Aurelia Butler

Stuart Hignell, who runs Bristol Gas Supplies, has known many of his customers in the English city of Bristol for years — he has a Polaroid photo of one of his elderly clients on the corkboard behind his desk — and is conscious that many are on fixed incomes. But as petrol prices rise and the costs of delivering gas canisters around the city grow, Hignell is being forced to make a difficult choice: put up the prices for his customers or protect them by absorbing ever increasing costs.“How can I turn around to these people and tell them their prices are going up?” he asked. “But something’s got to give — you can’t just keep sucking it in and sucking it in”.Many small business owners are, like Hignell, struggling to absorb the impact of spiralling prices as UK inflation hits a 40 year high. Rising costs for energy and goods and services have become the top two concerns of businesses throughout the UK. In June last year, only 30 per cent of UK businesses with 10-49 employees reported above normal input prices to the Office for National Statistics. By March of this year, the proportion had jumped to 57 per cent. Many can no longer hold off passing these increases on to customers. Aleksis Gailans, who runs a costume hire company on the outskirts of Bristol, struggled to think of any product or service that his business uses which hasn’t gone up in price. While his company has “tried to hold off for as long as we can”, he said, it has had to begin passing on costs. Gailans is not alone: around 41 per cent of UK businesses with between 10 and 50 employees indicated in late April that they have already begun increasing prices. Aleksis Gailans, who runs a costume hire company, has had to begin passing on costs. © Charlie Bibby/FTMatt Griffith, director of policy at Business West, the chamber of commerce for England’s western region, is in close contact with many enterprises in the area and is clear that they need to start recouping costs. Increasing prices is “the only route left” for many, he said. “Financially they have nowhere else to go.”Vicky Lee, who heads the Bristol City Centre Business Improvement District, agreed. Many of the companies that she works with in the city centre cannot keep their costs down. They don’t have “the buying power, the strength to reduce cost per unit by purchasing on a larger scale”, she said.She added that the shadow of the pandemic continues to affect many small businesses in the area. While they have managed to “bounce back quickly”, they had to borrow to keep going during the crisis. Debt repayments on these loans have further tightened margins and pushed businesses to raise prices. Passing the increased costs on to customers has not been an easy decision for many small business owners, despite the challenges of the current environment, said Chris Jenkins, who has worked in Bristol’s wholesale fruit market for most of his life. In the face of steep transport costs, his company tried to become more efficient.Vicky Lee, who heads the Bristol City Centre Business Improvement District, said companies don’t have ‘the buying power, the strength to reduce cost per unit by purchasing on a larger scale.’ © Charlie Bibby/FT“We’ve got no excess staff whatsoever. All of us are working flat out all the time. And, we’ve just got no fat. It’s just been cut, cut, cut everywhere we can go to try and minimise costs”, he said, adding that there was “nothing else they can do” to keep prices down. The knock-on effect of rising prices on consumer spending is another worry. Jeremy Kynaston managing director of No1 Harbourside, a bar, restaurant and live music venue situated on Bristol’s historic harbour, and two other venues in the city, acknowledged that people are just beginning to feel the increase in prices, but is hoping that they will continue to eat out.Chris Jenkins, who works in Bristol’s wholesale fruit market, said the outlook was bleaker than ever before © Charlie Bibby/FT“When people go out, they know it’s going to cost a little bit more, and it’s up to us to make sure we’re clever about our quality and standards”, he said. However, Kynaston is worried about the impact the increase in the energy price cap in the autumn will have on his business. Ofgem predicts that household energy prices will increase by around 42 per cent in October, after a 54 per cent rise in April. “It’s daunting — the October price rises. But we do have a plan at least. It’s better than having no plan at all,” said Kynaston. To address the impact of spiralling energy prices on the cost of living, UK chancellor Rishi Sunak last week introduced a £15bn package of support. It included a one-off payment of £650 to around 8mn households in receipt of welfare payments. Jeremy Kynaston, managing director of No1 Harbourside, is worried about the impact the increase in the energy price cap in the autumn will have © Charlie Bibby/FTBut those further up the supply chain, such as Jenkins, are nervous that even with the extra government support, increasing energy prices will suck demand out of the local economy. “Come November, December, they’re [households] really going to feel it,” he said. He added that the pressure on household budgets in the coming months may see the fruit he sells to retailers become “more of a luxury”. Most economists acknowledge that price pressures may get worse before they get better, but predict that the energy shock, pandemic supply chain impacts and higher interest rates will taper off quite rapidly from the start of next year onwards. However, for Jenkins hope that a brighter period may lie ahead is hard to find.“I’ve been in the job for all my life. I was born into it,” he said. “In all that time, you’ve always been able to see the light at the end of the tunnel. You can’t seem to see it now.” More

TOKYO (Reuters) -Japan’s factories posted a sharp fall in output in April as China’s COVID-19 lockdowns and wider supply disruptions took a heavy toll on manufacturers, clouding the outlook for the trade-reliant economy.Separate data showed retail sales posted the largest rise in nearly a year as consumers stepped up spending after the government eased pandemic curbs, withstanding pressure from wider price rises that threaten to hurt demand.Factory output dropped 1.3% in April from the previous month, official data showed on Tuesday, on sharp falls in the production of items such as electronic parts and production machinery.It was the first fall in three months and much weaker than a 0.2% decline expected by economists in a Reuters poll.The data comes a day after Toyota Motor (NYSE:TM) Corp, the world’s largest automaker by sales, missed its global production target for April after output fell more than 9% year-on-year.Toyota’s output slump last month came after the Japanese carmaker on Friday cut its global production plan for June and signalled the possibility of lowering its full-year output plan of 9.7 million vehicles.”Japan’s production is likely to keep stalling in the short term as disruptions in the global supply chain continue,” said Kazuma Kishikawa, economist at Daiwa Institute of Research.A full recovery of goods transportation from China would likely take time even after Shanghai ends its strict COVID-19 lockdown from Wednesday, Kishikawa said, adding that it was likely to weigh on Japanese output.”Logistics won’t be restored in a day,” he added.While activity in Japan’s services sector is picking up as the pandemic subsides, the country’s manufacturing sector has been pressured by supply disruptions and higher material prices caused by Russia’s war in Ukraine.”The soft activity data for April suggest that the Q2 rebound may disappoint, though it’s worth noting that they don’t tell us anything about the recovery in the service sector,” wrote Tom Learmouth, Japan economist at Capital Economics, in a note.Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to return to growth in May, gaining 4.8%, followed by a 8.9% advance in June.While output would be on course for a strong rebound this quarter if those forecasts are realised, firms’ production plans have been far more overly optimistic than usual since supply shortages started to take a toll, Learmouth added.Separate data showed retail sales grew 2.9% in April from a year earlier, marking their sharpest gain since May 2021. That was bigger than the median market forecast for a 2.6% rise.The jobless rate stood at a more than two-year low of 2.5% in April from the previous month’s 2.6%. More

BEIJING (Reuters) – China’s non-financial outbound direct investment (ODI) in the first four months of the year rose 4.5% from a year earlier to $35.88 billion, the commerce ministry said on Monday.In yuan terms, ODI grew 2.5% in the January-April period from a year earlier, the ministry said in a statement. More

BENGALURU (Reuters) – Burning U.S. house price inflation will cool to 10%, half its current rate this year, and slow further over the next two as already very expensive homes and climbing mortgage rates sideline more prospective homebuyers, a Reuters poll found.Supported by near-zero borrowing costs and a rush by existing homeowners to find more space, average U.S. house prices have soared by over one-third since the pandemic started. But that unexpected boom is petering out already.The Federal Reserve has raised its key interest rate by a cumulative 75 basis points since March, with more expected this year and next, pushing up the key 30-year fixed mortgage rate above 5% in April and to its highest in more than a decade. The May 10-30 poll of 28 property analysts showed U.S. house prices would rise 10.3% on an average this year based on the Case/Shiller index. That would be half their current pace of around 20%, the fastest since comparable records began in 2001. “The rise in home prices has been staggering, and we do expect a significant slowdown going forward, particularly in the wake of a near-doubling of mortgage rates,” said Brad Hunter, head of consultancy Hunter Housing Economics. “Young families are already struggling to find a single-family home they can afford, and the increase in mortgage rates will only worsen this problem.”House price rises were predicted to slow further to 4.4% next year and 3.9% in 2024, down from 5.0% and 4.1% in the March poll. However, only a handful of contributors predicted prices would fall next year or in 2024.The U.S. housing outlook was better compared to some other markets, including Australia and New Zealand, where prices were predicted to fall modestly at some point over the coming three years after rising exponentially too. [AU/HOMES]But the predicted increase in this year’s house prices was significantly higher than inflation and wage growth forecasts in a separate Reuters poll, meaning affordability is unlikely to improve anytime soon, especially for the first-time homebuyers. [ECILT/US]Indeed, nearly 90% of analysts, 26 of 29, who answered a separate question said affordability for first-time homebuyers would either worsen or significantly worsen over the next two years. Only three said it would improve.With consumer inflation at around a four-decade high and rising interest rates and 30-year mortgage rates, housing market activity has already slowed sharply.”Millennials have not seen the 30-year above 5% for more than a month in their adult lives,” said Matthew Gardner, chief economist at Windermere Real Estate. “The impact of higher rates will lower sales and new housing starts, and price growth…will slow.”Meanwhile, existing home sales, which make up about 90% of total sales and declined to a near two-year low of 5.61 million units last month, was predicted to fall further to reach 5.34 million units by the second quarter of next year.(For other stories from the Reuters quarterly housing market polls:) More

TOKYO (Reuters) -Japan’s economy will grow at a weaker rate than previously thought this quarter despite hopes for a strong rebound in consumption after showing resilience in the three months through March, a Reuters poll of economists showed.The world’s third-largest economy is at risk of being hobbled by slowing economic growth in China and a surge in global raw material prices – both issues that could hurt Japan’s key manufacturing sector, the poll showed.However, the slower expansion still indicates growth will be strong enough for the economy to recover to its pre-coronavirus pandemic levels of end-2019 this quarter, about 70% of poll respondents said.The economy was projected to expand an annualised 4.5% this quarter, below April’s estimate for 5.1% growth, according to the median forecast of 36 analysts in the May 18-27 poll.”The speed at which the economy is recovering at home is slow,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.”Corporate profit could be severely squeezed if raw material prices continue to rise as there’s limited pass-through of those costs into final prices.”A slowdown in Chinese economic growth was the most-frequently cited issue posing a risk to Japan’s economy in the latter half of the year, the poll showed.In recent weeks, China paralysed economic activity in major cities such as Shanghai with extreme COVID-19 lockdowns, disrupting supply chains and clouding the country’s economic outlook.China’s hard-handed measures against the pandemic have already led to a fall in Japan’s shipments to and from Asia’s top economy in April, Japanese trade data showed earlier this month.Asked when Japan’s economy would recover to pre-coronavirus levels of end-2019, 20 of 28 economists said it would happen this quarter, after shrinking less than expected in January-March.Five chose next quarter, while two opted for October-December and one picked April-June next year.But analysts also said that even if the economy were quick to recover to end-2019 levels, it was likely to still fall short of higher levels seen earlier that year, before taking a hit from a sales tax hike in October 2019.”The economy will likely exceed its pre-sales tax hike level in July-September next year,” said Tsunoda.Looking ahead, economists’ second-most frequently cited risk for the second half of 2022 was “soaring raw material costs”, followed by “faster than expected U.S. monetary policy tightening”.Other choices were “spreading of new coronavirus variants”, “semiconductor chip and parts shortages” and “negative impact of domestic price rises on private consumption”.But none cited a persistently weaker yen as the biggest risk to the economy in the second half of the year.The poll also found core consumer prices, which exclude volatile fresh food prices, will rise 2.0% this fiscal year, which runs through March next year, and 0.9% in fiscal 2023.The economy will grow 2.3% this fiscal year, followed by an estimated 1.5% growth in fiscal 2023. Both forecasts showed analysts expected growth to come in slightly weaker than what they expected in last month’s poll.(For other stories from the Reuters global economic poll:) More

Biden will meet Federal Reserve Chair Jerome Powell to discuss the state of American and global economy, the White House said late on Sunday. In a Wall Street Journal opinion piece published Monday, Biden said the Federal Reserve’s main role was to control inflation.Biden said his “predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”He said he agreed with the Fed’s assessment “that fighting inflation is our top economic challenge right now.”Biden added the U.S. government should “take every practical step to make things more affordable for families during this moment of economic uncertainty.”Powell was formally sworn in last week to begin his second four-year term as head of the U.S. central bank.The Fed is under pressure to decisively make a dent in an inflation rate that is running more than three times its 2% goal and has caused a jump in the cost of living for Americans. It faces a difficult task in dampening demand in the economy enough to curb inflation while not causing a recession.There are already signs inflation has peaked. In the 12 months through April, the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, advanced 6.3% after jumping 6.6% in March, the Commerce Department reported on Friday. More

The plant in Rugby, in England’s West Midlands region, is Cemex’s first to fully operate on “Climafuel,” a mix of paper, cardboard, wood, carpet, textiles and plastics, the company said. Cemex Chief Executive Fernando Gonzalez said in a statement that the plant’s conversion served “as the model for the rest of our regions.”Concrete producers have been pressured by regulators and investors to lower CO2 emissions in recent years. Cement, key to producing concrete, contributes around 8% of CO2 emissions globally, according to estimates.Cemex did not give a time frame for the plant’s transition to alternative fuels, with the regional head saying in a statement the company “eventually (expected) to phase out” fossil fuels completely at the Rugby facility.The company said the move was part of its strategy to produce net-zero CO2 concrete by 2050. More