Industry supply chain fears deepen; UK borrowing below forecasts; US jobless claims fall – business live | Business

Manufacturers in Philadelphia are also being hit by rising costs, as the global supply chain problems rumble on.

The latest ‘Philly Fed’ survey shows that factories in the Philadelphia region continued to pay high charges for raw materials and parts, and passed those costs on.

Some 73% of firms surveyed reported an increased in input prices, while just 3% saw a reduction.

Over 58% of the firms reported increases in prices received for their own goods this month, 7 % reported decreases, and 34% reported no change.

The survey, used as a gauge for US industry more widely, also found that manufacturing activity in the region continued to expand this month, but at a slower rate, while new orders increased.

Philadelphia Fed
(@philadelphiafed)

Manufacturing activity in the region continued to expand this month, according to the firms responding to the October Manufacturing Business Outlook Survey. https://t.co/rUoReZcWSP pic.twitter.com/E4WhvyQVxo

October 21, 2021

Philadelphia Fed
(@philadelphiafed)

In addition, the price indexes remain elevated and continue to suggest widespread increases in prices. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

October 21, 2021

US unemployment claims have dipped as cases of the Delta variant of Covid-19 have receded, explains Daniel Zhao of Glassdoor:

Daniel Zhao
(@DanielBZhao)

Initial UI claims SA fell slightly last week to 290K, hitting another new intra-crisis low.

Initial claims are continuing to decline as the Delta wave recedes. Delta is on the downswing but cases are still elevated, suggesting further room for improvement.#joblessclaims 1/ pic.twitter.com/Vq7IZP59Bw

October 21, 2021

Daniel Zhao
(@DanielBZhao)

Continuing UI claims (SA) hit another intra-crisis low too, at 2.48 million. The decline has accelerated since mid-September, perhaps due to increased hiring after the Delta wave peaked in early-to-mid September#joblessclaims 3/ pic.twitter.com/nFu9A8OH93

October 21, 2021

Today’s data shows the US is on track to hit pre-pandemic jobless claims levels by the end of this year, says Robert Frick, corporate economist at Navy Federal Credit Union:

“Claims hit a new pandemic low of 290,000, but that number is even more impressive given seasonal adjustments were working against it due to the Monday holiday last week. All things being equal, we’re on track to return to pre-pandemic layoff levels by year’s end.”

US initial jobless claims have dipped to a new pandemic low.

Just 290,000 Americans filed new claims for unemployment insurance last week, a 6,000 fall on the previous week.

That’s the lowest level for initial claims since March 14, 2020, just before pandemic lockdowns drove jobless claims to record highs.

Equitable Growth
(@equitablegrowth)

For the week ending October 16, 256,304 workers filed for regular #UnemploymentBenefits. Initial claims declined with respect to the previous week. 1/4 pic.twitter.com/XhPKa6K2OK

October 21, 2021

Stripping out seasonal adjustments, and jobless claims dropped by over 24,000 to 256,403 last week.

That’s closer to the pre-pandemic levels, when initial claims were in the low 200,000s.

It shows that US firms are still holding onto workers, with vacancies near record levels, despite the ongoing supply chain disruption, Delta outbreaks, and signs that consumer confidence has weakened.

Mohamed A. El-Erian
(@elerianm)

At 290,000, weekly US initial jobless claims again came in better than expected.
Will reinforce the move among more #Fed officials judging that the “substantial further progress test” has been met.
The more this continues, the greater the challenge to separating taper from rates.

October 21, 2021

The number of Americans receiving unemployment support for at least two weeks also dipped:

Equitable Growth
(@equitablegrowth)

Regular continued claims, also referred to as insured unemployment, was 2.2 million the week ending October 9. Following the expiration of enhanced UI programs, including #PUA and #PEUC, a total of 3.3 million workers claimed benefits the week ending October 2. 3/4 pic.twitter.com/rcHsXDaraX

October 21, 2021

MTS Insights
(@MTSInsights)

Jobless claims were 290k last week, down -6k. The insured unemployment rate was 1.8%, down -0.1%. Continued claims fell -122k to 2.48 mil. Pandemic Unemployment Assistance claims fell -31k to 518k. https://t.co/eT6a6xoJwA pic.twitter.com/c9lAJy3Tdj

October 21, 2021

Bitcoin is proving to be a more popular hedge against inflation than the classic protection, gold.

Bitcoin hit a record high over $66,000 yesterday, and is up around 120% so far this year.

Gold, though, remains firmly out of favour – down 6% at around $1,780 per ounce, even though inflation is rising in many countries.

Bitcoin soared over April’s record high yesterday, after the launch of a bitcoin ETF (exchange-traded fund) which will give investors exposure to the crypto asset without having to buy it themselves.

That EFT could spur mainstream acceptance of crypto as an investable asset, with advocates insisting it offers protection against money-printing by central banks.

The Financial Times reports today that investors are fleeing gold for cryptocurrencies as inflation worries perk up.

More than $10bn has been pulled from the biggest gold exchange traded fund this year and funds’ physical gold hoards have also been selling down, according to Bloomberg data.

Veteran gold traders acknowledged times are changing. “There is zero interest in our strategy right now,” said John Hathaway, senior portfolio manager at Sprott Asset Management, a precious metals investment group.

He added: “The bitcoin crowd see the same things I see in terms of money printing risks of inflation.”

But… crypto does faces the threat of regulation, and could suffer if central bankers rein in their loose monetary policies.

Jeffrey Halley, senior market analyst at OANDA says:

It will be interesting to see how the digital Dutch tulip space copes with the unwinding of QE globally in 2022, as well as rate hikes, potential regulatory threats and a group of world central banks who aren’t going to sit by and let cryptos take away their monetary policy lunch.

And don’t get me started on (un) stable coins and their supposed, but surprisingly opaque to public scrutiny, dollar for every coin backing.

But in the short term, cryptos are a tradeable asset class for now, and the technical picture remains very bullish, he adds:

The price action and momentum as everyone tries to get rich quick, I mean invest in the future of money, should be respected.

Back in the markets, the Turkish lira has hit a record low after Turkey’s central bank slashed interest rates more aggressively than expected.

The Central Bank of the Republic of Turkey (CBRT) startled investors by lowering headline borrowing costs to 16% today, from 18%, twice as big a cut as expected.

Piotr Zalewski
(@p_zalewski)

A shocking 200 bps cut (most expected 100 bps) by Turkey’s central bank. Lira plummets to 9.49 against the dollar, a record.

October 21, 2021

President Tayyip Erdoğan had been demanding further stimulus measures, despite Turkey’s inflation rate running at almost 20%.

Erdoğan dismissed two CBRT deputy governors last week, including Ugur Namik Kucuk who had opposed an earlier shock rate cut. In March he sacked the bank’s governor, Naci Ağbal, after it raised rates against his wishes (the third governor he has ousted).

The lira has sunk to around 9.5 to the US dollar, a record low – which will push up the cost of imports further, fueling inflation.

Mohamed A. El-Erian
(@elerianm)

A 2 percent weakening in the #currency in #Turkey as #markets react to a 200 bps (bigger-than-expected) cut in rates by a politically pressured central bank Follows September’s 100 bps cut that had already driven the #Lira to record lows in recent weeks#economy #fx #centralbanks pic.twitter.com/b2vUW190Xn

October 21, 2021

Erdoğan has argued that higher interest rates cause inflation, because companies pass on their increased borrowing costs onto consumers through higher prices.

Orthodox economics, though, says higher interest rates deter borrowing and encourage saving, leading consumers to spend less, and lowering inflation.

Michael Nicoletos
(@mnicoletos)

#Turkey’s central bank chief, powered by President Erdogan’s unorthodox monetary ideas, announced an interest-rate cut despite rising inflationary pressures and a lira slumping to record lows. not to mention lack of sufficient FX reserves)

The lira sank. who would have thought… pic.twitter.com/oNiEnF3puf

October 21, 2021

Concerns about shortages of raw materials, parts and workers in the UK have escalated, according to the latest industrial trends survey from the CBI.

Almost two-thirds of manufacturers said that a lack of material and components was likely to hit their output over the next quarter, the highest reading since January 1975.

Concerns about worker shortages also jumped. Two-in-five firms are worried about a lack of skilled labour, the highest reading since July 1974. Nearly a third are concerned about availability of other labour, a record reading.

Manufacturers also reported that costs growth continued to rise sharply over the last quarter, similar to July, which saw the fastest growth since 1980.

This led them to lift their own prices (as we’ve seen with Unilever today). Average domestic prices surged at the fastest rate since April 1980, with exports prices up at the most rapid pace since April 2011.

Looking ahead to the next three months, costs growth is set to speed up further, with both domestic and export price inflation expected to accelerate, the CBI warns.

The supply chain crisis appears to be weighing on business optimism, which was broadly unchanged in the quarter to October, after rising in the previous two quarters.

Anna Leach, CBI Deputy Chief Economist, said:

“From higher material costs to labour shortages, manufacturers continue to face a number of serious global supply challenges hampering their ability to meet strong demand.

Manufacturers are using key levers, such as hiring new workers and planning further investment in plant & machinery and training, to expand production. But with both orders and costs growth expected to climb over the next quarter, we’re not out of the woods yet.

Here are full details of the report:

CBI Economics
(@CBI_Economics)

UK #manufacturing output volumes in the quarter to October grew at a similarly firm pace to September, according to the latest quarterly Industrial Trends Survey. Manufacturers expect output growth to pick up substantially in the next three months pic.twitter.com/PahKHz4Ubl

October 21, 2021

CBI Economics
(@CBI_Economics)

Total new orders in the quarter to October at a slower, but still strong, pace compared to July, with the deceleration driven by an easing in domestic orders growth. Meanwhile, export orders increased at a similar pace to last quarter pic.twitter.com/4dgoJKjTV7

October 21, 2021

CBI Economics
(@CBI_Economics)

Concerns about supply shortages in the next three months escalated further in October. 64% of firms cited availability of materials/components as a factor likely to limit output next quarter (highest share since January 1975). pic.twitter.com/v3fraM7GSv

October 21, 2021

CBI Economics
(@CBI_Economics)

Manufacturers also expressed heightened concerns about labour shortages affecting future output, with 40% of firms worried about a lack of skilled labour (highest since July 1974) and 31% concerned about availability of other labour (a survey-record high). pic.twitter.com/dO7wCFVjif

October 21, 2021

CBI Economics
(@CBI_Economics)

The manufacturing sector continues to face acute cost pressures. Firms reported that average costs growth in the quarter to October remained broadly in line with July – which saw the fastest growth since 1980. Costs growth is set to speed up further next quarter pic.twitter.com/3Vf7AD9pud

October 21, 2021

CBI Economics
(@CBI_Economics)

Rapid cost growth has continued to feed into price pressures, with average domestic and export prices growing at their fastest rate since April 1980 and April 2011, respectively. Both domestic and export price inflation are expected to accelerate in the next three months pic.twitter.com/Vpz7lX1pyY

October 21, 2021

Julian Jessop, economics fellow at the Institute of Economic Affairs, has spotted that Britain’s national debt, as a share of the economy, is actually lower than estimated earlier this year.

That’s because GDP has been higher than thought, proving that growth, not tax rises are the best way to improve the public finances.

[Increasing the denominator is an excellent way to lower your debt/GDP ratio, rather than self-defeating austerity measures which end up hitting growth]

As Jessop puts it:

“UK government borrowing and debt continue to undershoot the OBR’s old forecasts, underlining how economic growth – not tax hikes – is the best way to repair the public finances.

“Borrowing was a whopping £43.4 billion lower than projected in the first six months of the fiscal year. What’s more, the ratio of debt to national income has already fallen sharply as the economy has rebounded more quickly than expected and GDP has been revised higher.

“The stock of debt was reported to be equivalent to 95.5 per cent of GDP at the end of September, but it was estimated at 99.7 per cent as recently as June, and more than 100 per cent several times in 2020.”

Julian Jessop
(@julianHjessop)

Something I think almost everyone has missed… ?

UK public debt has *already* fallen sharply as a share of national income as GDP has been revised up

September 95.5%
August 97.6%
July 98.8%
June 99.7%

and it was reported at more than 100% several times in 2020#Budget

October 21, 2021

UK flights last week hit their highest level since the first Covid-19 lockdown.

They rose to 59% of their 2019 average, as the relaxation of travel restrictions lifted demand (although this was before Morocco banned flights to and from the UK due to the rise in coronavirus case rates)

Office for National Statistics (ONS)
(@ONS)

The 7-day average number of UK daily flights in the week ending 17 Oct 2021 was the highest since the first UK wide lockdown, at 59% of the level seen in the same week of 2019 (3,625), according to @Eurocontrol ✈ https://t.co/BbsH8zHNoV

October 21, 2021

But the ONS also reports that spending on credit and debit cards in Britain fell by five percentage points last week, to 97% of its pre-pandemic average.

The sharpest falls over the past week came for spending in the ‘staple’ and work-related categories, while social spending was broadly unchanged.

• “delayable” decreased by 4 percentage points
• “staple” decreased by 10 percentage points
• “work related” decreased by 9 percentage point

The ONS also reports that UK wholesale gas prices finally dipped last week, for the first time in three months.

Office for National Statistics (ONS)
(@ONS)

Data from @nationalgriduk show the system average price (SAP) of gas has decreased by 6% in the week to 17 October 2021.

This was the first weekly fall in 13 weeks https://t.co/PEy6QUS1Wx pic.twitter.com/Y9tKDfLxkU

October 21, 2021

Today, gas for next-month delivery is around 226p per therm, having briefly spiked over 400p per therm early in October.

But that’s still over quadruple January’s levels of around 50p, a surge which has caused 13 smaller suppliers to collapse in recent weeks.

The head of Scottish Power has warned that the energy crunch will drive more suppliers under, and keep pushing up energy bills until 2023.

Keith Anderson, chief executive of Scottish Power, also blasted the UK’s energy price cap, which stopped suppliers passing on rising wholesale costs:

“Customers are going to get a huge increase in their bills next April, and in October, and I suspect that they’ll see another increase in their bills six months later.

“Moving the energy price cap every six months is just completely hopeless. We need it to start changing more frequently.”

Anderson also predicted that the UK could be left with just five or six of the strongest suppliers still standing. Here’s the full story by my colleague Jillian Ambrose:

Over a fifth of UK companies are struggling to find hauliers to bring goods into the UK, with food importers particularly hit.

The Office for National Statistics’ latest business insights report shows that:

Of currently trading businesses that reported how their importing had been affected, 22% reported lack of hauliers to transport goods or lack of logistics equipment as a challenge, in late September 2021, up from 11% in late April 2021.

A lack of hauliers was particularly prevalent in the accommodation and food service activities industry with 64% of businesses in this industry reporting it as a challenge, up from 7% in late April 2021.

The UK government is now relaxing the rules on cabotage, to allow EU drivers to make unlimited deliveries within a fortnight. That could encourage them to make trips into the UK.

But the biggest challenges remain paperwork, transport costs, and customs duties and friction at the border.

More than half of firms reported challenges in exporting or importing, where there’s been little improvement since January 2021 when the UK-EU trade deal came in.

The number of UK online job adverts rose 2% last week, as companies continue to struggle to fill vacancies.

The latest real-time economic indicators from the ONS show there were 43% more online job ads last Friday than in February 2020, before the first lockdown.

Adverts for positions in “transport, logistics and warehouse” roles jumped by 6%, and are four times as high as before the pandemic. That highlights the strains in Britain’s supply chain, with shortages of lory drivers, delivery workers, and other logistics roles.

Office for National Statistics (ONS)
(@ONS)

Figures from @Adzuna show the volume of online job adverts in “transport, logistics and warehouse” are over 4 times as high as its February 2020 average level, having increased by 6% from the previous week https://t.co/aa6RWGLmLv pic.twitter.com/imoA8pzBc2

October 21, 2021

Simon French, chief economist at Panmure Gordon, says UK debt repayment costs are heading higher, as inflation pushes up:

Simon French
(@shjfrench)

This AM’s UK borrowing data keeps the OBR on track to revise down in-year borrowing considerably next week – but dont expect Chancellor to hang out the bunting with debt interest as % of GDP approaching its highest level since 2011/12 – & heading higher as RPI-linked coupons ⬆️ pic.twitter.com/P9KUWp3ZSQ

October 21, 2021

Simon French
(@shjfrench)

Revisions will largely be a function of cautious OBR forecast for 4% growth in 2021 back in March. This underestimated the pace of the recovery – we had +6.5% YoY at time, & consensus now +7%. Need for I-Y energy subsidies/ Net Zero/LU funds likely to reinforce wider HMT caution.

October 21, 2021

Unilever’s price hikes will have hit a lot of consumers, points out Neil Wilson of Markets.com:

Unilever products are just about everywhere in just everyone’s homes. So, when they raise prices it usually affects a lot of people.

Unilever raised prices by an average 4.1% in the third quarter across all its brands, helping it to achieve underlying sales growth of 2.5% despite sales volume declining 1.5%. Turnover rose 4%. The company said it is taking action to “offset rising commodity and other input costs”.

The company’s prediction that inflation will keep rising should worry central bankers too, says AJ Bell financial analyst Danni Hewson.

Unilever reckons inflation is here to stay. That’s bad news not just for investors in the consumer goods giant but also for central bankers.

“The like of the Federal Reserve will have been hoping inflationary pressures would ease sooner rather than later as they walk the tightrope of keeping prices from overheating while not choking off the recovery by raising interest rates too far and too fast.

“However, given the breadth of costs Unilever is exposed to and the fact that dealing with input costs is bread and butter for a consumer goods company, a warning that inflation will be higher in 2022 carries weight.

It could also push cash-conscious consumers towards cheaper rivals, Hewson adds.

“For now Unilever hopes price increases, running at the highest rate in years, will keep margins flat year on year but the company faces its own balancing act of not increasing prices so much that its products are no longer competitive.

It is a real test of the strength of the company’s brands

Freetrade’s Senior Analyst Dan Lane says Unilever faces a ‘very tricky path’, despite success in some areas.

Unilever’s ability to pivot towards its ecommerce channels is paying off.

Moving even further into Beauty has also clearly been a shrewd move – the likes of Dove and Vaseline are more than holding up their end of the bargain in the skincare division.

The reality is Covid is going to leave a very tricky path ahead for Unilever though. The prices of raw materials, packaging and distribution are soaring and there’s only so much of that extra cost it can add to a tub of Marmite before consumers skip the spread altogether.

For investors, there’s maybe the feeling the post-crisis quality growth story is in danger too.

If the world swings towards value stocks and investors dust off their attitude to fixed income the popular bond-proxies like Unilever could really suffer.

Consumer goods giant Unilever has lifted its prices, and warned that further inflation is ahead as it battles an “unprecedented” rise in costs.

Unilever makes food ranges including Carte d’Or and Magnum ice cream, tea brand PG Tips, Hellmann’s mayonnaise and Marmite, personal care products including Dove soap, and cleaning products such as Cif, Persil and Domestos.

Unilever lifted its prices by 4.1% in the last three months, as it passed on the impact of rising commodity and other input costs to consumers.

And it warned today that it doesn’t see these pressures easing.

Finance chief Graeme Pitkethly said:

“We expect inflation could be higher next year than this year.

These price hikes saw Unilever’s underlying sales grow by 2.5%, more than offsetting a 1.5% drop in sales volumes.

Commodity costs and wholesale food prices have been soaring this year, driven by rising demand, higher energy costs, and ongoing supply chain disruption from the pandemic.

The UN’s Food Price Index shows that global food commodity prices are up almost a third over the last year, with driven by cereals, vegetable oils, dairy and sugar prices.

Unilever’s CEO, Alan Jope, said the company will continue to raise prices in response to rising costs:

Cost inflation remains at strongly elevated levels, and this will continue into next year.

We have and will continue to respond across our categories and markets, taking appropriate pricing action and implementing a range of productivity measures to offset increased costs.

Shares in Unilever have jumped 2.7%, to the top of the FTSE 100 leaderboard.