Economy

The UK is “over the worst” of soaring food price inflation, according to the head of Ocado, but the online grocer warned that it would take time for prices to moderate. Tim Steiner, the group’s chief executive and co-founder, said interest rate rises, greater mortgage costs and higher wages would continue to put pressure on prices. But he added: “We are definitely over the worst in my opinion.” “I think we need to see interest rates ideally stabilise and come down before we can start to see that inflation will actually start to go back down. But I don’t see it going up from where it is now,” he said on Tuesday. Steiner’s view that inflation has peaked follows similar remarks from other retail executives, raising hopes that the UK — which has experienced western Europe’s highest rate of food inflation — will finally see some relief. Tesco chief executive Ken Murphy recently said he believed “we’re past the peak inflation” while J Sainsbury head Simon Roberts said earlier this month that “food inflation is starting to fall”.UK grocery price inflation eased for a fourth consecutive month in July, according to data published by research company Kantar. The annual pace of grocery price inflation eased to 14.9 per cent in the four weeks to July 9, down from 16.5 per cent in the previous month.Steiner’s remarks came as Ocado reported earnings before interest, taxes, depreciation and amortisation of £16.6mn for the six months to May 28. The group said its technology business had been profitable for the first time.Revenue increased by 8.6 per cent to £1.37bn. Ocado shares were up 14 per cent in morning trading. The company still recorded a pre-tax loss of £289.5mn, up 37 per cent year on year, but stuck to its annual guidance. Its shares have lost two-thirds of their value over the past two years, after hitting a record high during the pandemic-driven boom in online shopping.Ocado runs an online supermarket in the UK in partnership with Marks and Spencer and also sells its technology to other retailers around the world to enable them to sell goods online.Steiner pushed back at suggestions that retailers were raising prices beyond the heightened input costs of raw materials and wages.

“When you look at the overall margins to the sector, I think calling it profiteering is really not sensible,” he said, adding that the sector had to cope with substantially rising commodity prices as well as energy and labour costs. “I think grocers have worked enormously hard as a sector to keep those price rises to a minimum for the UK consumer,” he said.Ocado shares surged last month after rumours that it could be a bid target for Amazon. “Speculation is speculation,” said Steiner. “Whenever any offer comes, as a management team and board I’ve got responsibilities to take this seriously.”“But it’s not something I’m out pursuing,” he added. More

Jacques-Louis David’s painting of Napoleon crossing the alps. The enduring achievements of the former French leader are largely bureaucratic, not military, successes To judge by the trailer, Ridley Scott’s biopic of Napoleon will entertain, inspire and extravagantly miss the point. But then so did the paintings of the same subject by Jacques-Louis David. Napoleon wasn’t, or wasn’t just, a conqueror. He was, over and above all else, history’s greatest bureaucrat. What survives of him isn’t the French empire (which he left smaller than he found it) but the Banque de France, standardised education, prefects who keep French regions in line with Parisian diktat and a Civil Code that still influences jurisdictions around the world. To this day, the adjective “Napoleonic” describes something centralised and perhaps officious, not something martial.Prepare for a Napoleonic world, then. The most important governmental trend today is the rise of protectionism. In the US, Europe, China and India, the state is turning from open trade to the cultivation of domestic industries. One justification is strategic: don’t count on frail or hostile regimes for essential goods. Another is progressive: give skilled manual labour a break for once. Both trace back to the election-winning arguments of Donald Trump in 2016.And so we have something of an irony to chew on. Populism, which sets itself against the elite, against the “deep state”, is going to leave it more powerful, not less. The technocrat, vilified so recently, will be the string-pulling figure of our age, dispensing subsidies, guiding this economic sector, shunning that one. Corporate leaders will have an ever tighter and more collusive relationship with government, not as a corrupt byproduct of the system but as a central feature of it. Populism was meant to take the governing class down a peg or two. Its main legacy will be something close to the opposite.When would you rather be a politician or civil servant: now, when you might shape a whole industry, or in pre-populist times? When would you rather be a lobbyist in the “swamp”: during the laissez-faire age, when government and business were at least nominally distinct, or the protectionist one, when no sector wants to miss out on public largesse? (If chipmaking is strategic, why not agriculture?) The elites are going to be stronger and more incestuous as a result of populism, a movement dedicated to their downfall. Perhaps we should have seen the paradox coming. Populists have a rebellious style but a paternalist agenda. They hate the so-called blob, but want it to shape much of the private sector. They resent elites, but more often for abdicating power — over markets, over national borders — than for hoarding it. They have a thing for direct democracy but also for Singapore. This is a movement that was always in two minds on the question of faceless authority.The contradiction is most obvious on the US right. Trump apparatchiks dream of taming the deep state if their man gets to govern again. So-called Schedule F appointments would make it easier to fire civil servants. In an executive branch version of what the right has done to the judiciary over several decades, partisan cadres are being groomed for bureaucratic posts throughout Washington.At the same time, the Trump world demands more industrial strategy. Is there a record of it being done well, anywhere on Earth, without a permanent, independent bureaucracy, licensed to plan and invest regardless of the churn of elected administrations?At some point, demagogues will have to choose which they hate more: free trade or the blob. Curbing the one tends to empower the other. Notice that, though Trump started the move to industrial protection, it has achieved real substance under a centre-left government. The right could never follow its antitrade logic to its natural conclusion, which is the aggrandisement of officialdom. Trump managed to fall out with the national security state, of all things. The idea that he could abide a US version of Japan’s former, and lordly, Ministry of International Trade and Industry, is fanciful. Yet that kind of technocratic power is what, via the hand of his successor Joe Biden, populism has inadvertently created.I fear, though cannot know, that we are living through the biggest wrong turn in government policy of my lifetime. A decade into this protectionist age, we might regret the waste, the pork, the higher consumer prices (do “workers” not pay those?) and the fragmentation of the west into squabbling trade zones. But the wrongness of this trend is another column. For now, what stands out is the improbable winner of it. Imagine being told in 2016 that elites would have more clout, not less, and owe it to their own [email protected] More

Referring to the possibility of further rate hikes, Knot said: “For July it is a necessity, for anything beyond July it would at most be a possibility, but by no means a certainty.””We have to carefully watch what the data tells us. So far, we’ve been mainly preoccupied with the risk of inflation persistence. But the balance of risks is gradually shifting, and the risk of perhaps doing too much needs to be paid more attention to,” he said in an interview with Bloomberg TV. More

(Reuters) – U.S. Treasury Secretary Janet Yellen said a cooling — but not faltering — labor market is playing a leading role in helping slow inflation, among a raft of factors imposing disinflationary pressures, Bloomberg News reported on Tuesday.Yellen also told Bloomberg in an interview on Monday that the United States was making good progress in bringing inflation down and she did not expect the U.S. economy to enter a recession. More

GANDHINAGAR, India (Reuters) – Multilateral development banks must create a new funding mechanism and triple sustainable lending by 2030 to eliminate poverty and achieve climate goals, a G20 panel said in a report on Tuesday that called for big changes in the way MDBs operate.The independent panel, headed by economists Lawrence Summers and N.K. Singh, was commissioned by the Group of 20 nations to propose reforms for MDBs.”Individually and collectively, MDBs must become effective agents in all developing countries for integrating the development and climate change agendas,” said the report, which was tabled during the G20 finance meeting in India’s western state of Gujarat.Excluding China, which has sufficient domestic resources to finance its transition to clean energy, the panel estimated that developing countries would need to spend an additional $3 trillion annually by 2030 to cover investments in climate action and meet their development goals. Of this, the report said around $1.8 trillion should go towards sustainable infrastructure, a four-fold increase since 2019, while $1.2 trillion would be needed to achieve other goals, including a 75% increase in spending on health and education.”The international development finance system should be designed to support this spending by providing $500 billion in additional annual official external financing by 2030, of which one-third (should be) in concessional and non-debt creating financing and two-thirds in the form of non-concessional official lending,” the report said.MDBs, like the International Monetary Fund and World Bank, must work with governments and the private sector to reduce, share and manage risks and thus bring down the cost of capital, it said.It also said that MDBs should provide an incremental $260 billion of additional annual official financing, of which $200 billion should be in non-concessional lending, and help mobilise and catalyse private finance.The G20 will continue to work towards resolving differences in helping low-income countries manage their debt burdens and free up funding for climate financing.Countries like Zambia and Ghana have been waiting for big creditors to make progress in providing debt relief under the so called “Common Framework”, which is led by the G20.Global creditors, debtor nations and international financial institutions agreed in April to galvanise the Common Framework – a platform supposed to speed up and simplify the process of getting financially ailing economies back on their feet.Zambia, locked in default for almost three years, struck a deal last month to restructure $6.3 billion in debt owed to governments abroad including China, but many challenges remain. More

UK grocery price inflation eased for a fourth consecutive month in July to the lowest rate this year, according to research published on Tuesday. The annual pace of grocery price growth eased to 14.9 per cent in the four weeks to July 9, down from 16.5 per cent in the previous month, according to research company Kantar, the largest monthly slowdown since its peak in March. Fraser McKevitt, head of retail and consumer insight at Kantar, said the slowdown in grocery inflation “will be good news for many households although, of course, the rate is still incredibly high”.He added that because wholesale energy and food prices soared in the summer of 2022 following Russia’s invasion of Ukraine “this latest slowdown is partially down to current figures being compared with those higher rates one year ago”.The figures come ahead of official inflation data for June, which will be published by the Office for National Statistics on Wednesday. Economists polled by Reuters expect the headline figure to decline to 8.2 per cent from 8.7 per cent in May.Last month’s official figures showed that while price growth for food and non-alcoholic beverages was historically high, it eased to 18.3 per cent in June from 19 per cent in May. Susannah Streeter, head of money and markets at financial services company Hargreaves Lansdown, cautioned that with Russia exiting the Black Sea grain deal and refusing to guarantee safe passage for ships exporting wheat and corn there were concerns about food prices “staying sticky”.UK food inflation remains far higher than in the US, where it is currently 5.7 per cent, and the eurozone, where it stands at 12.5 per cent. Victoria Scholar, head of investment at online investment platform Interactive Investor, said this is partly because of the UK’s “reliance on imports from abroad and freak weather conditions that have limited crop supplies”.There have been concerns that supermarkets are “profiteering” from the inflationary environment by raising prices more than necessary, something they strongly deny.Kantar revealed that cheaper supermarkets were the best performing food retail companies. Aldi was the fastest-growing grocer, with annual sales up by 24 per cent. That pushed its market share to 10.2 per cent, up from 9.1 per cent a year ago. Lidl reported a similar increase in sales and rising market shares. More

Turkey has clinched a landmark deal to sell its drones to Saudi Arabia as Ankara deepens its rapprochement with Riyadh and looks to the oil-rich Gulf for cash to help prop up its struggling economy. The drone agreement, together with other Saudi investment commitments, was announced on Tuesday, as Turkish president Recep Tayyip Erdoğan embarked on a tour of the Gulf that will also take him and a delegation of business executives to Qatar and the UAE. Erdoğan’s new economic team, which was appointed after the president was re-elected in May, has already enacted several major policy changes as it seeks to ease a crisis that has eroded the prosperity of everyday Turks and sent foreign investors fleeing. Securing fresh investment is a pillar of the programme put in place by finance minister Mehmet Şimşek, who has close ties with Gulf governments and investors. Gulf investment is seen as particularly important since many western investors remain sceptical that Erdoğan will stick to the new economic plan, which has required painful adjustments such as tax rises, with local elections looming next spring. Riyadh said on Tuesday that it had agreed to purchase drones from Turkey’s Baykar “with the aim of enhancing the readiness of the Kingdom’s armed forces and bolstering its defence and manufacturing capabilities”. Haluk Bayraktar, the privately owned defence company’s chief executive, described the pact as the biggest defence export contract in Turkey’s history. The two sides also struck memoranda of understanding over direct investment and co-operation in the energy, media and defence sectors. The deal highlights how Erdoğan is taking further steps to repair Turkey’s relationship with Saudi Arabia which deteriorated sharply following the 2018 murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul. The Turkish president has also looked to mend ties with the UAE. Ankara and Abu Dhabi became bitter rivals in the decade after the 2011 Arab uprisings rocked the region, but have both moved to de-escalate tensions in recent years. Bankers said Erdoğan had a list of assets Turkey was seeking to sell stakes in to raise foreign currency, with the hope of striking deals with the oil-rich region’s sovereign investment funds. “There’s an active programme to sell and most are directed towards this region,” said an international banker. “It’s more of a government-to-government effort to the region. There’s absolutely appetite [in the Gulf].” The banker said the assets covered a “whole range” of sectors. “It’s not just handouts, these will be good commercially driven transactions,” the banker said. “It should have happened before but there wasn’t clarity about the direction of the country.”

Abu Dhabi’s sovereign investment fund, ADQ, previously committed to invest $10bn in Turkey after Sheikh Mohammed bin Zayed al-Nahyan, the UAE’s president, visited Erdoğan in late 2021. ADQ told the Financial Times last year that it was interested in Turkish logistics companies, food businesses and financial services. The UAE also agreed last year to a $5bn currency swap with Turkey in a boost to Ankara’s foreign currency reserves. Qatar, which has long been Turkey’s closest ally in the oil-rich Gulf, expanded a currency swap agreement with Ankara in 2020 from $5bn to $15bn. The Qatar Investment Authority, the gas producer’s $450bn sovereign wealth fund, also holds stakes in several Turkish entities, including Turkey’s Eurasia Tunnel company, Borsa Istanbul, the stock exchange and Istinye Park, a shopping mall in the commercial capital. Turkey’s current account deficit hit a record $37.7bn in the first five months of this year. It has been financed in large part with foreign currency reserves, but officials would prefer to bridge the gap with foreign inflows. In a sign of how the new economic policies have started to bear fruit, foreign investors have pumped $1.3bn into Turkish equities in the five weeks to July 7, according to data from Turkey’s central bank. More

The investment bank’s chief economist, Jan Hatzius, cited a slew of better-than-expected economic data in a research report released late Monday.
“The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession,” he said.

Skyline of lower Manhattan and One World Trade Center in New York City and the Water’s Soul sculpture on July 11, 2023, in Jersey City, New Jersey. (Photo by Gary Hershorn/Getty Images)
Gary Hershorn | Corbis News | Getty Images

Goldman Sachs revised down the odds of a U.S. recession happening in the next 12 months, cutting the probability down to 20% from 25% on the back of positive economic activity.
The investment bank’s chief economist, Jan Hatzius, cited a slew of better-than-expected economic data in a research report released Monday.

“The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession,” he said.
The chief economist cited resilient U.S. economic activity, saying second-quarter GDP growth was tracking at 2.3%. The rebound in consumer sentiment and unemployment levels falling to 3.6% in June also added to Goldman’s optimism.
The U.S. economy expanded 2% at an annualized pace in the first quarter. Last Thursday, data from the Labor Department showed that initial jobless claims fell to 239,000 for the week ended June 24, well below estimates of 264,000 and marking a 26,000 decline from the previous week.

There are also “strong fundamental reasons” to expect the easing of consumer price rises to continue after June’s core inflation, excluding food and energy, rose at the slowest pace since February 2021.
The investment bank, however, expects some deceleration in subsequent quarters as a result of sequentially slower real disposable personal income growth.

“But the easing in financial conditions, the rebound in the housing market, and the ongoing boom in factory building all suggest that the U.S. economy will continue to grow, albeit at a below-trend pace,” Hatzius said.
Goldman still expects a 25 basis point hike from the upcoming Federal Reserve meeting next week, but Hatzius believes that it could mark the last of the current cycle.
—CNBC’s Michael Bloom contributed to this report. More