Recession fears grow after disappointing retail sales

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20th September 2022

Bite-sized business news from the UK and beyond

Good morning Imagine taking the top job in the country but the world’s media still not knowing who you are. That’s what happened in one of the lighter moments of yesterday’s events when the new prime minister Liz Truss was mistaken for minor royal by Australian TV.

Today's stories

Recession fears grow after disappointing retail sales
Software giant acquires biggest threat

ECONOMY
Recession fears grow after disappointing retail sales

What happened?
On Friday official data showed that UK retail sales volumes fell 1.6% between July and August, more than the 0.7% expected, as consumers struggled with the soaring cost of living.

How did we get here?
With inflation close to 10% in August, consumers are feeling the squeeze. The value of retail sales actually rose 5.4% in the month from a year earlier. But the volume of goods purchased declined – that is, people are paying more to buy less.

The volume decline was the sharpest since December and followed a rise of 0.4% the previous month. Sales in every category - food stores, non-food stores, non-store retailing and fuel – fell as households cut back over affordability concerns, painting a worsening picture of consumer sentiment.

Many economists expect the UK to enter recession in the final three months of the year. The unexpectedly big decline in retail sales and an extra bank holiday in September raise the risk that the country may already be in one. These recession fears sent the pound fell to its lowest against the US dollar in 37 years.

Recession concerns are not contained to just the UK
On Friday shares in delivery giant FedEx plunged 20% after it warned that demand for its services was beginning to wane. The company is considered an economic bellwether, since its international operations can hint at the state of the global economy.

Looking ahead: Although the UK economy is in a fragile state, it’s not thought that this will deter the Bank of England from raising rates by another 0.75% this week to cool inflation.

Other stories to keep you in the loop

World Bank warns higher interest rates could trigger global recession
Porsche IPO: Luxury car maker valued at up to $75bn in share sale
eBay bans sale of Queen lying-in-state wristbands
Bitcoin drops below $19,000 benchmark
Beyond Meat COO accused of eating human nose

TECH
Software giant acquires biggest threat

What happened?
Last week software design giant Adobe announced plans to buy budding rival Figma for $20bn - the largest acquisition ever of a private software company.

How did we get here?
In the world of design, Adobe has reigned supreme for years. But founded in 2012 startup Figma has become a serious challenger. It revolutionised the graphic design process with software that makes it easy for people to work on projects simultaneously and in real time. The company’s mission is to help teams collaborate visually and make design accessible to all.

Why does this deal matter?
Adobe shares lost more than a third of their value this year as investors grew wary of its high costs and more accessible competitors emerged.

Figma is a rapidly growing enterprise, and Adobe noted that Figma’s total addressable market would reach $16.5bn by 2025, and the startup had gross margins of approximately 90%.

But investors aren’t convinced it’s a good deal
Figma is expected to pass $400m in annual recurring revenue this year, meaning Adobe paid roughly 50x Figma's annual sales or double the $10bn Figma was last valued at in June 2021.

That's an extraordinary price that didn't go down well with investors when paired with an underwhelming quarterly report. Adobe's shares fell 17% on the day of the announcement.

Stat of the day

Every three hours, YouTube adds as much content as Netflix and Amazon’s entire back catalogues combined

Interesting links from around the web

The whisper networks helping workers get jobs
7 ways to become fitter that have nothing to do with running or going to the gym
The 10 wealthiest cities in the world

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Recession fears grow after disappointing retail sales

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