Brits are becoming used to spending more and getting less for it and are adjusting their shopping habits accordingly.
According to the British Retail Consortium, retail sales increased 5.2% in the year to April, which is about half the rate of inflation over the same period. The hospitality sector has shown tremendous resilience in the face of the challenges and expenditure in restaurants and bars increased by 4% last month – no doubt the Early May Bank Holiday and the bonus one we got yesterday will have got May’s numbers off to a strong start too. UK energy suppliers are being urged to renegotiate long term energy contracts with UK small businesses to help them avoid facing closure. The Federation for small businesses has called for action as thousands of UK businesses are stuck in multi year fixed energy contracts that were entered into when costs were spiraling in 2022.
Since then, wholesale gas prices have fallen by 80% and the government has also withdrawn its support packages – meaning companies are stuck paying more, without support whilst the open market is much better value. Suppliers offering fixed price contracts will almost certainly have gone and hedged their own exposure in the market, meaning that they might be reluctant to renegotiate for fear of facing losses themselves. The FT has the story: www.ft.com/content/621f4906-18d2-408c-9fdf-b667547be254
The debt ceiling debate is once again dominating the news cycle, with Janet Yellen calling it a potential “economic catastrophe”. We don’t disagree with her at all, but the bipartisan game of chicken has been played so many times over the last decade or more that we’re fully expecting this to be ‘amicably’ resolved with a couple of concessions here and there – though both parties are miles apart on what they want in exchange for signing off an increase in the credit limit. Reuters is reporting that Ms Yellen has resorted to calling CEO’s directly and warning them of the “dangerous consequences of the current brinksmanship” probably in the hope that they in turn can pick up the phone and provide a ‘non-political’ intervention to their state legislators and try and get common sense to prevail. The debt ceiling is likely to be hit in the first week of June, so the countdown begins (again).
The rescue of another failed bank in the US has prompted the G7 to think about a rapid response plan to future failings – or perceived failings that then in turn become a self-fulfilling prophecy. The plans would involve more focus on mid-sized banks, that have been benefactors of deregulation in recent years and would require them to hold more capital and more deposit insurance. The G7 finance ministers are meeting later this week in Japan, ahead of the main G7 meeting which takes place next week. Nikkei has the story: www.asia.nikkei.com/Spotlight/G-7-in-Japan/G-7-eyes-responses-for-rapid-Silicon-Valley-Bank-type-failures
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The vast Ukrainian Nova Khakovka Dam has been destroyed in the Russian occupied region of Kherson, Ukraine releasing a torrent of water as concerns for residents and nuclear power facilities up and downstream grows.
Plans have been unveiled for a Universal Basic Income (UBI) trial in the UK, with the think tank Autonomy currently seeking financial backing. It is hoped that the trial will span over two years with participants receiving £1,600 each month and being in control of how they spend or save the funds.
Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.
Last night, the House comfortably passed the debt ceiling bill in arguably the most important stage in the process to ensure that the world’s largest economy averts a technical default. The House of Representatives cleared the Fiscal Responsibility Act by 314-117, the bipartisan deal assembled by President Joe Biden and House Speaker Kevin McCarthy.
Tonight, congress will vote on the bill agreed by President Joe Biden and House Speaker Kevin McCarthy, as the US tries to avert X-date by raising the debt ceiling. According to Reuters, “the deal caps federal spending and forces more poor people to work for food aid, concessions that Democrats hate. But it also preserves much of Biden's Inflation Reduction Act and punts the next debt ceiling showdown into 2025, which Republicans hate.”
As markets weigh on the Bank of England’s interest rate decision on 22 June, this morning’s hotter-than-expected inflation print has seen investors upwardly revise rate hike expectations. Indeed, market reaction to this morning’s print is a further reaffirmation that inflation continues to be the hottest topic of conversation.
The incumbent Recep Tayyip Erdogan has secured another five years as Turkey’s president following a run-off election which saw him take 52% of the votes, against Kemal Kilicdaroglu’s 48%
UK retail sales rose higher-than-expected this morning having increased 0.5% on a month-on-month basis for April. This beat market expectations of a 0.3% rise and came after a 1.2% fall last month.