UK retailers’ mark-ups on milk have hit a 30-year high, indicating that companies have used the recent rise in inflation to pad their profit margins on consumer staples.
For decades, the retail price of a pint of milk was 25-30 pop more than the farm gate price. But by March this year it had risen to 44p, according to data from the Office for National Statistics and the Agriculture and Horticulture Development Board.
Competition in the UK supermarket sector is generally cut-throat, so increased mark-ups suggest consumers are more used to higher inflation, economists said.
Paul Donovan, chief economist at UBS Wealth Management, called it a prime example of “profit-driven inflation” — when consumers hear so many stories about rising costs that they accept even bigger price increases as justified.
However, UK officials do not think that such “gluttony” is widespread or explains the overall pattern of high inflation. Excluding energy, UK corporate profits as a share of GDP last year were the lowest since 2009. Competition authorities say they have no evidence of specific concerns in the grocery sector.
Retailers’ margins are often squeezed when consumers begin to question whether price increases are justified, Donovan said. There are some signs that this may be starting to happen in the UK milk trade: last month, major supermarkets began cutting their milk prices.
Delphine Strauss
Our other charts of the week. . .
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US multinational corporations remit most of their profits to low-tax jurisdictions, according to data from the Peterson Institute for International Economics (PIIE).
Seven of the top 10 most popular locations for offshoring have historically had an effective corporate tax rate of less than 10 percent. These countries accounted for half of US companies’ foreign profits in 2019, up from just 30 percent in 2000.
US policy encourages offshoring because foreign assets face lower taxes than domestic assets. testimony to a US Senate committee from Kimberly Clousing, professor of tax law and policy at the University of California.
The OECD wants to introduce a global minimum rate of corporate tax but the deal – originally agreed between 136 countries in 2021 – has not come into force as it struggles to gain enough support in the US Senate.
Amy Borrett
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Americans are losing faith in key economic leaders, as their country faces a deadline to raise the government’s debt ceiling and fears of a possible economic recession.
Just 36 percent of Americans surveyed by Gallup said they have a lot of confidence in Federal Reserve Chairman Jay Powell to do or recommend the right thing for the U.S. economy — the lowest level of confidence in the Fed chair in more than 20 years.
Gallup found that confidence has also declined for President Joe Biden and Treasury Secretary Janet Yellen over the past year.
Federica Coco
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Last year the Netherlands produced twice as much solar energy as the average EU country and 10 times more than Sweden, according to the BP Statistical Review of World Energy.
While solar power still accounts for a small share of the Netherlands’ electricity production – about 14 percent – it has made rapid progress, doubling in the past two years.
However, the Dutch government recently voted to phase out the country’s net metering system, which has been in place since 2004. The scheme gave households a financial incentive to invest in solar panels by giving them credit for extra power.
Cleve Jones
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Most people in advanced economies think their country would be better off being open to change rather than clinging to traditional ways of life. A survey by the Pew Research CenterR.
As the world faces “rapid technological advances, economic upheaval and evolving values,” countries are embroiled in “heated political debates” about how to respond to such changes, Pew said.
People in the Asia-Pacific region were particularly open to change, with more than seven in 10 people in South Korea, Singapore and Australia holding this view.
The most notable exception was Greece, where most people said their country would be better off holding on to its traditions.
Young people, those on the ideological left and those with higher levels of education tend to accept change more than older people, those on the ideological right and those with lower levels of education.
Ella Hollowwood
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