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A quick check-in on markets at the start of trading this morning.
It’s broadly negative across Europe (barring the more domestically-focused FTSE 250):
FTSE 100 is down 0.2%
FTSE 250 is up 0.18%
Germany’s DAX is down 0.2%
France’s CAC 40 is down 0.4%
Italy’s FTSE MIB is down 0.14%
Spain’s IBEX is up 0.1%
Phillip Inman
Food inflation in the UK fell in May, lifting hopes that the rapid increase in grocery prices may have reached its peak after keeping the broader consumer prices index painfully high so far this year, my colleague Phillip Inman writes.
After more than a year of sharp increases in the price of food, the British Retail Consortium (BRC) said annual food inflation eased this month from 15.7% to 15.4%, even as the overall rise in shop prices hit a fresh high.
Fresh-food inflation, which has rocketing after spectacular increases in the price of sausages, milk, cheese and eggs, fell from 17.8% to 17.2%
While the decrease in May was modest, the BRC said it indicated that food-price inflation had peaked and was beginning to come down.
The BRC chief executive, Helen Dickinson said the fall in food inflation was offset by an increase in non-food prices despite “consumers benefiting from heavy discounts in footwear as well as books and home entertainment”.
Non-food inflation hit 5.8% in May, up from 5.5% in April and above the three-month average of 5.7%. Overall, retailers increased prices by 9%, up slightly from 8.8% in April, pushing shop price growth to a fresh high.
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You can read the full story here:
Introduction: Asda confirms £10bn merger; shop prices jump 9% in May
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Asda has kicked off what would have otherwise been a quiet morning, with confirmation that it will buy most of EG Group’s UK and Ireland business for £2.3bn.
The deal will see Britain’s third-largest grocer acquire around 350 petrol filling station sites and over 1,000 food-to-go locations from EG Group.
The combined group will be worth an estimated £10bn, with the merged companies making total revenues worth nearly £30bn.
The deal – which is set to be completed by the end of the year – is not expected to trigger any opposition from the competitions watchdog, given that both Asda and EG Group are owned by the Issa brothers – Zuber and Mohsin – and private equity firm TDR Capital.
Meanwhile, retailers, including supermarkets like Asda, raised prices by 9% in May, marking a record high for shop price growth.
That was despite a slight drop in food price inflation, with the British Retail Consortium (BRC) saying annual food inflation eased this month from 15.7% to 15.4%.
Whether those figures will have any sway on government plans for a voluntary cap on essential items such as bread and milk remains to be seen.
And there could be further pain ahead, with many retailers wringing their hands over a new round of post-Brexit border controls, which could reverse the slight decline in food price inflation.
As the BRC chief executive, Helen Dickinson, has warned:
While there is reason to believe that food inflation might be peaking, it is vital that government does not hamper this early progress by piling more costs on to retailers and forcing up the cost of goods even further.
More to come. Stay tuned!
