Welcome to the weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last few weeks.
China’s industrial profits fell for the first time since 2020 as COVID-19 restrictions disrupt activity
Chinese industrial profits fell by 8.5% in April compared with a year earlier. Factories in China have struggled during the latest Omicron outbreak and the resultant restrictions which have placed many people under strict lockdowns in some of the country’s largest cities, notably Shanghai. Foreign-owned industrial firms operating in China saw an even more pronounced drop in profits, falling by 16.2% compared to a year earlier.
The data illustrates the economic cost of the Chinese government’s Dynamic Zero COVID-19 policy, which has disrupted factory activity and trade logistics. Both air and truck freight are well below normal levels.
UK Chancellor announces windfall tax on energy companies to help offset the rising cost of energy bills
UK Chancellor Rishi Sunak announced an additional £15bn package of measures for households, funded by a £5bn windfall tax. The package includes a £650 grant for those on Universal Credit, a £300 grant for pensioners, a £150 grant for those on disability benefits and an increase in the value of the winter fuel discount.
The package will be funded by a new 25% levy on energy company profits which will remain in place until “oil and gas prices return to normal levels”. The package also included a new investment incentive, which will allow companies affected by the new levy to reclaim 90% of investment value in tax – almost double the previous allowance.
Market review
Equity markets recovered last week following consecutive weeks of falls. Generally, those stocks worst affected in the recent drawdown were the best performing. The NASDAQ recovered some losses, finishing the week up more than 5%. The oil price rose over the week as the G7 called on OPEC to increase energy supplies. Finally, the US dollar fell from its recent highs as US interest rates expectations moderated slightly.
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