Shortages hit US services firms, German factories and UK builders; Didi shares tumble after crackdown – as it happened

Time to wrap up. Here’s the main points.

Britain’s fiscal watchdog has warned that the pandemic, the climate crisis and the UK national debt’s exposure to higher interest rates are all “large and potentially catastrophic sources of fiscal risks”.

In its latest assessment of the risks facing the UK economy, the Office for Budget Responsibility showed that early action on getting to net zero by 2050 would add 21% of GDP to the national debt -- while only acting late would be twice as costly.

The OBR showed that the government face a £10bn spending black hole, with health, education and transport all needing more help.

And the Treasury watchdog also warned that advanced economies may be increasingly exposed to large, and potentially catastrophic, risks, after two ‘once in a century’ shocks in two decades.

Growth across the US service sector has slowed, as firms report problems obtaining raw materials and hiring staff.

German factory orders fell unexpectedly in May, as supply shortages also hit business.

German manufacturing orders fell by 3.7% in May, new figures from the Federal Statistics Office show -- dragged down by a slump in overseas orders, and less demand for heavy duty machinery.

UK builders have been hit by mounting price pressures and delays caused by a shortage of materials and finished goods, undermining a jump in business.

Rapid growth boosted employment in the construction sector – which accounts for about 6% of the economy – but 77% of firms reported longer lead times from suppliers, while prices for products and raw materials rose at their fastest rate since the survey was launched.

Oil has fallen back from multiyear highs, on speculation that the Opec+ production cuts deal could collapse after members failed to agree limited increases to supplies.

The US service sector slowdown seemed to push the market lower. Shares have fallen in New York, where the S&P 500 is down 0.75%, and in London, where the blue-chip FTSE 100 lost 0.9%.

China’s ride-hire firm Didi plunged by a quarter, after regulators launched an investigation and ordered its removal from app sites.

Supermarket chain Sainsbury has warned of gaps on shelves as supplies of some products including salads, beers and soft drinks run low because of shortages of lorry drivers and an uptick in staff forced to self-isolate because of covid-19.

Vauxhall owner Stellantis has announced that it will invest £100m to build electric cars and vans at Ellesmere Port, in Cheshire, in a move that will make it the first large plant in the UK dedicated exclusively to electric vehicles.

Ocado, the online grocer, has reported a 20% increase in retail sales and hailed a permanent shift in grocery shopping in the Covid-19 pandemic.

Goodnight. GW

The dollar is also rallying today, pushing the pound down almost three-quarters of a cent to $1.3775.

Back in London, the FTSE 100 index has closed 64 points lower at 7100, down 0.9%.

Energy stocks, mining companies and financial stocks were the worst performing sectors, with consumer cyclicals also lower.

Copper producer Antofagasta (-4.5%) was the top faller, with oil giant BP (-4.1%), steelmaker Evraz (-4%), commercial property firm British Land (-4%), manufacturing group Melrose (-3.6%), Barclays bank (-3.5%) and commodities giant Glencore (-3.1%) also in the fallers.

Ocado fell 4.2%, despite posting a 20% rise in retail revenues and a new contract in Spain.

The New York stock market is showing losses, as investors move into US government bonds, and major tech stocks.

The S&P 500 index, which covers a broad swathe of the US market, is down 0.5% at 4,328 points, away from its latest record high.

And the the Dow Jones industrial average has lost 325 points, or almost 1%, to 34,460.

Most of the 30 stocks on the DJIA are down, led by chemicals firm Dow Inc (-2.7%), construction machinery maker Caterpillar (-2.25%), and entertainment firm Walt Disney (-2.1%).

Oil stocks are also lower, with the slide in crude hitting the sector.

But some tech stocks are higher, with Apple (+1.2%) and Amazon (+3.4%), bucking the trend.

And government bond yields are also falling, indicating that investors are less worried about rising inflation leading to a pick-up in interest rates.

The oil price has now fallen sharply as investors fret about Opec+’s failure to reach a supply deal.

US crude, which reached its highest level since 2014 this morning, is now down 2% at $73.50 per barrel, while Brent crude is down 3% at $74.68, away from near three-year highs.

The clash between Saudi Arabia and the United Arab Emirates thwarted plans to gradually raise oil output from August to December. In the short term, that means production remains curbed at current levels beyond July -- leaving the market in limbo, just when global demand is increasing.

Neil Wilson of Markets.com says traders are concerned that Opec+’s production cuts deal, which is keeping the market tight, could unravel:

Oil has retreated sharply in the wake of the post-OPEC spike. It looks like the market is more worried about a potential crisis at the cartel than it likes the lack of fresh supply coming on in H2. WTI tests the 200-hour SMA at $74 where it finding a little support.

A break could see $72. Traders seem concerned that the speculative positioning could be unwound in the coming days if the OPEC+ deal were to start to unravel, ultimately leading to more crude and a less stable oil market.

Growth across the US service sector slowed last month as shortages of raw material and labor hit the economy.

The Institute for Supply Management says its non-manufacturing activity index fell to 60.1 last month from a record high of 64.0 in May.

This shows the 13th straight month of growth in a row, but is weaker than expected - suggesting that supply chain problems are holding back the recovery.

Production and new orders rose at a slower rate, while the employment index shows a contraction, and backlogs of orders grew.

Anthony Nieves, chair of the ISM’s services business survey committee, explains:

The rate of expansion in the services sector remains strong, despite the slight pullback in the rate of growth from the previous month’s all-time high.

Challenges with materials shortages, inflation, logistics and employment resources continue to be an impediment to business conditions,”.

The drop in the ISM services index in June suggests that shortages and price increases are becoming an increasing drag on hiring and economic activity, says Michael Pearce, Senior US Economist at Capital Economics.

The ISM also produces a round-up of views from company managers, which show that supply chain problems are causing problems.

• “Our restaurants are quickly — maybe too quickly — returning to 2019 sales levels. Strong consumer demand for dining out is clearly evident as COVID-19 restrictions ease, but the challenges are supply chain outages, logistics delays and employee- and management-staffing constraints. Some locations cannot open for business or (have) limited hours, as we cannot staff the restaurant to meet consumer demand.” [Accommodation & Food Services]
• “Severe supply chain disruptions and inflation are continuing in the marketplace, in all sectors.” [Arts, Entertainment & Recreation]
• “COVID-19 continues to cause troubles for all of our deliveries, as well as short supply a lot of materials. (Shortages of) lumber, copper, and steel continue, which is driving up pricing and lead times.” [Construction]
• “The declining positive test rates for COVID-19 is already having a significant impact, as virtually all aspects of our operations are picking up rapidly. The summer is normally the slow period, as limited teaching is taking place, but this year, preparations for the fall semester are already underway.” [Educational Services]
• “New business is actively trending up locally, nationally and internationally.” [Finance & Insurance]
• “We continue to see a high (patient) census as COVID-19 restrictions are eased, but the volumes are not pandemic related. There are more patients now because they wouldn’t or couldn’t get treatment because of restrictions on (non-COVID-19) care or personal cautiousness.” [Health Care & Social Assistance]
• “Employees globally are returning to the office where possible. We expect to have most employees in the office starting in September.” [Information]
• “Business conditions continue to rebound; however, like everywhere, the challenges in the supply chain are numerous. We continue to see cost increases, delayed shipments, pushed-out lead times, and no clarity as to when predictive balance returns to this market.” [Retail Trade]
• “Labor market remains tight, and wages have risen at an unprecedented rate. We are expecting a long-term effect on pricing of services.” [Transportation & Warehousing]
• “Overall business activity in the month has been strong. We are seeing increased orders and slight improvements in backlogs. The primary headwinds this month continue to be very expensive ocean freight rates, increasing business costs and increasing raw-materials costs. The top line is not outrunning expenses.” [Wholesale Trade]
• “Starting to see a lot of commodity-price increases for chemicals, acidizing and cementing. This is driven by product cost increases stemming from low production from plants.” [Mining]

Shares in other China tech companies facing cybersecurity investigations are also sliding.

The Cyberspace Administration of China (CAC) opened a cybersecurity review into several other companies as well as Didi, to “prevent national data security risks” as the crackdown on the country’s technology sector continues.

It includes subsidiaries of the logistics firm Full Truck Alliance, and Boss Zhipin, an online recruitment platform backed by tech giant Tencent and listed on the Nasdaq.

Shares in Full Truck Alliance are down nearly 20% while Kanzhun, the holding company for Boss Zhipin, have dropped 11.5%.

During the cybersecurity review, these companies are not allowed to register new users, CNBC reported.

US-listed shares of other prominent Chinese companies are also falling, as the cybersecurity crackdown on Didi spooks the sector.

Agriculture tech firm Pinduoduo (-5%), search engine giant Baidu (-4.4%), and online retailer JD.com (-3.9%) are among the top fallers on the Nasdaq.

Tech giant Alibaba is down 2.5%, while streaming service Tencent Music Entertainment have slumped 9%.

The value of Didi, the China ride-hailing company, has plunged by over a fifth after Beijing’s cyberspace regulators announced a crackdown against the company

Didi slumped by around 22% in early Wall Street trading to around $12, below the $14 at which it raised $4.4bn in its IPO just last week.

The selloff came after the Cyberspace Administration of China ordered smartphone app stores to pull Didi Global Inc’s app after it alleged the ride-hailing company had “illegally collected users’ personal data”.

The CAC urged Didi to:

“earnestly rectify and reform existing problems, and to conscientiously ensure the personal information security of the numerous users”.

In response, Didi said it had stopped registering new users and would remove its app from app stores - warning in a separate statement to investors that it expected the app takedown may have an “adverse impact” on its revenue in China.

Wall Street had been closed yesterday, so this is traders’ first chance to react:

CAC had already launched an investigation into the ride-hailing company on Friday to “safeguard national data security, maintain national security and protect public interest” .

Our China affairs correspondent Vincent Ni explains:

Some observers believe the move against Didi is part of a continuing crackdown by the Chinese authorities on what was once a loosely regulated technology sector. It follows government actions in recent months aimed at the online marketplace Alibaba, and social networks Tencent and Bytedance, the parent company of TikTok.

The government has also been ramping up its efforts to safeguard the nation’s data security and cybersecurity. In April, a dozen government agencies issued cybersecurity review measures, requiring critical information infrastructure operators to conduct network security reviews for technology products and services they procure that are relevant to national security or have the potential to be.

Deutsche Bank have warned that the balance of risks facing the global economy is slightly more negative.

In its latest House View, Deutsche says that recent weeks have seen the global recovery motor along as expected, supported by the vaccine rollouts and a further easing of restrictions.

But the balance of risks has deteriorated slightly, they say, due to the continued global reach of the delta variant and the market wobble last month when US Federal Reserve officials predicted two interest rate rises in 2023 to address inflation.

Although Wall Street hit record highs last week, Deutsche strategists continue to expect a 6-10% correction in US equities this summer given that growth indicators are peaking.

And Covid-19 will remain in the spotlight, they add, particularly as the global decline in cases since late-April has now stalled and the more-infectious Delta variant has emerged.

With vaccination rollouts now in an advanced phase across many developed countries, one of the biggest questions soon will be the extent to which governments and citizens are prepared to live with the virus.

That answer will have crucial implications for the shape of the recovery and the new steady-state we’re heading to. Watch the U.K. if it fully lifts restrictions in two weeks, with still high case numbers, for clues to the global picture.

6 Jul 202109.09 EDT

Sarah Butler

Sainsbury’s has enjoyed a boost in sales of beer and other home socialising staples during the Euro 2020 football tournament, but said it was struggling to keep up with the extra demand.

The supermarket chain was selling 17 packs of beer a second on Saturday as England fans stocked up for the quarter-final match against Ukraine.

Beer sales have surged 60% above normal levels during the tournament as a whole, the company said, and families have continued to eat more at home over the past few months, despite Covid-19 lockdown easing.

As a result, Sainsbury’s said there had been gaps on shelves and it was finding it challenging to keep up with higher than expected demand, amid a shortage of HGV drivers and a rise in staff absences as workers were forced to self-isolate...

6 Jul 202108.50 EDT

Vauxhall owner to invest £100m to build electric vehicles at Ellesmere Port

Jasper Jolly

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In another step in the UK’s long journey to net zero, Vauxhall owner Stellantis has announced that it will invest £100m to build electric cars and vans at Ellesmere Port, in Cheshire.

My colleague Jasper Jolly explains:

The move will make it the first large plant in the UK dedicated exclusively to electric vehicles.

It will build four electric vans and their passenger car equivalents at the UK factory under Stellantis’s Vauxhall, Opel, Peugeot and Citroën brands, replacing the Astra family car which will be built in Germany instead.

The decision will secure the jobs of 1,000 workers at Ellesmere Port as well as an estimated 3,000 in the supply chain.

The investment will be welcomed across the UK car industry, which has suffered from years of uncertainty over foreign owners’ investment plans since the Brexit vote in 2016. It is the second significant investment into the UK car industry in a week, after Nissan said it would pour £1bn into electric car and battery production in Sunderland.

The UK-EU trade deal that came into force at the start of the year has allowed companies to put in place longer-term plans to invest in new electric technology, despite the ongoing production difficulties caused by the coronavirus pandemic.

Stellantis will install new equipment to assemble battery packs at Ellesmere Port. However, the plant will source the cells that make up batteries from EU plants owned by ACC, a joint venture between Stellantis and French oil company Total. British-made vehicles with batteries sourced from the UK or EU will not face export tariffs when sold in European markets under the Brexit deal.

Stellantis would consider sourcing from the UK in future if so-called gigafactories – large battery factories – are established.

Here’s the full story:

6 Jul 202108.39 EDT

Full story: Sunak must spend extra £10bn a year on public services because of Covid

Richard Partington

Rishi Sunak will need to spend an additional £10bn each year on public services to deal with the continuing fallout from the Covid-19 pandemic after this year, the Treasury’s tax and spending watchdog has said.

The Office for Budget Responsibility (OBR) said the chancellor faced unfunded spending commitments across three vital government departments over the coming three years from the lasting effects of the pandemic.

It comes as Boris Johnson’s government warns the public that Britain must “learn to live” with the pandemic as risks to public health remain and the prospect of another difficult winter for the health service looms despite swift progress with the Covid vaccination programme.

In its fiscal risks report, the OBR said the chancellor faced significant headwinds, with the pandemic increasingly likely to leave a legacy of heightened funding pressures for public services after 2021.

It said pressure on health budgets could be about £7bn a year above current spending plans, due to the need to pay for a continuing test-and-trace programme, revaccinations and the health impact of the pandemic.

The funds would also be needed to deal with potential future outbreaks of the disease, as well as handling the growing backlog of routine treatments that were put on hold by the crisis.

Other ongoing pressures the government has not budgeted for include £1.25bn of catchup funding for education, as well as £2bn a year to fill holes in fare revenues for the national railway network and Transport for London...

The fiscal cost of acting early, or even late, on the transition to net zero pale into insignificance compared to the cost of completely unmitigated climate change, the OBR adds.

It has modeled the fiscal risks from an extreme, unmitigated climate scenario, in which increasing CO2 emissions cause average UK temperatures to rise by around 4°C by the end of this century.

It found it would cause “progressively more frequent and more costly shocks to the public finances than have historically been the case”, sending debt levels ratcheting higher as a series of shocks hits the government.

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That’s due to extreme weather events at home and the spillovers from even greater damages in hotter countries.

This scenario also shows a greater economic and fiscal costs of adapting to higher temperatures.

This would add to the UK’s other significant long-term pressures -- such as the increased spending demanded by an ageing society, and other cost pressures in the health system.

So debt ratchets up more sharply to reach 289 per cent of GDP by the end of the century, as the hit from each shock increases and the period between them to get debt back down diminishes

That’s almost three times today’s debt/GDP levels, and twice as high as you’d expected with a typical number of shocks over the century [and well beyond levels seen as sustainable].

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The OBR says such a worst-case scenario now appears “increasingly unlikely” – it would fail to take into account the mitigation policies already in place.

But while based on extremely broad-brush assumptions, they highlight the magnitude of the fiscal costs that might be avoided by successfully stabilising global temperatures in line with the Paris targets, the watchdog says, adding:

A true ‘current policy’ fiscal scenario that incorporates only actions underpinned by firm policies that have already been announced would therefore lie somewhere between this illustration of catastrophic unmitigated warming and the early action scenario.

Introducing the policies necessary to meet the climate targets that are set out in legislation in the UK and increasingly being adopted elsewhere would shift the ‘current policy’ outcome further away from the catastrophic scenario. But this is very much still work in progress.

The fiscal cost of achieving net zero by 2050 will be twice as high if the UK government delays taking action until 2030, rather than acting fast now, the UK’s fiscal watchdog says.

The Office for Budget Responsibility’s fiscal risks report shows taking early action to decarbonise the economy has a smaller net impact on the UK’s finances than Covid-19 or the 2008 financial crisis.

But delaying until the start of the next decade will end up adding twice as much to the national debt as acting fast.

And failing to take action has a catastrophic impact on the public finances (and, rather more importantly, the planet), with debt rocketing to 289% of GDP by the end of the century, up from about 100% now.

The UK’s Climate Change Committee (CCC) puts the cumulative investment cost for the whole economy between now and 2050, plus the operating costs of emissions removals, at £1.4trn in 2019 prices, the report says.

The Government has not said how much of that cost it expects to bear -- but the OBR assumes it meets a quarter of it. When combined with savings from more energy-efficient buildings and vehicles, the net cost to the state is £344bn in real terms. Spread across three decades, that’s an average of just 0.4% of GDP in additional public spending each year.

Speaking at today’s press conference, OBR chairman Richard Hughes explains that the watchdog has drawn up an ‘early action’ scenario, in which the UK ramps up carbon taxes and also boosts investment in green technologies from the mid-2020s.

In that scenario, making the transition to net zero by 2050 adds about 20% of GDP to government debt over the next 30 years, slightly less than the pandemic is expected to add in just two years, Hughes says.

The bulk of the cost comes from the loss of fuel duty, followed by government support for investments in zero carbon technology - which are only partly offset by taxing carbon more heavily.

The report says:

Carbon tax revenues. Our [early action] scenario assumes all emissions are taxed, and more heavily, from 2026-27 onwards (which could be achieved by extending the UK ETS [emissions trading system] or imposing a uniform carbon tax in its place).

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But, this is only one scenario for reaching net zero, and arguably ‘quite an optimistic one’ Hughes admits, in which governments around the world act decisively this decade to put their emissions on a steeply declining path.

So the OBR has modelled alternative scenarios - varying the timing of the transition, impact on productivity, and fiscal policy choices.

One scenario actually saves the government money -- if the investment costs are funded within existing spending plans (meaning a very tight squeeze on other public services), and the loss of fuel duty is replaced by another tax on motoring, such as a road user charge.

But under the ‘late action’ scenario, decisive steps to cut emissions globally and in the UK are delayed until the 2030s. Then, the UK must manage a more hurried and costly transition to net-zero - and misses out on five years of carbon tax revenues.

Under this scenario, debt in 2050-51 is 23 % of GDP higher than in the early action scenario, with GDP around 3% lower and direct public spending costs increasing by around a half.

Hughes says:

The price of this delay is a doubling of the total fiscal cost of the transition.

Hughes also points out that in some sectors of the economy, such as transport, decarbonisation pays for itself as improvements in battery technology drive the lifetime cost of electric cars below the cost of petrol cars.

But other areas have significant net costs, such as replacing household gas boilers with green alternatives, which society would have to bear.

The net cost to the government depends on revenues changes - net zero provides threats and opportunities. At risk are the revenues collected from petrol duty - which are almost certain to disappear once fossil-fuel cars are banned by 2030.

But, this can be partly made up for with a carbon tax (although the revenues here would decline as the economy shifted to net zero).

Here are more key charts from the report:

And here’s some reaction:

The OBR are now running through the report:

The OBR has also examined the risks which rising interest rates would pose to UK government debt -- and shows that this would be much less of a risk if it was accompanied by a stronger economy and rising productivity.

It has produced several scenarios to see whether the UK’s £2trn+ national debt, or around 100% of GDP, is sustainable if the cost of borrowing increased to historically more normal levels.

In the “benign scenario” where rising interest rates are matched by productivity growth, borrowing reaches 5.1% of GDP in 2050-51 (versus 2.9 per cent in the baseline), pushed up by higher interest rates as net interest payments rise to 3.3 per cent of GDP – a level last seen in 1985-86.

But that is offset by higher growth so that the debt-to-GDP ratio falls slightly below the baseline, although it remains above pre-pandemic levels at the end of the scenario in 2050-51.

In the second, more challenging scenario, interest rate rise without a pick-up in productivity, but because investors move towards riskier assets and away from government bonds. This leads to a sharper rise in the national debt.

That drive up the effective interest rate paid on government debt, pushing borrowing up to almost 7% of GDP in 2050-51. Without the offsetting gain from faster growth, debt hits 139 per cent of GDP by 2050-51, its highest level since 1954-55.

The report also examines the impact of rising inflation -- and concludes that the government can’t easily inflate the debt away.

That’s because the effective maturity of public debt has dropped as the Bank of England has run its quantitative easing programme, and more debt is index-linked (so the interest rate is pegged to inflation).

[A] temporary burst of inflation has only a modest impact on the debt-to-GDP ratio, which initially falls more quickly than the baseline mainly due to primary spending being held constant in cash terms. By 2050-51, debt reaches 95 per cent of GDP, just 2 per cent of GDP below the baseline.

With a persistent rise in inflation, there is a marginal improvement in the debt-to-GDP ratio in the first 13 years as inflation erodes the real value of the nominal debt (though again moderated by the shortening of the effective maturity of debt). But in the long run, the debt-to-GDP ratio actually rises to 107 per cent of GDP by 2050-51 (10 per cent of GDP above the baseline) as a result of the extra inflation risk premium being paid on the government’s borrowing.

The OBR has also examined the “extreme case of a loss of investor confidence in the UK’s creditworthiness” that causes a flight from UK government bonds.

This leads to a vicious circle where rising debt raises borrowing costs, which in turn increase the rate at which debt rises. In this scenario, an adverse shock, similar in magnitude to that experienced in the financial crisis, and a loss of investor confidence lead to a sterling depreciation and a rise in the risk premium on gilts.

In this scenario, higher inflation and the falling pound also force the Bank of England to raise Bank Rate to 4%, hurting growth.

The escalating crisis also forces the Government to borrow at shorter maturities so that higher market rates feed through into debt interest costs even more quickly.

Borrowing increases throughout the scenario due to a worsening primary balance as the economy shrinks, as well as escalating interest costs -- hitting 15% of GDP by 2029-30, close to its record peak last year.

The adverse feedback loop between higher debt and higher gilt rates leads to steadily rising interest costs, with the debt-to-GDP ratio increasing in every year. By 2029-30, the average gilt rate hits 10 per cent – a rate last seen in 1991.

The OBR ends the scenario in 2029-30 when the government’s interest costs reach 9.5% of GDP, above any level seen in war or peacetime......

The OBR warns that the UK faces a £10bn per year shortfall in spending on health, education and transport following the pandemic.

These “potential unfunded legacy costs of the pandemic” represent a material risk to the public spending outlook, the fiscal watchdog warns.

The Fiscal Risks report says:

Departmental spending plans make no provision for virus-related spending beyond this financial year. Instead, spending totals from 2022-23 onwards were cut by £14½ billion a year in Spending Review 2020 and the 2021 March Budget relative to the sustained rises in departmental spending planned pre-pandemic.

At the same time, overall public spending is still forecast to be higher as a share of GDP in the medium term than it was pre-pandemic.

Chancellor Rishi Sunak could redirect spending from other areas to address pandemic costs (causing a further squeeze there) or he could increase total spending - meaning further tax rises or increased borrowing, the OBR adds.

And it identifies three key areas where the pandemic could leave £10bn per year in spending pressures:

• Health. Pressures on health budgets could be around £7 billion a year from the potential need to pay for: standing test and trace and revaccination programmes; the consequences of the pandemic for individuals’ physical and mental health; additional spare capacity to cope with possible future outbreaks; and the pandemic-related backlog of treatments.
  
  
• Education. Schools may require around £1¼ billion a year to enable pupils to catch up on the estimated two to three months of education that they have lost on average during the pandemic, in addition to the £1.4 billion that has been committed since the Budget, with the intention of reviewing the case for further funding in the Spending Review.
  
  
• Transport. Around £2 billion a year may be needed to fill a 10 to 25 per cent hole in the fare revenues of the new Great British Railways and Transport for London (TfL) if passenger numbers do not return to pre-pandemic levels. The Government has already provided £12.8 billion of direct support to the railways and TfL in 2020-21. However, as of June 2021, passenger numbers on national rail and the London Underground were still down a half on pre-pandemic levels.

The pandemic has caused the largest and most synchronised peacetime shocks the world economy has faced since the Great Depression of the 1930s, the OBR points out...

-- with the UK one of the countries worst hit...

...although the economy has adapted, with successive lockdowns having less economic harm...

The government’s sizable rescue package has also supported the economy, they add: