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France is experiencing an inflationary storm but price pressures are still mounting

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France has so far avoided the bread price hikes that have swept Europe—an indication not only of the role of French bread in the country’s culture, but also of Paris’ relative success in curbing inflation.

“Our prices have risen at the slowest rate in Europe,” said Dominique Antract, who heads the main French federation of 33,000 confectioners and bakers.

From his shop in the clunky 16th arrondissement of Paris, Entaract hailed baguettes as “almost . But the country’s bakers and bread eaters have also been helped by government measures that have shielded the economy from large fluctuations in energy costs.

While Europeans saw, on average, the price of a loaf rise by about a fifth, data from Eurostat, the European Commission’s statistics office, showed that annual bread prices in France rose by 8.2 percent.

Economists stress that energy subsidies to businesses and households underlie France’s relative success in keeping a check on the exponential price hikes that have hit shoppers across the region.

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A baker removes a baguette from an oven in Paris
A baker removes a baguette from an oven in Paris. French bakeries have so far largely resisted the bread price increases sweeping Europe © Yoan Valat / EPA / Shutterstock

Other European countries acted to rein in prices only after Russia’s invasion of Ukraine caused energy costs to rise, as well as wheat prices.

But Ludovic Soubran, chief economist at insurance company Allianz, said France’s energy subsidy – which President Emmanuel Macron led before his re-election last April – meant Paris “got in too early”. “It pretty much worked out — it was a good call.”

Unlike other major European economies – including Germany, Spain and the Netherlands – consumer price inflation in France is unlikely to enter double-digit territory, as it peaked at 7.1 per cent in November – well below the regional average of 11.1 percent.

“The peculiarity of France is that it intervened much earlier than anywhere else,” said Anne-Sophie Seif, chief economist at consultancy BDO France.

The low level of inflation has led to a less severe living crisis than that faced by other places.

France, unlike most EU countries, is now expected to avoid a recession in 2023, according to French statistics agency Insee – which nonetheless expects French output to contract in the fourth quarter and expects growth to slow sharply this year.

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Analysts said the measures appeared to have been inspired by political calculations.

The line graph of the annual growth rate of the CPI (%) shows that France avoids the worst price hikes faced by its European neighbors

In the run-up to last year’s elections, Macron was anxious to avoid a repeat of the “Yellow jacketsThe protests that followed His attempt to impose a fuel tax in 2018.

He made the decision to freeze consumer gas bills in November 2021, and to provide energy subsidies worth 100 euros to less than 6 million households in December of that year. Since early 2022, increases in energy bills have been capped at 4 percent for consumers and small businesses. The measures, which included pump cuts and electricity tax cuts, cost the government just over 34 billion euros last year.

“There was no reason at the time to bring the Energy Price Shield to consumers other than to stop people from taking to the streets right before the election,” Soprane said.

Economists say other factors have helped rein in inflation in 2022. French wage increases have been, on average, smaller than anywhere else in the EU, said Eric Dorr, director of economic studies at the IÉSEG School of Management. He added that France also has a highly competitive supermarket sector, with major retailers using their power to extract low prices from suppliers, although some are now also warning of higher prices.

Paris plans to spend nearly 46 billion euros on more household energy protection in 2023, including limiting increases in gas and energy bills to 15 percent. The government has also allocated €10 billion in aid to companies to reduce their energy bills.

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But some companies remain concerned and warn that the help may not be enough.

Cofigeo, a food group known for its canned William Saurin brand cassoulet Stud’s has already said it will pause production at four of its eight French factories in January because a renewal of the electricity contract means its bill will jump tenfold. Some energy-intensive companies such as steel and glass makers have also cut production.

Generosity with subsidies, economists say, could also store other problems given the country’s debt level. After providing 240 billion euros in state aid to help French companies in 2020 and 2021 during the coronavirus pandemic, public debt is well above the eurozone average of 94.2 percent, more than 110 percent of output.

Standard & Poor’s, which recently revised France’s outlook to negative from stable, said the country may have less room to maneuver if further economic shocks materialize.

Higher interest rates [in 2023] “It will challenge the strategy taken by the French state,” said Sylvain Breuer, chief economist for Europe at Standard & Poor’s Europe.

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While inflation is falling elsewhere in the eurozone, figures released on Thursday are expected to show an uptick in price growth in France. French inflation is expected to peak in the first quarter of 2023, according to the French central bank.

Many companies, which do not benefit from energy price caps but are protected by fixed terms for their energy deals, are facing contract renewals.

At the Interact bakery, energy costs are set to quadruple in 2023, though government subsidies should cover about half of the increase. If bakers raised the price of bread by 10 or 20 cents a loaf, he said, most would be able to get by. “Some are freaking out, saying they’re going to have to shut down . . . but I’m telling the bread makers they need to start passing some raises.” “It will not be an exceptional year.”


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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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