Market Round-Up

While it may be hard to believe, it’s been over three years since the world saw its first coronavirus lockdown come into force in Wuhan, China. Ever since, the country’s economic growth figures have been under the microscope as investors watched for signs of recovery in the markets. Fast forward some time and economic data for the first quarter of 2023 saw optimism build in China, as GDP performance notably beat expectations by 0.5%, suggesting the post-lockdown recovery could be in full swing. The GDP data shows that the some of the biggest sector contributors were consumer retail and travel-related consumption and services as consumers continued to demonstrate pent-up demand, especially during the Chinese New Year. The rise in consumer spending is likely a positive sign for the global economy as increased spending and post-lockdown demand benefits businesses within the global retail, travel and leisure sectors. Interestingly, one of the listed companies which has benefitted from Chinese consumer spending over recent months is the French company LVMH. The company owns the likes of Louis Vuitton, Dior and Fendi, and reported Asia-wide sales increase of 14% in its recent trading update with a 30% rebound in sales in its travel retail and department stores division.

Consumer Price Index (CPI) data for March, which shows the overall change in consumer goods prices over time, came in above market consensus by 0.3% while inflation softened slightly to 10.1% year-on-year, making the UK the only country in Western Europe with double digit inflation. In its recent report, the Office for National Statistics announced some of the main contributors to inflation, stemming from housing and household services as well as food and non-alcoholic beverages. Delving deeper into the data shows that food prices have seen the greatest increases in 45 years. Since March 2022, the price of 400g of cheddar cheese has on average risen by 49% while the price of 800g sliced white bread has increased by 21%. Many of the surging food prices we are seeing are likely caused by a combination of the war in Ukraine, Brexit’s impact on labour shortages and bad weather abroad. While food prices continue to remain high and CPI figures look to be somewhat unsettling, the Bank of England remains confident that inflation will begin to fall sharply from the current quarter. This is because last year's big energy price rises following Russia's invasion of Ukraine have started fading out of annual comparisons.

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