Tesco warns of ‘unprecedented increases’ in cost of living, as recession fears haunt markets

Show key events only Live feed Show key events only From 1h ago 07. 35 Introduction: Tesco warns of ‘unprecedented increases in the cost of living’ Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets. Customers are facing “unprecedented increases in the cost of living” as rising prices hammer households.

That’s the verdict from Tesco this morning, the day after the Bank of England warned that inflation will hit 11% this October, in the worst squeeze on households in decades. Ken Murphy , Tesco’s chief executive, warns that the market environment “remains incredibly challenging”, with signs that customers are changing their shopping behaviour as inflation bites. The UK’s largest supermarket chain has reported that its underlying UK sales dropped by 1.

5% in the three months to 28th May (excluding fuel sales and VAT). That’s compared with a year ago when the pandemic lockdown boosted demand for grocery. Murphy explains: .

css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment. Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.

” Tesco is also sticking to its profit forecasts, and says it has grown market share over the quarter against rivals. Guidance for profit and cash remain unchanged for Tesco (at this early stage). — Steve Dresser (@dresserman) June 17, 2022 Like-for-like sales fell 2.

4% in the Republic of Ireland over the quarter. As Tesco has over a quarter of Britain’s grocery market, it has a very good view of the state of the economy. And Murphy’s concerns come just a day after a report warned that food price rises in the UK could hit 15% this summer – the highest level in more than 20 years, with meat, cereals, dairy, fruit and vegetables are likely to be the worst affected.

UK food price rises could hit 15% over summer, report says Read more Anothe survey has found that more Britons are now skipping meals or using a food bank, due to rising inflation. Also coming up today Recession fears are gripping markets, after a raft of rate hikes this week from the Federal Reserve – its biggest in 28 years, the Swiss National Bank (unexpectedly), and the Bank of England to get a grip on inflation. Stocks slumped yesterday, with London’s FTSE 100 racking up its worst fall in three months (down over 3%), as the blue-chip index fell to its lowest since March.

Wall Street was hammered again, wiping another 3. 25% off the benchmark S&P 500 index. 🔔 European Closing Bell 🔔 🇬🇧 FTSE 100 down 3.

1% 🇪🇺 STOXX 50 down 2. 7% 🇪🇺 STOXX 600 down 2. 3% 🇩🇪 DAX down 3.

2% 🇫🇷 CAC 40 down 2. 3% pic. twitter.

com/SEszSMb2PF — PiQ  (@PriapusIQ) June 16, 2022 Shares in Asia are now sliding today, on worries that these tighter monetary policies from central banks could undercut a global economic recovery. Japan’s Nikkei is down 1. 5%, while Australia’s main index has shed almost 2%, The outlook is worsened by the likelihood of the conflict in Ukraine dragging on and the west’s economic war on Russia leading to even higher energy prices ahead of the northern hemisphere winter.

“The speed and degree of policy tightening may prove too much for economies to handle, particularly given the commodity price shock currently in play,” economists at NAB bank in Australia said in a note on Friday. . css-knbk2a{height:1em;width:1.

5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} “As a result, recession risk for several of the major advanced economies, including the US, is uncomfortably high. ” David Bassanese, chief economist of Betashares in Sydney, went further and predicted a US recession “within the next 12 months” due to persistent inflation and the Fed’s pledge to raise rates until the inflation genie is back in the bottle. European stocks are expected to open higher today after Thursday’s rout.

European Opening Calls: #FTSE 7098 +0. 76% #DAX 13170 +1. 01% #CAC 5950 +1.

08% #AEX 644 +0. 82% #MIB 22058 +1. 52% #IBEX 8191 +1.

40% #OMX 1907 +0. 87% #SMI 10507 +0. 30% #STOXX 3468 +1.

17% #IGOpeningCall — IGSquawk (@IGSquawk) June 17, 2022 The agenda 10am BST: Eurozone inflation rate for May (final estimate) 1. 45pm BST: Federal Reserve chair Jerome Powell speaks at the Inaugural Conference on the International Roles of the U. S.

Dollar 2. 15pm BST: US industrial production for May Updated at 07. 41 BST 2m ago 08.

54 Tesco’s CEO Ken Murphy says shoppers are buying less and trading down to cheaper products. On a call with reporters, Murphy explained that customers are seeking out cheaper products in areas where prices have risen significantly, including bread, pasta and baked beans. People are also making more shopping trips, but buying less each time, as they try to manage their budgets as inflation eats into disposable incomes.

Murphy says: . css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} “We are seeing higher frequency shopping trips, so there’s an elevation in the number of shopping trips, we are seeing basket sizes coming down a little bit.

” Tesco, Britain’s biggest retailer, said it was seeing early indications of changing customer behavior due to surging inflationary pressures https://t. co/fk2OV12lvj pic. twitter.

com/PyIfscM4aH — Reuters Business (@ReutersBiz) June 17, 2022 20m ago 08. 36 Here’s Matt Britzman , equity analyst at Hargreaves Lansdown , on Tesco’s trading statement and cost of living warning: . css-knbk2a{height:1em;width:1.

5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} “After a slew of retailers warned on profits it’s encouraging to see Tesco keeping guidance unchanged. That’s not to say they’re immune to the current pressures, back in April we heard consumer spending wasn’t showing signs of weakness yet, but it always felt like it was round the corner. Those cost pressures are now starting to take their toll and management called out changing behaviours today, that puts more emphasis on grocers offering a strong value proposition which is an area Tesco deliver well on.

Aldi Price Match and Low Everyday Prices are being rolled out further, with distribution up shy of 20% from last year, that’s helping keep prices at a level consumers can stomach and the group’s snapping up market share as a result. ” 30m ago 08. 26 The UK stock market has opened cautiously as recession fears grip investors.

The FTSE 100 index is up just 8 points at 7053 points, having hit a three-month low last night as markets tumbled. Oil giants BP (-2. 3%) and Shell (-2%) are the top fallers, along with mining companies such as Rio Tinto (-1.

3%) and Anglo American (-0. 7%), on concerns that slower growth will mean less demand for oil and commodities. European markets have crept a little higher, with Germany’s DAX and France’s CAC up 0.

2% each. 🔔 European Opening Bell 🔔 🇬🇧 FTSE 100 up 0. 2% 🇪🇺 STOXX 50 up 0.

3% 🇪🇺 STOXX 600 up 0. 2% 🇩🇪 DAX up 0. 4% 🇫🇷 CAC 40 up 0.

4% pic. twitter. com/lYhPGdCqrv — PiQ  (@PriapusIQ) June 17, 2022 Updated at 08.

26 BST 34m ago 08. 22 Tesco faces a growing threat from discount retailers Aldi and Lidl, says Freetrade senior analyst Dan Lane, as customers seek out cheaper options. Lane predicts that inflation-induced belt tightening will lead more households to head to a German discounter, who have already been growing their market shares this year .

. css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Describing a ‘changing customer behaviour’ is as far as Tesco will go today but that almost certainly means shoppers are trading down and tackling the cost of living in the supermarket.

Ken Murphy will hope his cocktail of Aldi Price Match, Low Everyday Prices and Clubcard Prices will keep customers around but it’s the first of that list that’s key now. Aldi Price Match will become even more important as long as customers are forced into real discount mode. Tesco experimented with its own cheap chain in Jack’s and it just didn’t work, so it’s clear that keeping its ranges wide and its prices low has to be the strategy now.

50m ago 08. 06 Shoppers cut back on food and travel as price rises bite The cost of living crisis is damaging many people’s physical and mental health, as the prices of necessities continue to soar. A new poll, for BBC News, also found that households across the UK are reducing the amount of food they are buying, socialising less, turning off lights, travelling less and expecting to work more, as they try to deal with rising prices.

Here are the key points: More than half (56%) of UK adults say they reduced the amount of food they’ve bought to save money Eight in ten (81%) UK adults report being worried about the cost of living — with adults aged 35-54 most concerned. Of UK adults worried about the cost of living, two thirds (66%) say this is having a negative effect on their mental health. Young adults are significantly more likely to say they have experienced negative mental health effects, with five in six (83%) saying this.

45% of people report that worrying about the cost of living has had some negative effect on their physical health 49% of UK adults expect their personal financial situation to worsen in the next 6 months and 52% expect to work more hours . Approximately two in five UK adults say they expect to be able to save for Christmas in the next six months One quarter (24%) of UK adults say the support recently announced by the Government is enough to help people with the rising cost of living. Food spending and mental health hit by rising prices, BBC survey reveals https://t.

co/yAuoUTg30B — BBC Business (@BBCBusiness) June 16, 2022 Updated at 08. 27 BST 1h ago 07. 49 Tesco’s online sales in the UK have dropped by 14.

5% compared with a year ago, today’s trading statement shows. Sales at large stores are down slightly, while takings at convenience store are up 6. 2%, as the relaxing of pandemic restrictions sees more people return to work, and less demand for home deliveries.

Here’s Steve Dresser , CEO of Grocery I nsights , with early reaction: On a one year basis: Quite the chart around sales distribution: Large stores falling away on a 1 year basis, but online -14. 5%. pic.

twitter. com/N9RlKBHVDs — Steve Dresser (@dresserman) June 17, 2022 Tesco market share grew and distribution of Aldi price match and Low Everyday prices is up 19%. Maintaining the largest improvement in quality and value perception of any retailer vs pre pandemic.

— Steve Dresser (@dresserman) June 17, 2022 1h ago 07. 35 Introduction: Tesco warns of ‘unprecedented increases in the cost of living’ Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets. Customers are facing “unprecedented increases in the cost of living” as rising prices hammer households.