The Times - UK (2021-11-11)

the times | Thursday November 11 2021 55

Business

Factory gate inflation in China has hit a
26-year high as makers of components
and finished goods pass on rises in the
costs of energy and raw materials.
Producer prices increased by 13.5 per
cent in the year to October, accelerat-
ing still further from the 10.7 per cent
jump recorded for September. The new
figure showed producer inflation pick-
ing up to a level not seen since July 1995
and exceeding analysts’ consensus
forecast of 12.4 per cent.
Consumer prices inflation in the
world’s second biggest economy also
picked up, with the annual rate rising
from 0.7 per cent in September to 1.5 per
cent in October, partly because of
higher vegetable prices.
The latest producer prices surge will
put pressure on wholesalers and then
retailers to push up their own prices,

Demand for servicing electric cars and
sales of electric bicycles and scooters,
driven by a growing desire among
Britons to go green and resist climate
change, have helped to lift profits at
Halfords.
The retail chain revealed half-year
profits yesterday that were up by 16 per
cent to £64.3 million and upgraded its
forecast for annual profit to between
£80 million and £90 million, from its
previous guidance of above £75 million,
Shares in Halfords promptly jumped
by 55¼p, or nearly a fifth, to 333¾p. The

into the second half of the year. We see

an easing of supply chain disruption —

the vaccine rollout in Asia has taken a

step forward, so there’s less disruption

to manufacturing there.” He added that

the company had secured its freight

costs over the winter and was not

expecting significant further inflation.

Despite growing uncertainty about

spending, inflation, wages and the cost

of living, the Halfords chief was confi-

dent that demand would persist. “We’re

in a really good position. We have now

a much bigger services business, it’s not

discretionary,” he said.

Halfords has 404 stores with 374

Hamzah Khalique-Loonat

Soaring inflation at China’s factory

gates raises fears for rest of world

Patrick Hosking Financial Editor not only in China but also wherever
Chinese goods are sold.
The figures raised expectations that
China could be heading for a phase of
stagflation, where rapidly rising prices
coincide with an economic slowdown.
“We are concerned about the pass-
through from producer prices to con-
sumer prices,” Zhiwei Zhang, chief
economist at Pinpoint Asset Manage-
ment, said. Consumer prices were likely
to speed up in the coming months, he
added, as companies facing depleted
inventories were forced to pass higher
costs on to customers.
“The risk of stagflation continues to
rise,” he said.
The latest pick-up in prices leaves the
People’s Bank of China in a quandary,
with any stimulus move to offset the
slowing economy in danger of worsen-
ing inflation. “Rising CPI and elevated
producer prices inflation reduces the

probability of a ... rate cut,” Ting Lu,

chief China economist at Nomura, said.

The latest figures come amid grow-

ing concerns that the inflationary burst

worldwide may not be as transitory as

central bankers had hoped and could

feed through into wages and a more

lasting period of above-target inflation.

In the United States, consumer prices

rose by 6.2 per cent in the 12 months to

October, the highest level for 31 years.

In Germany, the federal statistical

office confirmed yesterday that con-

sumer prices had risen by 0.5 per cent

between September and October and

were up 4.5 per cent on a year earlier.

UK consumer prices inflation was

3.1 per cent in the year to September,

with the Bank of England forecasting a

peak of 5 per cent in April 2022.

Upstream industries drove the latest

factory gate price increases in China,

with coalmining and washing prices

surging 104 per cent from a year earlier

and prices in the oil and gas extraction

industry rising by 60 per cent.

Restrictions on carbon emissions

and soaring prices for coal — a key fuel

for electricity generation — have led to

power rationing and production cuts in

recent months, although coal prices

have fallen since then after government

intervention.

“Factory gate inflation is probably

close to a peak,” Julian Evans-Prit-

chard, senior China economist at the

Capital Economics consultancy, said in

a note, citing falls in coal prices.

Halfords increases profits on Britain’s road to net zero

group’s share price has risen by 22.5 per

cent since January.

Halfords, Britain’s biggest cycle

retailer, also sells car parts, services

vehicles and repairs bikes. It noted per-

sistent supply chain issues, including

production constraints, raw materials

inflation and freight disruption. It said

that “moving anything around the

globe over the past six months has been

particularly challenging” and that at

times freight costs had reached ten

times the normal rate.

Graham Stapleton, 53, chief execu-

tive, said he was “very pleased with [the]

first-half performance and momentum

garages and serves more than 20 mil-

lion customers a year.

According to the Department for

Transport, rail and bus usage are about

30 per cent and 20 per cent down,

respectively on pre-pandemic levels.

Stapleton said that “there’s definitely

reticence for some public transport”,

but noted that car travel had returned

to pre-pandemic levels, while demand

for bicycles had continued to rise.

“There are a lot more people wanting to

buy bikes,” he said, “partly as personal

transportation, but partly because of

the climate.”

Tempus, page 58

Consultant

charged with

insider trading

Times Business Reporter

A partner at McKinsey, the consulting

firm, has been criminally charged with

insider trading ahead of Goldman

Sachs’s purchase of GreenSky, a finan-

cial technology lender, for $2.24 billion.

Puneet Dikshit, 40, of New York,

faces two charges of securities fraud

after allegedly generating about

$450,000 of profit from 2,500 Green-

Sky call options that he bought in the

two days before the merger was an-

nounced on September 15.

Dikshit led McKinsey’s unsecured

lending practice in North America and

had been a lead partner advising Gold-

man. The US Securities and Exchange

Commission filed related civil charges.

Lawyers for Dikshit did not immedi-

ately respond to requests for comment.

Goldman Sachs was not charged or

accused of wrongdoing. McKinsey said

that it had dismissed Dikshit for “a

gross violation of our policies and code

of conduct. We have zero tolerance for

the appalling behaviour described in

the complaint and we will continue co-

operating with the authorities.”

Prosecutors said Dikshit had bought

“call” options, a bet the stock price would

rise, without receiving pre-clearance

from McKinsey and had sold them

shortly after the merger was announced.

Evergrande

misses bond

deadlines

Times Business Reporter

The world’s most indebted property

developer appeared to be on the brink

of default last night after failing to make

interest payments to some of its inter-

national investors.

Bondholders of the cash-strapped

China Evergrande Group had not

received coupon payments by the end

of 30-day grace periods at the close of

business in Asia yesterday.

Evergrande has been struggling from

deadline to deadline in recent weeks as

it grapples with more than $300 billion

in liabilities, $19 billion of which are

international market bonds.

It has not defaulted on any of its off-

shore debt obligations, but a 30-day

grace period on coupon payments of

more than $148 million on its April

2022, 2023 and 2024 bonds ended yes-

terday. A failure to pay would result in

a formal default by the company and

would trigger cross-default provisions

for other Evergrande dollar bonds,

exacerbating a debt crisis looming over

the world’s second largest economy.

Evergrande declined to comment.

For its two separate offshore coupon

payment obligations that were due in

late September, the developer’s bond-

holders did not receive the payments

until one working day after the 30-day

grace periods ended.

Evergrande’s problems add to con-

cerns about a liquidity squeeze in the

property sector. It also has coupon pay-

ments totalling more than $255 million

on its June 2023 and 2025 bonds due on

December 28.

China’s property woes have rattled

global markets. There was a lull in mid-

October when Beijing said the crisis

would not spiral out of control, but

concerns have resurfaced, with the US

Federal Reserve warning that China’s

property sector could pose global risks.

Inflation is heating up in Chinese factories amid increases in the costs of energy and raw materials. Producer price rises have reached a level not seen since 1995

AFP/GETTY IMAGES

13.5%

Increase in Chinese producer prices

in the year to October