Supermarket value range shoppers hit hardest by rising prices; Germany on brink of recession – business live | Business

UK shoppers have been hit by increased shortages of food in the shops this month, new data from the Office for National Statistics shows.

A quarter of adults reported that they could not find a replacement when the items they needed were not available when food shopping in the past two weeks.

This proportion has increased from 15% in a similar period a year ago, indicating that Britain’s fruit and vegetable shortages are not just down to seasonal factors.

Nearly 2 in 10 adults experienced shortages of essential food items that were needed on a regular basis in the past two weeks, up from 13% a year ago.

Around 22% adults experienced shortages of non-essential food items in the past two weeks. Since March 2022, the proportion has seen a general increase to its current level, the ONS says.

Over nine in 10 adults reported that their cost of living has increased in the last year – a period when inflation hit double-digits.

The main reasons given were:

Two thirds of adults reported spending less on non-essentials:

The ONS also asked the public what they feel are important issues facing the UK today, and the cost of living crisis topped the list, followed by the situation in the National Health Service.

Over in Germany, fears of a recession are swirling after Europe’s largest economy shrank by more than first thought at the end of last year.

German GDP contracted by 0.4% in the final quarter of 2022, updated figures from statistics body Destatis this morning show. That’s twice as sharp a downturn as the 0.2% first estimated.

Germany is expected to contract in the current quarter, which would put it into a technical recession, after being hit by soaring energy prices.

Destatis says:

The German economy markedly lost momentum at the end of the year. The gross domestic product grew in the first three quarters of last year (+0.8%, +0.1% and +0.5%) despite difficult framework conditions in the global economy.

The data is a reminder of the economic cost of the Ukraine war, as Europe marks the first anniversary of Russia’s full-scale invasion.

The GDP report shows that private consumption fell by 1% quarter-on-quarter, as German households were hit by rising inflation.

Companies cut back too, with capital investments plunging by 2.5% quarter-on-quarter.

Construction output suffered from shortages of material and skilled labour shortagem and cold weather in December, while high energy costs hit manufacturing.

Net exports, government consumption and a large inventory build-up prevented the economy from falling into a deeper contraction, ING’s economist Carsten Brzeski explains.

Brzeski predicts a German recession in the short term and a subdued recovery afterward, saying:

In Germany, industrial orders have weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historic lows, the loss of purchasing power will continue in 2023, and the full impact of monetary policy tightening still has to unfold.

Today’s numbers mark the first part of what could become a technical recession in Germany. We think that the risk of yet another contraction in the first quarter and, thus, a technical recession is high and that the German economy is still miles away from staging a strong rebound.

However, German business sentiment has improved for the last five months, according to data from the IFO institute this week which suggested the economy was emerging from its weak patch.

Shares in cinema chain Cineworld have tumbled by over 40% in early trading, after it warned this morning that shareholders’ equity may be wiped out by its plans to exit from Chapter 11 bankruptcy protection.

Cineworld, which filed for bankruptcy protection last September, has been seeking a buyer.

Today, it says that while it has received “non-binding proposals” for parts of its operations, it has not received an all-cash bid for the entire business.

Cineworld, which owns the Regal chain in the US as well as cinemas across the UK and in Israel and eastern and central Europe, says it hopes to emerge from Chapter 11 in the first half of this year.

And it warns that any route out of Chapter 11 is likely to wipe out existing shareholders, saying:

Discussions between the Company and certain of its stakeholders regarding a potential Plan are progressing.

Whilst the discussions suggest that there is a route to the Company emerging from the Chapter 11 cases, in light of the level of existing debt that is expected to be released under any Plan, the Company does not believe that there will be sufficient creditor support for a Plan that contemplates any recovery for equity interests, and it is therefore not expected at this time that any Plan will provide any recovery for holders of Cineworld’s existing equity interests.

Shares have fallen to 2.1p, down from 3.9p last night. At the end of 2019, before the Covid-19 pandemic hit, they were worth 220p.

In the City, British Airways’s parent company has returned to profitability, as Covid-19 restrictions were eased last year.

IAG tells shareholders that it saw “a strong recovery” in its core markets in 2022, which boosted revenues and cash flows, and helped it post a profit

IAG made a pretax profit of £431m, up from a loss of £2.9bn in 2021.

Operating profits were £1.25bn, up from a loss of £2.76bn.

It expects a “further recovery” in profits this year, aiming for an operating profit before exceptional items of €1.8bn to €2.3bn. But, that will depend on the macroeconomic environment, fuel costs, and other cost inflation.

Luis Gallego, IAG’s CEO, says demand looks to be robust.

“2022 was a year of strong recovery, driven by sustained leisure demand and markets reopening.

At this point of the year we continue to see robust forward-bookings, while also remaining conscious of global macro-economic uncertainties.

In better news, though, UK consumer confidence has rebounded this month to its highest level in almost a year.

GfK’s gauge of consumer morale has increased to -38 in February from -45 in January, beating expectations for a reading of -43.

This was the biggest month-on-month rise in nearly two years, lifting sentiment to the highest level since April 2022.

GfK found that people are more optimistic about the state of their personal finances and the general economic situation, particularly about the next 12 months.

It suggests UK households have been resilient despite the cost of living crisis, which could help the economy avoid a deep recession this year.

Consumer confidence is still low by historic standards, though, as Victoria Scholar, head of investment at interactive investor explains:

The reading is still languishing in negative territory and 12 points below its reading from February 2022 amid the cost-of-living crisis, lacklustre growth, and rampant inflation. But consumers were more willing to purchase bigger items and reported an improvement in their personal finances.

Not dissimilar to the inflation picture, consumer confidence has a long way to go to restore more normal levels, but the latest reading points to an encouraging trajectory with sentiment starting to shift away from near all-time lows. With the UK narrowly staving off a recession, financial markets picking up, inflation starting to ease and interest rates approaching their peak, there are incipient signs of hope for the UK consumer.”

The price of pasta has nearly doubled in two years, new research for the BBC has found.

A standard 500g bag of pasta was 50p two years ago – now it’s 95p, an increase of 90%, data from retail research firm Assosia shows.

The BBC has been tracking the cost of a small basket of 15 everyday essentials. The total has gone up by £5.34 – from £15.79 in 2021 to £21.13 in 2023.

That’s an increase of a third, at a time when households are also weighed down by soaring energy costs.

Kay Staniland, director at Assosia, said the figures show the real price rises that shoppers are seeing each week, adding:

“It’s inflation on top of inflation at the moment.”.

More here

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

UK households who relying on supermarket value ranges are being hit the hardest by the cost of living squeeze, after grocers hiked their prices sharply.

New research from Which? released this morning found that the price of value items that make up the supermarkets’ most basic ranges has risen by 21.6% since January 2022 – or twice the current rate of consumer price inflation.

Standard own-brand food prices were up by 18.9%.

Overall inflation across supermarket shelves was 15.9% in the year to January, Which?says, with pricier goods rising by less that typically cheaper ones. Branded groceries were up 13.2% year on year, while premium ranges went up by 13.4%.

The cost of everyday staple items had surged over 12 months, Which reports:

Among the most alarming items soaring in price include muesli, which went from £1.20 to £2.25 at Sainsbury’s (up 87.5%), tins of sliced carrots went from 20p to 33p (up 63%) at Tesco, and pork sausages went from 80p to £1.27 (up 58.2%) at Asda.

The report is the latest evidence that poorer households are being hardest hit by the squeeze on budgets. Charities warned this week that one in four households regularly run out of money for essentials.

Prices were up 23.6% at Lidl and 22.5% at Aldi on a year ago, compared with 10.4% at Ocado, 13.2% at Sainsbury’s, 13.6% at Tesco, 14.4% at Morrisons, 15.2% at Waitrose and 16.8% at Asda.

However Which? found the discounters were generally still cheaper than their competitors.

Sue Davies, Which? head of food policy, says supermarkets should make more efforts to help shoppers find the best value products on the shelves.

“It’s clear that food costs have soared in recent months, but our inflation tracker shows how households relying on supermarket value ranges are being hit the hardest.

“Supermarkets need to act and Which? is calling for them to ensure everyone has easy access to basic, affordable food ranges at a store near them, particularly in areas where people are most in need.

“Supermarkets must also do more to ensure transparent pricing enables people to easily work out which products offer the best value and target their promotions to support people who are really struggling.”

Food producers have blamed rising energy bills and labour shortages for pushing up their costs, which are being passed onto customers.

As we’ve been covering this week, supermarket shoppers now face shortages of fruit and vegetables, and restrictions on how many items they can buy at many supermarkets.

Yesterday, environment secretary, Thérèse Coffey, has caused a furore after she suggested people should “cherish” seasonal foods such as turnips, if they can’t get hold of tomatoes and lettuce this winter.

My colleague Zoe Wood has written about turnipgate here:

With a love of turnips more commonly associated with the long-suffering manservant Baldrick in Blackadder, Coffey handed her critics the kind of material they could normally only dream of.

“Let them eat turnips!” suggested the Labour MP Ben Bradshaw, using the hashtag #TomatoShortages, as “turnips” started to trend on Twitter timelines for possibly the first time.

Coffey made her comments after being called to the Commons to answer an urgent question about supermarket rationing of salad ingredients, owing to shortages caused by bad weather in Spain and north Africa. She had been trying to make a point about eating seasonally.

The turnip tumult has also made two front pages this morning, with the Daily Star offering a ‘cut out and keep’ vegetable.

As well as pitching seasonal veg, Coffey predicted that the current shortages of some fruit and vegetables should be resolved in two to four weeks.

The agenda

• 7am GMT: German Q4 GDP (second estimate) and consumer confidence report

• 7.45am GMT: French consumer confidence report

• Noon GMT: Mexico’s Q4 GDP report

• 1.30pm GMT: US PCE survey of consumer inflation

• 1.30pm GMT: US personal income data for January

• 3pm GMT: University of Michigan consumer sentiment report