As our financial expectations change, important signs are beginning to show from all corners of the economy. The ONS is preparing to release the first estimates of Q2 Gross Domestic Product (GDP). It gets thwarted by its own attempt to provide a cohesive overview of the performance of the UK economy. At the same time, companies such as Greggs, JD Wetherspoon and Tesco announce positive earnings that paint a picture of changing consumer habits. On the other side of the Atlantic, the US economy continues to struggle with weak job growth, forcing the Federal Reserve’s hand.
The ONS fails in its core mission of bringing together data to tabulate and judge the performance of the UK economy. Analysts anticipate that the final Q2 GDP numbers will likely not reveal new insights, especially considering the strong start to the year reported earlier. The prior projection was for a slight increase of 0.3%. Yet few can reconcile this number with independent sources of data, exposing a potential black hole of economic reporting.
It’s been a pretty brutal year for British food, even the likes of Greggs. Its share prices have fallen to almost five-year lows. Now the firm is entering perhaps its most important chapter, with the next two quarters considered make or break for its stock price. For now, Greggs continues to face pressure to secure its place at the top of the market. This is despite rising costs, with a 25% increase on sausage roll prices since 2022.
JD Wetherspoon, another big firm in the hospitality sector, today reported a healthy 5.1% rise in like-for-like sales. All of this happened during a pandemic, and between just 12 weeks ending July 20th. This positive momentum comes as the company announced plans to open 15 new pubs and implement price cuts across 800 locations. Notably, their Q4 report highlighted a surge in sales of chicken dishes, reflecting changing consumer preferences as dining habits continue to evolve.
In retail, Tesco reported like-for-like sales well ahead, up 4.7%. They announced £15.39bn in retail sales for the 13 weeks ending May 24th. The UK operations were a standout performer, with 5.1% sales growth, suggesting UK consumers might be more resilient amid ongoing economic malaise.
Back here in the states, the economic forecast seems to be a bit more pessimistic. The new non-farm payrolls report is the clearest indicator yet of a rapid slowdown in job growth. In fact, at 0.2% that’s the slowest rate we’ve had since last November. In addition, the Federal Reserve likely took its cue from weaker-than-expected job creation. As a response, they decided to make their first rate cut of 2023 to boost economic activity.
Nike, for its part, isn’t doing any better as it’s forecasting a 7% drop in sales for its next quarter. The company expects gross margins to be in the range of 3.5 – 4.25 pp. Even with this headwind Nike did not change its full year guidance, forecasting adjusted operating profit of £2.7 billion to £3 billion.