It's inflation week...
The business news that matters.
Hello and welcome to the latest Off to Lunch…
It’s that week of the month again when the latest data on inflation is published. In the last two months the release of this data has sparked a doom-loop of rising mortgage rates and pessimism about the UK economy after inflation came in higher than expected.
The latest data will be published on Wednesday and show how prices moved in June. The consensus among economists is that the consumer price index will have dropped from 8.7 per cent in May to 8.2 per cent in June However, core inflation, which strips food, energy, alcohol and tobacco - categories prone to short-term fluctuations - is expected to stick at 7.1 per cent according to Bloomberg. This is not great. In contrast, inflation in the US has fallen to 3 per cent.
A survey of chief financial officers in the UK by Deloitte, the accountancy firm, has found they view tight monetary policy as the biggest threat to their business, ahead of geopolitics and energy prices. Deloitte surveyed 69 finance directors between June 15 and June 27, including 13 FTSE 100 finance directors and 21 FTSE 250 directors. Ian Stewart, chief economist at Deloitte, said:
“Businesses have negotiated a series of major challenges in the last four years, including the UK’s departure from the EU, the pandemic and supply shortages. The legacy of those earlier shocks, in the form of inflation and high interest rates, is now the central challenge.”
You can find Deloitte’s report here
New figures out of China today have provided more evidence that their economy is slowing down, which will have consequences for the rest of the world given how much China exports.
The Chinese economy grew by 0.8 per cent in the second quarter of 2023, down from 2.2 per cent in the previous quarter. Meanwhile, youth unemployment has hit 21.3 per cent, retail sales rose by just 3.1 per cent year-on-year in June and investment in property fell by 7.9 per cent in the first six months of 2023. These figures were all worse than expected. The FTSE 100 has fallen 0.3 per cent on the back of the data, with other European markets also down. The threat of falling prices and deflation in China looms large.
Other stories that matter…
1. The Leeds-based chip designer Optalysys has raised £21 million of funding from Lingotto, an investment company controlled by the Agnelli family, and Northern Gritstone. Optalysys has developed chips powered by light rather than electricity and which offer greater data security than existing chips. Financial Times story here
2. Dame Sharon White, the chair of the John Lewis Partnership, has warned the UK has a growing problem with shoplifting. “Gangs and shoplifters have become much bolder given some of the cost of living pressures,” she told the BBC. Story here.
3. The combined wealth of UK households has fallen by £2.1 trillion since early 2021 due to rising interest rates, according to the Resolution Foundation, the think tank. Household wealth has fallen from a record 840 per cent of GDP in 2021 to 650 per cent now. You can find the Resolution Foundation’s report here. Meanwhile, Paul Johnson, director of the Institute for Fiscal Studies, is incandescent about weekend reports that the Conservative party is looking at plans to scrap inheritance tax. “What is the question to which abolishing inheritance tax is any sort of plausible answer?” he writes. Piece here
4. Tech analyst Ben Thompson has written an interesting piece about how the strikes in Hollywood by actors and writers demonstrate the challenges that businesses face from the ability to distribute any product for free through the internet - in this case, TV shows and films. This ability is “a poisoned chalice for industries predicated on scarcity”, he writes, which has left streaming services saddled with heavy costs. “For the video industry the first step to survival must be to retreat to what they are good at — producing content that isn’t available anywhere else — and getting away from what they are not, i.e. running undifferentiated streaming services with massive direct costs and even larger opportunity ones”. You can read this analysis in the Stratechery newsletter here
5. The author and former investigative journalist Dan Gardner says that businesses need to get better at understanding and promoting their history to give employees a sense of purpose. Mission statements and “conspicuous displays of social conscience” don’t work, he explains. “Mission statements are abstractions. Human beings are not hardwired for abstractions. We are hardwired for stories.” You can read his piece here
A correction to the Sunday press review: I wrote that United Utilities has said that investors should watch its annual meeting remotely rather than attend in-person. What I meant to write is the opposite: investors should attend in-person because the meeting will not be available remotely. My apologies. You can find the Sunday press review here
And finally…
Carlos Alcaraz’s victory over Novak Djokovic in the men’s final at Wimbledon was sport at its best - a five-set thriller between the world number one and number two, an exciting new talent against arguably the best player of all time. It felt like a changing of the guard. This is reflected in the brilliant analysis of the match which is available to read today…
I recommend checking out Barney Ronay in The Guardian. He writes:
It is genuinely rare in sport to witness such an obvious meeting of grand talents heading in opposite directions, one somewhere close to the end, the other just stepping out of the doors and on to the surface of the moon. The changing of the guard stuff, the GOAT versus the kid, has followed both players through the draw.
You can find that piece here
Christopher Clarey covered tennis for The New York Times for 30 years and has written a biography about Roger Federer. He now writes a Substack newsletter called Tennis & Beyond. On the development of Alcaraz as a player, he writes:
He is a great talent carefully nurtured by his father Carlos Sr., a teaching professional who had the wisdom and self-restraint to pass on the coaching duties to Juan Carlos Ferrero, once No. 1 in the world himself. Ferrero, whom Alcaraz now considers a “second father”, is just the sort of level-headed guide that a young tennis genius requires in a microcosm where it is so easy to get discouraged and distracted. Ferrero’s academy near Alicante is an isolated, peaceful place: ideal for focusing on the tasks at hand.
You can find that piece here.
Jason Gay in The Wall Street Journal writes:
This is why we know Alcaraz is for real: because he did the hardest possible thing. He showed up at Wimbledon and defeated a historic champion, a player with a strong case as the greatest to ever do it, who loves this tournament and its grass as much as anyone. He did it through a fire, in a comeback, in five sets, with ruthlessness. Novak Djokovic finally met his Novak Djokovic, and he was Carlos Alcaraz.
You can read that column here
Congratulations as well to Henry Searle, 17, from Wolverhampton, who became the first British player since 1962 to win the boys’ title at Wimbledon. The winner in 1962 was Stanley Matthews, son of the legendary footballer. More on Searle here
Check-out some of the social media reaction to Alcaraz’s win, including a video of him being starstruck at meeting Lionel Messi for the first time…
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Best
Graham