Market Loop - Consumer prices reach 30 year high

ECONOMY
Consumer prices reach 30 year high

What’s going on?
Last month UK inflation rose to 5.4%, the highest rate since 1992 thanks to soaring grocery and energy bills as well as ongoing supply chain issues.

Why is this important?

The consumer price index, which measures price changes across a basket of goods, rose to an annual rate of 5.4% in December, from 5.1% in November. CPI hasn’t reached this level since March 1992 when it was 7.1%.

A little bit of inflation is typically a good thing so long as payslips keep up. This unfortunately isn’t the case at the moment with wages only rising by 4%, meaning an increased strain on household incomes.

Pricing pressure came from the cost of food, drink, energy bills and clothing driven by kinks in global supply chains and rising fuel demand post lockdown. 

Unfortunately there are no signs of the trend reversing. The next energy price cap, in effect from April, is expected to almost double bills for millions of households. The Bank of England, which uses interest rates to control inflation, says that prices will soon climb to 6% and may not cool until 2023.

The Bank is well off its 2% target rate of inflation. Just before Christmas it took action to curb prices by raising interest rates from 0.1% to 0.25% and economists think another hike could come next month.

The UK is not alone, global inflation has reached the highest level since 2008 with the US and Eurozone are all reporting decades-high prices.
 

FITNESS
Peloton considers drastic turnaround plan

Fitness giant Peloton is bringing in consultants at McKinsey & Co to assess its operations and potentially slash jobs after a rough 2021, according to close sources.

The clothing division is especially under scrutiny due to weak sales. Employees at the company’s 123 physical stores in the US, UK, Canada and Germany may have to take customer service calls, and 10% of locations could close.

Peloton was one of the major lockdown winners in 2020 when millions bought its treadmills and stationary bikes to workout with whilst stuck at home.

The easing of pandemic-related restrictions last year has led to a steady decline in revenues and in November it reported a loss of $374m in the past quarter. To make matters worse it then announced that  it will increase delivery and assembly fees because of historic levels of inflation and higher supply chain costs.

It’s also been dogged by product safety issues and in May it recalled 125,000 treadmills after a six-year-old died after being pulled under the back of the equipment.

The tale of Peloton’s demise can be seen in the share price which shot up 440% to $163 in 2020 but is now closer to $30, where it was pre-pandemic.