Germany’s manufacturing export conditions stagnate amid increasing weakness in European markets

The recent improvement in global export conditions stalled in July. This was indicated by the HCOB Germany Manufacturing PMI Export Conditions Index – which tracks trade-weighted global economic activity changes – falling to 49.9, just below the 50.0 mark separating growth from contraction. The latest reading was down from 50.8 in June and the lowest since January's 49.3.

Overall export conditions stagnated, largely reflecting increasing weakness in European markets. Trade-weighted activity across Europe fell for the second month running and at the fastest rate since January (the respective index at 47.9). Central to this were downturns in economic performance in the Netherlands and Czechia. Spain and Greece remained two of the bright spots in Europe, although both recorded slower expansions than in June.

North America (53.3) was the strongest growth area for the second month running in July, owing to a sustained robust upturn in the US. However, the region's latest rise in trade-weighted activity was the least marked for three months. This was also the case for Asia (52.8), where a loss of momentum in China offset a return to growth in Japan.

Amid faltering global economic conditions, goods producers in the eurozone's largest economy reported a continued decline in international demand at the start of the second half of the year. At 44.4, up marginally from June's 44.1, the HCOB Germany Manufacturing PMI New Export Orders Index remained firmly in sub-50 contraction territory.

Export sales also fell globally for the second month running in July. Although the latest decrease was only modest again, it further reversed the brief upturn in trade flows seen between April and May. Among the economies monitored by the survey data, India remained the stand-out as it recorded a sharp and accelerated increase in export sales. Vietnam and Brazil were the best of the rest, while Greece saw the only notable growth in new orders from abroad among the monitored European countries.

Germany remained towards the lower end of the global export performance scale in July. This was largely due to a sharp reduction in foreign orders in the country’s Automobiles & Auto Parts sector, where the rate of contraction even quickened slightly for the second month in a row (the respective index recording an average of 36.4 in the three months to July).

The decline in new export orders across the Consumer Non-cyclicals segment (44.7) was broadly in line with that recorded for the German manufacturing sector as a whole. Here, surveyed businesses commented on subdued retail demand amid caution among consumers.

Machinery & Engineering remained one of the better-performing sectors, recording only a modest decline in new export orders, which were among the weakest seen over the past two years.

More positively, Chemicals export sales continued to go against the wider trend, rising sharply and at the quickest rate since late 2021. Stock-replenishment efforts were cited as supporting the recovery in international demand for Chemicals products.

 

Why the UK pound is unlikely to regain its pre-Brexit levels

The UK pound should rally against the US dollar and the euro over the coming year. Still, it is unlikely to reach pre-Brexit levels again anytime soon, according to Kamakshya Trivedi, head of Global Foreign Exchange, Interest Rates and Emerging Markets Strategy Research at Goldman Sachs Research, in some market analysis published on the bank’s website.

Goldman Sachs Research’s estimate of fair value is around £1.25 versus the dollar, compared with around £1.45 just before Britons voted to leave the EU. “If you are going to have a big disruption in the trading arrangements with one of your largest trading partners, which is what Brexit included, there is going to be an impact on the currency,” he notes.

That said, Trivedi sees reasons to expect the pound to be strong in the next 12 months. Goldman Sachs Research recently raised its 12-month target for the British pound versus the dollar to £1.32 (from £1.28 previously). The currency rose to £1.30 in July against the greenback, its highest level in a year. (The pound traded around £1.70 to the US currency in July 2014, two years before the Brexit vote.)

“The pound typically does well in a friendly global macro outlook,” Trivedi says. Traders and investors are beginning to relax about the risks of inflation, and worries of recession have faded. When equity markets are trading firmly, and interest rates are moving in a range or even declining, the British currency tends to perform strongly.

He also noted that the Bank of England is no longer a dovish outlier when it comes to monetary policy, which has been one of the things keeping the pound lower in recent years. The European Central Bank, the Bank of Canada, and Sweden's Riksbank have cut their policy rates this year, and the US Fed is expected to start cutting rates in September.

One risk to the UK and the rest of Europe is that Donald Trump wins the US election in November and follows through with imposing major tariffs. If that happens, “it would be pretty painful for the euro area,” Trivedi says. “The pound has some sensitivity to that as well. While it may not be the most directly targeted, it will still feel the impact. A global trade war is never good for a currency of an open economy like the UK.

And the new Labour government will have to show that it can deliver on its ambitions to increase economic growth and productivity. “That is obviously still an ambition and not a reality,” Trivedi says. “So we have to see how that plays out.”

 

RingCentral partners with Coupa to improve efficiencies, productivity, and growth

RingCentral, an AI-driven cloud business communications provider, has deployed Coupa to help optimise its spending and business operations. After a decade of growing revenues, RingCentral sought to modernise its back-office operations as its business has continued to scale. The firm chose Coupa to automate sourcing, procurement, risk, and payments processes. 

“Coupa’s platform helps us control risk, improves governance over our cash management and spend, and uses AI to automate and drive smarter business decisions across our organisation,” said Sonalee Parekh, CFO of RingCentral. 

“With Coupa, we have been able to modernise our source-to-pay (S2P) processes,” Parekh added. “We’re now operating at an incredible velocity, and as a result, we believe we can achieve measurable cost savings by the end of the year.” 

 

NatWest partners with UK Infrastructure Bank finance broadband expansion

NatWest has announced a £100m term loan guaranteed by UK Infrastructure Bank (UKIB), and a £25m term loan to support Quickline Communication’s large-scale broadband expansion in Yorkshire and Lincolnshire. This is alongside a £125m term loan from UKIB.

The financing from NatWest and UKIB is aligned with Quickline’s target of passing more than 500,000 rural premises in the area.

Yorkshire-based broadband provider Quickline has secured four contracts under the UK government’s Project Gigabit programme, which, on completion, will connect almost 170,000 homes and businesses to full-fibre broadband in hard-to-reach rural areas across Yorkshire and Lincolnshire. As a result of the investment, Quickline will also expand its commercial network to a further 190,000 in these rural communities.

Through Project Gigabit, the government is rolling out lightning-fast, reliable broadband across the UK, with a renewed push to achieve full gigabit coverage by 2030.