Economy

Food prices for the eurozone’s shoppers are set to keep rising at near-record rates for at least another year, despite the region’s largely self-sufficient agriculture sector, according to the European Central Bank.Russia’s invasion of Ukraine has disrupted supplies from the war-hit region and led to a surge in the price of key agricultural commodities imported from there, such as fertiliser, animal feed and sunflower oil. An ECB report on Tuesday warned this is pushing up costs for European farmers and food producers well beyond those that rely directly on imports from Ukraine or Russia — and is likely to drive broader increases in what consumers pay for their weekly groceries.In an article from the ECB’s monthly research bulletin published on Tuesday, officials said food inflation was “expected to stay high in the coming months, despite some counterbalancing factors”, such as increased domestic production or a switch to alternative sources. Pointing to a surge of more than 40 per cent in the farm gate and wholesale prices of food in the eurozone, the central bank predicted that further “price pressures will affect euro area consumer food prices through the pricing chain in the coming months”.The soaring cost of fertiliser, which rocketed 151 per cent in the EU in the year to April, meant food prices would continue to surge in 2023, the central bank said.

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The EU produces more agricultural products than it consumes. But this has not insulated the region from the surge in food prices sweeping across much of the world.The price of food in the 19 countries that share the euro rose 7.5 per cent in the year to May, an all-time high since the single currency was launched in 1999. Annual food inflation is higher in the US and UK, but prices have been rising faster in the eurozone over the past three months.Monetary policymakers would normally look past short-term rises in food prices as a supply-driven source of inflation that they have little influence over. But if food prices keep going up, people’s expectations that costs will continue to spiral could become entrenched. Consumers are more sensitive to sharp increases in their weekly food bill, because it is more easily noticeable than other costs. Jennifer McKeown, head of global economics at Capital Economics, said policymakers “no longer have the luxury” of dismissing food inflation, “particularly since food prices are so visible and influential on the inflation psyche”. She forecast that if agricultural commodity prices kept rising it would cut consumer spending in advanced economies by 0.7 per cent.The ECB announced this month that it would begin raising rates in July in a bid to combat inflation that, at more than 8 per cent, is now four times policymakers’ goal of 2 per cent. The invasion of Ukraine, known as “the breadbasket of Europe”, has vastly reduced the country’s exports of wheat and corn as well as sunflower oil. The war also hit supplies of fertiliser from Russia and potash from Belarus.The ECB said Ukraine, Russia and Belarus only accounted for a combined 2 per cent of the food and fertiliser imported into eurozone countries in 2020. But it added that the bloc still relied heavily on the supply of certain products from the three countries, such as maize, which is used widely for animal feed, sunflower oil and fertiliser.Disruption to the supplies of fertiliser or maize were likely to push up the price of many other food products by raising costs for farmers, the central bank said. Alternative supplies of these products would be more expensive, it added.“Households may substitute sunflower seed oil with other vegetable or animal oils and fats, but it is also used in a number of processed food products, so the reduced supply has a large impact,” it added.

In the Baltic states and Finland, which rely more heavily on Russia, Ukraine and Belarus for agricultural and fertiliser imports than most eurozone countries, food inflation has been well above the bloc’s average at between 12 and 19 per cent.Even if food producers buy their ingredients from domestic farmers or those in other eurozone countries, they will still have to pay more due to the surge in global prices for many agricultural commodities and sharply higher energy and fertiliser costs for farmers, the ECB said. More

Surging inflation is expected to push up British grocery bills by £380 this year, according to new consumer data, as the Bank of England chief economist argued that higher interest rates would be necessary to tame rising prices.In April, the research company Kantar had predicted the average cost of an annual supermarket shop would rise by £270 this year, but revised this up by more than £100 on Tuesday due to continued upward price pressures across the supply chain.The research showed “just how sharp price increases have been recently and the impact inflation is having on the [food retail] sector”, said Fraser McKevitt, head of retail and consumer insight at Kantar.Official data showed that consumer price inflation rose at a 40-year high of 9 per cent in April with the Bank of England predicting it could rise by 11 per cent in autumn.The figures came as the Bank of England’s chief economist Huw Pill said there was a need for further interest rate rises in the UK even if an increase heightened the risk of recession.Speaking to an online audience on Tuesday, Pill said that the BoE’s efforts to ease inflation used “blunt instruments” that would bring down inflation but could not fine tune the economic cycle or address inequality. Pill acknowledged that inflation had taken on “self-sustaining momentum”, which might prompt the BoE to act more aggressively to bring it down with higher rates. Official data for prices of food and beverages rose at an annual pace of 6.7 per cent in April, the fastest in more than a decade. Kantar data showed that the surge in food price growth has continued to rise. Grocery inflation reached an annual rate of 8.3 per cent in the four weeks to June 12, according to the data, up 1.3 percentage points from the previous month and its highest level since April 2009.Shoppers have responded to rising living costs by swapping branded items for cheaper supermarket own-label products, Kantar said. Sales of the former fell by an annual rate of 1 per cent in the 12 weeks to June 12, in contrast with a 2.9 per cent increase in sales of own-brand goods. “We can also see consumers turning to value ranges, such as Asda Smart Price, Co-op Honest Value and Sainsbury’s Imperfectly Tasty, to save money,” added McKevitt.

Financial markets expect the central bank to raise rates to 3 per cent over the next year as the bank tries to rein in inflation. At the same time, the outlook for UK economic growth is deteriorating as higher price growth is expected to hit consumption. Although some on the BoE’s Monetary Policy Committee do not think further tightening is required to tame inflation, Pill sided with the more hawkish members. “We will do what we need to do to get inflation back to target. And at least in my view, that will require further tightening of monetary policy over the coming months,” Pill said.  More

ROSEBUD, South Dakota (Reuters) -U.S. President Joe Biden on Tuesday announced his intention to appoint Mohegan Indian Tribe Lifetime Chief Marilynn Malerba as U.S. Treasurer, marking the first time a Native American’s signature will appear on U.S. currency.U.S. Treasury Secretary Janet Yellen, who is visiting the Rosebud Sioux Tribe in South Dakota on Tuesday, also announced the creation of a new Treasury Office of Tribal and Native Affairs, which will report to the treasurer and administer tribal relations.Malerba’s appointment by Biden also will allow Yellen’s signature to be added to the U.S. currency, as this was prohibited without a U.S. treasurer in place. Dollar notes have been printed since Yellen took office last year with former Treasury secretary Steven Mnuchin’s signature on them.The appointment helps reduce a long list of unfilled and unconfirmed senior positions at Treasury.The treasurer position has been vacant since January 2020, when Jovita Carranza left to become Small Business Administrator in the Trump administration. The U.S. Treasurer directly oversees the U.S. Mint, the Bureau of Printing and Engraving, storage of about $270 billion worth of gold at Fort Knox and is a key liaison with the Federal Reserve.Malerba’s appointment to the position no longer needs confirmation by the U.S. Senate.”With this announcement, we are making an even deeper commitment to Indian Country,” Yellen said in prepared remarks to be delivered at the Rosebud Sioux reservation. “Chief Malerba will expand our unique relationship with Tribal nations, continuing our joint efforts to support the development of Tribal economies and economic opportunities for Tribal citizens.”Malerba, who had a lengthy career as a registered nurse, has been chief of the Connecticut-based Mohegan tribe since 2010 and previously chaired its tribal council and served as its executive director of Health and Human Services, according to the Mohegan website https://www.mohegan.nsn.us/explore/heritage/our-ceremonial-leaders/chief.The Treasury said Malerba will join Yellen at the Rosebud Sioux reservation on Tuesday, where Yellen will discuss the impact of some $30 billion in federal COVID-19 aid to tribal governments.Yellen’s visit to the Rosebud Sioux reservation marks the first time that a Treasury secretary has visited a tribal nation – department officials said they could find no record of a prior visit. Yellen will tour programs at the reservation that are using nearly $200 million in funds last year’s American Rescue Plan, including $40 million worth of affordable housing projects.The Treasury on Tuesday also announced that it has approved the tribe’s plan to use more than $160,000 to upgrade its broadband internet infrastructure under a $10 billion broadband fund for state, local and tribal governments. More

“The year 2022 is far more complex,” FFS Chairman Jean-Pierre Cointreau told reporters. “We recovered from the COVID-19 crisis but we can see that sales are at down 4% (in value) in the 12 months to the end of May in supermarkets, and down 7% between January and May.” Spirits exports, France’s second-largest sector after aerospace, had also recorded a fall in the past few months, he said. Last year, they accounted for nearly half of total spirits sales by value and were up 30% at 4.9 billion euros ($5.18 billion). “In the United States we have seen a sharp drop in sales since April due to the rise in inflation (..) and in Asia it has clearly slowed down because of the sanitary measures,” Cointreau said. “It is clear that geopolitics will be one of the most important parameters in the coming year,” he added, referring to the Ukraine war and tensions between China and Taiwan. The United States accounts for 44% of total French spirits shipments in value and Asia 29%.In France, where alcohol consumption has been in decline, sales volumes in retail shops have stagnated in 2021 despite higher sales for white spirits like vodka and gin. Sales rose in hotels and restaurants in France which had been shut in 2020 because of COVID-19 but they were still well below pre-pandemic levels, FFS said. Cointreau also stressed that lower availabilities and higher prices for gas, glass as well as grains, used for spirits like vodka, were raising costs and concerns in the industry.It could also suffer from grain supply shortages due to the Ukraine war and weather problems, which are expected to hit this year’s grain production, he said.The FFS, which represents French producers and distributors of spirits beverages, encompasses 250 companies, including small businesses and international groups. ($1 = 0.9463 euros) More

The International Air Transport Association (IATA) comprising almost 300 airlines sought to put into perspective the furore recent airport and holiday chaos and also tempered plans to boost capacity as the battered sector tries to solve staff shortages since air travel collapsed during the pandemic.”Let’s relax a little; yes, we have challenges, but it is not everywhere,” IATA Director General Willie Walsh said, adding that the industry would be able to see its way through recent problems.He was speaking to reporters as airlines concluded a three-day Doha meeting marked by a sharper than expected recovery of air travel that caught airports and many planners by surprise.The airline industry expects to narrow losses this year but has raised its forecasts owing to the brisk recovery while voicing concern about rising inflation and conflict in Ukraine.Some airlines may have to adjust capacity plans to cope with staff shortages, but not all carriers and airports are facing the chaos recently seen in Europe, Walsh told a news conference.Walsh predicted that the industry will see its way through current capacity and staffing challenges.However, he said that airlines are not able to absorb the sharp increases to fuel costs, calling on companies to put their money where their mouth is and produce sustainable aviation fuels.Walsh also pledged that the aviation industry would stick to a commitment to achieve net zero emissions by 2050 despite debate over the speed of development of alternative fuels. More

The latest forecast comes about a week after the U.S. Federal Reserve rolled out its biggest rate hike since 1994 to stem a surge in inflation and as several other central banks also took aggressive steps to tighten monetary policy.Goldman Sachs also downgraded its U.S. GDP estimates below consensus for the next two years to reflect the drag on the economy. “The Fed has front-loaded rate hikes more aggressively, terminal rate expectations have risen, and financial conditions have tightened further and now imply a substantially larger drag on growth — somewhat more than we think is necessary,” Goldman’s economists said in a note from late-Monday.”We now see a 30% probability of entering a recession over the next year (vs. 15% previously) and a 25% conditional probability of entering a recession in the second year if we avoid one in the first year, implying a 48% cumulative probability at a two-year horizon (vs. 35% previously),” the economists said.”We are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply,” the note said.(The story corrects to remove reference to 2023 and adds “over next year” in headline; replaces paragraph 5 with comment from research note) More

PARIS (Reuters) – Sales of luxury goods are set to rise at least 5% this year as shoppers in the United States and Europe continue to snap up high-end watches, jewelry and shoes despite political uncertainty linked to conflict in Ukraine and soaring inflation, consultancy Bain said Tuesday.“Consumption doesn’t seem to be affected so far,” Bain partner Claudia D’Arpizio told Reuters in an interview. Bain estimates that global sales of personal luxury goods will reach at least 305 billion euros ($320 billion) this year, according to its most conservative estimate — and up to 330 billion euros in a more optimistic scenario — building on its fast rebound from pandemic lockdowns. This compares with a previous estimate for 300 billion to 310 billion euros. Bain widened its projections to account for strong current sales, said D’Arpizio, despite a wobbly stock market in the United States and concerns about an economic recession.“We are aware that we are in a very turbulent environment,” she said. Analysts at Bain said global sales of personal luxury goods, which include clothing, accessories and beauty products, reached 288 billion euros last year, surpassing a previous forecast for 283 billion due to strong spending over the holidays.Even with high inflation and disruptions from COVID-19 lockdowns in mainland China, luxury firms tapped into local demand in Europe and the United States with effective marketing.“We were for sure astonished,” by resilient consumer confidence despite inflation, D’Arpizio said.Domestic spending from Chinese consumers will likely recover through the second half of the year, according to Bain, which also highlighted South Korea as a booming market.The United States overtook Europe as the largest luxury market last year, Bain said in a previous report.($1 = 0.9522 euros) More

WASHINGTON (Reuters) – President Joe Biden’s pointed criticism of oil and gas companies for earning massive profits as families suffer from high gasoline prices challenges a pillar of American capitalism: that U.S. companies should make as much profit as they legally can, and direct that windfall back to investors. Biden told Shell (LON:RDSa) Plc, Exxon Mobil Corp (NYSE:XOM) and Chevron Corp (NYSE:CVX) and other refining giants last week they have another responsibility: to do everything they can to bring down high gasoline prices that are squeezing American consumers and driving up inflation.”We see it as a patriotic duty,” White House press secretary Karine Jean-Pierre said Wednesday. Russia’s invasion of Ukraine has caused gas price hikes, she said. “We know where to put the blame, on the war. But oil companies, oil refiners they have responsibilities too. What they have been doing is taking advantage of the war.”  Particularly galling to the White House is the jump in industry stock buybacks, returning to investors profits that the administration wants invested in more refining capacity to bring gasoline prices down. Biden’s criticism is being soundly rebuffed by industry executives and trade groups as having no place in an economic discussion. “The injection of ‘patriotism’ into this is an attempt to put shame on folks,” said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, the pro-business lobby group. “These are market forces and market functions.” Instead, Bradley and other industry officials say the administration should remove import tariffs and cut regulations to allow more domestic fossil fuel production and refining, which would signal to energy markets that supplies will increase.But the idea that U.S. chief executives should serve other stakeholders besides investors, and take direction from other masters besides market forces isn’t new for Biden, the U.S. presidency, or for corporate America. His recent push is part of a slow-boil rethink of the role that companies, chief executives and the very wealthy should play in the U.S., what workers and average citizens deserve and whom governments should champion and protect.Biden himself campaigned on a promise to fix American inequality, raise wages and force companies to pay their “fair share” in taxes, part of a broader attempt to reshape the U.S. economy. Democrats’ roughly 100-member Congressional Progressive Caucus has pushed bills expanding workers’ and consumers’ rights, playing a growing role in Washington lawmaking. And these companies have made promises too. In the summer of 2019, CEOs of more than 180 big U.S. companies, including Exxon and Chevron, pledged https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans they would not only work for shareholders, but employees, customers, suppliers and their communities to “build an economy that serves all Americans.”Inflation hits poorer Americans particularly hard because they spend a greater percentage of their income on food and fuel. Asked last week about the pledge in the context of Biden’s remarks, the Business Roundtable group that organized it said in an email: “BRT CEOs, including our energy members, are attempting to do just that while navigating a global energy crisis, high costs for crude oil and other inputs, and an adverse regulatory and investment environment.” Biden’s attempt to shame these companies into taking less profit has historical precedent. President John F. Kennedy attempted to curb steel prices https://www.jfklibrary.org/archives/other-resources/john-f-kennedy-press-conferences/news-conference-30 60 years ago, criticizing “a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility,” and accusing them or showing “utter contempt for the interests of 185 million Americans.”Kennedy’s diatribe in April 1962 came in response to steel companies announcing a $6-a-ton price increase, shortly after agreeing to a new contract — brokered by Kennedy’s administration — with the United Steelworkers union. A day after Kennedy’s remarks, the companies rescinded the price hike. Unlike today, the exchange came at a time when steel profits were declining, imports were increasing and shares were falling. Announcing disappointing earnings a month later, U.S. Steel Corp CEO Roger Blough reportedly told shareholders: “This concept is incomprehensible to me – the belief that government can ever serve the national interest in peacetime by seeking to control prices in competitive American business, directly or indirectly, through force of law or otherwise.”Jawboning companies “to reduce inflation has never been very effective,” said Martin Bailly, a senior fellow in economic studies at the centrist Brookings Institution think tank.”Biden’s frustration is understandable because there is no tool to reduce inflation except to put the whole economy into a downturn,” said Bailly, an expert on regulation and productivity.”I think the right approach is to tough this situation out. Tell Americans that the inflation is the result of disruptions from COVID-19 and the huge price shock from the Russia-Ukraine conflict. Support the Federal Reserve and say that things will be bad for some time, but we will get through this and restore growth and price stability as soon as possible.” More