Food inflation across rich nations falls to pre-Ukraine war levels; UK economy at turning point – business live | Business

The last year has been very tough for the UK retail sector, with weak consumer spending, rising costs and high interest rates pushing many retailers to the wall.

The number of retailers falling into insolvency jumped by 19% in the last year, new data from audit, tax and advisory firm Mazars shows, to 2,195.

High profile failures in the last 12 months include Body Shop, Ted Baker and Wilko, who all filed for administration.

Mazars says that many retailers have been hit by a combination of increased costs and cautious household spending among consumers, while higher interest rates are causing significant problems for any retailer that has a significant level of debt that is either “floating rate” or that is coming for refinancing.

Rebecca Dacre, partner at Mazars, says:

“We are unlikely to see the retail sector trading comfortably until interest rates start to fall.

Despite inflationary pressures easing, high interest rates and low consumer spending continue to persist.”

“The rise in the National Living Wage is the largest on record and some face a sharp rise in business rates from April.”

The UK state pension has risen today, as have a swathe of benefits.

People receiving the state pension will get a 8.5% increase, after the government stuck with its ‘triple lock’ policy of increasing pensions by the highest of inflation, wages, or 2.5%.

Today’s increase, based on last summer’s wage inflation, will be worth an extra £900 a year to full rate claimants.

Universal credit claimants will receive a 6.7% increase, based on last September’s inflation rate. Other benefits including the personal independence payment, disability living allowance and employment and support allowance are also rising by 6.7%.

Mel Stride, the Work and Pensions Secretary, said:

“Thanks to the triple lock and our efforts to drive down inflation, we are putting money back in the pockets of pensioners. This is only possible because we have stuck to our plan and our economy has turned a corner.

“This will make a meaningful difference to all those who rely on the state pension and ensure we continue to provide a safety net for those who need it most while making work pay wherever possible.”

Germany’s economy has suffered another drop in overseas sales.

German exports dropped by 2% during February, statistics body Destatis reports, worse than the 0.5% fall expected by economists. On an annual basis, exports were down 4.4%.

Demand from other European countries softened, with exports to EU countries down by 3.9% month-on-month.

Exports to the People’s Republic of China fell by 0.6% to 8.0 billion euros, while exports to the UK fell 2%, but there was a 10.2% jump in exports to the US.

Imports swelled by 3.2% month-on-month, but were 8.7% lower than a year ago.

Hopes are building this morning that the UK economy is pulling out of recession.

Two industry surveys suggest that UK growth has reached a “turning point”,

Accounting and business advisory firm BDO reports that output from UK businesses has risen for the second consecutive month to its highest level in nearly two years.

BDO’s Output Index, which tracks output across the services and manufacturing sectors – climbed to 102.39 in March, its highest reading since May 2022.

This, BDO says, shows a “robust recovery and a turning point for the UK economy”.

Kaley Crossthwaite, partner at BDO, says:

“Output reaching its highest point in nearly two years illustrates the UK’s robustness in the face of global economic adversities and is a big step towards economic stability and growth.

“For businesses, the main mood right now is cautious optimism – with drops in the Employment and Optimism Index showing that we’re not out of the woods just yet. All eyes are on the Bank of England, with an interest rate cut looking possible for June, as businesses hold out hope for a further recovery this year.”

Deloitte reports that sentiment among UK chief financial officers has risen for the third consecutive quarter, as bosses grow more optimistic about the prospects for their own businesses.

The proportion of CFOs reporting high or very high levels of uncertainty facing their businesses fell to 36% this quarter, Deloitte says, which is less than half the peak seen in mid-2022 (77%).

This takes uncertainty back to levels last seen in the summer of 2021 (35%), a time when national lockdown restrictions were ending.

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

The global cost of living squeeze has eased, as food inflation across rich nations drops to its lowest level since before Russia’s full-scale invasion of Ukraine.

After two years of surging prices, the annual rise in consumer food prices across 38 industrialised countries fell to 5.3% in February, the Financial Times reports, citing new OECD data expected today.

That’s down from 6.2% per cent in January, and well below a peak of 16.2% in November 2022, according to the latest OECD data.

Many global food commodities, such as cereals and dairy products, have been easing in recent months, after spiking in 2022, which is now feeding through to lower inflation in the shops. In the UK, food price inflation hit a two-year low last week.

The worst of high food inflation is now behind us, according to Carlos Mera, head of agricultural commodities at Rabobank, who told the FT:

“Agricultural commodity prices have dropped significantly in the last two years, since the peak in prices that followed the invasion of Ukraine, and this is acting as a disinflationary force even at [the] retail level.”

Falling inflation doesn’t mean prices are falling, though; they’re rising at a slower rate than before.

In many advanced economies, food inflation has dropped to around half its recent peak.

The OECD’s inflation gauge comes as financial markets reassess how quickly central banks will be able to cut interest rates this year.

In America, the economy is showing more vigour than expected, undermining expectations that the US Federal Reserve will cut borrowing costs three times this year.

Rising oil prices this year had also added to inflationary pressures. But this morning, Brent crude has dropped 1.7% to $89.60 per barrel, having hit a five-month high over $91 last week.

Kathleen Brooks, research director at XTB, says:

Headline inflation is now being impacted by the oil price. The WTI crude price is higher by 21% so far this year, and oil prices are now boosting US inflation after subtracting from it at the end of last year.

The International Monetary Fund is expected to release Chapter 2 of its World Economic Outlook (WEO) this morning, which will examine the impact of higher interest rates.

The agenda

• 7am BST: German trade balance for February

• 8am BST: Philippines interest rate decision

• 9am BST: IMF to release Chapter Two of its World Economic Outlook

• 3pm BST: Israel interest rate decision