Bank of England Inflation Report: Please find attached the following link to the May Inflation Report; this will include PowerPoint slides and Excel sheets containing the final charts and tables.https://www.bankofengland.co.uk/inflation-report/2019/may-2019
CBI analysis of the Bank of England’s UK economic forecasts, including why the Monetary Policy Committee is looking to raise interest rates despite subdued growth.
The CBI’s economic experts cut through the data of the Bank of England’s latest quarterly Inflation Report and unpack the Bank’s outlook for UK economic growth and inflation in the years ahead. This essential information can help your business plan for any changes in funding costs in the next three years, as well as make strategic planning simpler by giving you a bigger picture of what the economy may look like into the medium term.
- In its May 2019 meeting, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously (9-0) to maintain rates at 0.75%.
- The MPC’s forecast for GDP growth in the near term was upgraded, reflecting, at least in part, pre-Brexit stockbuilding in Q1 2019 (which is expected to unwind in Q2). That being said, the MPC maintained that the underlying pace of growth continues to be subdued overall due ongoing Brexit uncertainties and the slower global growth.
- In the event of the “smooth” Brexit outcome that the Bank expect, growth is expected to pick up in the medium-term, supported by household spending and a recovery in business investment recovers.
- The Bank also expect weaker inflation in the near-term due to lower expected retail energy prices. However, the MPC believe inflation will overshoot the BoE’s 2% target in the medium-term as domestic cost pressures build.
- The MPC’s current guidance on the future path of rate rises remained unchanged: i.e. a further gradual tightening in monetary policy will be necessary to return inflation to target, assuming that the economy continues to evolve in line with the MPC’s forecast.
- Governor Mark Carney implied that this translates to more rate rises than financial markets are currently pricing in (around two 25bp hikes up to mid-2022).
“Super Thursday” saw the Bank of England’s Monetary Policy Committee (MPC) vote unanimously (9-0) to maintain rates at 0.75%. The decision to keep monetary policy unchanged was in line with consensus expectations.
The MPC’s forecast for GDP growth in the near term was upgraded, reflecting, at least in part, pre-Brexit stockbuilding in Q1 (which is expected to unwind in Q2). That being said, the MPC maintained that the underlying pace of growth continues to be subdued overall due ongoing Brexit uncertainties and the slower global growth. In the event of the “smooth” Brexit outcome that the Bank expect, growth is expected to pick up in the medium-term, supported by household spending and a recovery in business investment recovers.
The Bank also expect weaker inflation in the near-term due to lower expected retail energy prices. However, the MPC believe inflation will overshoot the BoE’s 2% target in the medium-term as domestic cost pressures build. As a result, the MPC’s current guidance on the future path of rate rises remained unchanged: i.e. a further gradual tightening in monetary policy will be necessary to return inflation to target, assuming that the economy continues to evolve in line with the MPC’s forecast. Governor Mark Carney implied that this translates to more rate rises than financial markets are currently pricing in (around two 25bp hikes up to mid-2022).
BoE growth expectations upgraded:The MPC judge that the sluggish underlying momentum in the UK economy largely reflects the impact of Brexit uncertainty and softer global economic activity. In particular, Brexit uncertainty seems to be the main driver behind the recent fall in business investment in the UK for four quarters in a row – the longest streak of decline since the financial crisis.
However, the MPC expects UK GDP growth in Q1 2019 to have received a temporary boost due to stockpiling activities by UK and EU businesses (the impact of which on GDP will likely unwind in Q2). This is one of the main factors behind the upgrade in the MPC’s GDP growth forecast for 2019 (1.5% from 1.2%). That being said, the MPC believes that economic activity across the near-term will continue to be constrained by Brexit uncertainty and slower global growth.
In the medium-term, the MPC expects economic activity to pick up. Household consumption, which has been supported by a tight labour market and the recent firming in real pay, is expected to continue supporting growth, while business investment is set to recover as Brexit uncertainty wanes. Consequently, GDP growth in 2020 and 2021 was also upgraded to 1.6% (from 1.5%) and 2.1% (from 1.9%).
Inflation forecast downgraded in the near-term:The Bank expect CPI inflation fall below their 2% target in the near term, reflecting lower expected retail energy prices. These revised expectations are important to note as they resulted in the Bank’s near-term profile for inflation being noticeably lower than it was February. However, towards the second half of the forecast period, the MPC expects inflation to pick up to above 2% as domestic pressures build – particularly as stronger wage growth, in the face of weak productivity, keep unit labour costs growth elevated.
Notably, the MPC also continue to expect demand to outstrip supply growth over their forecast period – with the upgrade to their GDP forecasts meaning that they expect an even larger margin of excess demand. This is also expected to stoke inflation. Consequently, the MPC stated that the path of monetary policy going forward will continue to tighten at a “gradual pace and to a limited extent”.
Governor Mark Carney was also vocal about financial markets pricing in an insufficient number of interest rate rises. Markets are currently pointing to around two rate rises until mid-2022, suggesting that (in the event of a smooth Brexit) we can expect a greater degree of monetary policy tightening than this. Carney’s comments suggest that businesses should not put too much weight on markets’ current expectations for rate hikes when planning for future changes in funding costs.
Defra Brexit Updated Guidance: Leaving the EU with a deal remains the Government’s top priority. However, we must prepare for every eventuality, including a no deal scenario.
The Department for Environment Food and Rural Affairs (Defra) has produced the following communications to help the farming and wider agriculture sector prepare for when the UK leaves the EU.
- Animation: 10 things you need to know before we leave the EU – you can view the animation at: https://www.youtube.com/watch?v=uGeMOrIMwkw&t=1s.
- Arable and horticulture factsheet – EU Exit A4 ARABLE AND HORTICULTURE NEWSLETTER_FARMING_25.04.19
The Food Standards Agency (FSA) has today advised that increased allergen information should be provided on pre-packed direct sale food to give consumers greater confidence in the food they eat.
The Board also set out key priorities identified as part of an ambition to make the UK the best place for food hypersensitive consumers, which includes those with food allergy and intolerance.
At a public meeting, the Board agreed on advice for Ministers that full ingredient labelling should be mandatory for all pre-packed food for direct sale.
The FSA agrees with allergic consumers that full ingredient labelling would deliver a significant improvement, and greater consistency by following the same labelling system that consumers are familiar with, as found on packaged food.
The Board also agreed that the department should lead on a range of work to promote and accelerate the sharing of best practice across the industry and improve awareness in businesses and the public.
The decision by the Board will be the basis for the formal advice provided to Ministers who will take the final decision.
Perspective: Refined Grains and Health: Genuine Risk, or Guilt by Association? was published in Advances in Nutrition, a peer-reviewed medical journal from the American Society of Nutrition. It argues that consumption of ‘refined’ cereals is not related to increased adverse health outcomes.
Campden BRI: Calorie reduction and fibre enhancement: A new research project is aiming to:
- increase understanding of the function of fibre in products
- investigate the potential for calorie density reduction using fibre
- assess the different forms of fibre on the market
This member-funded research project started this year and will run to the end of 2021. In 2019 the project will carry out a review of existing fibres and their functionality, conduct a horizon scan of new fibre sources, produce a prototype food product to demonstrate the role of fibre in calorie density reduction, and develop a method for specific dietary fibre determination.
Later in the project, research into consumer perception and acceptability of fibre enhanced products and a toolbox for mitigating undesired effects of fibre enhancement will be carried out.
The project team is currently looking for input from members on the research. Should it be focused and in depth, or provide a broader overview? Are you interested in certain model systems or fibre types? Contact: Michael Adams +44(0)1386 842284 email@example.com
EC adopts new rules setting maximum limit on trans fatty acids: The European Commission (EC) has adopted a new Regulation to set a maximum limit on the use of industrially produced trans-fat in foods in the EU. The maximum limit corresponds to 2 grams of industrially produced trans fats per 100 grams of fat in the food intended for the final consumer and food intended for the supply to retail. Businesses must also provide information on the amounts of trans fat in food supplied to other businesses if the limit of 2 grams is exceeded. This Regulation will apply with effect from 2 April 2021.
Statistical reports on obesity, diet & physical activity in England: NHS Digital has published a statistical report on obesity, diet and physical activity. The issues covered include childhood obesity and adult obesity prevalence; diet among adults and children, including trends in purchases, consumption of food and drink and energy intake levels; obesity related hospital admissions and prescription items; and physical activity levels. It shows that 29% of adults (up from 26% in 2016) and 20% of year 6 children are classified as obese. Obesity prevalence was over twice as high in the most deprived areas as in the least deprived areas. Furthermore, despite all the efforts to promote the 5-A-Day campaign, only 29% of adults and 18% of children achieve this dietary target. Public Health England (PHE) has also published a Slope Index of Inequality for Child Obesity for English regions from 2006/07 up to 2017/18, as an update to the the National Child Measurement Programme and Child Obesity Profile for the academic year 2017 to 2018.
PHE has published an Reformulation Update Report detailing the work undertaken in the various reformulation initiatives over the last year.
It sets out various stakeholder meetings PHE have held, and reports published from May 2018 to date across calories, sugars, salt, and infant food.
It suggests that sugars year two monitoring report may be publishing ‘towards the end of summer’ and salt ‘later this year’.
EFSA review of bees & pesticides guidance: The European Food Safety Authority (EFSA) has agreed to review its guidance on bees and pesticides, published in 2013, following a request from the European Commission, given that new evidence has become available. EFSA is setting up a stakeholder consultative group to support this review and it has invited nominations for membership of the stakeholder group. As well as involving stakeholders throughout the process, pesticide experts from Member States will be consulted via EFSA’s Pesticides Steering Network and a public consultation and workshop be organised when the document has been drafted.
Titanium Dioxide: Further to the French Order to ban titanium dioxide (E171), EFSA was requested by the European Commission to provide urgent scientific and technical assistance. EFSA has published a statement concluding that the French, ANSES, opinion does not identify any major new findings that would overrule the conclusions made in the previous two scientific opinions on the safety of titanium dioxide (E 171) as a food additive issued by the EFSA in 2016 and 2018.
CCC proposes UK cuts meat & dairy consumption to reach net zero target: In its latest report, the independent Committee on Climate Change (CCC) has advised the Government that it should aim for a net zero greenhouse gas (GHG) emissions target by 2050 in order to meet its commitments under the Paris Agreement on climate change. Targeting “net zero”, as opposed to absolute zero, is an acknowledgement that some sectors of the economy cannot be decarbonised easily and the UK will also need to adopt measures to remove carbon dioxide from the atmosphere. The CCC makes clear that significant policy changes will be needed given that the UK is not currently on track to achieve its goal of an 80% reduction in emissions by 2050. Among other measures it suggests that the UK population should consume less meat and fewer dairy products under its “further ambition” (20% reduction) and “speculative” (50% reduction) policy options. The Business Secretary, Greg Clark, welcomed the report but said the Government is not immediately accepting the CCC’s recommendations to which it would respond in due course.
The Health and Safety Executive (HSE): is working closely with the Food and Drink Manufacture Forum (FDMF) to better understand workplace ill-health. This survey will allow us to measure awareness and understanding of a number of work-related health issues within workplaces across Great Britain where food and drink are manufactured; also the kinds of measures that are put in place to control risk. It will also help us to evaluate the success of various FDMF and HSE initiatives to improve workplace health and to find out what control measures are associated with the best health outcomes for your employees. We are interested in the views of any manufacturers of food and drink, so please feel free to forward the link on to other interested parties, if you wish.
The survey responses you help us get will be invaluable in ensuring that future ill-health work is based on the best evidence. The survey is completely anonymous and no-one outside the research teams will see individual responses. Findings will also be reported in a way which means individual organisations cannot be identified, so, for example, we wouldn’t report findings relating to the manufacture of a certain product where there are so few businesses that it would be clear who had replied. Responses will be reported in aggregate.
The deadline for the survey is 24 May 2019. If you have any questions or queries, please feel free to contact firstname.lastname@example.org.
FDF Webinar:Environmental Risks and Liabilities 16 May 2019
This webinar focuses on common pitfalls and sources of potential environmental liability, which are likely to affect the food and drink industry, providing insights into the risks and environmental liabilities arising from:
- packaging waste responsibilities
- protection of the water environment, including developments in the water abstraction and permitting regime
- increased risk of exposure for directors/senior management to criminal liability
- hedging future electricity costs
- general duty of care for the management of waste
Presenter: Alison Ogley, Partner, Planning & Environmental, Walker Morris LLP