Director’s Weekly News – 6th August 2018

Dear all,

Detailed below is the weekly news for week commencing 6th August 2018.

Have a good week.

Gordon Polson – Director

The Federation of Bakers

CBI Economic Update: Bank rate hiked slightly higher

  • “Super Thursday” saw the Bank of England’s Monetary Policy Committee (MPC) vote unanimously (9-0) to increase rates by 25 basis points to 0.75%. The decision to hike rates was in line with the CBI’s and consensus expectations
  • The MPC’s decision was supported by UK economic activity regaining some of its momentum in Q2 after a weak Q1 (due to the poor weather), which was in line with the MPC’s forecasts in May
  • This modest acceleration in Q2, the MPC argued, supported the notion that the UK economy was growing above its potential, which, in turn, puts upward pressure on prices. Consequently, the MPC made the decision to tighten monetary conditions slightly in order to gradually bring inflation back into line with the Bank of England’s target (2%)
  • The MPC’s guidance on the future path of rate rises remained unchanged: an ongoing tightening in monetary policy will be necessary to return inflation to target, assuming that the economy evolves in line with the MPC’s forecast.

 

Economy developing largely as expected

  • Several indicators point to a recovery in economic activity over Q2, which supports the MPC’s assertion in May that weak growth in Q1 was a blip caused (mostly) by the poor weather conditions
  • UK growth remains supported by robust global growth and accommodative financial conditions, but this only partly offsets more subdued domestic demand
  • The MPC also believes that inflationary pressures are building: the labour market remains tight, with pressures to increase pay packets starting to come through. Coupled with this, weak productivity is pushing up unit labour costs.

 

MPC forecasts broadly unchanged

  • The MPC’s forecast for GDP growth is mostly the same as in May, with the economy growing at an average pace of 1.8% y/y through to mid-2021, above their estimate of potential growth (1.5%). This pushes up domestic inflationary pressure, thus is the key reason why they expect to raise interest rates further going forward.
  • Expectations for CPI inflation are higher in the near future due to increased energy prices and the recent further fall in sterling. But inflation still steadily falls back to 2% (the Bank of England’s target) over the next few years through 2021 as these upward pressures wane
  • The MPC continued to assert that developments in the Brexit negotiations – and the uncertainty surrounding them – will “hang over like a cloud” on the UK economic outlook throughout the forecast period
  • The Bank’s forecasts remained conditioned on a range of outcomes for the UK’s trading relationship with the EU, and assume a smooth transition to such an eventual relationship.

 

SEE ATTACHMENTS FOR MORE DETAIL:

 Monthly Economic Brief

18.08.03 CBI UK Economic Update – BoE Inflation Report

 

 

Tesco/ Carrefour: The strategic Alliance between Tesco and Carrefour is expected to become operational in October this year. It covers strategic relationships with global suppliers and joint purchasing of own brand products.

 

 

nabim Wheat Market Briefing update – 31 July 2018:Key Points

  • Key trends identified in the May and June reports have remained unchanged as wheat markets have continued to push upwards.
  • UK wheat quotations for November delivery now stand £40-£50 per tonne higher than a year ago.  Markets have been rising steeply since April 2018.
  • The UK’s long, hot summer has driven feed grain prices sharply higher as livestock farmers look to secure their forage needs.  Weather throughout northern Europe has been similar leading to reduced harvest estimates in France, Germany and Scandinavia.  Expectations for Ukraine and Russia have also been cut back from initial levels.  More recently, expectations of the next Australian crop have also been downgraded, although there are more optimistic reports for wheat from North America.
  • UK yields appear to be lower than normal, with some reports of 15% less – although it is still early in the harvest period and early crops may not be representative.
  • More positively, quality from the earliest cut crops in the UK is reported to be reasonable, but once again early results are not necessarily representative of the overall harvest.  This has helped to temper the increase in market price quotations for bread wheat.
  • All this means that quotations for feed wheat are over £190 per tonne for November delivery to Yorkshire and northwest England, whilst bread wheat is in the range £205-£210.  These figures are some £50 per tonne higher than they were in April 2018.
  • The clearest illustration of the trend is provided by the chart of London wheat futures quotations; Paris futures follow a similar pattern.

 

FDF Q2 2018 Confidence Survey Results:  This week FDF released the Q2 results of our latest Food Business Confidence Survey. This showed more than three quarters of manufactures expected input prices to rise in the remainder of 2018. It also showed a majority had seen cost rises in either ingredients, packaging or energy. However, the results also showed sales were up for 54% of respondents, and 42% had launched new products. Read the full press release and results of the survey here

Health and Safety: You may be aware that the IOSH Food and Drink Group, in conjunction with the FDMF, have developed this year’s Food and Drink Manufacturing Conference, which is taking place on the 2nd and 3rd of October at the Nottingham Belfry.  This link will provide further details of the venue and agenda. The conference is strongly linked to our Common Strategy objectives.  In particular in respect of managing MSDs and occupational health; also focussing on effective H&S leadership and worker engagement.  The IOSH Food and Drink Group have recently released this article (attached as a work version) to emphasise how the conference will indeed focus on health and wellbeing.

FDF Event10 Sept Introduction and Refresher on Environmental Law: Join us for this one-day course at FDF offices, covering the major environmental laws that impact food and drink manufacturing, and make sure you’re not falling foul of compliance requirements. Book your ticket here.