Deloitte: Key Theme debriefing for Week 30 July

KEY THEMES from Ian Steward (Deloitte)

* Germany and Italy say they will do everything possible to protect the euro – euro crisis
* Preliminary figures show that the UK economy contracted by a worse-than-expected 0.7% in Q2 2012, the third consecutive quarter of negative growth – slowdown
* Mario Draghi, President of the European Central Bank (ECB), claimed the bank is prepared to do “whatever it takes” to support the euro – eurozone crisis
* Greek Prime Minister Antonis Samaras said the Greek economy is in a “great depression”, similar to the one the Americans faced in the 1930s – Greece
* Eurozone business activity contracted for the sixth consecutive month in July, according to survey data from Markit Economics – slowdown
* Ratings agency Moody’s placed Germany, the Netherlands and Luxembourg on “negative” outlook, citing their exposure to the Greek, Spanish and Italian economies – sovereign risk
* Spanish 10-year borrowing costs hit a euro-era record of 7.59% over concerns that Spain will need to follow Greece, Portugal and Ireland in requiring a formal international bailout – Spain
* US 10-year Treasury Bonds reached a low of 1.4%, their lowest yield since the 19th century according to Reuter’s data – flight to safety
* Sales at UK charity shops rose 3% in Q1 2012 according to the Charity Retail Association – recessionary spending
* UK sales at Domino’s Pizza rose 11% year-on-year in the first half of 2012, boosted by rainy weather and extra public holidays – discretionary spending
* Analysts warned that US livestock prices could rise by more than 10% per year due to rising prices of corn and soya bean, which are widely used as animal feed – commodity prices
* Online peer-to-peer lending increased 300-fold to yuan 6bn in China between 2007 and the first half of 2011, according to data from China National Radio – shadow banking
* Rolls-Royce reported a 7% year-on-year rise in underlying profit in the first half of 2012, driven by demand from airlines for fuel-efficient engines – Rolls-Royce
* Jaguar Land Rover announced that it is to create 1,100 new jobs at its Castle Bromwich plant in the West Midlands – UK auto sector
* Publisher Penguin saw a 33% year-on-year rise in revenues from ebooks in the first half of 2012, with ebooks now comprising 19% of all revenues – digital revolution
* German car-maker Volkswagen reported record vehicle sales of 4.6m for the first half of 2012, driven by strong growth in China and Latin America – emerging markets
* Chinese oil producer China National Offshore Oil Corporation (CNOOC) agreed to buy Canadian oil firm Nexen for $15.1bn, potentially China’s largest foreign takeover, further to approval by the Canadian government – M&A
* Sales of Thomas Hardy’s Tess of the d’Urbervilles have increased by 300% since May according to internet retailer Amazon, after being featured in best-seller Fifty Shades of Grey – complementary good
* A certificate of debt discovered by a town historian shows the German hamlet of Mittenwalde lent Berlin 400 gilders in 1562, a figure theoretically worth trillions of euro’s now after accounting for compound interest and inflation – bad debt

 

Ian Stewart , Chief Economist  (Deloitte LLP)

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