UK shoppers face biggest price rises since 1990 in Christmas rush – business live

Written by on November 25, 2021

Brrrrr it’s cold out there today in Europe, in a cold snap that is pushing up power prices:

Bloomberg’s Stephen Stapczynski has the details:

Stephen Stapczynski
(@SStapczynski)

Nordic power prices just surged to a record high on sub-zero temperatures and low output from wind farms 🇸🇪 📈

Day-ahead power prices gained 37% to 151.33 euros/MWh in the Nord Pool spot auction for Friday, the highest everhttps://t.co/QxGuWGIE28 pic.twitter.com/C1pZoLsTki

November 25, 2021

Stephen Stapczynski
(@SStapczynski)

Meanwhile, French power futures for Monday rose to 625 (!) euros/MWh, another all-time high, as a blast of cold weather expected to boost heating demand https://t.co/iONWDoVk6F

November 25, 2021

Americans sitting down for Thanksgiving lunch also face the sharpest jump in prices in 30 years.

Jim Reid of Deutsche Bank explains, in his Chart Of The Day (below):


If the American Farm Bureau Federation is right, then your Thanksgiving meal this year will be the most expensive on record, up +13.7% since last year, the second highest increase in the 36 years they have run the survey, only behind the +16.8% increase in 1990.

Over the very long term agriculture prices tend to decline in real terms. A look at p.43 of our last annual long-term study (link here) shows that wheat for example has an annual real return of -1.1% p.a. over the last 150 years. However as the second line on the chart from the FAO (UN Food & Agriculture Organization) shows, real international food prices have climbed to their highest since 1975 after last year being lower than where they were when their data started in 1961.

So even food, which normally falls in price in real terms over the long run, is soaring in price in 2021. Inflation is becoming more and more broad based across the economy as we hit the home straight of this year.



Cost of Thanksgiving Dinner, vs the UN food price index

Photograph: Deutsche Bank

WTO chief sees global supply chain problems as ‘transitory’

The head of the World Trade Organization said on Thursday that she expects global supply chain problems to be short-lived, saying that they will go into 2022 but not beyond, Reuters reports.

“Our assessment of this situation is it is not a structural issue. It’s a transitory issue,” Ngozi Okonjo-Iweala told a media briefing, saying she expected them to stretch into 2022 and then work themselves out after several months.

Supply chain problems have emerged as the global economy has pulled out of a pandemic-induced recession and threaten to slow recovery. They have already stoked inflation.

Devdiscourse
(@dev_discourse)

WTO chief sees global supply chain problems as ‘transitory’ https://t.co/3hjfiULyRG

November 25, 2021

Orbit becomes latest UK energy supplier to go bust

Another UK energy supplier has gone bust, following the collapse of Bulb earlier this week, bringing the number of households affected by a supplier failure closer to the 4m mark.

Orbit Energy confirmed it was the latest casualty of the energy market crisis, bringing the total number of suppliers that have failed to 24 in fewer than 12 weeks, as companies unable to withstand higher wholesale prices go under.

The latest collapse was announced by the energy regulator Ofgem in a tweet that also named Entice Energy – but the post was later deleted. A spokesperson for Entice could not be reached for comment.

An Ofgem spokesperson said the tweet was sent in error.

However, Orbit later updated its website to say it was ceasing to trade.

It added:


“Ofgem, the energy regulator, is appointing a new supplier for its customers. Customers need not worry, their supplies are secure and funds that domestic customers have paid into their accounts will be protected if they are in credit.”

Poland has announced a 10 billion zlotys (£1.8bn) package to help its citizens cope with the jump in inflation.

The programme will temporarily cut taxes on petrol, gas and electricity and provide cash payments to households, to cushion the cost of living squeeze.

Associated Press has the details:


Poland’s Prime Minister Mateusz Morawiecki said Thursday that starting in December the government will cut tax on fuels and on energy and will offer bonuses to hardest hit households next year to counter inflation that has reached its highest level since 2001.

Morawiecki said that the so-called “anti-inflation shield” will cost the government some 10 billion zlotys ($2.4 billion) while additional funds will come from spending cuts.

He blamed the inflation, which was 6.8% in October, year-on-year, on higher energy costs, saying they stem from Russia’s gas policy, the European Union’s climate policy and CO2 emission certificate prices, as well as on bonuses that were paid out to help businesses survive the COVID-19 pandemic. Prices have risen on foods, fuels and energy.

“We are offering a large reduction of tax, in order to cushion the effects of the inflation,” Morawiecki said.

Mexico’s economy shrank by more than expected in the last quarter as the Covid-19 pandemic hit businesses.

Mexico’s GDP fell by 0.4% in the third quarter of the year, updated data show, twice as bad as the 0.2% contraction first reported.

A nearly 1% contraction in tertiary activity, which includes services and transport, hit the economy, as the Delta variant hit service sector companies.

Global supply chain disruptions have weighed on a recovery in manufacturing, with ‘secondary activity’ such as factories only rising 0.3%.

Pantheon Macro
(@PantheonMacro)

Final GDP for #Mexico in Q3 “Weaker than expected due to the Delta wave.” @andres__abadia

November 25, 2021



An aerial view of vehicles and machines for export at the Port of Lianyungang on November 15, 2021 in Lianyungang, Jiangsu Province of China.

An aerial view of vehicles and machines for export at the Port of Lianyungang on November 15, 2021 in Lianyungang, Jiangsu Province of China. Photograph: VCG/Getty Images

The global supply chain problems pushing up the cost of UK goods in the shops, and weighing on the eurozone recovery are partly due to delays at China’s ports.

Bloomberg has looked into this, and found that China’s tough quarantine rules are hitting the shipping industry’s recovery:


China’s increasingly extreme Covid Zero policies are standing in the way of a full recovery for the shipping industry and prolonging a crisis that’s snarled ports and emptied shelves worldwide.

In its attempts to keep the virus out, China’s continued to prohibit crew changes for foreign crew and recently imposed as much as a seven-week mandatory quarantine for returning Chinese seafarers. Even vessels that have refreshed their crew elsewhere have to wait two weeks before they’re allowed to port in China.

To comply, shipowners and managers have had to reroute ships, delaying shipments and crew changes, adding to the supply chain crisis. “China’s restrictions cause knock-on effects,” said Guy Platten, the secretary general of the International Chamber of Shipping, which represents shipowners and operators.

“Any restrictions to ship operations have an accumulative impact on the supply chain and cause real disruptions.”

Mena Commodities ®
(@MenaCommodities)

#Shipping #Covid_19 🦠

Supply-Chain crisis only getting worse with #China’s 7-Week Port Quarantine pic.twitter.com/i3xA8dkfBI

November 25, 2021

Carbon dioxide emissions in China have fallen for the first time since last year’s lockdown, a report today shows.

It’s a sign that the downturn in China’s property sector, energy shortages, and the clampdown on polluting industries have all hit factory output.

Emissions declined by about 0.5 per cent in the three months to the end of September, according to data published by Carbon Brief, a climate research and news service.

It is the first decline since the first quarter of 2020, when the pandemic forced China to impose lockdowns and travel restrictions.

It might show that China will hit peak emissions earlier than forecast. Alternatively, Beijing could stimulate its economy again, leading to a pick-up in emissions.

Carbon Brief’s Simon Evans has tweeted the details:

Simon Evans
(@DrSimEvans)

NEW

China’s CO2 emissions fell 0.5% in Q3 2021 – important new analysis for @CarbonBrief by @laurimyllyvirta

It’s the first drop since lockdown & a big turnaround from post-Covid surge earlier this yr

Could it mark an early emissions peak?

1/https://t.co/0LmywrDAdu pic.twitter.com/oX5Sv3P4Od

November 25, 2021

Simon Evans
(@DrSimEvans)

China’s post-Covid stimulus drove a big spike in demand for CO2-heavy construction materials

But with the real-estate sector slumping, so too demand for cement and steel

2/https://t.co/0LmywrDAdu pic.twitter.com/gIDNfVgXTP

November 25, 2021

Simon Evans
(@DrSimEvans)

The real-estate slump is combining with the energy crunch, which means China’s coal demand is currently falling – contrary to widespread misperceptions

As a result, the country’s CO2 emissions are now in a declining trend that looks set to deepen

3/https://t.co/0LmywrDAdu pic.twitter.com/B8NVQvJbIj

November 25, 2021

Simon Evans
(@DrSimEvans)

The signs of further emissions decline can be seen in steel industry operating rates (red lines), where output was down 23% in October compared with a year earlier

4/https://t.co/0LmywrDAdu pic.twitter.com/TaGUXPxJgo

November 25, 2021

Simon Evans
(@DrSimEvans)

Longer term, renewable capacity additions continue to increase, with 37% more solar & 33% wind added in the first nine months of 2021 than a year earlier

Investment in nuclear was up 52%

…but as yet no sign of a slowdown in fossil-fired capacity

5/https://t.co/0LmywrDAdu pic.twitter.com/E7vdzSN6gJ

November 25, 2021

Simon Evans
(@DrSimEvans)

In transport, EV production is also on a rip, up 160% in the first 10mths of the year

“new energy vehicles” made up 13% of overall output in 2021 to date, increasing to 17% in October

6/https://t.co/0LmywrDAdu pic.twitter.com/phVnN9TnMP

November 25, 2021

Simon Evans
(@DrSimEvans)

What comes next has big implications for global emissions:

Are we seeing an early peak for China’s emissions?

Or will further stimulus spending mean another bump before a higher peak later this decade…?

7/endshttps://t.co/0LmywrDAdu

November 25, 2021

ECB: supply bottlenecks lasting longer than expected

The supply chain problems hitting the euro area have lasted for longer than policymakers expected.

The minutes of the European Central Bank’s last meeting, at the end of October, show that governing council members “widely acknowledged that supply bottlenecks were lasting longer than initially thought”.

Some EB officials pointed out that firms relying on “just-in-time” delivery systems had suffered most, raising the question of whether future systems would return to relying more on inventories and buffers. Others suggested that the move towards more globalisation in manufacturing could reverse, the minutes say, adding:


Overall, however, it was stressed that supply bottlenecks would gradually fade away as supply reconnected with demand, even though this was taking longer than expected.

The meeting also discussed the surge in energy prices, which could increase the likelihood of “scarring effects” that could hamper future growth.

But policymakers pushed back at the idea that Europe faces stagflation, pointing out that the euro area is still seeing robust growth, while a 1970s-style wage-price spiral is less likely today:


In this context, it was recalled that stagflation experiences in the 1970s occurred in a different environment, in which indexation allowed wages to react to energy prices and thus sustained both stagnation and inflation.

European Central Bank
(@ecb)

Account of the monetary policy meeting of the Governing Council of the ECB on 27-28 October 2021 https://t.co/2a8bEH2uNi

November 25, 2021

Pound drops to 11-month low vs dollar

Sterling has now slipped to its lowest level of the year against the resurgent US dollar.

The pound eased by 0.1% against the dollar to $1.3304, the lowest since last December.



The pound vs the US dollar this year

The pound vs the US dollar this year Photograph: Refinitiv

Uncertainty over when the Bank of England might raise interest rate, and last night’s hawkish tone in the Federal Reserve minutes, are weighing on the pound.

Jeremy Thomson-Cook, chief economist at international business payments firm Equals Money, says:


The only news to note [yesterday] from the UK were comments made by BoE member Silvana Tenreyro, where she commented that she would not want to say that we could see a rate rise in December or February and that any decision would be backed by economic data.

Similar rhetoric as BoE governor Bailey’s comments about the BoE not providing forward guidance.

Meanwhile, the dollar benefited from yesterday’s big fall in jobless claims, which adds to pressure to slow the Fed’s stimulus programme faster:


We also saw a shift in sentiment from Fed member Daly saying that she sees the case for speeding up tapering. Her comments suggested that should the job market continue to improve and inflation continue to climb higher, then she sees the case for an acceleration of taper.

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