UK rate cuts needed to spur consumer spending, says Sainsbury’s boss
The boss of Sainsbury’s said Britain needs several interest rate cuts to stimulate consumer spending, particularly on non-essential things.
Simon Roberts, the chief executive of Sainsbury’s, said:
Customers are continuing to be cautious, particularly in the areas of discretionary spending.
He said consumers’ caution was
not surprising given everything households have been through in the cost of living crisis.
Until we see sequential interest rate cuts, hopefully as soon as possible, that caution from consumers is going to continue on those more discretionary items.
Roberts said when the weather improved, people spent more on things other than food. Last week, when Britain enjoyed a “mini-heatwave” Sainsbury’s sold more fans and cooling equipment than it had sold so far this year.
It just shows that when the weather does turn, customers do want to buy into what they need to enjoy the summer.
Sainsbury’s said shoppers continued to buy more items of food from its shelves than a year before but grocery sales growth slowed to 4.8% in the latest quarter from 7.3% in the previous quarter as inflation across the market eased.
At its Argos chain, sales fell by 6.2%, even though it sold 25% more TVs than a year before as sports fans prepared to watch the men’s Euro 2024 football tournament.
The retailer said the decline reflected “an unseasonal start to summer”, with cold and wet weather hitting sales of summer goods such as paddling pools and garden furniture that did well in a hot start to the summer last year.
Key events
Closing summary
Our main stories today:
Sainsbury’s has said sales growth slowed in recent weeks as food inflation eased and consumers shopped “more cautiously” amid poor weather and the cost of living crisis.
Sales at established stores rose 3% in the three months to 22 June compared with a rise of 4.8% in the previous quarter, excluding fuel and the impact of the closure of the group’s Irish Argos stores.
Simon Roberts, the chief executive of Sainsbury’s, said consumers’ caution was
not surprising given everything households have been through in the cost of living crisis. Until we see sequential interest rate cuts, hopefully as soon as possible, that caution from consumers is going to continue on those more discretionary items.
People want more certainty that the cost of owning a home is going to come down.
Inflation across the eurozone slowed to 2.5% in June despite lingering pressure on households from price increases in the service sector, leaving the European Central Bank on track to keep interest rates on hold this month.
Annual inflation in consumer prices across the 20-country bloc eased from 2.6% in May, according to a flash estimate from the EU statistical agency Eurostat, matching financial market expectations.
Our other stories:
Thank you for reading. We’ll be back tomorrow. Bye! – JK
Q: What is the biggest risk facing the economy today?
Both Powell and Lagarde point to cyber attacks.
Lagarde also mentions the “backlash against the fight against climate change”.
The debate has moved on to artificial intelligence. Lagarde said the ECB uses AI in models, and “whenever we need a lot of language mining in structured and unstructured data”.
Tesla shares jump on better-than-expected deliveries
Tesla has reported a smaller-than-expected 5% drop in vehicle deliveries in the second quarter, sending its shares sharply higher.
The US electric vehicle maker said price cuts and incentives helped stimulate demand.
Shares of the world’s most valuable automaker jumped more than 8%, valuing the company at $712bn.
The EV maker handed over 443,956 vehicles in the three months to June 30, 4.8% lower than a year earlier, and up 14.8% from the prior quarter.
Powell is asked about the US debt levels. “The US is running a very large deficit” at a time of high employment, he observed.
The level of debt is not unsustainable but the path we are on is unsustainable. It should be a real focus going forward… You cannot run this kind of deficits in good economic times.
Asked about the French election, Lagarde declined to comment directly.
Our mandate is price stability and that is obviously based on financial stability.
She said the central bank is monitoring developments in markets, such as bond yields, as usual.
We are very attentive.
Powell reiterated that the risks to inflation are much more balanced than a year ago, when the Fed was mainly focused on bringing inflation down from high levels. Asked about rate cuts, he said:
The risk on the inflation side is that we move too quickly and inflation comes back…And the other risk is that we wait too long
and we lose economic momentum, such as the expansion in the labour market, he said.
Powell is now asked about the inflationary effect of Taylor Swift touring Europe, and services inflation. He sidesteps the first bit, and says:
Famously services inflation is stickier and famously it is tied to labour.
You can see the labour market is cooling off. It’s doing what you would want it to do – it’s cooling off over time.
We don’t see ourselves getting back to 2% inflation this year or next year, maybe late next year.
US inflation is currently at 2.6%.
“What is keeping prices sticky?” Lagarde is asked – in relation to the eurozone’s 4.1% rate of services inflation.
It’s still likely to be a bumpy road until the end of 2024.
She said the ECB is trying to determine the “root causes” – whether high services inflation is caused by permanent changes, or lagged effects of other components.
What is behind is is a lot of wages. Services has a high component of labour.
“We are getting back on an disinflationary path,” said Jerome Powell.
“We want to be more confident” before we decide on reducing policy, he added.
Because the US economy is strong and the labour market is strong, we have the ability to take our time.
If we go too soon, we could undo the good work we’ve done in bringing down inflation.
We have two-sided risks now.
In her opening remarks, Lagarde said:
We are very advanced on this disinflationary path.
Asked if she was setting markets up for a pause in interest rate cuts, she said:
I’m not setting up anything for anyone… It’s looking under the skin of the economy.
In Sintra, Portugal, European Central Bank president Christine Lagarde and US Federal Reserve chairman Jerome Powell are now speaking at a policy panel at the ECB Forum on Central Banking in Sintra in Portugal now. Also on the panel is Roberto de Oliveira Campos Neto, president of the central bank of Brazil. You can watch live here (via the ECB’s website).
The ECB cut its main deposit rate last month to 3.75% from a record high of 4%, putting it ahead of the US Federal Reserve and the Bank of England, which have yet to reduce borrowing costs. It was the first time that the main eurozone interest rate had been reduced in almost five years.
Lagarde said yesterday that benign economic developments suggest that further interest rate cuts are not urgent, with a robust labour market and resilient wage growth.
Biden unveils rules to protect millions of US workers from extreme heat
The Biden administration has unveiled a long-awaited proposal to protect workers from extreme temperatures. If finalized, the rule will establish the nation’s first-ever federal safety standard for excessive heat exposure in the workplace and protect as many as 36 million indoor and outdoor workers.
Announced on Tuesday amid temperature warnings across the country, the rule would require employers to establish heat safety coordinators, undergo extreme heat safety training, create and regularly update emergency heat response plans, and provide workers with shade and water.
It would also require a heat acclimatization process for new employees to gradually increase their exposure to high temperatures. Three out of four workers who die of workplace heat exposure in the US die during their first week on the job, senior administration officials told reporters on Monday.
Rupert Murdoch’s Fox Corp launches Netflix rival Tubi in UK
Rupert Murdoch’s Fox Corporation has launched its ad-supported streaming service, Tubi, in the UK.
The platform will compete with services such as Netflix, Disney+, ITVX and Channel 4’s streaming platform as well as BBC iPlayer.
Fox says the service will launch with more than 20,000 films and TV episodes on-demand, featuring content from Disney, Lionsgate, NBCUniversal and Sony Pictures Entertainment, in addition to its own originals.
The Twilight films, starring Robert Pattinson and Kristen Stewart, the horror film Candyman and the Tubi original reality series House of Heat are among the current offerings.
Book festivals previously sponsored by Baillie Gifford seek donations
Nine festivals that were previously sponsored by investment company Baillie Gifford are now seeking donations.
“Amidst intense discussion around arts funding and challenges to our continued flourishing”, reads a joint statement, the festivals have “joined forces” to “call for increased support”.
Monday’s statement comes weeks after Baillie Gifford partnerships with the nine festivals ended – including Hay festival, Edinburgh international book festival and Cheltenham literature festival – after calls by campaign group Fossil Free Books (FFB) for the company to divest from fossil fuels and companies linked to Israel.
“As writers and other book workers, we care deeply for literary festivals and support their call for sustainable funding,” said FFB in response to the statement.
