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UK faces ‘bleak winter’ as food prices soar; China’s slowdown deepens – business live | Business

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Key events

Soaring food prices unfairly hit poorest hardest

Soaring food prices hit the poorest hardest, as they spend a greater proportion of their income on essentials such as food and energy.

They could also spur the Bank of England to raise interest rates again, at its next meeting in mid-December.

That would be another blow to many households, pushing up the cost of credit and ther borrowing, as the BoE tries to squeeze out inflationary pressures.

Victoria Scholar, head of investment at interactive investor, tells us:

The BRC-Nielsen IQ Shop Price Index points to record highs all round as rising costs across the board from wages to energy and agriculture are being passed on to consumers in terms of higher prices, especially for meat, eggs, and dairy.

Increasing essential food prices are adding to the cost-of-living crisis, unfairly impacting those at the lower at of the income spectrum more acutely.

Families will be forced to make tough spending choices this festive season, with many opting for a slimmed down version of Christmas this year.

The Bank of England continues its combat against inflation, with another hike expected at its next meeting in December as the central bank desperately attempts to slow the rising cost of living.”

With food prices rising so fast, the cost of Christmas will be higher this year.

Mike Watkins, Head of Retailer and Business Insight at NielsenIQ, says:

Shoppers will be managing their budgets more closely than at any time since the start of cost-of-living crisis.

Retailers are now responding by offering seasonal savings and price cuts and will be hopeful of an uptick in shopper spend as we move into December.”

Earlier this week, a survey commissioned by the Salvation Army found that older people are particularly worried about paying for Christmas dinner.

Some 16% of households are planning to use a food bank to get items for their festive meal, while 38% are likely to skip meals if they have an unexpected expense such as a broken boiler.

The Salvation Army’s Lieutenant Colonel Dean Pallant said:

“Christmas should be the season of joy, not sorrow.

“If so many people are worried they can’t even afford one of the most important meals of the year, it’s a red flag that poverty is creeping further into our communities.”

UK faces bleak winter ahead as food prices rocket

UK households face a ‘bleak winter’ as prices in the shops continue to accelerate, driven by food.

Food inflation has surged to a new record, with prices jumping by 12.4% over the last 12 months.

Items such as eggs, meat, dairy products and coffee shot up, according to the latest data from the British Retail Consortium (BRC). This lifted fresh food inflation to 14.3%, up from 13.3% last month.

These soaring prices are a heavy blow to shoppers in the run-up to Christmas, particularly poorer households, on top of higher energy bills and falling real wages.

UK shop inflation, to November 2022
Photograph: BRC

Overall shop prices are now 7.4% higher than last November, up from 6.6% in October, the highest since the BRC started crunching its numbers in 2005.

Helen Dickinson OBE, CEO of the BRC, warns that Christmas will be pricier this year too.

“Winter looks increasingly bleak as pressures on prices continue unabated. Food prices have continued to soar, especially for meat, eggs and dairy, which have been hit by rocketing energy costs, and rising costs of animal feed and transport.

Coffee prices also shot up on last month as high input costs filtered through to price tags. Christmas gifting is also set to become more expensive than in previous years, with sports and recreation equipment seeing particularly high increases.

Rising inflation means the UK is expected to suffer its worst fall in living standards since at least the 1950s.

A chart showing how UK living standards are set for the largest fall on record in 2023-24

Dickinson predicts that many households will cut back on seasonal spending in order to prioritise the essentials.

Retailers continue to do all they can to support their customers and ensure everyone can enjoy the festive season by fixing prices of many essentials, offering discounts to vulnerable groups, raising pay for their own people, and expanding their value ranges.”

Here’s the full story:

Introduction: China PMIs hit seven-month low as economy weakens

Employees work at EGING Photovoltaic solar panels factory in Changzhou, Jiangsu Province, China.
Employees work at EGING Photovoltaic solar panels factory in Changzhou, Jiangsu Province, China. Photograph: Alex Plavevski/EPA

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Today we have fresh evidence that China’s economy is struggling, as strict COVID-19 restrictions and rising infections drag growth down.

Activity at China’s manufacturing and services companies shrank again this month, at the fastest pace in seven months. Output, employment and delivery times all weakened, while measures of new orders, and new export demand, also fell further.

The official manufacturing purchasing managers’ index (PMI) fell to 48.0 for November against 49.2 in the previous month, the lowest reading since April.

The non-manufacturing PMI, which tracks service sector activity, fell to 46.7 from 48.7 in October. Any reading below 50 shows a contraction.

China’s manufacturing and non-manufacturing activities both slip deeper into contraction in Nov.
Manufacturing PMI at 48
Non-manufacturing PMI at 46.7 pic.twitter.com/afbmZSPAdD

— Cathy Yuan Zhang (@CathyYuanZhang) November 30, 2022

Economists fear China’s economy will struggle next year, with policymakers sticking to their zero-Covid strategy despite protests on the streets last weekend.

Sheana Yue, China economist at Capital Economics, warned that China’s economy may struggle for months:

“Downside risks continue to grow as the virus situation continues to worsen and will weigh heavily on the economy into 2023.”

As we covered yesterday, several carmakers have cut production due to the clampdown on the virus. Apple could miss out on production of as many as 6 million units of its premium iPhone 14 Pro models this quarter, due to disruption at Foxconn’s Zhengzhou plans.

Stephen Innes, managing partner at SPI Asset Management, agrees that the first half of 2023 will be weak:

The activity data continues to cement the view that the Chinese economy is expected to display a distinct “two halves” next year, where a brutal winter will likely continue to weaken economic data in December and the first quarter following.

Still, it will give way to above-consensus growth in H2 as the economy reopens.

Also coming up today.

We’ll hear from the Bank of England’s chief economist, Huw Pill, when he speaks at a conference organised by the Institute of Chartered Accountants in England and Wales.

Yesterday, BoE governor Andrew Bailey revealed the Bank had been left in the dark about Kwasi Kwarteng’s disastrous mini-budget, describing an “extraordinary process” with “no formal communication” in advance between the central bank and the Treasury.

European markets are set to open higher, ahead of the flash eurozone inflation report for this month. It may show that inflationary pressures are peaking.

We also find out how many workers were hired by US companies last month, how many vacancies are unfilled, and how India’s economy fared in the last quarter.

The agenda:

  • 7.45am GMT: France’s inflation report for November

  • 8.30am GMT: Bank of England chief economist Huw Pill speaks at a conference of the Institute of Chartered Accountants of England and Wales (ICAEW)

  • 8.55am GMT: German unemployment report

  • 10am GMT: Eurozone flash inflation report for November

  • Noon GMT: India’s Q3 GDP report

  • Noon GMT: US weekly mortgage applications

  • 1.15pm GMT: ADP survey of US company payrolls in November

  • 1.30pm GMT: US Q3 GDP report (second estimate)

  • 3pm GMT: JOLTS survey of US jobs openings


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