US consumers facing rising prices blamed mainly on supply shortages

Published

3 years ago

August 11, 2021

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American consumers faced rising prices last month but the pace of that rise has slowed, according to official figures released on Wednesday.

The US Department of Labor said that consumer prices were up 0.5% from June to July, compared with the previous monthly increase of 0.9%.

Compared with the same time last year, however, they have risen 5.4%.

If the calculations were stripped of energy and food prices, core inflation was up 4.3% in the past year, down slightly from the 4.5% yearly increase recorded in June.

However, some of the categories that had contributed to previous rises began to slow in July – used car prices were up just 0.2%, while air fares fell by 0.1%.

Also among the figures were:

• A 75% annual rise in the cost of vehicle rentals, despite a fall of nearly 5% last month

• Rents are up, with soaring house prices forcing many people to remain in their apartments

• Vehicle insurance was down in July after six consecutive monthly increases

• The price of a new car was up 1.7% in July and 6.4% in the past year – the largest jump since 1982

• The price of a hotel room was up 6% in July, and up nearly 22% compared to a year ago

• Restaurant prices were up 0.8% in July, the largest increase since 1981. Analysts said this is because the costs of food and wages is higher and this is being passed to consumers

Kathy Bostjancic, an economist at Oxford Economics, said June “marked the peak in the annual rate of inflation”.

She added: “That said, price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated.”

The US has seen some economic recovery as it reopens following what is thought to have been the worst of the coronavirus pandemic.

But rising inflation is holding this recovery back, cancelling out most of the benefits workers might have expected from higher pay.

It also increases pressure on the Federal Reserve’s policymakers, who are meant to keep inflation under an annual target of 2%.

Federal Reserve chairman Jerome Powell has said he expects the rise to be temporary, blaming the sudden shutdown and then reopening of the economy for the current supply shortages.

Republicans are blaming US President Joe Biden, especially his massive $1.9trn financial aid package, which was passed earlier this year.

The package included federal unemployment aid and stimulus cheques for much of the population.

Congress will consider even more spending in the coming weeks.

Regarding the consumer price data, a White House official told Reuters: “This is one month and we don’t want to put too much emphasis on it, but what we see in this trend is very consistent with the story we’ve been articulating for a number of months now.”

Business

Zahawi takes on Very Group role days after quitting as MP

Published

15 hours ago

May 13, 2024

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Zahawi takes on Very Group role days after quitting as MP

Nadhim Zahawi, the former chancellor, is to be named as chairman of one of Britain’s biggest online retailers, days after confirming that he would step down from parliament at the next general election.

Sky News has learnt that Mr Zahawi is to be appointed non-executive chair of Very Group, the largest remaining part of the Barclay family’s business empire.

Sources said the appointment, which will see him replacing interim chair Aidan Barclay, would be announced on Monday.

His arrival at Very Group will come during a period of turbulence for the Barclay family, who own The Daily Telegraph but are unable to exert influence over it under a government order while its future ownership remains uncertain, subject to a forthcoming auction.

Mr Zahawi’s appointment at Very Group, first revealed by Sky News in March, is likely to prompt a search for fresh equity investment in the near term, as well as a broader review of its capital structure.

The company, which owns the Very and Littlewoods brands, is weighed down by debt, but has nearly 4.5 million customers and significant expansion targets.

Based in Liverpool, it sells electrical goods, homewares and fashion, backed by a large consumer finance arm.

It is said to have performed resiliently despite uncertainty over its ownership.

The company recently said it had secured £125m of new debt funding from Carlyle Global Credit and IMI, which the company has said is designed to support future growth.

Mr Zahawi, the MP for Stratford-on-Avon since 2010, had a brief stint as chancellor of the exchequer, while he also held ministerial posts at the Department of Health and Social Care – where he oversaw the vaccine rollout during the COVID pandemic – the Department for Business and as chancellor of the Duchy of Lancaster.

He was made Conservative Party chairman by Rishi Sunak but was dismissed for failing to disclose he was being investigated by HMRC and the National Crime Agency over a multi-million pound tax dispute related to the sale of shares in his polling firm YouGov while he was chancellor.

He said he had made a “careless and not deliberate” error after initially saying he had no knowledge of the investigation and had “paid all taxes”.

Mr Zahawi’s announcement last week that he would not stand again at the next election meant he joined the likes of Theresa May, the ex-prime minister, and former Conservative Party chairman Sir Brandon Lewis in deciding to leave parliament.

Prior to his political career, he was the founder of YouGov, while he is now a patron of the Adam Smith Institute, the economic thinktank.

Mr Zahawi has been playing a role as an intermediary between the Barclay family and the Abu Dhabi-based investor IMI Investments since its interest in participating in a bid for The Daily Telegraph emerged last summer.

He had been tipped to chair the newspaper group if RedBird IMI, a vehicle fronted by former CNN president Jeff Zucker, had been successful in buying it.

However, a fierce backlash from Conservative parliamentarians prompted Downing Street to intervene and amend legislation to prohibit ownership of British newspaper titles by investors connected to a foreign state.

RedBird IMI is now finalising preparations to conduct a further auction of the Telegraph newspapers and The Spectator magazine.

The Barclays, who used to own London’s Ritz hotel, have already lost control of several of their corporate assets.

In February, Yodel Group, their parcel delivery business, narrowly averted insolvency when it was sold to a consortium backed by executives at Shift, a rival.

The parent company of ArrowXL, another delivery firm they own, had been forced into administration by HSBC, its principal lender.

Half of the £1.2bn loan that the Barclays took from RedBird IMI and IMI was secured against their media assets, with the bulk of the remainder said to have been secured against other assets including Very Group.

At various points in the last decade, the Telegraph proprietors have explored a sale of the online shopping business, having valued it at over £3bn.

Very Group and Mr Zahawi both declined to comment.

Business

Pinewood-owner Aermont among suitors for £850m Village Hotels

Published

1 day ago

May 12, 2024

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Pinewood-owner Aermont among suitors for £850m Village Hotels

The major backer of Pinewood Studios is among the suitors vying to buy Village Hotels, one of Britain’s biggest mid-market hotel chains.

Sky News understands Aermont, which specialises in real estate-backed investments, submitted an offer last week for Village Hotels, which is owned by KSL Capital Partners.

City sources said KSL was seeking offers worth in the region of £850m or more.

A number of other parties are also understood to have tabled bids ahead of a deadline last week.

Blackstone, the giant private equity firm, is considering making an offer but has yet to do so, according to insiders.

The auction is being handled by bankers at Morgan Stanley.

It comes months after attempts to sell Center Parcs UK were called off, while a mooted sale of Travelodge has so far failed to result in a deal.

Village Hotels comprises a portfolio of more than 30 properties from Aberdeen to Bournemouth, with rooms available at budget prices.

Founded in 1995 as Village Urban Resorts, the hotels feature pub-style restaurants and gyms.

KSL was reported to have paid £485m for the business when it bought it in 2014 from De Vere Group.

The Denver, Colorado-based buyout firm has also owned other UK hotel chains including Hotel du Vin and Malmaison.

Aermont and Blackstone declined to comment.

Business

Former Rank chief Birch in talks to run Ladbrokes-owner Entain

Published

2 days ago

May 11, 2024

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Former Rank chief Birch in talks to run Ladbrokes-owner Entain

Henry Birch, the former boss of Rank Group, is among the candidates vying to run Entain, the FTSE-100 owner of Ladbrokes.

Sky News has learnt that Mr Birch is one of a small number of candidates being considered by Entain to replace Jette Nygaard-Andersen as its permanent chief executive.

The recruitment process comes at a challenging time for Entain, which has been beset by boardroom upheaval and regulatory difficulties in various international markets.

Its stock has halved in the last year, leaving it with a market capitalisation of just under £5bn.

This weekend, sources close to the company confirmed that Mr Birch was a serious contender for the post, although they said others were also in contention.

An appointment could still be weeks or even a small number of months away, they added.

Mr Birch stepped down as chief executive of Very Group, the online retailer owned by the Barclay family, in 2022.

He is an experienced gambling industry executive, having spent four years as chief executive of William Hill Online prior to joining the London-listed multichannel gaming operator Rank Group.

He has also held roles at Leisure & Gaming plc and BettingCorp.

Under Mr Birch, Very Group broke the £2bn annual sales mark for the first time.

Investors in Entain have been pressing its board to recruit a new chief executive with substantial gambling experience as it grapples with a plunging share price and numerous regulatory and strategic challenges.

Last week, Sky News revealed that former bosses of bookies Coral and Skybet had rejected overtures to become its new boss.

Industry sources said that Dan Taylor, chief executive of Flutter Entertainment’s international operations, had also been approached, although it was unclear whether he was interested.

Entain has been under siege from activist investors for months.

In January, it announced that Ricky Sandler, who runs Entain shareholder Eminence Capital, would join its board as a non-executive director.

Last month, it said that Barry Gibson, its chairman, would retire later this year and be replaced by interim chair, and former acting CEO, Stella David.

Entain has hired bankers to sell PartyPoker and other non-core operations, which the Financial Times reported could include Netherlands-based BetCity, which Entain bought for £398mn last year.

As well as Ladbrokes, Entain owns Coral and a stake in BetMGM, a major US betting player.

MGM Resorts, the US casino operator behind the Bellagio in Las Vegas, attempted to buy Entain in 2021 but was rebuffed at a much higher valuation than the UK company’s shares trade at now.

MGM has since ruled out a further bid, although analysts expect it to return at some stage.

The company has faced a deluge of regulatory problems, triggering sharp criticism of its governance and business practices.

Last December, it was ordered to pay £615m for failing to prevent bribery at its former Turkish subsidiary under a deferred prosecution agreement.

Shares in Entain closed at 778.8p on Friday, giving the company a market capitalisation of £4.98bn.

Entain declined to comment, while Mr Birch could not be reached for comment.