23/08/2017 BBC Business Live


23/08/2017

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This is Business Live from BBC News, with Rachel Horne and Ben Thompson.

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Advertising a slowdown, global giant WPP misses targets

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as big companies pull spending on adverts.

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Live from London, that's our top story on Wednesday 23rd August.

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Consumer giants are cutting their ad spend with WPP, but is it a sign

:00:33.:00:36.

of economic weakness or just a symptom of the shift

:00:37.:00:38.

Also in the programme, Typhoon Hato causes havoc in Hong Kong,

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leading to hundreds of flights being cancelled and a stock

:00:45.:00:47.

We have the FTSE 100, down, the WPP share prices down already tempers

:00:48.:01:00.

and this morning. We will bring you all of those figures in a moment.

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And we'll get the Inside Track on the cost of keeping fit.

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We meet one man flexing his financial muscles -

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and boosting his gym empire in the depths of a recession.

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And with the global fitness industry now worth a staggering $83bn

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a year we want to know, how much do you spend

:01:19.:01:21.

WPP - the world's largest advertising group -

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has cut its sales outlook, after a drop in demand

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from consumer goods clients and weak trading in the US.

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Like-for-like net sales fell 0.5% while underlying net sales in the US

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fell by 2.2% in the first half of the year.

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Shares in he giant have tanked this morning ,

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The advertiser is seen a bellwether for an industry that's changed

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While the total spent by brands globally on advertising in 2016

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was up at $493 billion, where it's being spent

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were effectivly flat, global digital ad sales

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That number will of course keep growing,

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and by 2021 it's estimated it will account for 50% of all adverts.

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Well, mostly to Facebook and Google, together they control

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54% of the global digital advertising market,

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But are adverts on these platforms even getting to their audience?

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It's been estimated that invalid traffic, that's where a bot rather

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than a human views an advert, is costing advertisers a staggering

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$16.5 billion a year, and that number is expected to grow.

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Well, a little earlier I spoke to Sir Martin Sorrell,

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the CEO of WPP who explained what his company was doing

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There are a couple of points here. First there is the bots issue, that

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these ads are not being watched by people but by machines and we are

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ever vigilant on that. Group M, our media planning and buying company,

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which buys about $75 billion of media around the world, about 25% of

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worldwide media that goes direct to agencies, or goes through agencies.

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They have very high standards, in terms of viewability, measurability

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to try and counter that. And then there is the consumer brand safety

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issue, which you are sort of referring to, which is that some

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material might end up in less than satisfactory, to put it mildly,

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areas or parts of the internet. And that is an area it has become even

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more important, fake news and fraud also becoming important. And that is

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a question. You can't be 100% certain that you can cover this,

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that you can be much more stringent, in terms of the rules. Facebook, for

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example, and Google have made strenuous efforts recently, under

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some pressure to do so, but they have made strenuous efforts

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recently, and they dominate digital advertising.

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With us is Stephen Woodford, Chief Executive at the

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There is a lot for us to get through in these results but first of all it

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is worth living at what advertising tells us about the wider economy,

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because it is one of those things we call a bellwether, when advertising

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is doing well, the economy tends to do well, and vice versa. So what

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does this tell us about the economy? When you look at the contribution

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advertising makes to the economy it is a very important bellwether. It

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has a big impact on the overall economy, as well as being a big

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sector in its own right. One of the things we should think about it is

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2016 was a record year for the advertising industry, particularly

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in the UK. 2017, we are still forecasting some growth. Why was

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2016 so good? It was surprisingly good because in effect all of the

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Brexit scare stories did not serialise, the this is where it

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feeds through to the bellwether, because business confidence in a

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sense determines a lot of advertising decisions, so it is

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businesses's expectations of what consumers will be doing. What do you

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think that these figures we have seen from WPP? The markets are

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surprised, the share price has fallen by over 10% this morning.

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Were you expecting the sorts of figures from WPP? I think we were,

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in terms of potentially less organic growth may have had in the past but

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I can't really comment on the share price fall, but I do think it is

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worth saying about WPP, it is the world's leading company so it is a

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very good bellwether for the global advertising industry, and it is also

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a reflection of the British advertising industry, how many

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industries is the world's biggest company a British one? I think WPP

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is something we should be very proud of here in the UK. If it is a

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bellwether, does it sound the alarm that they are growing their growth

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predictions, sales have fallen, problems in the US? I can't comment

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on the detail of that but I think there is overall a potential

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softening of demand because of the overall global economy. That being

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said, if the US carries on performing strongly I would expect

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advertising to rebound. Certainly in the UK at our expectations are low

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growth but still some growth in line with the economy. If you look at an

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organisation like WPP, traditionally made a lot of its money from TV and

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big billboard ads. Clearly that has now changed and it is now digital.

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You might say a integrated agency that can do online, print, big

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posters and TV is commandeering the market. Where is the growth coming

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from? Digital platforms in particular, and the piece before

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talked about the growth of Google and Facebook. But it is worth saying

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all advertising media is going digital. Even the oldest media,

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posters, is not for the 5% digital, in terms of digital outdoor display

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ads and so on. The industry, television and radio and press is

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going digital. This year, digital revenues up by 25%, a quarter of all

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of their advertising revenue. Even press is very strongly going on the

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digital channels, so I think the whole industry is changing towards

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more digital channels. This dominance from Facebook and Google,

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when it comes to digital advertising, can you see anybody is

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coming in in the future and taking any share off them? It is hard to

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predict the future. The rise of other platforms, Google and Facebook

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will fear most new platforms coming, whether it is Amazon or others. It

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is a strong overall indicator of the health of the market is the balance

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between these two things. Generally, advertising works best when you use

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a multiple of channels, ideally for the five different channels. TV on

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its own can be very good, digital on its own can be very good, when you

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use the two together you get better results. The best advertising tends

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from using brand building advertising and short-term

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advertising, which is usually digital. You have an update on the

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WPP share price, you saw it on the screen, it is down 149 points this

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morning, more than a 10% fall in the share price in the first 38 minutes

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of trade for WPP, so investors not to thrilled.

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In Hong Kong, the city's stock market has been shut down

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and flights have been cancelled by Typhoon Hato, which has been

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Sharanjit Leyl is in our Asia business hub.

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What impact is that storm having on the financial markets, they have

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been shut, schools and businesses shut, what impact will that have on

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the city? You pretty much said it, all of those things are shut down.

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Hong Kong has come pretty much to a standstill. The typhoon really a

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category eight storm, down from category ten, which means the struct

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of Winscombe huge waves, uprooted trees, flooded streets, closed

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businesses. No trade for the Hang Seng. We know it is the worst storm

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the special administrative territory hasn't Jordan Silk -- since 2012.

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More than 400 flights have been cancelled and cafe Pacific said the

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storm would severely impact flights. We are told only one flight managed

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to land earlier this morning. Now the schools are closed, all of the

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skyscrapers in Hong Kong's iconic skyline are shrouded in darkness, as

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workers stay home. Bearing in mind it had been a category ten typhoon

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warning initially and this was really only the third time one had

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been issued since 1997 when the former British colony was handed

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over to China. Even though the territory suffers the storms on

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pretty much an annual basis, this one may well be bad enough to have

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an impact on businesses and the economy. Thank you very much.

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Let's take a look at some of the other stories making the news.

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Chinese car-maker Great Wall Motor has said it has not held

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talks with Fiat Chrysler, putting a possible bid

:10:57.:10:58.

Great Wall confirmed it had researched the US-Italian car-maker

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but made no substantial progress towards a deal.

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On Monday, the car-maker expressed interest in buying

:11:08.:11:09.

Shares in the Chinese firm fell 2% in Shanghai after the announcement,

:11:10.:11:17.

Amazon's blockbuster deal to acquire Whole Foods Market for $13.7 billion

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Whole Foods shareholders are voting today on the deal,

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which would propel Amazon further into the grocery business

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The size of the gender pay gap in the movie industry has been

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It estimates the top ten actors earned $488m last year -

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three times their female counterparts - who took home $172m.

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Transformers star Mark Wahlberg tops the male list at $68m, compared

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with $26m for La La Land's Emma Stone.

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Let's look at how the markets have been getting on. Markets in Asia

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generally up just a little, following a surge they saw yesterday

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running with a bit of optimism over US tax reform plans. The Hang Seng

:12:13.:12:18.

is actually closed at the minute because of typhoon Hato, so that is

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why it is flat. Wall Street, the dial up almost 8%. An even higher

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rise on the Nasdaq. Much more attention will be on the central

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bank meeting duties. Tomorrow. Will the Federal Reserve boss give any

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plans about the bank's plans to wind in its huge bond holdings? We will

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talk about that in a moment. Let's see European markets have been

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doing, the FTSE is down ever so slightly. WPP share prices down more

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than 11% now this morning. Future growth down from 2% to between zero

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and 1%. In Europe, central bank chief, the ECB chief, Mario draggy,

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he is going to speak today. Investors will be looking to see

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what he says. Let's go to Wall Street and Michelle Fleury. When

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Hewlett-Packard split into two companies, HP ink which has as its

:13:25.:13:28.

printer and copier business was considered the runt of the letter.

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Investors saw for growth opportunities in the enterprise side

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but HP think has surprised many, in a good way. -- HP Ink. Given the

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lacklustre PC and printer market, profits are likely to fall. Look out

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for more news on America's housing market. Recent data shows house

:13:53.:14:00.

prices have recovered. The latest figure is expected to show an

:14:01.:14:04.

increase in July but investors are watching the signs of weakness. So

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well concerned over a looming slowdown hurt profits at home

:14:08.:14:16.

improvement retailer, Lowes, which shows its second-quarter results.

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Joining us is James Quinn, business editor, Telegraph Media Group.

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We spoke about WPP at the start of the show. Is this a shock? I think

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it is one of those bellwether stocks. If you look at the global

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economy, pretty stark words from Martin Sorrell earlier. I think it

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is a surprise, yeah. Possibly an element of surprise. The share price

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will probably end the day six or 7% down. When a company share price

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drops this far, this fast, will you now see people going, let's by a

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bargain? There will be some bargain buyers looking for activity. It is

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August. A lot of traders will be away. A lot of problematic trades

:15:12.:15:16.

kicks in there. Then real-life traders return. Sally is not here

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today. She gets very excited about the central bank action. I will play

:15:24.:15:28.

that role. We will hear from Mario Draghi today. What we expect from

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Mario Draghi? She has started speaking while we have been on air.

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He is largely talking about Monetary Policy Committee regulation. Not

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talking too much about tapering. The initial reaction was quite muted. At

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the same time we have strong numbers from Germany today showing how

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strongly the German economy is growing. That is quite interesting

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in terms of what he and Janet Yellen will talk about. I think she will

:16:00.:16:07.

avoid talking about tapering. Her speech will focus on financial

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stability. The speeches are analysed to the nth degree. On the on this

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programme can we talk about someone making a speech to avoid something.

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We will talk more in awhile. For now, thanks.

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Still to come, the business of fitness - we hear from the man

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who's bucking an economic slowdown and running one of the world's most

:16:31.:16:33.

successful gym chains in South America.

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You're with Business Live from BBC News.

:16:36.:16:45.

Identity theft has hit new record levels, according to the Fraud

:16:46.:16:49.

It says nearly 90,000 cases were recorded by the group

:16:50.:16:55.

in the first half of the year, with young adults

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The BBC's personal finance reporter, Kevin Peachey,

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Kevin, what do the numbers tell us? They show that cases went up by 5%

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in the first half of the year. That takes it to 500 cases a day.

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Name-macro says it has reached epidemic levels. -- Theresa May. It

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is not the old and vulnerable. It is people in their 30s and 40s. People

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with a digital footprint to have been online are social media and so

:17:29.:17:33.

their identities have been stolen. What can people do to prevent it? Is

:17:34.:17:40.

it as simple as constantly changing your password? There is an element

:17:41.:17:44.

of that. Some people don't realise they have been victims because the

:17:45.:17:48.

fraudsters have taken out a loan in their name. They are getting their

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details from public records and the dark web, part of the Internet that

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is not available on a conventional search. So Cifas says yes, people

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should be changing their passwords. They should be using... Employers

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should be educating staff on how to keep on top of fraud prevention and

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making sure they are changing passwords and keeping safe online.

:18:15.:18:18.

What is really interesting is that young adults are the most likely

:18:19.:18:22.

target. When we think about online fraud, we thought maybe it was older

:18:23.:18:28.

people? Absolutely. The over 60s are the only age group cases are going

:18:29.:18:34.

down it is coming up the fastest among 20-year-olds. That is clearly

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because they are part of social media. They have a strong online

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presence. The 30s and 40s are where the most cases are overall.

:18:44.:18:48.

Thank you, Kevin. Go and change your password. There is an interesting

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story on the Business Live page. The new Heathrow boss slamming -- the

:18:54.:18:59.

former BA boss slamming Heathrow over its new runway. He says the

:19:00.:19:07.

plans are not credible. Sir Rod Eddington is advising a rival scheme

:19:08.:19:11.

proposing an alternative to the runway at Heathrow. Nonetheless, he

:19:12.:19:17.

knows what he is talking about. This claim will have some weight. That is

:19:18.:19:19.

on the website. Our top story - the world's biggest

:19:20.:19:23.

advertising group, WPP, has cut its sales outlook,

:19:24.:19:27.

following a drop in demand from consumer goods companies

:19:28.:19:30.

and weak trading in the US. Let me show you what the markets are

:19:31.:19:44.

doing. WPP one of the big fall is so far. Currently down almost 11%.

:19:45.:19:49.

Investors somewhat surprised by that lowering of the growth forecast.

:19:50.:19:56.

That is probably why the FTSE 100 has tipped into the red. The pound

:19:57.:20:01.

weakening once again over the course of the week. That has been a

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continuing trend stop And now let's get the inside track

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on the fitness industry... Globally the industry

:20:06.:20:08.

was worth $83.1bn in 2016, and it continues to grow,

:20:09.:20:11.

specially in Europe and the USA. Latin America has seen slower

:20:12.:20:17.

growth, but 20 million consumers there use more

:20:18.:20:19.

than 65,000 health clubs. In Brazil, one man has

:20:20.:20:22.

been defying all trends. Edgard Corona's Smart Fit now has

:20:23.:20:26.

365 gyms across the continent. The BBC's Daniel Gallas metup

:20:27.:20:33.

with him in Sao Paulo. He began by askinghim how he has

:20:34.:20:35.

expand the business in the middle the whole idea is that -- at the

:20:36.:20:51.

beginning is less divine. When we want uniforms, we chose fashion

:20:52.:20:56.

designers. It is a very important factor. Everything together. The

:20:57.:21:07.

system that you provide, the programmes that you create, help us

:21:08.:21:11.

to be different from the market. If you are in the US, from the total

:21:12.:21:18.

number of members, you have 70 weight percent in this business. --

:21:19.:21:27.

seven to 8%. The people come. What makes members stay is the right

:21:28.:21:30.

process to deliver results. What we are looking for and trying to

:21:31.:21:35.

improve his results in a short period of time. So the great value

:21:36.:21:45.

that you have is time. If I ask you to exercise two hours a day, you

:21:46.:21:52.

will say, I don't have this time. But you can come here three times a

:21:53.:21:59.

week, 30 minutes. Increase your metallic -- metabolism speed, reduce

:22:00.:22:03.

your weight, improve your health. You will see a healthy, more

:22:04.:22:12.

beautiful, thinner... A lot of people say that Brazil is a very

:22:13.:22:15.

hard place to do business, that it is risky to invest here. Why do you

:22:16.:22:23.

do it and how do you do it? For sure, maybe it's not an easy place

:22:24.:22:29.

to do business. But in Brazil, everything that you do, regulations,

:22:30.:22:34.

regular Tories and everything, is very, very tough. A lot of laws, a

:22:35.:22:46.

lot of rules to improve people's lives. And most expensive. Maybe

:22:47.:22:58.

Latin Americans understand how to work in this kind of environment.

:22:59.:23:07.

Expanding in a downturn. Some markets are pretty resilient. We

:23:08.:23:09.

have been asking you how much you would spend on keeping fit. Amanda

:23:10.:23:18.

says walking and housework are free. Ed says, how much of that ?83

:23:19.:23:24.

billion, it's actually dolorous, is made up of multiple gym memberships

:23:25.:23:32.

going on used? Jerome says he pays ?90 per month, which is ?300 for

:23:33.:23:38.

every swim he takes. Samantha says ?85 on running trainers, worth every

:23:39.:23:43.

penny. Good trainer is important. Andrew says YouTube provide advice

:23:44.:23:48.

for exercise at home. Lots of free online sessions. Jim locations are

:23:49.:23:55.

very smart these days. Mine is next to a KFC and a McDonald's. It is a

:23:56.:24:00.

vicious circle. James Quinn is back with us. There is a really nice

:24:01.:24:09.

story in the Guardian. Poor and overpriced funfair rides could be

:24:10.:24:13.

closed under new rules. There is a shining light on this, we may get

:24:14.:24:20.

better rides? That's right. The competition authority has decided to

:24:21.:24:26.

look at this sector, questioning whether when one funfair comes to a

:24:27.:24:30.

town, whether another one can, the same time, whether pricing too high.

:24:31.:24:35.

They are really expensive. If you want to go on the merry-go-round, it

:24:36.:24:43.

is $5, $6. Yes. Some pricing is in question. The showman 's Guild of

:24:44.:24:50.

Great Britain, the governing body of the funfairs, has said, yes, we

:24:51.:24:55.

agreed. Maybe some of our practices are not up to scratch in the modern

:24:56.:25:04.

era. Let's wrote in the New York Times. Apple plans for a self

:25:05.:25:12.

driving car. It is a crowded market. It seems Apple has decided they will

:25:13.:25:16.

put their technology to use in a self driving car. Apple's

:25:17.:25:22.

headquarters is in silicon valley in the US. They will try this

:25:23.:25:27.

technology in a shuttle bus that takes employees to work. That is a

:25:28.:25:33.

risk! It is slightly different to testing and iPhone! Good to see you.

:25:34.:25:40.

Thank you James. Good -- thank you for all your comments.

:25:41.:25:45.

Really interesting when you talk about how much the fitness industry

:25:46.:25:53.

is worth. 83 billion dollars a year. It is all the gear, everything.

:25:54.:25:55.

There will be more business news throughout the day

:25:56.:25:59.

on the BBC Live web page, and on World Business Report.

:26:00.:26:01.

Good morning. It has been a pretty wet night across Northern Ireland

:26:02.:26:14.

and Scotland. I am hopeful of the weather improving from any today as

:26:15.:26:22.

the rain band clears, you can see the front which is draped across

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