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INFLATION IN U.K. REACHES 30-YEAR HIGH
Consumer prices in Britain increased 5.4 percent in December, compared to a year earlier, the fastest annual rise since March 1992, the National Office of Statistics reported.
November’s rate was 5.1 percent.
The latest rise was driven by increases across a range of goods and services.
Analysts expect the kingdom’s inflation rate to peak at 6 percent in April as the U.K. continues to emerge from the Omicron onslaught and consumers resume spending amid continued shortages and supply-chain snags, causing prices to rise further.
Also in April, Britain’s cap on energy prices is due to be reviewed.
Last month, the Bank of England became the first central bank in a major economy to raise interest rates in response to inflation, which we noted in “European Markets: Higher Rates Impact” (21 Dec 2021).
TRENDPOST: Inflation’s relentless rise is putting the central bank under greater pressure to raise rates again in the very near future. And the higher rates rise, the deeper the U.K.’s economy will fall. Indeed, that is why, as detailed in this Trends Journal, the government is ending the COVID War and opening up its economy. (See “UK’S BORIS “BULLSHIT” JOHNSON WINDING DOWN COVID WAR?”)
PROCTER & GAMBLE REPORTS HIGHER SALES AS PRICES RISE
Despite, and partly because of, the largest price increases in more than two years, Procter & Gamble’s (P&G’s) sales of consumer products from diapers and razors to toothpaste and antacids grew 6 percent in 2021’s final quarter, year over year, giving the company revenue of $21 billion for the period.
About half the increase was due simply to retail price increases, P&G said in a statement announcing the quarter’s results. Consumers buying larger volumes of products accounted for the other half.
The U.S. inflation rate ran at a four-decade high late last year, finishing December at 7 percent, its highest since June 1982, as we reported in “U.S. Inflation Highest in 40 Years” (18 Jan 2022).
P&G’s share price gained 3 percent on the news and pushed past $164 on 21 January, its highest level in more than a year.
P&G will continue to raise prices this year, the company said, and predicted not only that consumers will continue to pay them, but also that the company will see greater profits even amid shortages of workers and materials.
“The consumer is very resilient and very focused on these categories of clean home and health and hygiene,” CFO Andre Shulten said in a statement quoted by The Wall Street Journal.
TREND FORECAST: Companies will continue to raise prices as high as they can to increase profit margins until they hit the breaking point when consumers slow down purchases because prices are too high.
COST OF RECYCLED PLASTIC SOARS
The cost of recycled PET, the most common form of consumer plastic, has shot up 103 percent to €1,690 a ton, or about $1,900, since January 2021 as more consumer products companies seek to fulfill sustainability targets they have pledged.
Prices for bales of discarded plastic bottles, the raw material for recycled PET, have risen even more, according to data service ICIS.
Costs for recycled plastic now exceed those for new, according to the Financial Times, even as rising prices of petroleum push up the cost of virgin plastic.
The European Union has mandated that drinks makers such as Coca-Cola and Nestlé use at least 25 percent recycled plastic in their bottles by 2025; some manufacturers have set even loftier goals.
However, “projects are on hold and ramping up [of recycled plastics’ use] has really slowed…is what we’re hearing from suppliers,” Helen McGeough, plastics recycling analyst at ICIS, told the FT.
“Supply of recycled PET doesn’t anything like match the demand because recycling companies can’t scale fast enough,” sustainability consultant Sue Garrard said to the FT.
Three associations of beverage producers have asked the European Union to grant them priority access to recycled plastic ahead of other industries in order to meet the mandated targets.
Germany has begun a return deposit program on plastic bottles; other European countries are considering similar plans. The U.K. holds drinks makers responsible for funding collection programs for their used bottles.
TREND FORECAST: Manufacturers are under growing pressure from consumers to take responsibility for environmental stewardship, an aspect of our “Top 2022 Trend” toward sustainability and self-sufficiency.
As supplies of recycled plastic fall short, drinks companies and other consumer products makers will support bottle deposit programs and similar schemes to collect used plastic because it is no longer trash but instead has now become raw material in the circular economy, a concept we detailed in “Raise a Glass to the Circular Economy” (9 Mar 2021).
INFLATION ADVICE FROM THE EXPERTS
Wondering how to cope with inflation? Let yourself be guided by the Argentinians, who live with inflation of 50 percent or more each year.
Here are their tips Bloomberg gathered, adjusted for those in the northern hemisphere learning to live with price hikes of 5 to 7 percent annually.
Spend your income right away because your money will be worth less tomorrow. We might not be ready to stock the freezer with six months’ worth of chicken thighs, but there’s wisdom here: buy big-ticket items now—that new flat-screen TV, the second car, the dining room set—because the price will be higher next month.
Borrow now to buy expensive items. To buy those big-ticket items, borrow now and buy them at today’s price, which will be lower than tomorrow’s; then repay the loan with tomorrow’s dollars, which will be worth less than today’s. You score a win-win.
Negotiate pay raises that keep pace with inflation. In an inflation economy, the old 2-percent pay bump loses you money before it shows up in your next paycheck. This is an employees’ market. Dicker for pay hikes that are tied to inflation. The downside: tying wages to inflation fuels a wage-price spiral, in which the two chase each other higher in a cycle that becomes hard to rein in.
Buy investments linked to inflation. In the U.S., yields on Treasury Inflation-Protected Securities rise with prices; typically, so does the value of precious metals, commodities, and some collectibles. Real estate also has remained a reliable stash of value over the long term.