Inflation + Labour + Netflix
A look at the latest inflation figures, Labour and business, and Netflix's results
Inflation in the UK rose to 10.1 per cent in September. It has not been higher than that in 40 years. Inflation rose from 9.9 per cent in August, when it had actually dropped from 10.1 per cent in July. The September figure dashes any faint hopes that inflation may be easing after that dip in August and is higher than economists expected.
There are two things I wanted to point out on the back of the figures. Firstly, the September inflation figure is particularly important because it is used by the government to calculate the annual change in benefits payments, pensions and much more. The triple-lock on pensions means that the state pension rises by the highest of either average earnings, 2.5 per cent or inflation in September. Inflation in September of 10.5 per cent will be the highest of these three in 2022. However, the government is yet to confirm that benefits and pensions will rise by this rate of inflation. This lack of confirmation dominates the front pages of the Conservative-supporting newspapers this morning, whose readers obviously include a lot of pensioners…
The second aspect of the inflation data I wanted to point out is how it is being driven by items that matter to every household. Inflation is often reported as one number, in this case 10.5 per cent, when it is calculated by the annual changes of a collection of items. That headline number often doesn’t mean much to people if they can’t see it in items they are buying or they have already switched to cheaper alternatives. However, if you look beneath that headline 10.5 per cent inflation rate for September you can see it is hitting food, housing costs and more…
The rise in the price of food and non-alcoholic drinks is actually higher than the overall rate of inflation, as this graph from the Office for National Statistics shows…
This next graph from the ONS breaks down what has been driving inflation…
And this one shows that these figures are something that can’t be blamed on Liz Truss and Kwasi Kwarteng. The UK’s inflation rate is in-line with other developed economies…
Finally, this graph from Refinitiv shows how the rate of inflation in September looks in a historical context…
Labour and business…
Given there is so much to talk about right now I have been struck by how many times comments from John Allan, the chairman of Tesco, on the BBC’s Sunday with Laura Kuennsberg have been brought up in the conservations I have had with business leaders and advisers in the last 72 hours. Four different people have said similar to me - that this felt like a “moment”.
For those who missed the comments, Allan, who is also the former president of the CBI, Britain’s biggest lobby group, was asked what he thought of Labour after an interview with Jonathan Reynolds, the shadow business secretary. He said: “Well I think what both parties need to spell out is a very clear growth plan and frankly I don’t think we have seen a growth plan from the Conservatives. I hope we will. We have seen the beginnings, I think, of quite a plausible growth plan from Labour. So at the moment their ideas are on the table, and many of them are actionable and attractive. I wait to hear what the government has to say in due course, but at the moment there is only one team on the field.”
“Only one team on the field".” “Attractive”. “Plausible”. It has been a long time since business leaders spoke that warmly about the Labour party relative to the Conservative party. As chairman of Tesco, Allan leads the biggest private employer in Britain. You can listen to his comments here. They are at 56 minutes
Podcast
A reminder that the latest episode of our Business Studies podcast is available now. It’s an interview with Tim Steiner, chief executive of Ocado, the online grocery company and one of the few British tech companies to have made it big in the 21st century. The interview includes Tim Steiner talking about how and why he built Ocado, what he has learned and what comes next…
You can listen on Substack here, Apple here and Spotify here
There will be bonus content for Off to Lunch members on Friday when we will look at Tim Steiner’s interesting comments on the rapid delivery market for groceries and whether the likes of Getir and Gorillas getting products to households within 15 minutes is sustainable…
A chart that helps you understand the world…
Netflix included the chart above in its latest financial results which were published last night. It is designed to show that interest in its new series Dahmer, which is about serial killer Jeffrey Dahmer, was bigger than other prominent shows released at the same time. Netflix said this showed the benefits of releasing an entire series at once, rather than broadcasting one episode a week, which is what HBO has done with House of the Dragon and Amazon has done with The Rings of Power. The company added: “It’s hard to imagine, for example, how a Korean title like Squid Game would have become a mega hit globally without the momentum that came from people being able to binge it. We believe the ability for our members to immerse themselves in a story from start to finish increases their enjoyment but also their likelihood to tell their friends, which then means more people watch, join and stay with Netflix.”
I wanted to flag this because it again demonstrates the importance of quality content to Netflix. The company’s financial results are often analysed as something of an economic bellwether - an increase in subscribers is used to suggest that consumers are splashing out and a dip in subscriber numbers leads to comments that consumers are tightening their belts. Of course, there is something to be taken from the figures about the mood of consumers. However, at the heart of the story, and the growth of Netflix, is content. It grew on the back of must-watch shows like House of Cards, Squid Game, The Crown and more, as I wrote in one of the first Off to Lunchs in April.
In the last quarter Netflix has had success with Dahmer and the latest series of Stranger Things. It reported that subscriber numbers rose by 2.4 million around the world in the three months to the end of September compared to the previous three months (April, May and June). This is the first time in 2022 that Netflix has reported a growth in subscribers, which now total a remarkable 223 million, up 4.5 per cent year-on-year. Shares in the company are forecast to open up more than 12 per cent when trading begins in New York on Wednesday afternoon. A sign that the global economy is starting to improve? Or just a sign that Netflix has programmes that people want to watch? Ted Sarandos, Netflix’s co-chief executive, said on Tuesday night: “The best way to reduce churn is to keep them entertained.”
Other stories that matter…
The boss of Iceland, Richard Walker, is looking to stand as a Conservative MP at the next election. A new Archie Norman? (Retail Week)
One of the fall-outs from the surge in UK gilt yields is that the yield on corporate bonds has also risen sharply, meaning a string of big companies now have to pay more interest on their debt. The yield on a Rolls-Royce bond due to end in 2027 has risen from 3.6 per cent last year to 10 per cent (Wall Street Journal)
Semafor, the new international media venture set up by former Bloomberg boss Justin Smith and Buzzfeed editor Ben Smith has launched its business coverage (Semafor) Here is an interesting piece on its plans (NiemenLab)
The price of charging an electric car has gone up again (Fast Charge)
Author David Epstein has looked at whether there is a link between creativity and mental illness, flagging research that shows a connection between bipolar disorder and the family members of creative writers (Range Widely)
Amazon has started selling home insurance (FT)
Greggs has won an initial ruling as part of a £150 million legal battle to get its insurance company to pay-out for the closure of its shops during the Covid-19 lockdown (Business Live)
Two brothers from Blackburn are looking to take their chain of high-end Chinese restaurants abroad after opening five in the UK (BusinessLive)
And finally…
Having started watching The Rings of Power on Amazon but then skipping the penultimate episode and fast-forwarding through the final episode to find out the big reveal (I will avoid any spoilers) I think Stuart Heritage’s review in The Guardian is a fair summary of how I feel too. You can read it here. It’s not complimentary.
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Best
Graham