Good evening,
The cost of living crisis is pounding the British economy. Official figures released today showed a jump in inflation to 9 per cent, the highest level the country has seen in more than 40 years.
The increase in prices, which is double the amount expected by the Bank of England just six months ago, is being driven by sharp rises in energy costs and the tightest labour market since the early 1970s — as yesterday’s employment figures showed. In fact, the buoyant labour market will make it harder for the BoE to tame inflation, according to the FT’s Delphine Strauss and Chris Giles.
Stagflation is on the cards for several countries this year, but the UK is especially exposed to the toxic combination of high inflation and low growth.
Britain is far from alone in having to tackle this issue, but it now holds the dubious honour of having the highest inflation rate in the G7 group of rich nations, as shown in the FT’s global inflation tracker.
The impact of rising prices is being felt in that most British of institutions, the pub, with two of the largest operators warning today that they have had to axe discounts, reduce energy use and simplify their food menus to minimise price hikes for customers. Another sign of the times is a rise in home cooking, as seen in Premier Foods’ results below.
The BoE has tried to deflect blame for the cost of living increase. The central bank’s governor Andrew Bailey cited global shocks when referring to the rise in prices and added that there “isn’t a lot we can do about it” rising to double-digits by the end of the year. A depressing conclusion to a depressing state of affairs.
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Need to know: the economy
Japan’s economy shrank during the first three months of this year, weighed down by Covid-19 restrictions and soaring global commodity prices accelerated by the yen’s fall to a multi-decade low.
Latest for the UK and Europe
The pandemic has made it harder for the UK government to recruit and train staff for key regulatory bodies, making it more difficult for the country to capitalise fully on the benefits of leaving the EU. The National Audit Office found staffing shortages, including of veterinarians, lawyers and toxicologists, at the Competition and Markets Authority, the Health and Safety Executive and the Food Standards Agency.
Global latest
Chinese president Xi Jinping’s zero-Covid policy is causing growing financial strain in the world’s second-largest economy, with the FT uncovering evidence that local authorities are now diverting funds from poverty alleviation and infrastructure spending to pay for mass coronavirus testing.
International investors dumped $16bn worth of Chinese bonds in April, reflecting the decline in the renminbi’s value and more attractive returns on dollar debt. That marked the third straight month of net sales by offshore investors and contributed to a record Rmb235bn ($34.8bn) net outflow in renminbi-denominated debt since the beginning of 2022.
Need to know: business
The war in Ukraine has been blamed for scotching a merger between Commerzbank and UniCredit and thus further delaying European banking’s long-awaited cross-border consolidation wave.
China’s crackdown on technology companies and tough Covid-19 restrictions have hit Tencent, the country’s most valuable company, which reported its slowest revenue growth on record for the three months to March.
Peloton, whose internet-connected home exercise bikes made it a pandemic winner, has drawn strong demand from public and private investors — including Blackstone and Apollo — to secure a $750mn loan. The financing deal was necessary for Peloton, which has struggled since lockdowns were lifted, and last week reported widening losses and dwindling cash on its balance sheet.
Another company that prospered during the pandemic was Premier Foods, manufacturer of British comfort food brands such as Mr Kipling cakes and Homepride sauces. It has continued its run of success post-lockdowns, reporting a boost to sales from rising inflation pushing British consumers to eat at home more often.
JPMorgan shareholders have issued a stinging rebuke to chief executive Jamie Dimon and his senior management team over pay. At the Wall Street bank’s annual meeting, only 31 per cent of investors backed the $201.8mn remuneration plan for six senior executives, including a $50mn one-off special payment to Dimon. If New York mayor Eric Adams gets his way, Dimon will also be forced to ride the subway to work. It would certainly save him a few dollars on limousine rides and help Adams in his quest to get New Yorkers back on public transport and into their city centre offices.
These are turbulent times for Hong Kong’s private jet market. The number of these aircraft kept in the city has shrunk significantly because of a triple whammy of pandemic border closures, the financial crisis at Evergrande —China’s second-largest property developer — and a US tax break allowing owners to write off the cost of such planes against federal taxes.
The World of Work
Rumours of the death of the office and city centre shopping have been greatly exaggerated, according to commercial property landlord British Land. The FTSE 100 company reported underlying profit was up by a quarter to £251mn, compared with the previous year, and said it was leasing space at the fastest pace in a decade.
Movements such as #MeToo against sexual harassment and the worldwide Black Lives Matter protests that followed the murder of George Floyd two years ago this month have sharpened the focus on diversity. That shift is now driving demand for training to help senior management tackle the challenges and opportunities of supporting diversity, equity and inclusion at work.
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And finally . . .
What do Wall Street watchers do when they are not hunting with the pack? They go fishing. Robert Armstrong, writer of the Unhedged newsletter (which you can sign up to here), took time out from assessing credit market spreads to learn from a group of friends how to land yellowfin tuna in the idyllic coastal waters off Colombia.