Key Takeaways
- The UK economy unexpectedly contracted by 0.1% in September, leading to a significant slowdown in Q3 GDP growth to 0.1%, falling short of expectations.
- Hapag-Lloyd anticipates a notable deceleration in global container shipping volume growth, projecting 3% in 2025 and 2% in 2026, following a stronger 6% rise in 2024.
- Burberry reported mixed H1/Q2 earnings, with H1 revenue ex-FX down 3% (slightly below estimates) but Q2 retail comparable sales up 2% (exceeding expectations), and a revised FY Capex of approximately £120M.
- Merck KGaA posted higher earnings, driven by robust organic growth across its various business units.
- Key UK economic indicators for September showed a sharp decline in industrial production by 2.0% (M/M) and manufacturing production by 1.7% (M/M), contrasting with modest growth in construction and services output.
UK Economy Faces Unexpected Contraction and Slowing Growth
The UK economy experienced an unexpected contraction in September, with monthly GDP declining by 0.1% against expectations of flat growth. This downturn contributed to a significant slowdown in the third quarter, where GDP grew by a preliminary 0.1% quarter-on-quarter, missing the estimated 0.2% and falling from the previous quarter's 0.3%. On a year-on-year basis, Q3 GDP growth registered 1.3%, also below the 1.4% forecast and prior period.
Further highlighting economic weakness, UK industrial production plunged by 2.0% month-on-month in September, a sharper decline than the estimated -0.2% and a reversal from the prior month's 0.4%. Manufacturing production also saw a substantial drop of 1.7% month-on-month, significantly worse than the -0.3% estimate. Year-on-year figures for September showed industrial production down 2.5% and manufacturing production down 2.2%.
Despite the broader economic slowdown, some sectors showed resilience. UK construction output grew by 0.2% month-on-month in September, surpassing the 0.0% estimate, and increased by 1.3% year-on-year. The Index of Services also rose by 0.2% month-on-month in September, slightly above the 0.1% estimate.
Trade figures for September indicated an improvement in the overall trade balance, narrowing to -£1.094 billion from a previous -£3.386 billion, and better than the estimated -£3.10 billion. The visible trade balance also improved to -£18.883 billion. However, Q3 data revealed a 0.1% decrease in exports and a 0.3% decrease in imports quarter-on-quarter. Total business investment for Q3 contracted by 0.3% quarter-on-quarter and grew by a modest 0.7% year-on-year.
Hapag-Lloyd Forecasts Decelerating Shipping Volumes
Global container shipping giant Hapag-Lloyd anticipates a slowdown in the growth of global container shipping volumes in the coming years. The company projects a 3% year-on-year growth in 2025, followed by a further deceleration to 2% in 2026. This comes after an expected stronger performance in 2024, with volumes rising by 6%. The outlook suggests a moderation in the robust demand seen recently, potentially influenced by global economic conditions and trade dynamics.
Burberry Reports Mixed Q2, Adjusts Capex
Luxury fashion house Burberry (BRBY) released its H1/Q2 earnings, presenting a mixed picture. For the first half, revenue excluding foreign exchange impacts declined by 3%, slightly underperforming the estimated -2.84%. However, the company's Q2 retail comparable store sales showed a positive increase of 2%, surpassing analyst expectations of a 0.62% rise. Looking ahead, Burberry has revised its full-year capital expenditure forecast, now expecting it to be approximately £120 million, a reduction from the previously anticipated £130 million.
Merck KGaA Achieves Higher Earnings Through Organic Growth
German science and technology company Merck KGaA (MRK) announced higher earnings, attributing the positive performance to organic growth across all its business units. This indicates a strong underlying operational performance and successful execution of its business strategies. The company's focus on internal growth drivers appears to be yielding positive financial results.
Other Economic Updates: Sweden and Turkey
In Sweden, the Consumer Price Index with Fixed Interest Rate (CPIF) on a year-on-year basis was 3.1% in October, matching both the previous month's figure and analyst estimates. The CPIF excluding energy also stood at 2.8% year-on-year. On a monthly basis, Sweden's CPIF grew by 0.4% and the overall CPI increased by 0.3%.
Meanwhile, Turkey's home sales in October registered 164.3 thousand units, an increase from the previous 150.7 thousand units. However, on a year-on-year basis, home sales declined by 0.5%.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.