US economy goes into reverse
The US economy contracted by 1.4% in the first quarter of 2022, new data out shows.
GDP undershot estimates of a 1% expansion during the first three months of the year and followed a 6.9% expansion in the final quarter of 2021. It marks the first shrink since the depths of the Covid-19 pandemic.
The US Bureau of Economic Analysis blamed the fall on an uptick in Covid-19 cases, which disrupted business, and the end of state and federal support measures meant to help people and businesses weather the worst of the pandemic.
Hinesh Patel, portfolio manager at Quilter Investors, said the economy “had a far poorer show than had been anticipated.”
“While this headline may be a bit of a shocker, price impact is by far the most dominant factor,” Patel said. “Without inflation, the economy grew by a monstrous 6.5% annualised – and that’s including the Omicron overhang. As such, it’s little wonder the Fed is forced into its current stance.
“While consumer consumption has been healthy, a natural demand brake is likely on the horizon as a result of high prices and rising wages.”
Champagne and vodka maker Pernod Ricard sparkles
French spirits group Pernod Ricard, the producer of Mumm champagne and Absolut vodka, has uncorked a market-beating 20% jump in organic sales in its third quarter results as people have returned to socialising following the coronavirus pandemic.
Sales for the first nine months of the year totalled €8.4 billion (£7.1 billion).
However, chairman and chief executive Alexandre Ricard sounded a cautionary note about the future, with the resurgence of the virus in China and Russia’s invasion of Ukraine threatening to derail its progress.
“The global environment remains volatile with an increasingly challenging and inflationary context,” he said. “We expect a softer Q4 impacted by Covid disruptions in China, phasing normalization in the US and conflict in Ukraine.”
An interim dividend of €1.56 (£1.32) per share will be paid on 8 July this year.
Twitter slumps to a loss in final update before going private
A huge jump in costs at Twitter wiped out rising revenues at the social media company in the first quarter, pushing it to a loss.
Twitter, which is in the process of being bought by Elon Musk, reported a 16% jump in first quarter revenue to $1.2 billion as advertising income rose 23% to $1.1 billion. But costs rocketed 35% to $1.33 billion in the period.
The result was a negative operating margin of -11% and an operating loss of $128 million in the quarter.
Daily users on the site rose 16% to 229 million in the first quarter.
Earlier this week Musk sealed a deal to buy Twitter for $54.20 per share, valuing the business at $44 billion. The sale still needs to be approved by shareholders and regulators but is expected to close later this year.
“Given the pending acquisition of Twitter by Elon Musk, we will not be providing any forward looking guidance, and are withdrawing all previously provided goals and outlook,” Twitter said.
UK starts trade talks with Switzerland
UK negotiators are hoping to strike an enhanced trade deal with Switzerland as the two “services superpowers” seek to expand their existing agreement.
An eight-week consultation on a new UK-Swiss free trade agreement – which ministers hope will be broadened to include the UK’s vital services sector – has been launched after prime minister Boris Johnson hosted his counterpart president Ignazio Cassis.
The government is seeking views from UK businesses and the public about the potential agreement.
At present, the two nations have bilateral trade worth £35 billion annually. While many UK businesses benefit from tariff-free trade on most goods, roughly half of the yearly trade is in services, which are not tariff-free.
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US economy shrinks for first time since pandemic
The US economy has suffered its first dip since the height of the Covid-19 pandemic, disappointing experts who had predicted another quarter of growth.
The Bureau of Economic Anlaysis said US GDP fell by 1.4% in the first three months of the year, even though economists had predicted a rise of 1%.
This was a huge reversal of fortunes from the 6.9% growth in the previous quarter.
The drop is the first since the second quarter of 2020, when the economy witnessed a major drop of around 30% as the world scrambled to contain the coronavirus.
The Bureau said the decrease in Q1 was partly caused by a drop in exports and government spending, while imports – which act as a drag on the GDP reading – increased.
The body also said that in the first quarter, the Omicron variant of Covid-19 led to continued restrictions and disruptions for businesses.
Hinesh Patel, portfolio manager at Quilter Investors, said: “While this headline may be a bit of a shocker, price impact is by far the most dominant factor.
“Without inflation, the economy grew by a monstrous 6.5% annualised – and that’s including the Omicron overhang. As such, it’s little wonder the Fed is forced into its current stance.”
Volvo profits drop due to supply chain disruption
Volvo is feeling a “gradual impact” from the market disturbances caused by the war in Ukraine and the coronavirus lockdowns in Asia.
The company registered a “stable financial result” in the first quarter of the year, in its own words.
The Swedish car maker’s operating profit for the period stood at SEK 6.04 billion (£484.6 million), down some SEK 2.3 billion (£190 million) on the same period in 2021.
“In the first few months of 2022, the war in Ukraine has destroyed lives and displaced millions of innocent people. The same war has also sent already rising inflation to new heights and further disrupted supply chains that were already fragile,” said Jim Rowan, chief executive of Volvo Cars.
“When summarizing Volvo cars’ performance during this first quarter, I am incredibly pleased that we have delivered such stable results.”
Volkswagen and BP partnership aiming for 8,000 EV charging points by 2024
Volkswagen and BP have joined forces in a bid to add thousands of electric vehicle (EV) charging points at fuel stations in the next two years.
The companies said the first phase of its roll-out would see 4,000 charge points at BP’s Aral retail sites in Germany and its own-brand retail sites in the UK in the next 24 months.
And by the end of 2024, it expected to have created up to 8,000 charge points across Germany, the UK, and other European countries.
Volkswagen said its innovative Flexpole 150kW charging units would be used. These have an integrated battery storage system, meaning they can be connected to existing electricity grids without the need for any upgrades.
One of the biggest obstacles to the roll-out of fast-charging infrastructure is the requirement for high-powered grid connections.
But Volkswagen says its charging points, which can provide enough charge for up to 160km of driving in as little as 10 minutes, do not require “a dedicated substation and costly construction work”, which “significantly reduces installation times”.
Russia costs weigh on McDonalds earnings
Earnings growth at McDonalds was muted in the first quarter as costs related to the suspension of its Russia business weighed on the firm.
The fast-food giant said it had spent $27 million (£21.7 million) as part of its pledge to keep paying its employees and suppliers in Russia and Ukraine, while $100 million had been spent on inventory that it thought would “likely be disposed of due to restaurants being temporarily closed” as Russia’s war with Ukraine wages on.
This meant operating income rose by just 1% in the first three months of the year, even as revenues rose 11%.
In terms of global comparable sales, the US rose by 3.5%, while the international operated markets division, which includes the UK, saw sales jump more than 20%, helped in part by a reduction in Covid-19-related restrictions.
Kevin Ozan, chief financial officer, said on the firm’s results webcast that the UK had been a strong performer, “fueled by sustained digital momentum, the popularity of McPlant offerings, and the succesful Chicken Big Mac promotion”.
The firm also set aside $500 million for a “potential settlement related to an international tax matter”.
Elsewhere, the firm revealed how it was benefitting from the rise of online ordering, with digital sales exceeding $5 billion, representing over 30% of total sales in the company’s top six markets.
Chief executive Chris Kempczinski said the firm was in robust shape and was ready to face challenges including “inflation, supply chain issues and Covid resurgences”, adding that it would “focus on what’s in our control during challenging times”.
India’s second richest man eyes bid for Boots
India’s second richest man has entered the bidding war for Boots, the UK’s biggest High Street pharmacist.
Mukesh Ambani is the biggest shareholder and chairman of retail-to-energy group Reliance Industries, which the Financial Times revealed is working on a bid for Boots in partnership with US investor Apollo Global Management.
65-year-old Ambani is the eighth richest person in the world, with an estimated net worth of more than $100 billion.
Sainsbury’s boss attacks rivals for price rises
Sainsbury’s CEO Simon Roberts has accused rivals of ramping up food prices, exacerbating the cost-of-living crisis as inflation bites hard on family finances.
The grocer recorded profit for the year of £730 million, but said that could fall by up to £100 million next year as it keeps the cost of essentials such as bread, milk and potatoes as low as it can to aid struggling customers.
It can do so, say analysts, because it has very little debt compared to private equity owned rivals such as Asda and Morrisons, and has a long running cost cutting programme across the business that has seen it close cafes, Argos stores and specialist fish and deli counters.
Chief executive Simon Roberts said: “Customers are watching every penny and pound. It is tough out there. The cost of living is on everyone’s mind and we will stand shoulder to shoulder with them.”
On food inflation he said: “We are inflating behind the market, our direct competitors are inflating ahead of the market.”
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- 1 US economy goes into reverse
- 2 Champagne and vodka maker Pernod Ricard sparkles
- 3 Twitter slumps to a loss in final update before going private
- 4 UK starts trade talks with Switzerland
- 5 US economy shrinks for first time since pandemic
- 6 Volvo profits drop due to supply chain disruption
- 7 Volkswagen and BP partnership aiming for 8,000 EV charging points by 2024
- 8 Russia costs weigh on McDonalds earnings
- 9 India’s second richest man eyes bid for Boots
- 10 Sainsbury’s boss attacks rivals for price rises