Introduction: Food inflation across rich nations drops to pre-Ukraine war levels
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The global cost of living squeeze has eased, as food inflation across rich nations drops to its lowest level since before Russiaâs full-scale invasion of Ukraine.
After two years of surging prices, the annual rise in consumer food prices across 38 industrialised countries fell to 5.3% in February, the Financial Times reports, citing new OECD data expected today.
Thatâs down from 6.2% per cent in January, and well below a peak of 16.2% in November 2022, according to the latest OECD data.
Many global food commodities, such as cereals and dairy products, have been easing in recent months, after spiking in 2022, which is now feeding through to lower inflation in the shops. In the UK, food price inflation hit a two-year low last week.
The worst of high food inflation is now behind us, according to Carlos Mera, head of agricultural commodities at Rabobank, who told the FT:
âAgricultural commodity prices have dropped significantly in the last two years, since the peak in prices that followed the invasion of Ukraine, and this is acting as a disinflationary force even at [the] retail level.â
Falling inflation doesnât mean prices are falling, though; theyâre rising at a slower rate than before.
In many advanced economies, food inflation has dropped to around half its recent peak.
The OECDâs inflation gauge comes as financial markets reassess how quickly central banks will be able to cut interest rates this year.
In America, the economy is showing more vigour than expected, undermining expectations that the US Federal Reserve will cut borrowing costs three times this year.
Rising oil prices this year had also added to inflationary pressures. But this morning, Brent crude has dropped 1.7% to $89.60 per barrel, having hit a five-month high over $91 last week.
Kathleen Brooks, research director at XTB, says:
Headline inflation is now being impacted by the oil price. The WTI crude price is higher by 21% so far this year, and oil prices are now boosting US inflation after subtracting from it at the end of last year.
The International Monetary Fund is expected to release Chapter 2 of its World Economic Outlook (WEO) this morning, which will examine the impact of higher interest rates.
The agenda
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7am BST: German trade balance for February
-
8am BST: Philippines interest rate decision
-
9am BST: IMF to release Chapter Two of its World Economic Outlook
-
3pm BST: Israel interest rate decision
Key events
Yellen says US won’t allow China to decimate new industries
US treasury secretary Janet Yellen is wrapping up a visit to China by warning that Washington will not allow Beijing to decimate new US industries.
Yellen has just held a news conference after four days of talks with Chinese officials.
She said the talks had advanced American interests, and that she had raised concerns about Chinaâs overinvestment in industries such as electric vehicles, batteries and solar products, fueled by âlarge-scale government support.â
Yellen says:
âWeâve seen this story before. Over a decade ago, massive PRC [Peopleâs Republic of China] government support led to below-cost Chinese steel that flooded the global market and decimated industries across the world and in the United States.
âIâve made it clear that President Biden and I will not accept that reality again.â
ð¨ðºð¸ð¨ð³BREAKING: YELLEN – CHEAP CHINESE GOODS THREATEN WORLD ECONOMY
“Now, we’re seeing an increase in business investment in a number of new industries targeted by the PRC’s industrial policy, and that includes electric vehicles, lithium-ion batteries, and solar. China is now⦠pic.twitter.com/A32Z2D8x9N
— Mario Nawfal (@MarioNawfal) April 8, 2024
During her trip, Yellen also warned there will be âsignificant consequencesâ if Chinese companies provide support for Russiaâs war against Ukraine.
UK retailer insolvencies hit five-year high
The last year has been very tough for the UK retail sector, with weak consumer spending, rising costs and high interest rates pushing many retailers to the wall.
The number of retailers falling into insolvency jumped by 19% in the last year, new data from audit, tax and advisory firm Mazars shows, to 2,195.
High profile failures in the last 12 months include Body Shop, Ted Baker and Wilko, who all filed for administration.
Mazars says that many retailers have been hit by a combination of increased costs and cautious household spending among consumers, while higher interest rates are causing significant problems for any retailer that has a significant level of debt that is either âfloating rateâ or that is coming for refinancing.
Rebecca Dacre, partner at Mazars, says:
âWe are unlikely to see the retail sector trading comfortably until interest rates start to fall.
Despite inflationary pressures easing, high interest rates and low consumer spending continue to persist.â
âThe rise in the National Living Wage is the largest on record and some face a sharp rise in business rates from April.â
Pension and benefits rise today
The UK state pension has risen today, as have a swathe of benefits.
People receiving the state pension will get a 8.5% increase, after the government stuck with its âtriple lockâ policy of increasing pensions by the highest of inflation, wages, or 2.5%.
Todayâs increase, based on last summerâs wage inflation, will be worth an extra £900 a year to full rate claimants.
Universal credit claimants will receive a 6.7% increase, based on last Septemberâs inflation rate. Other benefits including the personal independence payment, disability living allowance and employment and support allowance are also rising by 6.7%.
Mel Stride, the Work and Pensions Secretary, said:
âThanks to the triple lock and our efforts to drive down inflation, we are putting money back in the pockets of pensioners. This is only possible because we have stuck to our plan and our economy has turned a corner.
âThis will make a meaningful difference to all those who rely on the state pension and ensure we continue to provide a safety net for those who need it most while making work pay wherever possible.â
German exports fall 2%
Germanyâs economy has suffered another drop in overseas sales.
German exports dropped by 2% during February, statistics body Destatis reports, worse than the 0.5% fall expected by economists. On an annual basis, exports were down 4.4%.
Demand from other European countries softened, with exports to EU countries down by 3.9% month-on-month.
Exports to the Peopleâs Republic of China fell by 0.6% to 8.0 billion euros, while exports to the UK fell 2%, but there was a 10.2% jump in exports to the US.
Imports swelled by 3.2% month-on-month, but were 8.7% lower than a year ago.
UK growth at âturning pointâ as economy gains momentum
Hopes are building this morning that the UK economy is pulling out of recession.
Two industry surveys suggest that UK growth has reached a âturning pointâ,
Accounting and business advisory firm BDO reports that output from UK businesses has risen for the second consecutive month to its highest level in nearly two years.
BDOâs Output Index, which tracks output across the services and manufacturing sectors â climbed to 102.39 in March, its highest reading since May 2022.
This, BDO says, shows a ârobust recovery and a turning point for the UK economyâ.
Kaley Crossthwaite, partner at BDO, says:
âOutput reaching its highest point in nearly two years illustrates the UKâs robustness in the face of global economic adversities and is a big step towards economic stability and growth.
âFor businesses, the main mood right now is cautious optimism â with drops in the Employment and Optimism Index showing that weâre not out of the woods just yet. All eyes are on the Bank of England, with an interest rate cut looking possible for June, as businesses hold out hope for a further recovery this year.â
Deloitte reports that sentiment among UK chief financial officers has risen for the third consecutive quarter, as bosses grow more optimistic about the prospects for their own businesses.
The proportion of CFOs reporting high or very high levels of uncertainty facing their businesses fell to 36% this quarter, Deloitte says, which is less than half the peak seen in mid-2022 (77%).
This takes uncertainty back to levels last seen in the summer of 2021 (35%), a time when national lockdown restrictions were ending.
Introduction: Food inflation across rich nations drops to pre-Ukraine war levels
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The global cost of living squeeze has eased, as food inflation across rich nations drops to its lowest level since before Russiaâs full-scale invasion of Ukraine.
After two years of surging prices, the annual rise in consumer food prices across 38 industrialised countries fell to 5.3% in February, the Financial Times reports, citing new OECD data expected today.
Thatâs down from 6.2% per cent in January, and well below a peak of 16.2% in November 2022, according to the latest OECD data.
Many global food commodities, such as cereals and dairy products, have been easing in recent months, after spiking in 2022, which is now feeding through to lower inflation in the shops. In the UK, food price inflation hit a two-year low last week.
The worst of high food inflation is now behind us, according to Carlos Mera, head of agricultural commodities at Rabobank, who told the FT:
âAgricultural commodity prices have dropped significantly in the last two years, since the peak in prices that followed the invasion of Ukraine, and this is acting as a disinflationary force even at [the] retail level.â
Falling inflation doesnât mean prices are falling, though; theyâre rising at a slower rate than before.
In many advanced economies, food inflation has dropped to around half its recent peak.
The OECDâs inflation gauge comes as financial markets reassess how quickly central banks will be able to cut interest rates this year.
In America, the economy is showing more vigour than expected, undermining expectations that the US Federal Reserve will cut borrowing costs three times this year.
Rising oil prices this year had also added to inflationary pressures. But this morning, Brent crude has dropped 1.7% to $89.60 per barrel, having hit a five-month high over $91 last week.
Kathleen Brooks, research director at XTB, says:
Headline inflation is now being impacted by the oil price. The WTI crude price is higher by 21% so far this year, and oil prices are now boosting US inflation after subtracting from it at the end of last year.
The International Monetary Fund is expected to release Chapter 2 of its World Economic Outlook (WEO) this morning, which will examine the impact of higher interest rates.
The agenda
-
7am BST: German trade balance for February
-
8am BST: Philippines interest rate decision
-
9am BST: IMF to release Chapter Two of its World Economic Outlook
-
3pm BST: Israel interest rate decision