Aurelia Butler

BUENOS AIRES (Reuters) – When Ernesto Acuna, a convenience store owner in Buenos Aires, received the new price list this week from his supplier of the snacks, condiments, sodas and ice creams he sells, he was shocked to find costs on some had risen 60% since late July.The price list, updated after a primary election shock led to a sharp devaluation of the peso and interest rate hike on Monday, underscores the scale of Argentina’s challenge to avoid inflation, already at 113%, climbing faster.”An ice cream for someone who comes to the store that was 1,000 pesos before, today is 2,000,” said Acuna, citing an increase of 35% and then 50% two weeks later. He added that owners like him of ‘kiosko’ mini-stores didn’t know how to respond.”We kiosko owners don’t know if we should increase prices each day, or by how much.”The price lists from a major national supplier, analyzed by Reuters, showed an average hike of 18% between July 26 and Aug. 15. Many were grouped around 25%, while some prices were left unchanged. Ice creams and desserts saw the steepest jumps, although there was variance among different products.The analysis suggests that wholesalers are rapidly moving to raise prices after market volatility this week, which will feed into higher inflation in August as the country battles to avoid the hyperinflation it suffered in the late 1980s. The price list offers a window into how these market shocks are passed on to small business owners, and eventually customers. Acuna said products that are imported, face scarcities, or are seasonal see the highest increases.Businesses selling everything from cleaning products to car parts have rushed to adapt to the higher wholesale prices this week, suspending special offers and sometimes sales altogether. Juan Pablo Spagnolo, 46, another convenience store owner, said after initial increases of 40%-50% on Monday and Tuesday compared to the previous month, by Wednesday he had received lists with more “reasonable” increases, ranging from 15% to 25%.”I’m telling you the reality of today, but the reality of next Monday is completely different,” Spagnolo said.Even business owners with decades of experience, such as Acuna, are struggling to adapt to the triple-digit inflation, which analysts forecast will rise further in the lead-up to the Oct. 22 general election, where radical libertarian economist Javier Milei has taken pole position.Since March, business owners have received updated price lists from their suppliers twice a month, double the frequency of a year ago, said Acuna. Any drastic news, such as Monday’s devaluation, can lead to an additional list, he said. The price hikes are much steeper than past years, at least 10% per month, but with some products seeing much higher rises.Owners then decide how to pass these price hikes on to customers, treading a fine line between maintaining profitability and ensuring a steady clientele, according to Acuna. Some implement the price hikes gradually so as not to scare away customers. Others decide to accept losses on some products in favor of keeping loyal customers. “You keep trying to buy cheaper, look for a good price, run promotions,” Acuna said. “You keep trying to keep people coming to your kiosko, to choose you. There’s no other option.” Maria Leguizamon, a 48-year-old apartment manager and frequent customer at Acuna’s store, said she will have to trim spending after this week’s price increases – buying less meat and fewer treats.”Prices have gone through the roof, in every way,” Leguizamon said, adding that she didn’t blame the store owners and small businesses who were just trying to survive. “It’s madness what we’re living through.” More

US bond yields adjusted for inflation have surged to their highest level in 14 years, which has hit technology stocks hard, say analysts and investors. So-called “real yields” on Treasury bonds have rocketed over the past two weeks as investors have bet that the Federal Reserve can keep inflation under control by keeping interest rates high while avoiding sending the economy into a recession.On Thursday the yield on US 10-year inflation-linked government bonds, which are known as Tips, reached 1.998 per cent, its highest level since July 2009, according to Tradeweb data. It has risen 0.4 percentage points in August alone.At the same time, the 30-year inflation-linked bond reached its highest level since February 2011, while five-year Tips yields hit a 15-year high.Real yields are inflation-adjusted returns on Treasury bonds, and watched closely by the Fed and investors as a fundamental measure of how much it costs for companies to borrow money, absent the effects of price increases.Technology stocks offering the promise of high future growth are typically far more attractive to investors when interest rates are low. They can quickly lose their allure when investors are able to obtain higher yields in lower-risk bonds or money market funds. A 4.3 per cent return on a 10-year Treasury note may deter an investor from buying a far riskier asset.Higher yields can also weigh on the shares of technology companies that rely on debt to finance their growth. The surge in real yields has dovetailed with a 6.1 per cent decline for the Nasdaq Composite this month, as analysts and traders see real rates hit the sector. “Higher real rates have led to a stalling-out in the equity rally this year — they have put pressure on equities,” said Gennadiy Goldberg, head of US rate strategy at TD Securities.“When you see a real increase in borrowing costs, that’s when you see companies starting to make difficult choices,” said Goldberg. This drop in equities has also been accompanied by a broader tightening in financial conditions — a measure of the cost of and ease with which companies can raise cash. Financial conditions in the US have loosened since peaking in October, even as the Fed has raised interest rates to the highest level in 22 years. But a Goldman Sachs index of financial conditions has risen in August to its highest level since May.“Real rates are going up and it is definitely hurting risky assets. It is tightening financial conditions,” said Andrew Brenner, head of international fixed income at NatAlliance Securities. Treasury yields may have further to rise, and not just because the likelihood of a soft landing is growing.The US announced earlier this month that it would increase auction sizes of Treasury bonds to bridge the growing gap between tax revenue and government spending. The prospect of more Treasury bonds on the market has helped drive prices lower and yields higher. That change in supply has already sent yields on Treasuries higher. For the Fed, the real yield will offer an insight into the progress of its monetary tightening campaign, which began last spring.Real yields did not get much attention when inflation was raging, but now that price pressures are more muted, investors and the Fed are turning to focus more on real yields, said Stuart Kaiser, head of equity trading strategy at Citi.“Inflation is starting to stabilise, so people focus more on how much has the Fed really tightened,” said Kaiser. “If nominal yields are going to stay at this level even with inflation falling, then you have more restrictive real yields.” The significant increase in real yields could add to the case that the Fed has raised interest rates sufficiently. Futures markets are pricing in about a 50/50 chance that the central bank will raises interest rates by an additional quarter-point by November. That may change if economic data continues to show a slowdown in inflation — and if financial conditions remain tight. “The Fed is increasingly discussing real rates. To me, that is an indication that the Fed believes monetary policy is gaining traction and that they need to think about the next phase,” said Sophia Drossos, an economist at Point72 Asset Management. “The Fed seems to be considering that the current level of real rates might not be appropriate as the economy decelerates into the next year.”Additional reporting by Nicholas Megaw in New York More

The number of babies born in England and Wales last year dropped to the lowest in two decades, according to official data that highlights the country’s demographic challenges.Statistics published on Thursday by the Office for National Statistics showed there were 605,479 live births in England and Wales last year, a 3.1 per cent decline from 2021 and the lowest since 2002.The figure was down from a recent peak of nearly 730,000 in 2012.The trend has implications for the UK’s public finances and growth potential, experts said. If it continues “the already shrinking working age population would shrink even further in the years ahead”, said Anthony Travers, professor at the London School of Economics. “That will mean certainly greater tax demands on those who are in work.” The falling number of births also means demand for public services would continue to grow as the median age of the population rises and increase the “need for more migration”, he added.The number of people aged 15 to 64, traditionally considered the working age in the UK, has been declining from more than two-thirds of the population in 2007 to about 63 per cent last year. In a separate release, the ONS forecast the proportion will drop to less than 60 per cent by 2077.Economic growth will also be affected unless there is “a very radical change to the economy which can somehow produce growth by big productivity gains”, said Travers. He added that such an improvement in productivity had not occurred in the past 15 years.The ONS did not provide a total fertility rate for last year, but Jonathan Portes, professor of economics and public policy at King’s College London, calculated it to be at about 1.5 children per woman, which would be the lowest since records began in 1939. ONS figures from last year showed the fertility rate edging up to 1.61 children per woman in 2021, marginally up from the historical low of 1.58 in 2020.The UK fertility rate is well below that of France, Denmark or Sweden, but above Germany and most of southern and eastern Europe, according to UN population data. “Fertility is falling in most advanced economies, but the fall in the UK seems to have accelerated recently,” said Portes. He added there was no single cause, “but the impact of the housing crisis on young couples, sharp cuts to financial support for low income families, and access to childcare are all likely factors”.To avoid “a demographic crunch, the UK needs both immigration and an array of family-friendly policies in the labour market, housing and welfare”, he warned. With a cost of living and borrowing crisis, “it’s understandable given the very real struggle for many families right now, that people are putting off having children”, echoed Susannah Streeter, senior investment analyst at asset manager Hargreaves Lansdown. The ONS also revealed that in England and Wales, 30.3 per cent of all live births were to non-UK-born mothers in 2022; an increase from 28.8 per cent in 2021, and the highest since records began in 1969. In London, two-thirds of live births last year involved parents where either one or both were born outside of the UK, the highest percentage of such births of all the English regions and Wales.This has “broader national public policy” implications explained Travers. Given the different fertility rates across various ethnic groups, “in areas with relatively low migrant populations, we’ll probably see the proportion of people born there will be lower than in big cities such as London”, he said. More

China’s economic growth outlook has soured further with retail sales, industrial output and investment growing at a slower-than-expected pace. Weak consumer demand has tipped the world’s second largest economy into deflation amid rising pressure on Beijing to deliver more stimulus to support the economy. Following are forecasts from some global banks: Brokerage Current 2023 GDP Previous 2023 growth forecast GDP forecast Morgan Stanley (NYSE:MS) 4.7% 5% J.P.Morgan 4.8% 5% Barclays (LON:BARC) 4.5% 4.9% Deutsche Bank (ETR:DBKGn) 5% 5.3% Research More