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Food companies are talking about smaller price increases this year, good news for grocery shoppers, restaurant diners and the White House.Few prices are as visible to Americans as the ones they encounter at the grocery store or drive-through window, which is why two years of rapid food inflation have been a major drag for U.S. households and the Biden administration.Shoppers have only slowly regained confidence in the state of the economy as they pay more to fill up their carts, and President Biden has made a habit of shaming food companies — even filming a Super Bowl Sunday video criticizing snack producers for their “rip off” prices.But now, the trend in grocery and restaurant inflation appears to be on the cusp of changing.After months of rapid increase, the cost of food at home climbed at a notably slower clip in January. And from packaged food providers to restaurant chains, companies across the food business are reporting that they are no longer raising prices as steeply. In some cases that’s because consumers are finally pushing back against price increases after years of spending through them. In others, it’s because the prices that companies pay for inputs like packaging and labor are no longer rising as sharply.

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Year-over-year change in consumer price indexes
Source: Bureau of Labor StatisticsBy The New York TimesEven if food inflation cools, it does not mean that your grocery bill or restaurant check will get smaller: It just means it will stop climbing so quickly. Most companies are planning smaller price increases rather than outright price cuts. Still, when it comes to the question of whether rapid jumps in grocery and restaurant prices are behind us, what executives are telling investors offer some reason for hope.Some, but not all, consumers are saying no.Executives have found in recent months that they can raise prices only so high before consumers cut back.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The Bank of England is likely to hold interest rates higher for longer, new forecasts from Goldman Sachs show.
The Wall Street bank now sees five consecutive 25 basis point interest rate cuts this year, with the first in June rather than May.
Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.

Blurred buses pass the Bank of England in the City of London on 7th February 2024 in London, United Kingdom. 
Mike Kemp | In Pictures | Getty Images

The Bank of England is likely to hold interest rates higher for longer before slashing them more sharply than expected in the second half of the year, new forecasts from Goldman Sachs show.
In a research note released Tuesday, the Wall Street bank pushed back its expectations for rate cuts by one month, from May to June, citing several key inflation indicators “on the firmer side.”

But it said the central bank was then likely to cut rates more quickly than previously anticipated as inflation shows signs of cooling.
Goldman now sees five consecutive 25 basis point interest rate cuts this year, lowering rates from their current 5.25% to 4%. It then sees the Bank settling at a terminal rate of 3% in June 2025.
That compares to more moderate market expectations of three cuts by December 2024.

“We continue to think that the BoE will ultimately loosen policy significantly faster than the market expects,” the note said.
Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.

“The market is essentially embodying in the curve that we will reduce interest rates during the course of this year,” Bailey told U.K. lawmakers at the Treasury Select Committee.
“We are not making a prediction of when or by how much [we will cut rates],” he continued. “But I think you can tell from that, that profile of the forecast … that it’s not unreasonable for the market to think about.”
The Bank’s Chief Economist Huw Pill also said last week that the first rate cut is still “several” months away.

Cooling underway

Goldman analysts put their delay down to the persistent strength of the British labor market and continued wage growth. However, it noted than those pressures were likely to subside in the second half of the year, with lower inflation suggesting a “cooling is underway.”
U.K. inflation held steady at 4% year-on-year in January, though price pressures in the services industry remained hot. Meanwhile, the month-on-month headline consumer price index fell to -0.6% after recording a surprise uptick in December.
Goldman said there was a 25% chance the BOE would delay rate cuts beyond June if wage growth and services inflation remained sticky. However, it also said there was an equal chance of the Bank cutting rates by a more aggressive 50 basis points if the economy slips into a “proper” recession.

The U.K. economy slipped into a technical recession in the final quarter of last year, with gross domestic product shrinking 0.3%, preliminary figures showed Thursday.
Bailey said Tuesday, however, that the economy had already shown signs of an upturn.
“There was a lot of emphasis again on this point about the recession, and not as much emphasis on … the fact that there is a strong story, particularly on the labor market, actually also on household incomes,” he said.
Still, he noted that the Bank did not need to see inflation fall to its 2% target before it begins cutting rates.
U.K. government bond yields fell as Bailey spoke, suggesting increased investor expectations of rate cuts. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.A tinkle of warning bells is ringing Down Under for investors still waiting for recessions to bite or eagerly anticipating a swift global pivot to interest rate cuts.Earlier this month, Australia’s central bank — the Reserve Bank of Australia — decided to keep its main interest rate on hold at 4.35 per cent. Nothing alarming there. But in a statement, rate setters indicated that the next move could conceivably be up, not down.“A further increase in interest rates cannot be ruled out. While recent data indicate that inflation is easing, it remains high,” the RBA said. “The Board expects that it will be some time yet before inflation is sustainably in the target range.”This, of course, is central bank speak, and not a promise of any course of action. As RBA governor Michele Bullock said shortly afterwards in parliament, a range of options is still available. “What I said at the press conference was, ‘We’re not ruling out rising interest rates’. We are actually not ruling one in either,” she said, adding that “we don’t have a crystal ball”. She is acutely aware of the risk that the RBA ramps up rates too high for the economy to bear.To some extent, such comments represent the type of even-handed data dependency that we are familiar with from all the developed-market rates authorities. But it was still somewhat jarring, and a more hawkish tone than most market participants had been anticipating. Some investors believe Australia offers a cautionary tale.For Christopher Mahon, head of multi-asset at Columbia Threadneedle in London, the country’s example goes some way to illustrating that this time really is different. He has been referring to Australia as the “canary in the coal mine” for some time because it suggests, heretical as it may sound, that the sharp ascent in rates has a much less meaningful impact on the real economy than we are conditioned to expect.As he outlined in a note last month, Australia was widely viewed in 2022 as one of the developed economies closest to the firing line in the period of intense interest rate rises, particularly because mortgages tend to be set at floating rates, or on one- to three-year fixes, far from the US norm for 30-year home loan deals. In theory, that means Australian households should feel the burn quickly.But even after more than 4 percentage points of rate rises in less than two years, the Australian consumer is down but not out. “A reader would have to use a magnifying glass to see substantive impact on indicators such as employment, output or real estate,” he wrote. So the RBA simply has to leave the door open to more rate rises.Assumptions for swift rate cuts are also on shaky ground in New Zealand. Last week, regional bank ANZ flipped its view on what the Reserve Bank of New Zealand will do next. As recently as January, it thought the central bank would start pruning rates back in August. Now it is forecasting two more rate rises by April, taking the benchmark rate to 6 per cent.The RBNZ did say towards the end of last year that it stood ready to raise rates again after a pause if it thought its battle with inflation was stumbling. “We don’t think the Reserve Bank was bluffing, we think they were calling it like they see it,” ANZ’s chief economist for New Zealand, Sharon Zollner, said in a podcast. “If the Reserve Bank does follow through and hike in February, despite the fact that the economy is obviously weak . . . I think that would certainly get some international attention.” It certainly would.Mahon suggests the absence of a deep recession in Australia shows that the private sector was strikingly disciplined through the Covid-era rate cuts. Households and businesses did not feast on cheap money, opting to build up savings and refinance at lower rates for the longer term. “It’s the government sector that has been the least disciplined,” he says. The view that the aggressive increases of the past couple of years will lead to a recession is flat-out wrong, he adds.Plenty of fund managers out there disagree with this analysis, and the pattern in Australia does not necessarily translate to the US, which has the most global market impact. Investors point to elevated levels of US credit card and auto loan delinquency as evidence that the elusive US recession could be coming in to view. (Yes, we have heard this before and yes it was wrong.)But futures markets have already swung from anticipating six rate cuts from the US this year to three or four. If New Zealand does jump the other way this month, it is easy to imagine US stocks and government bonds recoiling in shock. Its central bank meets on February 28, just in case you’re [email protected] More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The eurozone’s collective wage growth has slowed for the first time in 18 months, but economists said the decline was unlikely to be enough to ease rate-setters’ concerns over high inflation.Data released by the European Central Bank on Tuesday showed annual rises in collectively negotiated pay for workers in the bloc increased 4.5 per cent in the last three months of 2023, compared with 4.7 per cent in the previous quarter. The first slowdown in the figure since the second quarter of 2022 comes after ECB policymakers said they wanted clear evidence of wage pressures moderating and not being passed on via higher prices before they would consider cutting interest rates.However, the rate remains above the 3 per cent level that the ECB has said is consistent with inflation falling to its 2 per cent target, after adjusting for productivity improvements. “The all-clear cannot be given,” said Marco Wagner, economist at German lender Commerzbank. “There is still much to suggest that inflation will ultimately stabilise above the ECB’s 2 per cent target.”For more than two years, workers across Europe have seen their purchasing power decline during the biggest surge in inflation for a generation triggered by Russia’s full-scale invasion of Ukraine. Many are now demanding significant pay increases to catch up with higher living costs.ECB president Christine Lagarde said last week that wages were “an increasingly important driver of inflation dynamics in the coming quarters” as she told EU lawmakers this meant the central bank would avoid “hasty decisions” on cutting rates.The slowdown in collective wage rises adds to signs that pay pressures are starting to ease. A separate tracker of salaries on new jobs by website Indeed declined for much of last year, although it picked up again in January. Recent surveys found businesses were hiring less and cutting more staff, while job vacancies have fallen.Jack-Allen Reynolds, economist at consultants Capital Economics, said negotiated wage growth was “arguably not as strong as it seems” after sharp slowdowns in Germany and France were partly masked by a big rise in Italy because of the advanced payment of 2024 wages at the end of last year.But he admitted the slowdown was “unlikely to be enough” to convince the ECB that wage pressures were moderating fast enough to justify cutting rates in April as he had forecast. Eurozone inflation has fallen from a record 10.6 per cent in October 2022 to 2.8 per cent in January. But unemployment in the bloc remains at a record low of 6.4 per cent and several ECB policymakers have said they want to see first-quarter wage data, which is only due out after their April meeting, before starting to discuss a potential easing of monetary policy from the current benchmark deposit rate of 4 per cent. Markets now expect the ECB to make its first quarter-point rate cut by June, with three further reductions to follow later in the year.Isabel Schnabel, an ECB executive board member, told the Financial Times this month that labour costs were being pushed higher by a “worrying” recent decline in productivity — as measured by output per hour worked — caused by a mix of labour hoarding, integration of “less productive workers” into the workforce and increased sick leave.  Tomasz Wieladek, economist at investor T Rowe Price, said there could still be a reacceleration of collective wage growth in the first quarter as German data for the previous three-month period did not include the one-off payments that many companies gave workers in December.This factor made “ECB policy challenging”, said Wieladek, adding: “If the first-quarter 2024 reading of negotiated wages challenges the narrative that wage growth is decelerating, then the [ECB] governing council may wait later than June to start the cutting cycle.” More

(Reuters) – Earnings updates from two of Australia’s biggest supermarket operators this month will be parsed by investors for any direction on future costs and signs of margin pressures.Woolworths and Coles, which together command nearly two-thirds of total sales in the Australian supermarket sector, have thrived amid high inflation through much of last year.They were successful in passing on costs to customers, who met the price rises with residual spending power from the COVID-19 lockdowns when the economy was estimated to have saved A$300 billion ($196.68 billion).The resultant boom in margins is expected to wane as easing inflation starts to crimp their ability to hold on to prices, analysts said, pointing to a faster-than-average cooling in food inflation even as other costs of running a business such as rents, fuel and power remain at elevated levels.Consumer price inflation in Australia eased to 0.6% at the end of December over the prior quarter, while food inflation eased for a fourth straight quarter.Woolworths reports interim earnings on Feb. 21 and Coles on Feb. 27.Woolworths, which accounts for 40% of total supermarket sales in Australia, saw a jump in sales in the quarter ended September 2023, thanks to easing prices for meat, fruit and vegetables, but warned cost-of-living pressures were making its trading outlook uncertain.While analysts expect Woolworths to post a rise in interim profit, they are watchful of cost management measures and their effect on margins, which have shown signs of hitting a ceiling.”The key near-term risk, in our view, is margin,” Jarden analysts said in a note. They cited a softening in sales so far this year and higher costs of doing business for potential margin risks.Jefferies analysts said they expect solid results, but added margins may have peaked with food inflation moderating.Woolies has also flagged a near $1 billion impairment charge at its New Zealand business, citing macro-economic challenges with compressed earnings-indicative margins reflecting stiff market competition and sticky cost pressures.Excluding the impairment charge, Woolworths is expected to report an interim profit of around A$941 million ($613.5 million), according to LSEG IBES estimates, compared with A$907 million last year.Its smaller rival, Coles, is set to report lower earnings as the No. 2 grocer is already grappling with margin contraction due to underlying cost inflation.”Coles is apparently struggling to contain costs given that its profits have shrunk and that its margins have been contracting despite rising revenues,” analysts at MarketGrader said in a note.UBS expects the retailer to report an interim profit of A$572.8 million, compared with A$643 million a year earlier. ($1 = 1.5337 Australian dollars) More

Analysts predicted a contraction of around 10%.
Israel’s high-tech economy is particularly affected by the fact that it has mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.

An Israeli national flag above produce for sale at Carmel Market in Tel Aviv, Israel, on Nov. 7, 2023.
Bloomberg | Bloomberg | Getty Images

Israel’s gross domestic product shrank nearly 20% in the fourth quarter of 2023, according to official figures.
The contraction was significantly larger than expected, as analysts predicted a contraction of around 10%. It reflects the toll of the country’s war against Hamas in Gaza, now entering its fifth month.

The economic data out Monday “pointed primarily to a contraction in private sector consumption and a deep contraction in investment, especially in real estate,” analysts at Goldman Sachs wrote in a research note.
“The deep GDP contraction occurred despite a strong surge in public sector consumption as well as a positive net trade contribution, with the decline in imports outpacing the decline in exports.”
Official figures showed a 26.9% quarter-on-quarter annualized drop in private consumption, and fixed investment plummeting nearly 68% as residential construction ground to a halt amid a shortage of both Israel workers due to military mobilization and Palestinian workers as the latter group has been mostly barred from entering Israel since Oct. 7.
Before then, more than 150,000 Palestinian workers from the occupied West Bank entered Israel daily for work in a range of sectors, predominantly in construction and agriculture.

Israel’s GDP contraction “was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in an analysis note.

“While a recovery looks set to take hold in Q1, GDP growth over 2024 as a whole now looks likely to post one of its weakest rates on record.”
Israel’s high-tech economy is particularly affected by the fact that it has mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.
The mobilization was triggered by the terror attack of Oct. 7 led by Palestinian militant group Hamas that killed about 1,200 people in Israel. Israel’s subsequent offensive against the Gaza strip and relentless bombing campaign has killed more than 28,000 people in the blockaded territory, according to Gaza’s Hamas-run health ministry. More

March futures on the S&P/TSX index were flat at 7:09 a.m. ET (12:09 GMT).A January reading of the consumer prices in Canada is due at 8:30 a.m. ET, which will provide more details on inflation and the Bank of Canada’s interest rate path. “Any surprise will be met by overreaction in markets even though this number will determine nothing as the BoC has made it clear they are on a longer-lived period of monitoring data and developments,” Derek Holt, vice-president and head of Capital Markets Economics at Scotiabank said in a note.Hotter-than-expected U.S. inflation data last week had dampened investor hopes of an early rate cut from the Federal Reserve. Minutes from the Federal Reserve’s last policy meeting are also due later this week.On the TSX, mining stocks could see a fourth day of gains as gold prices ticked higher on a softer U.S. dollar, whereas copper prices advanced after top consumer China cut mortgage rates to support the economy. [GOL/] [MET/L]Energy shares are expected to slip following two sessions of gains as oil prices turned red after trading higher earlier in the day. [O/R]Corporate earnings continue to gain momentum with Canadian miners, including First Quantum (NASDAQ:QMCO) amongst other companies, set to report their quarterly results in the week.The Toronto Stock Exchange’s S&P/TSX composite index ended 0.2% higher at 21,255.61 on Friday, its highest closing level since April 2022, on a boost from resource-linked shares. The index had gained 1.2% in the week, snapping a two-week losing streak. In corporate news, Canadian retailer Loblaw said today it expected to invest more than C$2 billion ($1.48 billion) this year to create more than 7,500 jobs.COMMODITIES AT 7:09 a.m. ETGold futures: $2,027.5; +0.7% [GOL/]US crude: $78.83; -0.5% [O/R]Brent crude: $82.89; -0.8% [O/R] More