Aurelia Butler

LONDON (Reuters) – Consumer goods companies are likely to post stronger fourth-quarter sales growth in Europe than in the United States, monthly data indicates, boosted by persistently higher prices in countries like Britain, France and Germany even as Americans paid less.Companies like Procter & Gamble (NYSE:PG) and Nestle began hiking prices in the United States at the end of 2021, driven initially by a pandemic-led freight and input cost crisis. The hikes, which ramped up following Russia’s invasion of Ukraine, were easier to take in the United States than Europe because contracts with companies like Walmart (NYSE:WMT) and Target are a lot more flexible than highly regulated deals in Europe. As the increases came early in the United States, the worst of it is over, analysts said, while European prices will take longer to ease.”Sales growth in Europe is higher … but that is just a matter of time. In six months’ time, pricing in Europe will normalise, just like in the United States, and they will have similarly low growth,” Bernstein analyst Bruno Monteyne said. P&G, the world’s biggest personal goods company, will kick off reporting the sector’s fourth-quarter earnings on Tuesday.Price hikes likely drove strong store sales growth in Europe at companies including Nestle, Danone, Kraft Heinz (NASDAQ:KHC) and Reckitt, according to monthly estimates by information and market measurement group Nielsen, even as growth in the United States was weaker. For instance, in the four weeks ended Dec. 2, Reckitt’s U.S. store sales were down 4.2%, according to Nielsen, but up 8.1% in the four weeks ended Dec. 3 in Europe. The data showed Nestle’s U.S. store sales fell 2.5% in that period, while its European sales rose 5.2%. Nielsen data does not cover every possible sales channel. Pepsico (NASDAQ:PEP), which is in acrimonious pricing negotiations with French supermarket operator Carrefour (EPA:CARR), is estimated to have generated only 1.1% store sales growth in the United States in the four weeks to Dec. 2. Meanwhile, P&G is estimated to have had 3.4% U.S. store sales growth in that period versus 6.1% in Europe in the four weeks to Dec. 3.COMPETITIVE PRICINGThe easing of prices came as U.S. consumer confidence increased during the quarter after months of decline, with Americans growing more optimistic about current and future business conditions as well as the labour market. The consumer confidence index jumped to a five-month high in December.In Europe, however, economic sentiment rose only slightly during the final quarter of the year, in line with expectations, as a modest up-tick of the mood in services, retail and amongst consumers outweighed a decline in manufacturers’ confidence.Analysts and investors have for months warned that continuing to raise prices in Europe could alienate cash-strapped shoppers who have been turning to retailers’ own brands, which are widely available.”Some companies will have lost market share and may want to price more competitively to win some share back,” said Tineke Frikkee, a portfolio manager at Waverton Investment Management, which invests in Unilever (LON:ULVR) and Reckitt. “Pricing decisions will vary per product, per country, per company.”Nestle, Danone and Kraft Heinz and Reckitt declined to comment. Pepsico and P&G did not respond to requests for comment. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFlorida governor Ron DeSantis dropped out of the race for the White House and endorsed Donald Trump, moving the former US president closer to a Republican coronation. The Swamp Notes newsletter (for Premium subscribers) discusses Trump’s options for his No. 2.The US aviation regulator recommended that airlines check an older version of Boeing’s 737 jet that has the same kind of door plug as that which blew out on an Alaska Airlines aircraft earlier this month. The world’s most successful hedge funds made their biggest profits on record last year as punchy bets on stock markets paid off when share prices surged. The pattern looks set to continue with strong gains in tech stocks in January.For up-to-the-minute news updates, visit our live blogGood evening.It may only be mid-January but the optimism associated with a new year already seems a distant memory as disappointing economic news and political discontent revs up on both sides of the Channel.In the UK, a new report from the Centre for Cities says urban economies in all parts of the country have stagnated since 2010, highlighting the failure of successive Conservative governments to narrow regional divides or “level up”, their favoured parlance. “Everywhere has done poorly,” said Paul Swinney, the think-tank’s director of policy and research.Today also brought another reminder of the cost of living crisis facing households. Clare Moriarty, head of the Citizens Advice charity, writes in the Financial Times that energy costs are driving people into debt and will still be a central issue for voters in a general election that is only months away.At the macro level, the damage from Brexit continues to mount, as FT chief economics commentator Martin Wolf details in his latest column and as public FT policy editor Peter Foster lays out in his new book, which Wolf says, “shows how a classic populist alliance of fanatics and opportunists mixed simplistic analysis with heated rhetoric and outright lies to weaken the UK’s most important economic relationship and threaten its domestic stability”.  Brexit was certain to go wrong because it was based on false premises, Wolf argues: “Countries cannot be fully sovereign in trade, since it involves at least one counterpart.”Business indicators offer few scraps of comfort. A new survey today shows that the number of UK companies in “critical financial distress” has jumped for the second consecutive quarter as high inflation and interest rates lift costs and weaken consumer sentiment. The government meanwhile appears to be pinning its hopes on a package of pre-election tax cuts.Brexit alone cannot of course be blamed for all Britain’s woes, as the current mood in Germany, the bloc’s biggest economy, well illustrates. New data this morning showing a sharp drop in exports to the US and China has added to signs that the country suffered a sharp downturn at the end of last year.Berlin is also experiencing a bout of political instability with its fractious coalition mired in a series of crises, prompting a growing number to flock to the far-right Alternative for Germany (AfD) party, whose popularity has risen as the country’s economic malaise has deepened, fuelled by the loss of cheap Russian gas and falling global demand for its cars, machines and chemicals. The rise of the AfD (which as a side note, has hailed Brexit as a “model for Germany”, albeit in terms of sovereignty rather than economics) in turn has driven hundreds of thousands of people on to the streets in protest. France, the EU’s second-largest economy, is also experiencing a bumpy start to the new year, with an early crisis for new prime minister Gabriel Attal. Farmers are blocking motorways and targeting government buildings in protests over rising costs and what they call suffocating national and EU red tape. Need to know: UK and Europe economyWidespread travel disruption continued in the UK and thousands were left without power in the aftermath of Storm Isha.The FT editorial board said the UK’s reputation as a world leader in academia was under threat after FT analysis showed one-third of the country’s universities experienced a decline in applications from overseas non-EU students last year. Gas pipeline companies fear a big hit to their businesses as the UK sets course for net zero, including recommendations to drop methane for home heating.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Poland’s new government has won a concession from the EU in its fight to limit cheap Ukrainian food exports, which have been blamed for a domestic grain glut. Poland and Hungary introduced unilateral import bans on Ukrainian produce in April 2023, following widespread protests from farmers. Need to know: global economyIvory Coast, the world’s biggest cocoa producer, is preparing to sell the first US dollar bond issue by a sub-Saharan African state in almost two years. The move is seen as a test of whether countries at the riskier end of the developing world will be able to return to debt markets.China is shifting its investments in Latin America towards strategic sectors such as critical minerals, technology and renewable energy. Brazil has won the lion’s share of investment in the past 20 years, followed by Peru, Mexico, Argentina and Chile.Russia’s invasion of Ukraine exposed many vulnerabilities in US and European energy supplies, not least in the nuclear sector where more than a fifth of the enriched uranium fuel required to power both regions’ nuclear fleets comes from Russia. Our Big Read explains how the US plans to break Russia’s grip.Guyana is hoping for big benefits from the sale of millions of carbon credits linked to forest conservation. The South American nation is at present under threat from Venezuela, which threatens to annex more than half of its territory.Japan is having to rethink its business models as the world’s fastest-ageing society runs out of workers. Solutions include deploying avatars, robots and artificial intelligence to the workforce in key sectors such as construction, trucking, farming and retail. Guayaquil, home to Ecuador’s largest port and an important hub for the export of bananas and shrimp — as well as illicit cocaine — is being ravaged by violence. Cartels fighting to control trafficking routes are in open rebellion against a government crackdown.Need to know: businessUS agricultural giant Archer Daniels Midland put its chief financial officer on leave and delayed its earnings announcement as it looked into accounting practices in its nutrition business. Sony called off its merger with Zee Entertainment, ending its agreement with the Indian media group two years after striking a deal to create a $10bn entertainment powerhouse. The talks collapsed at the weekend over the Japanese group’s refusal to allow Zee’s chief executive to stay on after the merger. Investors are looking for AI-powered gains as Big Tech’s reporting season gets under way. The “Magnificent Seven” (Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla) were the main drivers of US stock prices in 2023. Logistics experts are warning of a “chaotic” period for Europe’s manufacturers and retailers as supply chains are disrupted by attacks on shipping in the Red Sea. Europe is relying too much on Chinese electric vehicle batteries, according to an executive of South Korean battery maker SK On. One projection shows the market share of Chinese battery companies rising from 30 per cent to 50 per cent by 2027. German car suppliers are struggling to adapt to the shift towards EVs.The world of work A big factor in UK labour shortages is a shift towards shorter working hours for men, according to official data. Typical working hours have been in decline for decades, but the fall caused by Covid-19 lockdowns has accelerated the trend.The FT’s Jobs of the future series continues with a look at the sweeping changes on the horizon from technology, sustainability and shifting demographics.If there is one thing most people seem to hate more than politics, it’s office politics, writes Miranda Green. Learn to play the game, she advises, or you’ll be its victim.The Financial Times is asking readers to share their 2024 bonus expectations, and whether you intend to invest, save or spend the cash. Tell us via a confidential short survey.Some good newsGlobal tobacco use has dropped from one in three adults in 2000 to one in five in 2022 despite rearguard action from the industry, according to a World Health Organization report.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Christine Lagarde is performing poorly or very poorly as president of the European Central Bank, according to most respondents in a union survey of its staff that suggests internal dissent has surged in recent years.The rising unhappiness with Lagarde’s leadership reported in the survey, seen by the Financial Times, is a setback for the ECB president just over halfway through her eight-year term in charge of eurozone monetary policy.Slightly more than half of the 1,159 respondents said Lagarde’s performance was “poor” or “very poor”. That is well above the negative ratings of just under 9 per cent for Mario Draghi, who Lagarde replaced in 2019, and 14.5 per cent for his predecessor, Jean-Claude Trichet. The surveys about the two previous ECB presidents were done at the end of their terms.The Ipso union that represents the ECB’s 5,089 staff, said the findings, first reported on by Politico, suggested Lagarde had “opened the flank” of the central bank to criticism because “her external activities are visibly more focused on matters not related to the core business of the ECB”. It criticised her for straying “too frequently” into politics — this month she said the potential re-election of Donald Trump as US president was “clearly a threat” to Europe.The union added that Lagarde, as the first ECB president not to be a trained economist, did not have “the same technocratic standing than the previous two presidents in monetary policy topics”.Some ECB officials believe her efforts to simplify its communication has upset staff — she called economists a “tribal clique” during an appearance at the World Economic Forum in Davos last week. They also think some frustration stems from a freeze on its budget and hiring in recent years.The ECB responded by attacking the survey. It called it “flawed” and said the same person could have filled it in multiple times and some of its topics were the responsibility of a wider group than just the president or were outside the union’s remit.It said a separate ECB survey of staff last year had a higher response rate of 60 per cent and found 80 per cent were “proud to work” at the central bank and 89 per cent said they believed in its mission and purpose.Lagarde and the executive board were “fully focused on their mandate and have implemented policies to respond to unprecedented events in recent years such as the pandemic and wars”, it added.In a sign of growing disillusionment among ECB staff, almost 60 per cent of those surveyed by Ipso said they had low or no trust at all in Lagarde and the executive board, which was up from just over 40 per cent a year ago.Some of the dissent stems from anger over pay after the ECB granted staff a pay rise of just over 4 per cent last year, leaving employees with a real terms pay cut after inflation averaged 8.4 per cent in the eurozone in 2022. The bank is now offering staff a 4.7 per cent pay rise, which is below last year’s 5.4 per cent rate of eurozone inflation.More than two-thirds of staff surveyed expressed opposition to the ECB’s decision last year to cancel its “career transition support scheme” that gave an extra payment to employees who left close to retirement age.Just over half of respondents said they did not support Lagarde’s call for wage moderation and a similar proportion said they were “worried that inflation might not be back on track as expected”. However, there was more support for her push to take account of climate change in ECB decisions, which just over 57 per cent said they approved of.Lagarde has also emphasised a push to improve gender diversity in the central bank. But more than half of staff surveyed said they did not support her approach to gender targets.Women, who made up 37 per cent of respondents, were more supportive of Lagarde’s diversity policies than men. But satisfaction levels with the policies were lower for both men and women than under Draghi. More

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The world’s second-biggest economy faces multiple challenges including a weak housing market, sluggish demand, deflationary pressures and geopolitical uncertainties – factors that have weighed on the stock market in recent days. “China will consolidate and strengthen the upward trend of the economic recovery and promote the stable and healthy development of the capital market,” CCTV reported, citing the cabinet meeting held on Monday, chaired by Premier Li Qiang.China will also increase mid and long-term capital into the market and strengthen the “internal stability” of the market, state media added.The country’s blue-chip CSI300 Index on Monday dropped 1.6% to its lowest closing level in nearly five years, while the benchmark Shanghai Composite Index posted its biggest one-day drop since April 2022, falling 2.7%. As equities slid, major state-owned banks moved to support the Chinese yuan by tightening liquidity in the offshore foreign exchange market while actively selling U.S. dollars onshore, Reuters reported on Monday, citing people familiar with the matter. China’s economy grew 5.2% last year, slightly more than the government’s official target, but the recovery was far shakier than investors had expected. Economists polled by Reuters expected China’s economy to grow 4.6% this year. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Trade Secrets newsletter. Sign up here to get the newsletter sent straight to your inbox every MondayI’ll resist the temptation to write more about the Red Sea today since not much has happened except more exchange of ordnance between the Houthis and the US. One thing: upward pressure on freight rates on the China-US west coast routes may be easing. But since this is quite likely to be to do with the demand side because of Chinese economic weakness rather than supply constraints lifting, it’s not something we should welcome. Today’s main pieces are on carbon border taxes and how to calculate them, and Charted waters is on China’s surging exports to Mexico.Get in touch. Email me at [email protected] wop-bop-a-loo-bop, a-wop-CBAM-boom(Sincere apologies to fans of Little Richard.) If you missed it, there was a terrific piece by my FT colleagues on the EU’s carbon border adjustment mechanism (CBAM) a couple of weeks ago, which in particular touched on the tricky technical question of measuring emissions. If you’re now thinking “oh God, Alan’s about to disappear down a pointy-headed/bureaucratic rabbit hole, I’m outta here”, please stay a while to consider the following.There is basically no chance — none — that the world will multilaterally negotiate its way to an international carbon price in the foreseeable. Governments can’t even agree on what institution in which to have talks (the World Trade Organization’s too sclerotic, the OECD’s a rich-country club, the UN is, well, the UN). People at the Villars Framework initiative are working hard to create serious official conversations over climate and trade, but it’s a long-term project. Into this vacuum marches CBAM. Companies importing the six products it covers into the EU had to start reporting carbon footprint and emissions pricing from October 1 last year, with actual taxes being levied from January 2026. (In reality I suspect that date will get pushed back while countries come to grips with compliance.)One of the most basic questions remains unresolved: how you actually calculate emissions to plug into the tax-generating machine. All sorts of variations are possible: they can be measured at product, plant, company or national level, using direct or indirect emissions and so on.The snappily abbreviated Comet (Columbia University Coalition on Materials Emissions Transparency), which does impressively detailed work on this, notes that even within a single industry (steel) there are big variations. This excellent paper from 2022 runs through an example of three methods of calculating carbon emissions — the guidelines from the Intergovernmental Panel on Climate Change, which is targeted at governments, the GHG Gas Corporate Protocol, which was created for companies, and the one used by the EU for its Emissions Trading Scheme, and by extension CBAM.And guess what? They give different answers. As the paper sternly concludes: “Relying on the various permutations of carbon accounting systems as a basis for preventing carbon leakage will also lead to extreme difficulties in making apple-to-apples comparisons, potentially giving cover to protectionist motives and planting the seeds for trade disputes.”CBAM is very likely to be challenged at the WTO. Even if the EU’s smart lawyers have effectively litigation-proofed the principle, it can still be ruled unlawful if its implementation is unfair in practice.And that’s before we’ve got to gaming the system or straight-up cheating. Remember Dieselgate? Now imagine emissions-intensive businesses across the world trying to fiddle the measurements, and think of the Carbongate scandal that would ensue.Les absents ont toujours tort, or you don’t play the game, you don’t make the rulesMeasuring emissions drops squarely into the category of “stuff that we really should have harmonised by now, sorry about that”. Lots of different organisations are doing work on this (the OECD is one of the most sophisticated), but no international norm is emerging. Anyone wanting to sell carbon-intensive goods into the EU will have to calculate emissions using the bloc’s methodology, whether or not they use it for their domestic purposes. Currently, the EU allows companies to report using three different methodologies: by the end of 2024, only its own one will be allowed. To some extent that will de facto become an international standard, and governments wanting their companies to avoid the tax (the UK and Turkey being obvious examples) are planning to introduce their own border measures and have a strong incentive to align with the EU carbon price.Longtime Trade Secrets readers will recognise exactly where we’ve arrived: back in the familiar territory of the Brussels Effect, where EU standards are disseminated abroad by the need to access Europe’s market. The EU carbon measure may not be the best system — the Comet paper argues that it has some gaps — but, as with the General Data Protection Regulation, it’s the only one where there’s a strong incentive for international adoption.The US’s Environmental Protection Agency, for example, has its own way of measuring greenhouse gases, but since the US has no national carbon price, it’s got no real mechanism for exporting it. You don’t play the game, you don’t make the rules, as they say in Washington. Les absents ont toujours tort (those absent are always in the wrong) would be its rough Brussels equivalent.Charted watersIt’s been noted by a few people (including economists at the Bank for International Settlements) that the US trying to decouple from China is likely to mean other countries interposing themselves to create the illusion of severing supply chains, rather than the reality. One such is Mexico. Soaring Chinese exports of cars and car components to Mexico have been concerning US lawmakers, and looking at the numbers you can see why.Trade linksPeter Harrell, a former senior Biden White House official on international economics, writes in Foreign Affairs on “China-proofing” the global economy.Relatedly, some nice charts from academic Richard Baldwin on how China is the world’s only manufacturing superpower.With the WTO ministerial meeting a month away, the news service Borderlex lays out the issues on the fishing subsidies agreement that was a supposed success at the last ministerial meeting.My FT colleague Stephen Bush on why the UK should learn to love the services industries it’s actually good at, such as video gaming.Politico reports that late changes to the EU’s artificial intelligence regulation (which I wrote about here) will allow law enforcement to use facial recognition on video footage without a judge’s approval, to the dismay of some members of the European parliament.My FT colleague Martin Sandbu optimistically argues that China might play a positive role in pushing decarbonisation internationally.Trade Secrets is edited by Jonathan MoulesRecommended newsletters for youEurope Express — Your essential guide to what matters in Europe today. 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