Finimize - 🤨 This recession might be different

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Hi Reader, here's what you need to know for August 22nd in 3:10 minutes.

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Today's big stories

  1. Farmers need Deere, but Deere needs lower production costs
  2. There are five ways this recession differs from the others, which means you might want to take a different approach – Read Now
  3. UK retail sales were deceptively good in July

Deerely Departed, We Are Gathered Here Today…

Deerely Departed, We Are Gathered Here Today…

What’s Going On Here?

Deere & Co. – the world’s biggest agricultural equipment maker – gave a disappointing quarterly results update on Friday.

What Does This Mean?

Crop prices have been booming in the first half of the year, with corn and soybeans hitting 10-year highs and leaving farmers flush with cash. And what else would they spend it on but Deere’s machinery, which – along with higher prices – helped push up the company’s sales by a better-than-expected 22% last quarter from the same time in 2021.

That’s all well and good, but it still wasn’t enough to offset the higher prices of raw materials and parts, which drove up costs and dragged down profit. In fact, Deere cut its profit outlook for the rest of the year, warning that these issues aren’t going anywhere soon. The firm reaped what it sowed: investors sent its shares down 7%.

Why Should I Care?

The bigger picture: It’s a good day for America.
Deere is worth watching because it’s an economic bellwether, meaning its performance gives an insight into the wider US economy. So the fact that it said it was feeling upbeat about demand in its next financial year – largely thanks to the popularity of its early-order program – could be a sign that things aren’t as bad as they seem. Add in the recent demand for US oil and encouraging retail sales, and some economists think the country might be set to escape its “technical recession” – that is, two consecutive quarters or more of economic shrinkage – this quarter.

Zooming out: Ukraine keeps feeding the world.
One of the main reasons crop prices are so high is because the Russian invasion interrupted shipments out of Ukraine, one of the world’s so-called “breadbaskets”. But things are gradually getting back up and running: more than 500,000 tons of crops were shipped out of the country in the first half of the month, which is already helping push down global food prices.

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Analyst Take

Why This Recession Is Different

Why This Recession Is Different
Photo of Reda Farran

Reda Farran, Analyst

The US is in a technical recession, even if the world’s biggest economy is holding out on making it official.

But if this one feels very different from the one in the wake of the global financial crisis, you’re not wrong.

Inflation, for one, is much, much higher now than it was back then, while unemployment is remarkably low.

So that’s today’s Insight: five ways this recession is different, and how that should influence your investments.

Read or listen to the Insight here

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Don’t Be Fooled By UK Retail Sales

Don’t Be Fooled By UK Retail Sales

What’s Going On Here?

Data out on Friday showed that UK retail sales unexpectedly climbed last month.

What Does This Mean?

Amazon Prime Day has so much clout in the UK these days that there were 4.8% more online sales in July than there were in June, with shoppers grabbing nice-to-haves on the cheap while they had the chance. That uptick helped lift retail sales by 0.3% over the same period, even as economists had expected them to drop off.

But that obscures the rest of the story, with sales of clothing, household goods, and fuel all on the decline. Strip out online sales, in fact, and there were 3.4% fewer retail sales than the same time last year. More interestingly still, the value of those sales was up 7.8%, which goes to show that Brits are buying far less for far more… (tweet this)

Why Should I Care?

Zooming in: The UK is circling the drain.
It stands to reason that data out on Friday also showed UK consumer confidence fell to a record low in August, which could cause retail sales to slump more going forward. Brits’ outlook for the next year of their personal finances, meanwhile, is now even bleaker than it was during the financial crisis. This caps off a week of mounting evidence that the UK economy is hurtling toward a recession, even if it might suggest that the Bank of England’s anti-inflation efforts are starting to work.

For you personally: Your next steps.
There are a few things you can do to navigate this situation. If you can pay off more of your debt sooner, do: interest rates are bound to rise even more as the Bank of England keeps trying to get a handle on inflation. Likewise, if you’re due to remortgage, try to fast-track the process before lenders raise mortgage rates. And if you’re investing, diversify your portfolio so that any losses from one asset could be balanced out by gains in another.

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💬 Quote of the day

“If you want others to be happy, practice compassion. If you want to be happy, practice compassion.”

– Dalai Lama (the highest spiritual leader and former head of state of Tibet)
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