PRESS DIGEST - Financial Times - Aug 12

FIRST DROP IN FACTORY COSTS YIELDS HOPE

On Monday, data from the Office of National Statistics (ONS) showed that manufacturers' costs fell last month for the first time in almost a year, boosting hopes that the pressures fuelling inflation will eventually ease to reflect the recent drop in oil prices.

The ONS said that the input prices producers paid for fuels and raw materials fell by 0.6 per cent between June and July. The drop is encouraging because the figures are averaged over a month in which oil prices hit a record high before falling back. Input prices are therefore likely to fall further if oil prices remain at their current level.

SPENDING CUT ON INESSENTIALS

The British Retail Consortium (BRC) will report on Tuesday that total retail sales values were 1.7 per cent higher last month than in July 2007. Over the last three months the values were 2.9 per cent higher than a year earlier.

The survey shows that consumers are reining in their spending on all but essential purchases with retail sales outside the grocery sector contracting in July for a second consecutive month. Stephen Robertson, the BRC's director general, said: 'Frivolous shopping is off the agenda as most consumers concentrate on value and durability and there are few signs the slowdown has yet bottomed out'.

SLIDE IN HOME DEALS SHOWS SIGN OF EASING

A report by the Royal Institution of Chartered Surveyors (Rics) suggests that while house prices have further to fall there are some signs that the slide in housing transactions is starting to level out.

The ratio of completed sales to stocks of unsold property fell again from 18.2 per cent in May to 17 per cent in June, the lowest level since 1995 and Rics said a net balance of 83.9 per cent of surveyors thought prices had fallen in the past three months, and a balance of 68 per cent expected further declines.

The Rics survey did however find a slower rate of decline in new buyer enquiries and a slightly smaller proportion expecting sales volumes to drop further.

SENTIMENT WORSENS FOR EUROPEAN MANUFACTURERS

The latest KPMG/Market survey reveals that optimism amongst European manufacturers has fallen sharply since the beginning of the year as rapid input price inflation and the global economic slowdown depress business outlook.

The survey's results were based on about 3,700 manufacturers, with values ranging from -100 to +100. The net balance of companies forecasting a growth in activity fell to just +14.1 from +43.5 in January.

Prospects for company profits dropped to -13.2 from +15.8 six months earlier. Manufacturers particularly noted the strong increases in the prices of raw materials and energy as threats to their output.

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