Aurelia Butler

The British Retail Consortium said prices in store chains rose by an annual 2.7% in April, accelerating from a 2.1% rise in the 12 months to March and marking the highest rate since September 2011.”The impact of rising energy prices and the conflict in Ukraine continued to feed through into April’s retail prices,” said BRC chief executive Helen Dickinson.”Non-food products, particularly furniture, electricals and books, have seen the highest rate of inflation since records began,” Dickinson added, citing new supply disruption from China which has enacted more COVID-19 lockdowns recently.Food prices rose by 3.5% year-on-year, the biggest rise in just over nine years.The BRC’s gauge of inflation covers store prices and is not comparable with Britain’s official consumer prices index, a broader gauge of inflation that includes household bills. It hit a 30-year high of 7% in March.The persistence of high inflation is a key concern for Bank of England officials who are expected to raise interest rates on Thursday to 1%, the highest since 2009. Last week, Britain’s longest-running gauge of consumer confidence fell to its second-lowest level since records began nearly 50 years ago, with confidence in the outlook for personal finances falling to a new record low.Supermarket chains Asda and Morrisons said last week they would cut the prices of essential items. “Retailers will continue to do all they can to keep prices down and deliver value for their customers by limiting price rises and expanding their value ranges, but this will put pressure on them to find cost-savings elsewhere,” Dickinson said.”Unfortunately, customers should brace themselves for further price rises and a bumpy road ahead.” More

(Reuters) -Starbucks Corp suspended its guidance for the rest of its fiscal year on Tuesday as sales growth missed Wall Street targets due to China’s tough COVID-19 curbs.Comparable sales in China, where the chain has rapidly expanded in recent years to tap rising coffee consumption, declined 23%, overshadowing 12% growth in North America.China’s strict lockdown measures to meet its zero-COVID policy have upended operations of most global companies that have a significant presence in the Chinese market, including Apple (NASDAQ:AAPL), Gucci-parent Kering (EPA:PRTP) and Taco Bell-owner Yum China.”I remain convinced Starbucks (NASDAQ:SBUX)’ business in China will be eventually larger than our business in the U.S.,” Chief Executive Officer Howard Schultz said in a call with investors.The company expects “even greater impact” to its third-quarter results because of the timing of lockdowns in Shanghai and resurgence of the virus in Beijing and other cities.Even so, demand in its U.S. stores has been “relentless,” Schultz said. Shares rose 5% in extended trading following the results.”Demand and revenue are key drivers,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. Tigress owns Starbucks stock on behalf of clients and accounts it manages. “Everything is going well in spite of the pandemic and strength in the United States offset the weakness in China.”Global comparable sales at Starbucks, which recently brought Schultz back to lead the company amid a wave of unionization at its U.S stores, rose 7% in the second quarter, while analysts polled by Refinitiv had expected 7.1% growth.UNION APPROACHMore than 50 U.S. cafes have elected to join the Workers United union out of roughly 240 altogether that have sought to hold elections since August. Despite already raising wages since last year, the company will invest an additional $200 million in fiscal 2022 to lift pay for store managers, increase training, revitalize its “Coffee Master” program for baristas and launch an internal app to communicate directly with its 240,000 U.S. employees.The company will also accelerate the rollout of new ovens and espresso machines and speed up maintenance and repairs. And it will update its consumer-facing app to give customers more accurate times to pick up their beverages. The new money will bring total investments in employees and cafes to $1 billion this fiscal year alone. Schultz also said customers will be able to start adding tips to their credit and debit card purchases by late 2022, something that baristas at unionized stores in Buffalo, New York, asked for at the bargaining table.”Federal law prohibits us from promising new wages and benefits at stores involved in union organizing. And by law, we cannot implement unilateral changes at stores that have a union,” Schultz said, adding that “the union contract will not even come close to what Starbucks offers.”Schultz said his latest term as CEO will be temporary and that he and the board hope to name a successor by the autumn, with the aim for that person to take over entirely by the first calendar quarter of 2023. Schultz plans to remain on the board afterwards.Higher costs for labor, freight and commodities ate into North American operating margins, which contracted to 17.1% from 19.3% in the prior year.Total net revenue rose to $7.64 billion from $6.67 billion a year earlier, as the company opened 313 net new stores during the quarter. Analysts had expected $7.59 billion in quarterly revenue. More

Inflation hit a record high 7.5% last month, nearly four times the ECB’s target, and even underlying price growth, which filters out volatile energy and food prices, is now approaching 4%, suggesting that high price growth could linger even if oil prices retreat.”Talking is no longer enough, we need to act,” Handelsblatt quoted Schnabel as saying. “From today’s perspective, a rate increase in July is possible in my view.” A precursor to any rate hike must be the end of bond purchases, and this could come at the end of June, said Schnabel, the ECB’s head of market operations. Conservatives on the ECB’s 25-member Governing Council have been increasingly calling on the central bank to curb its ultra-easy policy to combat inflation, and most see two to three rate hikes before the end of the year.The ECB last raised rates in 2011 and has kept its benchmark deposit rate, now at minus 0.5%, in negative territory since 2014. Markets currently price 97 basis points of rate hikes for the rest of the year, indicating that increases are expected in each policy meeting from July onwards.The ECB will next meet on June 9, when the asset purchases are set to be ended, followed by a meeting on July 21. Schnabel said she did not expect the euro zone to fall into stagflation – a period of zero growth coupled with high inflation – but said the ECB’s main role was to fight off rapid price growth and not to prop up the economy.She added, however, that the ECB would act on any unwarranted increase in the spread of yields between the bloc’s core and periphery. More

BMW Group and Audi have suspended shipments of cars by rail from Germany to China, the biggest market for both carmakers, due to the Ukraine war.Most of the 846,237 vehicles BMW delivered to Chinese customers last year were produced at its joint venture factory in Shenyang, but between 150,000 and 200,000 were imported from Europe. Beginning in September, BMW began dispatching cars bound for western provinces by train, at a pace then set to reach 16,000 a year.“Due to the current geopolitical situation, our train transport on the Silk Road and Trans-Siberian railway have temporarily been switched to alternative routes or transportation modes to ensure planning and supply security,” said BMW. “Vehicles for China and Mongolia are now transported by ship from Bremerhaven.”Volkswagen Group’s Audi brand also confirmed that it has ceased rail shipments. Most of the 701,289 vehicles it delivered in China last year were also locally produced, but sales of imports rose 53 per cent. Based on data from the Netherlands’ Nunner Logistics and shipping information service Drewry Supply Chain Advisors, the cost to send a shipping container to Shanghai on the usual rail route is now about 78 per cent higher than by sea freight. But the train route is usually several days shorter.

BMW’s joint venture with China’s Brilliance Automotive in April opened a new robot-powered phase of its Dadong factory in Shenyang © Courtesy of BMW

Officials in both China and Europe previously promoted the freight services as a geopolitical advance. In recent years, BMW and several of its peers began moving some shipments from ship to rail to lower their carbon footprint as well as to pursue higher speed and schedule reliability, particularly as Covid-19 disrupted port operations in many places.These moves had helped to balance out the steady flow of Chinese imports on the trains. Last year, the Port of Duisburg, a small city in western Germany which is Europe’s top hub for Chinese train traffic, said it was dispatching one fully loaded eastbound train for each one arriving full from China; in 2017, the eastbound trains were just one-third full on average.It is unclear how many other exporters are following the lead of BMW and Audi.Porsche told Nikkei Asia late last year that it was then sending two to three trains to China weekly, each with 82 cars, but did not respond to fresh queries. Computer maker HP, one of the first major multinationals to rely on the trains for westbound shipments, also did not respond to requests for comment.According to the spokesperson for the Port of Duisburg, or Duisport, Europe-China service levels have remained unchanged at around 60 trains a week amid the Ukraine war even as companies’ eastbound bookings have fallen 20 per cent to 30 per cent.“They probably worry about loss of cargo, confiscation and lack of insurance,” he said, referring to the risk Russian authorities could seize shipments in retaliation for sanctions and moves by many insurers to terminate coverage for freight sent through Russia. “Maybe it is also about taking a stand against Russia and Putin,” added the Duisport official.Some European logistics companies are demanding that customers sign a liability waiver before accepting shipments for transit through Russia.To keep traffic flowing, some local authorities in China have begun helping shippers with war insurance cover for freight heading to Europe from their jurisdictions. The operator handling routes from Shanghai has offered a 20 per cent discount on rates.For shipments to Kazakhstan and other Central Asian republics, BMW is now using an alternate train route that runs through the Balkans, Turkey and the Caucasus. This itinerary requires at least one transfer by ship and the route can take almost twice as long as those through Russia. The Duisport official said the port has not observed much capacity expansion on the southern route.A version of this article was first published by Nikkei Asia on April 26 2022. ©2022 Nikkei Inc. All rights reserved.Related storiesChina opens wallet to keep trans-Eurasian express movingRussia’s logistics crippled by sanctions, ensnarling global economyVolkswagen to boost Chinese EV capacity to 1m by 2023: brand CEOStellantis begins reset of joint venture with China’s Dongfeng More