Time to wrap up

UK shoppers face the sharpest rise in prices in 30 years this month, as fears of Christmas shortages spur people to get their purchases sorted early.

Two more UK energy firms, Orbit and Entice, have collapsed, leading to more criticism of regulator Ofgem, as taxpayers face a £1.7bn bailout of Bulb.

One in 10 UK families – about 3m households – are facing a cost of living crunch this winter, unable to cover even basic bills such as food and heating, according to Citizens Advice.

The pound has hit its lowest level against the US dollar this year, after some US central bank officials suggested they could end their bond-buying stimulus programme faster than expected.

Some analysts think the Fed could complete tapering by next March, three months earlier than anticipated.

The latest minutes from the European Central Bank’s policy meeting show that supply chain problems have lasted longer than thought...

...but the head of the WTO remains hopeful they’ll be temporary.

Consumer confidence in Germany has fallen, as the fourth wave of Covid-19 hits morale and puts people off spending.

Germany’s economy also grew less strongly than expected in the last quarter, with business investment, government spending and net trade all dragging on growth.

China’s CO2 emissions have dropped, suggesting that power cuts, curbs on polluting industries, and the property slowdown have hit economic growth.

The pub and restaurant group Mitchells & Butlers has warned that problems caused by Brexit and rising costs will hurt the hospitality sector, just as businesses return to profit after the easing of pandemic restrictions.

Multipack crisps are still the item in shortest supply at UK shops, after production problems at Walkers, followed by painkillers, frozen turkeys, sparkling water and fresh pork.

Goodnight. GW

Britain’s FTSE 100 has posted its fourth daily rise in a row.

After a quiet session, with Wall Street closed for Thanksgiving, the blue-chip index has closed 24 points higher at 7310, up 0.33% today.

Hospitality firms finished the day on top of the risers, with catering firm Compass (+3.2%), and hotel groups Whitbread (+2.8%) and InterContinental (+2.8%) leading the way.

Vodafone led the fallers, down 3% after its shares went ex-dividend today.

Cyber-security firm DarkTrace also lagged, down 2%, and is likely to be ejected from the index after next week’s reshuffle.

The head of the World Trade Organization said on Thursday that she expects global supply chain problems to be short-lived, saying that they will go into 2022 but not beyond, Reuters reports.

“Our assessment of this situation is it is not a structural issue. It’s a transitory issue,” Ngozi Okonjo-Iweala told a media briefing, saying she expected them to stretch into 2022 and then work themselves out after several months.

Supply chain problems have emerged as the global economy has pulled out of a pandemic-induced recession and threaten to slow recovery. They have already stoked inflation.

Another UK energy supplier has gone bust, following the collapse of Bulb earlier this week, bringing the number of households affected by a supplier failure closer to the 4m mark.

Orbit Energy confirmed it was the latest casualty of the energy market crisis, as companies unable to withstand higher wholesale prices go under.

The latest collapse was announced by the energy regulator Ofgem in a tweet that also named Entice Energy – but the post was later deleted. A spokesperson for Entice could not be reached for comment.

An Ofgem spokesperson said the tweet was sent in error.

However, Orbit later updated its website to say it was ceasing to trade.

It added:

“Ofgem, the energy regulator, is appointing a new supplier for its customers. Customers need not worry, their supplies are secure and funds that domestic customers have paid into their accounts will be protected if they are in credit.”

The supply chain problems hitting the euro area have lasted for longer than policymakers expected.

The minutes of the European Central Bank’s last meeting, at the end of October, show that governing council members “widely acknowledged that supply bottlenecks were lasting longer than initially thought”.

Some EB officials pointed out that firms relying on “just-in-time” delivery systems had suffered most, raising the question of whether future systems would return to relying more on inventories and buffers. Others suggested that the move towards more globalisation in manufacturing could reverse, the minutes say, adding:

Overall, however, it was stressed that supply bottlenecks would gradually fade away as supply reconnected with demand, even though this was taking longer than expected.

The meeting also discussed the surge in energy prices, which could increase the likelihood of “scarring effects” that could hamper future growth.

But policymakers pushed back at the idea that Europe faces stagflation, pointing out that the euro area is still seeing robust growth, while a 1970s-style wage-price spiral is less likely today:

In this context, it was recalled that stagflation experiences in the 1970s occurred in a different environment, in which indexation allowed wages to react to energy prices and thus sustained both stagnation and inflation.

Sterling has now slipped to its lowest level of the year against the resurgent US dollar.

The pound eased by 0.1% against the dollar to $1.3304, the lowest since last December.

Uncertainty over when the Bank of England might raise interest rate, and last night’s hawkish tone in the Federal Reserve minutes, are weighing on the pound.

Jeremy Thomson-Cook, chief economist at international business payments firm Equals Money, says:

The only news to note [yesterday] from the UK were comments made by BoE member Silvana Tenreyro, where she commented that she would not want to say that we could see a rate rise in December or February and that any decision would be backed by economic data.

Similar rhetoric as BoE governor Bailey’s comments about the BoE not providing forward guidance.

Meanwhile, the dollar benefited from yesterday’s big fall in jobless claims, which adds to pressure to slow the Fed’s stimulus programme faster:

We also saw a shift in sentiment from Fed member Daly saying that she sees the case for speeding up tapering. Her comments suggested that should the job market continue to improve and inflation continue to climb higher, then she sees the case for an acceleration of taper.

UK shoppers face the biggest price rises in over thirty years this Christmas, as fears of shortages send people rushing to the shops early.

The Confederation of British Industry’s quarterly Distributive Trades Survey has found that selling prices in November grew at the fastest pace since May 1990, with a balance of 77% of firms reporting higher prices than a year ago.

Prices are expected to grow at a broadly similar pace next month, the CBI adds.

Its monthly retail sales balance - which shows whether annual sales growth is rising or falling - rose to a three-month high of +39 in November from +30 in October.

And a measures of sales for the time of year leapt to +35 from -1, its highest since September 2015.

Retailers were also less worried about supply shortages. Stock levels in relation to expected sales were broadly adequate (-2% from -23%), having hit a series of record lows this year. They’re expected to be good next month, the CBI says (+4%).

Ben Jones, CBI lead economist, says fears of shortages encouraged people to start their festive shopping earlier:

“Christmas seems to have come early for retailers, with clothing and department stores in particular seeing a big upward swing in sales volumes in November.

“It seems likely that reports of supply chain disruptions prompted consumers to start their Christmas shopping early. And there are encouraging signs that retailers’ efforts to help avoid any festive disappointments may be paying off, with stock levels seen as adequate for the first time in seven months.

“Overall, retailers are becoming more optimistic, with both employment growth and investment intentions picking up strongly. Cost pressures remain a very real concern, however, with selling prices growing at the fastest pace since 1990.”

The survey also found that internet sales were lower than a year ago, the first time in the survey’s 20-year higher history. That may be because England entered its second lockdown in November 2020, forcing non-essential shops to close.

Web sales are expected to rise in December, as people get their Christmas shopping orders in.

The pub and restaurant group Mitchells & Butlers has warned that problems caused by Brexit and rising costs will hurt the hospitality sector, just as businesses return to profit after pandemic restrictions eased.

The company, which owns pub chains including O’Neill’s and restaurant brands such as Harvester, said Brexit was still “an important event for the market” and had created risks for the sector, most notably around the supply and cost of products and workforce shortages.

It said higher energy bills and increased staff wages were also weighing on the sector.

Mitchells & Butlers – which also runs All Bar One, Toby Carvery and Miller & Carter – said customers began to return to its 1,600 UK venues when lockdown restrictions were relaxed in the spring. Its sales bounced back in August and September and it is now receiving bookings for Christmas parties.

Announcing its annual results, the group said its suburban locations were trading better than those in city centres, as continued home working meant people visited their local rather than a branch near their workplace. Footfall in major cities has been slowly increasing in recent months, a trend the company expects to continue....

More here:

Multipack crisps are still the item in shortest supply at UK shops, following production problems at major producer Walkers.

The Office for National Statistics (ONS) reports that 20% of stores visited between 19 and 22 November 2021 had limited supplies of crisps, and 4% had run out.

That’s slightly better than a week earlier, when 26% were short of supplies, and 4% had empty crisp shelves.

Crisps supplies have been disrupted by an IT computer upgrade at the world’s biggest crisp factory.

Leicester-based Walkers said last month that the glitch forced it to slow production, forcing the company to prioritise its most popular varieties – including cheese and onion, ready salted and salt and vinegar, as well as Quavers and Wotsits.

Kantar Public’s survey of 275 stores also found that paracetamol and ibuprofen were also in relatively short supply.

Buying fresh pork could be a challenge too, with 12% of stores only offering short supplies and 2% running out.

Shops were most likely to have run out of frozen turkeys, after consumers snapped them up quickly in recent weeks. Some 10% of shops didn’t have any frozen turkeys, while another 3% had limited stocks.

The beer shelves are heaving, though, with only 2% of shops having low stocks.

However, a group of 48 wine and spirits companies yesterday warned that Britain is facing a Christmas alcohol shortage unless the government does more to address the lack of HGV drivers.

The UK government has begun to count the cost of Bulb Energy’s collapse as many begin to wonder whether it is a fair price to pay for policymakers’ failure to spot a looming market breakdown.

My colleague Jillian Ambrose writes.

The life-support scheme set up to allow Bulb to keep supplying gas and electricity to its 1.7 million customers through the winter months could cost taxpayers up to £1.7bn, or £1,000 per customer, according to a court application to hand the company to a special administrator.

Officials are understood to be focused on finding a quick exit strategy from the arrangement as early in the new year as possible to help limit the eye-watering costs, as signs of the supplier’s “unsustainable” business model grow clearer.

Accounts for the collapsed supplier show a clear trend of growing losses and spiralling debts as it paid heavily to build its book of customers. In 2018, the company was believed to have around 300,000 customers and accounts showed debts of £26m. But by March 2020 Bulb’s dash for growth meant about 1.6 million customers and liabilities of £223m – with debt repayments due by the end of this year.

“It looks like Bulb didn’t buy their energy far enough in advance and were surviving hand to mouth on borrowed money. That’s irresponsible, really,” said one source close to the government.

Here’s the full story:

And here’s reaction from ITV’s Joel Hills:

And economist Shaun Richards:

The Federal Reserve rang the first big ‘inflation alarm bell’ last night, says Neil Wilson of Markets.com, with the news that some policymakers believe its stimulus package could be wrapped up faster than thought:

Will the Fed raise rates sooner than expected? Inflation the highest in 30 years, a labour market tighter than at any point since the great financial crisis and no Fed action - yet. No wonder we are starting to see them talk about a quicker taper, which would provide the ‘optionality’ to maybe raise rates a bit sooner than expected. We’ve been saying for some time that the Fed cannot ignore all this hard economic data, yet it seemed to be turning a blind eye to all the evidence. Recently though we have seen that it can adjust its uber-dovish stance to something less accommodative, albeit the pace of such transition has been glacial.

But the Fed is going up a notch. We got really the first big ‘inflation alarm bell’ if you like from the FOMC, as minutes from the last Fed meeting said: “Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives”. Wow, that is a step-change and shows at last the persistence of the inflation and inflation expectations dynamics are starting to worry them.

Germany’s economy grew more slowly than previously thought over the last quarter, in another sign that its recovery is faltering.

German GDP rose by 1.7% in July-September, updated data show, down from 1.8% previously reported -- with household spending providing the only boost to growth.

That’s a slowdown compared with Q2, when Germany’s economy grew by 2.0%. It’s weaker than the wider eurozone, which grew by 2.2% in Q3, but faster than the UK’s 1.3% growth.

Statistics body Destatis reports that German household spending rose by 6.2% during the third quarter of the year. That shows consumers drove the recovery over the summer, as hospitality venues such as bars and restaurants reopened.

However company investment and government spending both declined, while imports and exports both fell quarter-on-quarter, and net trade weighed on growth.

Consumer confidence in Germany has been hit by the surge in coronavirus infections, and the jump in inflation hitting households this winter.

The GfK institute’s consumer sentiment index, based on a survey of around 2,000 Germans, fell to -1.6 points heading into December, down sharply from 1.0 points a month earlier.

That’s the lowest reading since June, and below expectations.

GfK economist Rolf Buerkl said the fourth wave in the COVID-19 pandemic, with skyrocketing infection rates and hospitals reaching capacity limits, was causing concerns that more restrictions for shops and restaurants were on the cards.

“Consumer sentiment is currently being squeezed from two sides.

On the one hand, the number of cases in the fourth wave of the coronavirus pandemic is exploding, which threatens to overwhelm the health system and could lead to further restrictions.

On the other hand, the purchasing power of consumers is dwindling due to a high inflation rate of four percent”

This slide in consumer morale in Europe’s largest economy will dampen business prospects for the upcoming Christmas shopping season, Buerkl adds:

“The outlook for the upcoming Christmas season is now somewhat bleak.“

Some German states have already cancelled this year’s Christmas markets, due to concerns about the surge in Covid-19 cases, but others are going ahead.

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

America’s central bank could wrap up its stimulus programme and raise interest rates earlier than expected, with inflation at a 30-year high and the jobs market improving.

The minutes of the Federal Reserve’s most recent meeting, released last night, show that some policymakers are moving towards ending its bond-buying scheme sooner than thought, given the US’s high inflation rate which hit 6.2% last month.

The Fed started tapering its $120bn/month asset purchase scheme at this month’s meeting, cutting it by $15bn per month -- at which rate it would end by next June.

But the minutes drop a clear hint that tapering could be speeded up:

“Various participants noted that the (policy-setting) Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives.”

Some more dovish Fed members stressed they should take a “patient attitude” toward incoming data given supply chain problems and the pandemic.

However...

Participants noted that the Committee would not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives.

The prospect of the Fed tightening policy faster than expected has weighed on the pound and the euro in recent weeks. Last night, sterling touched its lowest level of 2021, trading at just $1.3325 to the US dollar.

The euro is even weaker - at its lowest against the US dollar since July 2020, and near a 21-month low against the pound.

The FOMC Minutes suggested the doves on the committee are “in retreat”, says Jeffrey Halley, senior market analyst at OANDA:

The committee noted that inflationary expectations in the near term could exceed forecasts and that a faster tapering is not out of the question.

It is probably the last item that weighed on markets the most. Once again, currency markets were the pressure relief valve, with the US Dollar spiking once again, helped along by a soggy German IFO [business climate survey], fears of virus lockdowns and ECB officials pouring cold water on rate hikes.

The news yesterday that US jobless claims have plunged to the lowest level since 1969 could also encourage the Fed to tighten policy faster.

Deutsche Bank expect the Fed to press down on the taper accelerator in December, by doubling the cuts to its purchases of US government debt (Treasuries) and mortgage-backed securities.

That would wrap the scheme up three months sooner than planned, as DB strategist Jim Reid explains:

This would bring monthly reductions in Treasury purchases to $20bn [up from $10bn] and MBS purchases to $10bn [up from $5bn], which would bring the end of taper forward to March.

In line, they’re bringing their call for liftoff forward a month to June 2022.

Something for investors to ponder. Although...Wall Street is closed for Thanksgiving, while European stocks are expected to open higher despite concerns about the fourth wave of Covid-19.

The agenda

• 8.30am GMT: Swedish central bank interest rate decision
• 9.30am GMT: Weekly real-time indicators of economic activity and social change in the UK
• 11am GMT: CBI distributive trades survey of UK retail sales in October
• 12.30pm GMT: European Central Bank publishes its Monetary Policy Meeting Accounts