UK manufacturing growth slows; Kellogg to split in three; Elon Musk’s US recession warning – as it happened | Business

Time for a recap.

Growth at UK factories has slowed, with bosses reporting a slowdown in output and new orders. With demand cooling, fewer manufacturers expect to raise prices over the next quarter.

British consumers have been hit by the sharpest increase in grocery bills in 13 years. Supermarkets are around 8.3% more expensive than a year ago, adding £380 to the average spend on food this year.

The Bank of England’s chief economist has predicted that further interest rate rises will be needed to cool UK inflation.

Tesla’s Elon Musk has said it is ‘more likely than not’ that the US will enter recession soon. Economist Nouriel Roubini, and Goldman Sachs, have also voiced concerns that a downturn could be near.

The US housing market has continud to cool, with existing home sales hitting their lowest rate in almost two years.

Food giant Kellogg Co is splitting into three companies, sending its shares up almost 3%. Kellogg plans to focus on snacks, and will spin off its North American cereals division, and its plant-based foods.

The hospitality industry has warned that today’s UK rail strikes will cost restaurants, pubs and other businesses £500m in revenue.

Footfall in central London to 1pm today has been 27% lower than last Tuesday and in city centres outside of the capital it was down by 11.2%, according to retail analysts Springboard.

The commodity trader Glencore has pleaded guilty in a London court to seven counts of bribery related to its oil operations in several African countries.

Rolls-Royce is to give more than 14,000 staff a £2,000 payment to help them cope with the soaring cost of living, the first time the engineering firm has made such a move.

EasyJet cabin crew unions in Spain have called nine days of strikes in July, threatening to add to a summer of disruption for airline passengers.

Stock markets have clawed back some of last week’s heavy losses, with the UK’s FTSE 100 up 30 points or 0.4% in late trading, and solid gains on Wall Street.

We’ll be back tomorrow morning, when UK inflation could climb to a new 40-year high…. GW

Just in: Sales of US homes fell last month as the once red-hot housing market cools.

Sales of existing US homes (excluding new builds) dropped by 3.4% in May to the lowest rate since June 2020, during the first wave of Covid-19.

That follows a 2.6% drop in April, as rising US interest rates deter potential buyers.

Lawrence Yun, chief economist at the National Association of Realtors, predicted that home sales would fall further:

“The impact of higher mortgage rates are not yet fully reflected in the data.”

Prices kept rising, though, supported by a lack of supply. The median house price hit $407,600 in May, up 14.8% on May 2021.

US food giant Kellogg has announced plans to split into three companies, as it focuses on snacks.

Kellogg, which began in 1894 when W.K Kellogg created Corn Flakes, has announced it will spin off its North American cereals and plant-based food divisions in two new companies.

Shares in Kellogg have jumped over 6% in pre-market trading, as it become the latest major US firm to break itself up.

Kellogg says the snack division made $11.4bn of net sales last year, or about 80% of total sales. It is focused on global snacking, international cereal and noodles, and North America frozen breakfast.

Brands include Pringles, Pop-Tarts, Kellogg’s breakfast cereals, Frosties, Coco-Pops, and Crunchy Nut. This business is expected to be a higher-growth company than today’s Kellogg Company, it says.

CEO Steve Cahillane, who will become chairman and CEO of the global snacking company, says splitting up the company makes sense:

“These businesses all have significant standalone potential, and an enhanced focus will enable them to better direct their resources toward their distinct strategic priorities.”

The names of the new businesses haven’t been decided yet.

“The North America Cereal Co.”, brought in $2.4bn in net sales last year, and will operate in the U.S., Canada, and Caribbean.

“Plant Co.”, which includes the MorningStar Farms brand, had $340m of net sales last year, and will be focus on plant-based foods.

In the past two years major U.S. firms such as Johnson & Johnson and General Electric Co have both announced splits.

Back in the markets… European stocks are holding their earlier gains, with the UK’s FTSE 100 now up 0.8%, or 56 points, at 7177 points.

Investors are anticipating that Wall Street will open higher, after the Juneteenth holiday on Monday.

A positive start to New York trading would be a relief after the S&P 500 plunged into a bear market last week.

But with recession fears swirling (as Elon Musk has shown), the economic picture is still troubling.

The FT’s Naomi Rovnick writes:

Hani Redha, multi-asset portfolio manager at PineBridge Investments, characterised Tuesday’s moves as a “bear market rally,” caused by a “psychological desire” for a shift in the market mood.

“It doesn’t really change the bigger picture of growth slowing down and tightening financial conditions,” he added.

“That combination still remains the overarching theme, which is pretty challenging.”

Growth at UK manufacturers is slowing and order books have softened, in another sign that economic demand is easing.

The CBI’s latest survey of British factories has found that manufacturing output growth slowed slightly in the three months to June, and is expected to ease further in the three months ahead.

Output increased in 12 out of 17 sectors in the three months to June, led by the motor vehicles and aerospace sub-sectors. But the food, drink & tobacco sub-sector shrank for the first time in just over a year.

Factory bosses reported that export order books fell back to a normal level in June, but were still above their long-term averages.

Encouragingly, fewer manufacturers plan to raise their prices than earlier this year. A net balance of 58% of firms expected domestic price growth for the three months ahead, down from 75% in May and a survey record of +80% in March 2022.

That is the weakest expectations for selling price inflation since September 2021 (although significantly above the long-run average).

Signs of weaker growth could be deterring some firms from raising prices.

Anna Leach, CBI deputy chief economist, explains:

“While manufacturing output is still being supported by a backlog of orders, growth appears to be softening.

Stocks of finished goods are now seen as broadly adequate and we may be seeing the first signs that weaker activity is beginning to slow the pace of price increases in the sector.

Manufacturers continue to report a range of challenges, including significant cost pressures, shipping delays, shortages of key inputs, and, not least, recruitment difficulties. Skills shortages remain widespread and are a key constraint on growth. All of these trends are weighing on confidence.”

Supermarket inflation hit 8.3% in the past month, the highest rate in 13 years, adding £380 to annual bills as the rising cost of living weighs on families, my colleague Sarah Butler reports:

Sales fell at all the big supermarkets as shoppers switched to discounters Aldi and Lidl and bought more own-label goods in an effort to keep a lid on spending, according to the latest data from Kantar.

Sales of supermarkets’ cheapest own-label products rose 12% while Aldi and Lidl’s sales rose by 7.9% and 9.5% respectively in the three months to 12 June. Aldi’s share of the grocery market is 9.6%, less than 1% behind Morrisons where sales fell by 7.2% in the three-month period making it the biggest loser in the market.

Here’s the full story:

Despite the money-saving trend, families splashed out during the platinum jubilee celebrations, buying a third more alcohol and 35% more ice-cream than during an average week, according to Kantar.

Sales of lemon curd were also up 16% as many people had a go at making the official jubilee trifle.