China has always been highly sensitive about the origins of the global pandemic – but has always denied it was the source. Nonetheless, having spread from China around the world, it has come back to haunt the Chinese authorities with cases now recorded in Beijing. Unfortunately, as the world’s second largest economy and a major cog in supply chains this is bad news for the global economy. Slower economic growth and further supply chain disruption seem inevitable and economists have warned that the impact from the latest round of lockdowns could be worse than the original Wuhan outbreak two years ago.

This will inevitably feed through to the UK. Many companies export goods to China or source key components from there. Whether, store or internet business models or omni-channel, many retailers source goods from China and further lockdowns are likely to further extend delivery times. The UK is already experiencing a cost-of living crisis which has been exacerbated by the war in Ukraine and higher energy bills.

Consumer confidence has also taken a knock, although the housing market still appears to be surprisingly resilient. Retail businesses will need to be nimble on both pricing and stock availability, securing sufficient product to fill shelves or warehouses to meet demand. Those with stronger finances and cash flow should be able to capture market share to help counter slowing consumer spending.

Meanwhile, many pandemic lockdown winners such as Peloton, Netflix and even Amazon are seeing reversal of fortunes as the cost-of-living crisis hits consumer confidence and spending patterns reset.

Cream rises to the top – proven business models and management teams will emerge from the current challenges in a stronger position as weaker competitors struggle. Government and central bank support was available during the pandemic, but that lifeline is no longer there.

What have we been watching?

Inflation, interest rates and consumer confidence overshadowed markets as the war of attrition continued in Ukraine. The prospect of more lockdowns in China also weighed upon commodities but markets are hopeful of additional monetary stimulus from the People’s Bank of China. A faster pace of interest rate hikes by the US Federal Reserve saw the Dollar strengthen further against both the Euro and Sterling with the latter now under $1.26 – good news for leading UK market overseas earners.

The war of attrition continues in Ukraine with Russian forces making probing attacks along the 300-mile frontline in Donbas. Foreign Secretary Liz Truss believes the war in Ukraine could last years and fears President Putin could deploy weapons of mass destruction in a desperate attempt to break the deadlock. President Putin warned that any country trying to intervene in the Ukraine war will face a ‘lightning fast’ response in what was seen as a reference to ballistic nuclear missiles. Elsewhere, local media reports that Finland and Sweden intend to announce simultaneous bids to join NATO in May.

The World Bank warned that the war in Ukraine is set to cause the ‘largest commodity shock’ since the 1970’s. This will add to the growing cost-of-living crisis with huge price increases for goods ranging from gas and petrol to wheat and cotton. Last week, EU leaders accused Moscow of ‘blackmail’ over gas exports after state-owned Gazprom suspended supplies to Poland and Bulgaria. European wholesale gas future contract prices jumped 10% higher on the news.

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In the UK, market research company Kantar warned that grocery prices were 5.9% higher in April than a year ago, the biggest increase since 2011. Retail sales slumped in April with the first year-on-year fall in volumes in thirteen months.

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Chinese authorities are struggling to contain the latest Covid-19 outbreak in Beijing with mass testing of 20million residents underway. Meanwhile, the People’s Bank of China said it ‘will step up prudent policy support to the real economy, especially for industries and small businesses hit hard by the pandemic.’

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Brent oil moved up to $106 despite concerns about Chinese demand given the spread of Covid-19 to Beijing.

Finally, talking about the risk of the UK economy losing its fizz.  CF Industries, which produces most of the UK’s CO2 supplies, has threatened to mothball its UK operations just months after receiving subsidies from the UK government. CO2 is a by-product of fertiliser production – a major energy user. Soft drink companies, pub landlords and packaged fresh food manufacturers will all be hoping the government and CF Industries can reach some form of agreement.


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