Oil prices dip; UK grocery price inflation highest since 2012 – business live

UK consumers borrowed an additional £1.9bn in February, a five-year high, of which £1.5bn was borrowing racked up on credit cards.

Mortgage approvals fell slightly in February, but remained above pre-pandemic levels, according to data from the Bank of England published this morning. The monthly figure fell to 71,000 in February from 73,800 in January, still above the pre-pandemic average of 66,700 in the 12 months to February 2020.

Paul Dales, chief UK economist at Capital Economics, said:

The leap in credit card borrowing in February and smaller increase in household savings could suggest that the cost of living crisis is already starting to bite. But we think it is more likely that households had the confidence to borrow and spend a bit more and/or were willing to use borrowing/savings to smooth their spending. As a result, the economy may have a bit more near-term momentum than we thought.

The £1.9bn rise in consumer credit beat the consensus forecast of £800m, was the largest in five years and compared to the pre-pandemic 2019 average rise of £1.1bn. Admittedly, as it was driven by a £1.5bn gain in borrowing on credit cards, it could be a result of the cost of living crisis forcing people to turn to credit.

But while that may be true for some people, typically during periods when finances are tight households in aggregate pare back their demand for credit.

The Russian rouble continues to strengthen against the dollar. It’s up more than 2% at 87.81 per dollar, touching 87.40 per dollar earlier, its highest level since 28 February (four days after Russia invaded Ukraine).

Russia is demanding to be paid in roubles for its gas shipments, and exporting firms are required to convert 80% off their foreign currency earnings into roubles. This is supporting the Russian currency, said Iskander Lutsko, chief investment strategist at ITI Capital.

Referring to the Russian stock market, which fully reopened yesteday after weeks of shutdown, he told Reuters:

The market now really depends on progress in negotiations between Russia and Ukraine.

The rouble-based Moex Russia index has turned negative, trading 2.45% lower at the moment, after an earlier gain of more than 4%. The dollar-denominated RTS index is clinging on to a 4% increase, after climbing more than 10% earlier.

The Russian flag carrier Aeroflot, one of the most volatile stocks since the market reopened, jumped nearly 15%. The oil and gas giant Rosneft and the state lender Sberbank are both up more than 2%, after earlier bigger gains.

The latest fuel prices from the RAC motoring group show that the chancellor’s fuel duty cut of 5p per litre, plus 1p for VAT, hasn’t been passed on in full by petrol stations across the UK.

It said Rishi Sunak missed a trick – a VAT cut on fuel would have given drivers “an immediate and guaranteed reduction on their fuel bill”.

According to the RAC, the average petrol price was 167.01p per litre last Wednesday, when Rishi Sunak presented his spring statement (a mini-budget), and dropped to 163.30p yesterday – a fall of 3.71p. The average price of diesel dropped by 2.79p from 179.90p last Wednesday to 177.11p yesterday.

RAC spokesperson Rod Dennis said:

Unfortunately, wholesale fuel prices were already rising before the chancellor made his announcement on fuel duty last week. This meant retailers were buying fuel in at a higher cost than they were a week earlier, which meant drivers may not have immediately and fully benefitted from the duty cut. Wholesale prices are currently falling, but it’s likely to be next week before we see what impact this has at the pumps.

Had the chancellor instead cut VAT on motor fuel last week, drivers would have seen an immediate and guaranteed reduction in their fuel bill next time they visited a petrol station. As things stand, drivers remain entirely dependent on what is happening on the wholesale market and the extent to which retailers are able or willing to pass on savings they make.

The UK chancellor, Rishi Sunak, is under mounting pressure over accusations that his wife, Akshata Murthy, is collecting “bloody money” in dividends from a family company that has refused to pull out of Russia, despite Putin’s invasion of Ukraine, writes my colleague Rupert Neate.

Labour and the Liberal Democrats are calling on Sunak to answer “very serious questions” over Murthy’s estimated $900m (£690m) stake in the IT services and consultancy company Infosys.

Infosys, which was founded by her billionaire father, NR Narayana Murthy, continues to operate in Russia while most big global IT and consultancy firms such as SAP, Oracle, PwC, McKinsey, Accenture and KPMG have all closed their Russian operations.

Sunak, who has repeatedly called on British companies to pull out of Russia in order to “inflict maximum economic pain” on Putin’s regime, refused to comment on his wife’s 0.91% stake in Infosys.

Here is a profile of Akshata Murthy. Money comes in from her 0.91% stake in Infosys, which is valued at about $900m (£690m), making Murthy richer than the Queen (£365m).

Our Guardian US reporter Lauren Aratani has looked at how America is embarking on the great new experiment of hybrid working.

It can be hard to remember what work at the office was like before the pandemic forced millions of Americans to start working from home. That shift was monumental and seemingly implausible, until it happened. But people soon adapted to saying “sorry, you’re on mute” on Zoom calls and wearing sweatpants all day.

This spring, workers are finally heading back to the office en masse and into another untested and ambitious experiment in work life: hybrid working.

“This is a brave new world – we’re doing something we’ve never done before, which is we’re going to go, en masse, hybrid,” said Nicholas Bloom, an economics professor at Stanford.

More than 7,000 finance jobs have moved from London to the European Union as a result of Brexit, according to consultants EY.

While the total is far less than the 12,500 job moves forecast by firms after June 2016, when Britain voted to leave the bloc, more could follow, EY said in its latest Brexit Tracker.

Paris scored highest in terms of attracting jobs from London, totalling 2,800, followed by Frankfurt at around 1,800, and Dublin with 1,200. Some £1.3 trillion of assets was also transferred from London to EU hubs.

EY said new local hires linked to Brexit total 2,900 across Europe, and 2,500 in Britain, where just over a million people work in the financial services sector.

Further relocations could result from European Central Bank checks on whether new hubs in the EU opened by banks which used London as their European base have enough staff to justify their new licences, EY said.

The Bank of England is scrutinising these to avoid banks in London being left with too few senior staff.

Omar Ali, financial services leader for Europe, the Middle East, India, and Africa at EY, said:

Staff and operational moves across European financial markets will continue as firms navigate ongoing geo-political uncertainty, post-pandemic dynamics and regulatory requirements.

McKevitt added:

The grocers are also adapting their pricing strategies in response to the rising cost of goods. One trend we’re already tracking is the move away from selling products at ‘round pound’ prices. The percentage of packs sold at either £1, £2 or £3 has dropped significantly from 18.2% last year to 15.9% this March.

Turning to the impact of the pandemic, he said:

Two years on since the first lockdown, we can assess what permanent changes the pandemic has made to the grocery landscape. The real story of Covid-19 has been the acceleration of online shopping, and retailers have built their digital capacity to match a seismic change in demand. 12.6% of sales were made online in March 2022 compared with just 8% three years ago. Shoppers over the age of 65 are leading the charge – the proportion of this demographic buying online has doubled from 9% to 18% over the past three years.

What we’re buying has shifted too and some of the recipes we learnt during the lockdowns have become firm favourites. For some, baking seems to have gone from fad to hobby as flour volume sales are 28% higher than in March 2019. The dry pasta market is also 17% larger compared with two years ago. There are hints too that people have become permanently more germ-conscious with liquid soap volumes up by 11%.

Grocery price inflation in the UK hit 5.2% in March, the highest since April 2012, according to the latest figures from data analytics firm Kantar.

As costs rise, consumers are turning to own-label products which tend to be cheaper than branded ones, and now account for 50.6% of all spending (versus 49.9% this time last year).

Discount retailers Aldi achieved a record market share of 8.6% and Lidl matched its best performance at 6.4%, as both chains grew sales by 3.6%.

Overall supermarket sales fell by 6.3% over the 12 weeks to 20 March from a year earlier, when many people stayed home because of the Covid-19 pandemic.

Fraser McKevitt, head of retail and consumer insight at Kantar, said:

It’s no surprise that sales are down over the latest period as consumers are now more confident eating out of the home again. As well as enjoying meals out with friends and families, people will have also been grabbing food and drink on the go from supermarkets while travelling or at work. Those sales aren’t included in these take-home figures, but they will be adding to the grocers’ overall performance.

What we’re really starting to see is the switch from the pandemic being the dominant factor driving our shopping behaviour towards the growing impact of inflation, as the cost of living becomes the bigger issue on consumers’ minds.

More and more we’re going to see consumers and retailers take action to manage the growing cost of grocery baskets. Consumers are increasingly turning to own label products, which are usually cheaper than branded alternatives.

European stock markets have opened higher, ahead of peace talks between Ukraine and Russia.

The FTSE 100 index in London is 59 points ahead at 7,532, a 0.8% gain. The Dax in Frankfurt climbed 1.2%, the CAC 40 in Paris is up 0.56%, the Ibex in Madrid rose 1.1% and the Milan exchange added 1.2%.

And, finally in our news round-up, my colleague Dominic Rushe has taken a look at Joe Biden’s proposed new tax on America’s richest households, when he unveiled his latest budget on Monday.

The Biden administration wants to impose a 20% minimum tax on households worth more than $100m. The proposal would raise more than $360bn over the next decade and “would make sure that the wealthiest Americans no longer pay a tax rate lower than teachers and firefighters”, according to a factsheet released by the White House.

The plan – called the “billionaire minimum income tax” – is the administration’s most aggressive move to date to tax the very wealthiest Americans.

Also on the retail front: Deliveroo has struck a partnership with WH Smith, Sarah reports. Books, stationery, phone chargers, toys and exam study guides are the latest items to be ferried to customers on fast-track delivery bikes via a partnership between WH Smith and Deliveroo.

The high street retailer will offer 600 products for delivery in as little as 20 minutes, joining similar services offered by supermarkets, pharmacies and takeaways.

Meanwhile, Asda faces a legal wrangle with Waitrose after unveiling a new £45m cut-price grocery range with a similar name to its pricier rival’s established discount brand.

Waitrose, which has used the Essential Waitrose brand for about 13 years, said it had sent a legal letter to its bigger rival over its new brand name Just Essentials by Asda on Monday.

“We were surprised to hear that Asda is launching an essentials range as the Essential Waitrose brand has been in use since 2009 and has built up a strong reputation for value, quality and higher welfare standards in that time,” said a spokesperson for Waitrose, which is part of the employee-owned John Lewis Partnership.

The supermarket chain Iceland will temporarily return to using palm oil in some own-label foods from June because the price of a key alternative – sunflower oil – has soared by 1,000% during the war in Ukraine, reports our retail correspondent Sarah Butler.

In 2018 the supermarket chain announced to much fanfare that it was removing the controversial ingredient, which has been linked to destruction of the Earth’s forests. As part of its stand against the product, it launched a TV advert made with Greenpeace, which was pulled after it was deemed too political.

But now the retailer’s boss, Richard Walker, has announced in a blog that he is making a U-turn with “huge regret”. “The only alternative to using palm oil under the current circumstances would simply be to clear our freezers and shelves of a wide range of staples including frozen chips and other potato products,” he said.

‘Our top search term is nuclear’: US bunker sales soar as anxiety over Russia rises.

Gary Lynch, chief executive of Rising S Company in Texas, sold five bunkers on a single day in February, at prices ranging from $70,000 to $240,000, reports Bradley Garrett.

Rishi Sunak yesterday defended his spring statement from accusations that it failed to do enough to help the poorest in Britain with soaring living costs by arguing that extra help could have put government finances at risk, report my colleagues on the economics team, Richard Partington and Phillip Inman.

In a fractious exchange with MPs on the House of Commons Treasury committee, the chancellor said he had been forced to make choices over where to prioritise support because of rising government borrowing costs as the British economy is buffeted by surging inflation made worse by Russia’s war in Ukraine.

“One may say, if they don’t like my choices, they’d be happy to borrow a lot more. That’s just not something I think is responsible or sensible,” he said.

The Bank of England’s governor Andrew Bailey warned of an energy price shock on the scale of the 1970s, and said there were already signs of a growth slowdown, as consumers and businesses come under heavy pressure from the cost of living squeeze, with soaring prices for gas, electricity and other goods and services.

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

In Germany, a closely-watched consumer confidence barometer from GfK fell to -15.5 going into April, below expectations and a 14-month low. In March, it was at -8.5.

Consumers worry about rising inflation and the war in Ukraine, which led to a substantial decline in expectations for the economy and their own finances. The income expectations measure fell to -22.1, the lowest since the financial crisis of 2009.

GfK said:

In February hopes were still high that consumer sentiment would recover significantly with the foreseeable easing of pandemic-related restrictions. However, the start of the war in Ukraine caused these hopes to vanish into thin air. Rising uncertainty and sanctions against Russia have caused energy prices in particular to skyrocket, putting a noticeable strain on general consumer sentiment.

Oil prices are falling again, extending losses from Monday, as traders worried about a sharp drop in demand from China. Yesterday saw the biggest oil sell-off since mid-March, as Shanghai went into a two-stage Covid lockdown, and ahead of peace talks between Ukraine and Russia. Negotiators are set to meet in Istanbul today for the first time in almost two weeks.

The war drove oil to 14-year highs earlier this month, but today Brent crude is down 1.1% at $111.24 a barrel while US light crude is at $104.84 a barrel. China is the world’s largest oil importer, and Shanghai, its financial hub, accounts for 4% of the country’s oil consumption, according to analysts at ANZ Research.

Japanese shares led gains in Asian stock markets as the Bank of Japan vowed to keep monetary policy ultra-loose, offering to buy unlimited government bonds for the first four days of this week, to stop yields rising. Globally, bond yields are climbing following the US Federal Reserve’s moves to lift interest rates to tame soaring inflation. Japan’s Nikkei rose 1.1% while Hong Kong’s Hang Seng gained 0.8%, and the Shanghai Composite slipped 0.3%.

The Agenda

• 7.45am BST: France consumer confidence for March
• 9.30am BST: UK Mortgage approvals/consumer credit for February
• 12.00 BST: Bank of England quarterly bulletin
• 3.00pm BST: US Conference Board Consumer confidence for March