experts, MPs, accountants and transparency campaigners to warn it is “riddled with flaws and loopholes”.

Here’s the rest of today’s stories:

We’ll be back in the morning, to discover how much oil giant BP made last quarter....

US factories have reported their first drop in output in two years, as weaker demand leads to a drop in new orders.

The US manufacturing PMI, released by S&P Global, has hit a two-year low of 52.2 in July, down from 52.7 in June. That shows muted growth.

The report says:

Contributing to subdued conditions was the first drop in output since June 2020 which reflected weaker demand conditions, as new orders fell at the fastest pace for over two years

Nonetheless, backlogs of work continued to increase as labor and material shortages hampered efforts to process incoming new work.

Thousands of potential homebuyers may find it easier to get on to the property ladder after a key mortgage affordability test was scrapped by the Bank of England.

The central bank has said the change – taking effect today – should not be viewed as “a relaxation of the rules”. However, some commentators said that while the move would be welcomed by many, there was a risk that some people would take out mortgages they were unable to afford.

The Bank has removed a requirement that forced borrowers to be able to afford a three-percentage-point rise in interest rates before they could be approved for a home loan.

A ship carrying Ukrainian grain has left the port of Odesa for the first time since the start of the Russian invasion, testing the crucial deal agreed between the two countries last month.

The Sierra Leone-flagged ship Razoni, carrying 26,000 tonnes of corn, finally set sail for Lebanon on Monday morning after weeks of negotiations between Ukraine and Russia, led by Turkey and the United Nations.

Russia has been blockading Ukraine’s ports since the start of the war, stoking a worldwide grain shortage that has caused the UN to warn of a looming hunger catastrophe.

Oleksandr Kubrakov, Ukraine’s infrastructure minister, said:

“Ukraine, together with our partners, has taken another step today in preventing world hunger.”

Here’s the full story, from our correspondent in Kyiv, Isobel Koshiw:

Around 20 million tons of grain are trapped in Ukraine, so unlocking these stores could ease the risk of worldwide grain shortage and global hunger.

But, Ukraine’s president Volodymyr Zelenskiy warned yesterday that the country’s harvest this year could be half its usual amount because of the Russian invasion, adding to concerns of shortages.

The UK’s Hinkley Point B nuclear power station has been switched off today, despite the country facing the risk of energy shortages this winter.

The closure of the plant will remove nearly a gigawatt of power generation capacity from the UK’s system – enough to supply 1.5m homes – before a winter in which the war in Ukraine is expected to weigh heavily on electricity supplies.

Hinkley Point B in Somerset has been producing power since 1976; without it, the UK will need to produce more electricity from other sources such as gas.

The reactor had reached the end of its working lift, having already seen its retirement extended by seven years.

There had been suggestions earlier this year that Hinkley Point B could be kept running for longer, but the government did not made any formal request to its owner, EDF, to keep the reactors open.

The UK’s financial regulator has brought in new rules to tackle misleading adverts encouraging high-risk investments.

The tougher curbs ban investment companies from offering certain incentives to invest, such as “refer a friend bonuses”.

The Financial Conduct Authority (FCA) brought in the clampdown following concerns that many people investing in high-risk products do not understand the risks - namely that they could lose money.

The new rules don’t cover crypoassets -- despite this being a particularly high-risk area, and one notorious for misleading advertising -- because the government is drawing up legislation to setermine now crypto marketing will be brought into the FCA’s remit.

The FCA expects that its final rules on the promotion of qualifying cryptoassets will be similar as for other high-risk products, adding:

Crypto remains high risk so people need to be prepared to lose all their money if they choose to invest in cryptoassets.

Around 18,000 of the lowest paid bank workers at HSBC are to receive a £1,500 payment to help cushion the impact of rising prices

The Unite union says it has “worked tirelessly” to demonstrate to HSBC the need for urgent action to help thousands of employees facing the largest squeeze on their incomes.

Dominic Hook, Unite national officer, says:

“HSBC UK has acted following dialogue with Unite which demanded support for employees through the current financial challenges brought by increases to household bills.

The union will continue to campaign to ensure all staff receive a fully consolidated pay increase to ensure pay rates keep up with living costs.”

Fellow banks NatWest, Lloyds and TSB, have all recently agreed £1,000 payments to their lower-paid staff.

UK factories also had a troubling start to the summer, matching the gloomy picture across Europe and in Asia.

British manufacturers suffered their first drop in output in over two years in July, as new orders and fresh export business both continued to decline.

Companies were hit by weaker market demand, difficulties in sourcing components and transportation delays, as well as a drop in new business.

This pulled the manufacturing PMI to a 25-month low, as activity growth slowed.

Firms blamed a drop in new orders on the cost of living crisis, weak domestic demand, client uncertainty, warmer-than-usual weather and lower intakes of new export business.

Foreign demand fell for the sixth month in a row, amid reports of weaker inflows from mainland Europe (partly due to post-Brexit issues), the USA and China.

Rob Dobson, director at S&P Global Market Intelligence, said:

“The UK manufacturing sector shifted into reverse gear at the start of the third quarter. Output contracted for the first time since May 2020, as new order intakes suffered the first back-to-back monthly decreases for two years. Rising market uncertainty, the cost of living crisis, war in Ukraine, ongoing supply issues and inflationary pressures are all hitting demand for goods at the same time, while lingering post-Brexit issues and the darkening global economic backdrop are hampering exports.

“With the Bank of England implementing further interest rate hikes to combat inflation, the outlook is beset with downside risks. With this in mind, the continued low degree of optimism among manufacturers is of little surprise.

There was one bright note - job creation accelerated as companies addressed staff shortages.

The eurozone manufacturing sector has fallen into contraction, adding to fears that Europe’s economy is sliding towards recession.

Factories recorded the sharpest drop in production since the initial wave of strict Covid-19 lockdowns in May 2020, according to S&P Global’s poll of purchasing managers for July.

Firms reported a drop in new orders which, aside from those seen during the pandemic, was the sharpest since the eurozone sovereign debt crisis in 2012 as steep inflation squeezed demand.

Weaker demand led factories to stockpile unsold goods.

Most major European countries saw a drop in factory activity, with only the Netherlands and Austria bucking the trend.

The eurozone manufacturing PMI fell to 49.8 in July from June’s 52.1. That shows the first contraction (below 50 points) since June 2020.

Although the eurozone grew faster than expected in the second-quarter of 2022, the outlook for the rest of the year is concerning.

Chris Williamson, chief business economist at S&P Global Market Intelligence said:

“Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region’s recession risks. New orders are already falling at a pace which, excluding pandemic lockdown months, is the sharpest since the debt crisis in 2012, with worse likely to come.

Production is falling at especially worrying rates in Germany, Italy and France, but is also now in decline in all other surveyed countries except the Netherlands, and even here the rate of growth has slowed sharply.

Lower than anticipated sales, reflected in accelerating rates of decline of new orders and exports, have led to the largest rise in unsold stocks of finished goods ever recorded by the survey. Increasing numbers of producers are consequently cutting production in line with the deteriorating demand environment, as well as scaling back both their purchases of inputs and hiring of staff.”

More than one in eight UK households fear they have no further way to make cuts to afford a sharp increase in annual energy bills this autumn.

Poorer families are most at risk, with over a quarter of households earning less than £20,000 worry they will be unable to cope with higher bills. Families in Yorkshire, the south-west and Northern Ireland the least confident about covering their costs, according to the latest rebuilding Britain index survey of 20,000 people by Legal & General.

Almost half of UK households are concerned about being able to keep up with rent or mortgage payments over the next 12 months as the majority realise they will have to make cuts elsewhere.

Nigel Wilson, the chief executive of Legal & General, said households across the UK are currently facing very tough financial choices.

For some, those choices seem impossible.

“However, what is most concerning is that the impact of the cost of living crisis is being felt more severely in some parts of the UK than in others. This threatens to widen the existing demographic and geographic inequalities that the levelling up agenda was designed to address.”

German retail sales have fallen at the largest annual pace since records began in 1994, as households cut back in the cost of living crisis.

Retail sales fell 8.8% in real terms in June compared with the same month last year.

This is the largest annual drop in nearly 30 years as rising consumer prices led consumers to rein in spending.

Germany’s National Office for Statistics reported that nominally, sales only fell by 0.8%, but tumbled once you adjust for rising prices, adding:

The difference between the nominal and real results reflects the high price increases in retail, which are having a noticeable impact on consumer confidence.

Food sales were down 7.2% year-on-year in real terms, while internet and mail order sales sank 15% compared with June 2021.

Germany’s manufacturing sector also contracted last month, for the first time in two years.

Production weakened, as German factories were hit by a deepening decline in new orders, including export orders, which both fell at the fastest rate since since May 2020.

Firms were hit by heightened uncertainty, a drop in investment spending, elevated prices, high stock levels at customers and ongoing supply chain frictions.

Fears of gas shortages also haunt German industry, explains Phil Smith, Economics Associate Director at S&P Global Market Intelligence:

“The potential for a shortage in gas supplies has German manufacturers seriously worried about the outlook for production in the coming year.

Goods producers’ expectations turned negative back in March, and have deteriorated in almost every month since then as downside risks to the sector’s outlook continue to build.”

S&P Global’s final Purchasing Managers’ Index (PMI) for manufacturing, which covers roughly a fifth of Germany’s economy, fell to 49.3 from 52.0 in June, showing a contraction.

The latest factory reports from Europe are coming in, confirming that conditions weakened last month.

French manufacturing output fell in July at the fastest rate since the first Covid-19 wave in 2020.

Indeed, aside from declines seen during the pandemic era, French goods production fell at the sharpest rate since April 2013 as high inflation squeezed demand and persistent supply issues constrained output.

The downturn in new orders steepened, as inflationary pressures persisted, leaving business confidence at subdued level

Purchasing managers blamed the deterioration on slowing activity at clients, shortages of materials and weaker demand.

The Frnech manufacturing PMI came in at 49.5, down from 51.4 in June and at its lowest level in just over two years.

Taiwan’s manufacturing sector has recorded the steepest downturn in two years, as firms were hit by a steeper fall in output and new business.

Factory bosses in Taiwan, a semi-conductor manufacturing powerhouse, reported that conditions deteriorated in July due to weaker global demand and rising costs.

This led to the sharpest drop in activity since early in the pandemic, with production volumes falling at a faster rate.

The S&P Global Taiwan manufacturing PMI sank from 49.8 in June to 44.6 in July, which shows the fastest downturn since May 2020 as activity weakened.

Annabel Fiddes, economics associated director at S&P Global Market Intelligence, said:

“Manufacturing companies in Taiwan painted an increasingly gloomy picture of conditions at the start of the third quarter. Output and new business both fell at the sharpest rates since the early stage of the pandemic in May 2020, with firms often linking this to weaker global economic conditions.

“Lower intakes of new work and increased caution towards the 12-month outlook drove marked falls in purchasing activity and inventories, while the sharpest fall in backlogs of work since late-2011 also adds to indications that current capacity exceeds demand.

Therefore, it seems likely that output could be cut further in the months ahead unless we see a marked improvement in client demand. “A brighter bit of news came from the price indices, which pointed to slower increases in both input costs and selling prices, while supply chains moved closer to stabilising. All this suggests inflationary pressures may have peaked, which will be welcome news for the central bank.”

Japan hasn’t escaped the slowdown either, with its factory sector growing at the slowest pace since last September.

Manufacturers said new export sales continued to fall in July (for the fifth month in a row), as demand softened.

This helped to pull Japan’s factory PMI down from 52.7 in June to 52.1 in July, showing slower growth, with firms reporting:

• Renewed reductions in output and new orders
• Softest rise in outstanding business for 17 months amid weaker demand
• Rising prices and delivery delays lead to accelerated stock building

Factories in South Korea also came under pressure in July, with activity dropping for the first time in nearly two years.
Output volumes fell at the fastest pace for nine months, as manufacturers continued to be hit by rising costs and material shortages.

Worryingly, new orders shrank for the first time since September 2020. Export demand weakened at the quickest rate for three months amid concerns about the economic impact of the Ukraine war and COVID-19 policy in China.

That knocked South Korea’s factory PMI down to 49.8 in July from 51.3 in June, falling below 50 (stagnation) for the first time since September 2020.

Usamah Bhatti, economist at S&P Global Market Intelligence, who produced the report, explains:

“South Korean manufacturers reported that strong inflationary pressures and sustained supply chain disruption had hindered production and demand at the start of the third quarter,”

“Higher prices for inputs including fuel, metals and semiconductors meant that the disruption was broad-based across the manufacturing sector.”

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

The latest surveys of factory output across the globe are released today, likely to show that growth weakened in July as inflation gripped the world economy.

And the news from China is not encouraging; factory growth went into reverse in July as Covid-19 outbreaks continued to hamper output sector, as property sales slid.

The official China manufacturing PMI slipped unexpectedly into contraction last month, as new orders and output weakened as authorities continue to impose lockdowns and restrictions to fight Covid-19 outbreaks in cities such as Xi’an and Tianjin.

Alvin Tan of RBC Capital Markets says the slowdown highlights the ‘fragile state of the economy’, adding:

With growing indications that Beijing is not willing to unleash massive stimulus to attain the year’s growth target and instead seek a “best efforts” outcome, the People’s Bank of China may have to lean on exchange rate depreciation to support the economy as global growth and export demand weaken further in coming months.

Overnight, a rival survey from data provider Caixin has confirmed the weak picture, showing that output and total new work slowed due to subdued demand, as China’s factories continued to cut staff.

Supplier delays rose too, with many firms reporting that “stock and staff shortages, and disruption from COVID-19, had weighed on vendor performance.”

Home sales are slumping too, as a mortgage boycott by home-buyers spreads.

Combined contract sales at China’s top 100 developers plunged 39.7% in July, compared to a year earlier to 523.1 billion yuan (£63bn), according to preliminary data compiled by China Real Estate Information Corp.

The real estate data company warned that there is a lot of pressure on companies to sell properties:

“Overall market demand and purchasing power have been overdrawn, while the industry confidence is also at a low level,”

Developers are still facing heavy de-stocking pressure in the short term.”

Confidence in China’s property market has plunged this year, as developers have sunk into a deepening liquidity crisis, leading to more projects being stalled..... and more homebuyers refusing to pay their mortgages on unfinished properties.

That strike has put more pressure on developers, who are already facing acute liquidity problems and who rely on customers paying upfront for homes to keep cash flowing.

Analysts have warned that property sales in China could fall by one-third this year, as people lose faith in the market.

The economic cost could be extremely sizeable, as Bloomberg reports

In a worst-case scenario, S&P Global Ratings estimated that 2.4 trillion yuan ($356 billion), or 6.4% of mortgages, are at risk while Deutsche Bank AG is warning that at least 7% of home loans are in danger. So far, listed banks have reported just 2.1 billion yuan in delinquent mortgages as directly affected by the boycotts.

The agenda

• 9am BST: Eurozone manufacturing PMI for July
• 9.30am BST: UK manufacturing PMI for July
• 1pm BST: Bank of Russia’s monetary policy report
• 2.45pm BST: US manufacturing PMI for July
• 3pm BST: ISM manufacturing PMI for July