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The British economy may have “turned the corner” but hopes of interest rate cuts soon, improving borrowing conditions for businesses and pressure on homeowners, are fading.
The accelerated growth of the United States and the tightening of the labor market maintain pressure on prices on the other side of the Atlantic. Restoring inflation to the Federal Reserve’s 2 percent target is a struggle.
Overall consumer prices in the United States rose 3.5 percent in March, following a 3.2 percent increase in February.
Closely watched core inflation, which excludes volatile gasoline and good prices, rose in the past three months at an annual rate of 4.5 percent.
The door has been slammed shut on an interest rate cut in June. Instead of six or seven cuts in US rates this year, markets now forecast just two, ending the year with a federal funds rate of 4.75 to 5 percent.
Restrained: A cautious Bank of England is unlikely to rush to cut rates even though the economy badly needs a boost amid sluggish output.
The United States has a direct impact on Great Britain. The pound fell, the FTSE 100’s glorious progress towards 8,000 was halted and golden edge yields rose.
Potentially, the cost of living in the UK could fall more rapidly than in the United States.
But a cautious Bank of England is unlikely to rush to cut rates even though the economy badly needs a boost amid sluggish output. The value of the pound does not dictate interest rate decisions.
However, a cut in the UK bank rate from 5.25 per cent, at a time when US borrowing costs are stagnant, would risk weakening the pound and bond prices. The fall of the pound sterling raises import costs.
The Bank has exaggerated the monetary restriction and should ease it. But the United States’ long-standing fight against inflation has put a stop to that.
Murphy’s law
Tesco continues to gain ground at the expense of its rivals.
Despite price competition from German startups Aldi and Lidl and quality challenge from Waitrose and M&S, the country’s most powerful grocer increased its market share in the 2023-24 financial year, posted pre-tax profits highest in a decade and projects operating profits. of £2.8 billion in the current year.
The scale of profitability, when cost of living pressures were pressing, caused dissonance: the Unite union accused him of “hoarding mountains of cash”.
The best thing is that Tesco’s dynamism benefits investors in the United Kingdom through an increase in dividends and a share buyback worth one billion pounds.
In case Unite hasn’t noticed, some 220,000 colleagues will share a “thank you” payment of £70m, equivalent to 1.5 per cent of annual income, which would mean a full-time employee would I would take home an extra 300 pounds.
That’s great, but it will look bad when the board’s pay report appears in the coming days. Chief executive Ken Murphy pocketed £4.4m the previous year.
By food supplier standards, Unilever’s profit margin is more than 16 percent; Tesco cannot be accused of “greed”, with a margin of 4.1 per cent.
The group is reinforced by the difficulties of some competitors. Asda and Morrisons have come under pressure from private equity ownership, hitting them with financial costs.
On the positive side, it has competed well by matching prices with Aldi, through its Clubcard loyalty card and a double-digit increase in sales of its luxury ‘Finest’ range.
This may have attracted sales from Waitrose. It is hoped that the new chairman of John Lewis/Waitrose, Tesco exile Jason Tarry, may have answers to that question.
Murphy’s work to combat theft and assaults on staff, launched in The Mail on Sunday, is bearing fruit with Rishi Sunak’s decision to make attacks on shop workers a specific criminal offence.
Supermarket staff, who are on the front line of the battle against bad behaviour, need support.
mud hut
As a growing online distributor, Matt Molding’s The Hut Group, now called THG, is judged by its revenue and earnings before interest and depreciation.
It is therefore disappointing that sales in the three main categories – beauty, nutrition and ingenuity (the technology branch) – have fallen in 2023. All very complex, but adjusted profits still reached £120.4 million.
We’re told that beauty perked up last quarter and that investment in artificial intelligence and automation should improve results. Consolidated accounts show overall losses were halved to £248,372.
Happy days postponed.