Economic News
Barclays Economic Update:
| KEY INDICATORS
FOREIGN EXCHANGE |
Level |
mtd % Change |
ytd % Change |
| $ per £ |
1.29 |
1.2% |
1.2% |
| € per £ |
1.13 |
1.9% |
1.9% |
| Yen per$ |
108.95 |
-0.5% |
-0.5% |
| $ per € |
1.14 |
-0.6% |
-0.6% |
| Chf per € |
1.13 |
0.5% |
0.5% |
| COMMODITIES |
Level |
mtd % Change |
ytd %5 Change |
| Total (GSCI INDEX) |
2,388.47 |
8.4% |
8.4% |
| Oil ($ per barrel, Brent) |
61.18 |
11.4% |
11.4% |
| Gold ($⁄ 100 Ounce) |
1,292.30 |
0.6% |
0.6% |
| UK Inflation, December 2018 |
CPIH RPI |
CPI |
| Previous |
2.2% y/y |
3.2% y/y |
2.3% y/y |
| Consensus |
2.1% y/y |
2.9% y/y |
2.1% y/y |
| Actual |
2.0% y/y |
2.7% y/y |
2.1% y/y |
The Dec’18 UK inflation data overall followed a fairly orderly Nov’18 print, unfolding largely as expected, though weak air fares dragged RPI lower than we expected y⁄y. The main surprise across our forecasts came in RPI, where air fares rose 40% m⁄m in Dec’18 compared with 53% m⁄m in Dec’17. Air fares have a weight of 10 parts per thousand (ppt) in RPI compared with 5ppt in CPI. Index day was 11 December in 2018 and 12 December in 2017 so the inter-year comparison is broadly consistent. This is interesting in the context of clothing prices, where we had seen some potential downside risks as a result of reportedly weak trading conditions on the high street. However, clothing prices declined less in Dec’18 m⁄m compared with 2017 although footwear prices fell notably more. There were clear signs of flash sales in the run up to Christmas, but the inflation data may have been collected too early to capture this discounting. How far clothing prices fall in Jan’19 will be similarly influenced by timing effects depending on when index day falls.
Other than air fares, road fuel prices were the main downward contributor to inflation, as widely expected. There were modest upward contributions from hotels, cafes and restaurants, communication and recreation and culture while food prices also posted a modest uptick. At the margin, this could be construed as a positive economic story for domestic demand, though the m⁄m pace of price rises for hotels, cafes and restaurants halved from Nov’18 to Dec’18. Focus in the UK will remain squarely on the Brexit process as this is the greatest near-term risk to consumer prices.
Summary: Dec’18 UK inflation was largely as expected for CPI/H but softer for RPI. Despite fairly grim warnings about trading conditions on the high street, clothing prices actually fell less month-on-month compared with the prior year; in both 2017 and 2018, December prices were collected at similar points in the month so are directly comparable. The softness in RPI was largely a result of air fares, which have twice as high a weight in RPI as CPI.
ONS Retailing Report: Main points
- In the three months to December 2018, estimates in the quantity bought decreased by 0.2% with declines across all main sectors except fuel.
- When compared with the previous month, the quantity bought in December 2018 decreased by 0.9%, as all sectors except food stores and fuel stores declined on the month.
- Looking at annual growth rates, the whole of 2018 increased by 2.7% in the quantity bought; an annual slowdown in comparison with the peak of 4.7% experienced in 2016.
- In December 2018, online retailing accounted for 20% of total retailing, with an overall growth of 13.9% when compared with the same month a year earlier.
Other news
Sugar Debate: An interesting analysis is given in this Spectator article. The Spectator – You can safely ignore the government’s sugar guidelines
AHDB Miller Usage Statistics – October 2018:The following key points are worth noting:
- The data for the year so far show that flour production was down 145,600t (-7.68%) against the same period in 2017/18. This was driven by a drop in ‘Other’ flour production, which includes starch and bioethanol, down 148,100 tonnes (-22.26%) against the same period in 2017/18.
- This decrease was likely due to the decline in production of bioethanol. Vivergo Fuels permanently closed its bioethanol plant at the end of September. Ensus have also announced that their bioethanol plant will shutdown from the end of November. A restart date has not been announced.
- The production of flour for human consumption (excluding the ‘Other’ category) was up very slightly by 2,300t (0.2%) against the same period in 2017/18. This is likely an underestimate as some flour destined for food is allocated to the ‘Other’ category.
- As has been the trend throughout this season, this increase was driven by increases in biscuit and food ingredients flour.
- The October 2018 production of breadmaking flour was down 13,700 tonnes (-6.12%) on the October 2017 level. As a % change, this decrease is significantly larger than the overall decrease for the season so far, down -2.42%.
- The data indicates that 76.46% of wheat used so far in the season was homegrown . This indicates that ‘Other’ production used a high proportion of imported wheat, as the nabim survey of member usage indicated that for the same period, domestic wheat accounted for 83.44% of total usage.
Webinar: Which may of interest-it takes palce tomorrow 22nd January: Changing the Perception of Fibre:https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowKey=62001&AffiliateData=FNEMEA_Billboard&Referrer=https%3A%2F%2Fwww.foodnavigator.com%2F
Public Health England will publish on Wednesday statistics on the National Diet and Nutrition Survey for Years 1 to 9, of the rolling programme for 2008 to 2009 up to 2016 to 2017.
FlexLink Systems Ltd joins Federation of Bakers:The Federation of Bakers is delighted to welcome a new associate member, FlexLink Systems Ltd.
FlexLink Systems is an automation company, working with manufacturers within various industries, including food and dairy to improve production efficiency through full line design and installation, or through individual components.
The company was founded in the early 1980’s and rapidly developed its range of products and international presence. Today FlexLink has over 35 years’ experience in offering high-end solutions to a wide range of manufacturing industries enabling their clients to enhance efficiency at factories in more than 60 countries worldwide.
Andy Howson, UK Sales Manager at FlexLink Systems commented: “We are looking forward to strengthening our relationship with the UK’s baking companies and the opportunities that our membership of the Federation of Bakers will bring for us as we continue to grow our business.”
Gordon Polson, Director of the Federation of Bakers, added: “We are delighted to welcome FlexLink Systems as an associate member of our organisation and hope to support them as they continue to expand their business.”
FlexLink joins current associate members AAK (UK), AB Mauri UK and Ireland, ADM Milling, American Pan UK, Baker Perkins, Bakers’ Basco, British Bakels, Bühler, Campden BRI, CSM (UK), Energy Management LLP, GB Ingredients, Kaak Group, Kwik Lok, Lesaffre Group, NFU Mutual, Puratos, Spooner Industries, TasteTech, The Ice Co, United Bakery Equipment Co, Zeelandia and Zeppelin Systems.
FDF Events:
23 January 2019 | Crisis Management training event:
Food scares have the potential to do significant damage to a business, but handling it well can help mitigate the damage. This event will share how best to handle a developing crisis, maintaining consumer confidence, and managing the media and public reputation. Register your place or find more information here.
7 February 2019 | Feeding Change: FDF Nutrition event:
With the Government’s Childhood Obesity Chapter 2 now out, and Governments in Scotland and Wales looking to progress on this further, diet and health is set to come back to the agenda in 2019. This event will explore the themes in these plans, the various reformulation programmes, and will hear directly from those that have already implemented changes to their products and menus. Find more information on the event here.
