The first chapter in the history of inflation was the failure of central banks to recognize the threat, as they spent most of 2021 talking about supply chain shocks and “transient” factors. The second chapter was the late realization of the need for action, followed several times on the interest rate lever. Chapter three, which was scheduled to arrive right now, was to be strong signs that the inflationary peak is in sight.
We are not there yet. The U.S. surprise on Wednesday was an inflation reading of 9.1% in June, a couple of degrees higher than markets and economists had predicted. The promise and threat from the US Federal Reserve to raise rates by 0.75% later this month, following a similar move last month, now seems to be fully fulfilled. It indicates another uncomfortable rise in the dollar, which is causing the euro to fall below parity for the first time since 2002.
The only consolation was the time stamp of the figure of 9.1%. A June reading did not capture the sudden drop in the price of many commodities from 15% to 20% in the last fortnight. Oil, the largest of the lot, was $ 118 a barrel in Brent variety on June 26; it is now $ 99. That factor, at the very least, should deter the Fed from opting for a more muscular one-point rise on July 27, or so the consensus now says.
But there was very little else to console investors. The detailed breakdown showed that US inflation is much more than an energy and food phenomenon. Even excluding those items, it’s running at 5.9% and the other big question, next to the “peak,” is how long it will take the Fed to regain control. The market sees that US rates, currently between 1.50 and 1.75%, will reach 3.5% by the end of the year and will not rise, but this hypothesis suddenly feels less certain. We haven’t seen an inflation figure that seriously surprises the low side yet.
Even a few weeks ago, an optimistic school of thought happily awaited the supposed fourth chapter of this saga: the time of next year (some said spring) when the Fed could declare inflation domestic. and could start reversing its rate. excursions. These happy thoughts now feel several leaps before events.
You go half empty at Wetherspoon’s
The last round of updates from the pub sector was far from cheerful, but at least the bosses tried to see the pint glass half full. In May, Mitchells & Butlers and Marston’s protested the rising cost of energy and food, but both also tried to look optimistic about demand. “Trade remains stable,” Marston CEO said. “We are encouraged by the improvement in the sales trajectory,” M & B’s said.
Wetherspoon’s, on the other hand, released the half-empty version on Wednesday. Overall sales have returned (only) to pre-pandemic levels, but the complaint about “much higher” labor costs was accompanied by fewer pink notes. The forecast of a balance sheet position was replaced by a warning to shareholders to expect a loss of £ 30 million during the current financial year.
Wetherspoon shares fell 8% to 577 p.m. In April 2021, it was £ 14, which illustrates the extent to which trade has disappointed after the blockade. “The recovery of many companies has been slower and more laborious than expected,” said founder and CEO Tim Martin. One such company is presumably Wetherspoon itself.
Naturally, Martin also delivered his standard sermon on the wickedness of the tax disparity between pubs and supermarkets, but his real view may be that of the effect on pub trade of work patterns from home. Clearly, something important has happened when sales of beers, beers and ciders have fallen by 8% compared to 2019 and cocktails have increased by 18.6%. This change will seem alarming when beer is the main product.
Why the delay in Morrisons’ inauguration?
The Competition and Markets Authority’s investigation into Morrisons’ purchase of the 1,100-person McColl’s convenience store chain should not be a complicated matter.
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McColl’s was virtually broken. Morrison’s bailout should save most of the 16,000 jobs. Consumers won’t have fewer options because McColl’s already got most of its stock from Morrisons. And, since the supermarket chain is number four in the UK market, Tesco et al will not tremble with their boots. Just delete the deal.
The real question is why it will take the CMA until September to come to the obvious conclusion. The inauguration was announced in May, which is long overdue for McColl’s staff and management to wait for his lifeguard to get to work.