US economy shrank unexpectedly as inflation, Omicron and Ukraine war hit growth – business live

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A flurry of UK companies are warning today that inflation pressures are rising, intensifying the cost of living squeeze on consumers.

Consumer goods giant Unilever, whose brands include makes Marmite, Dove soap and Ben & Jerry’s ice cream, has reported that input costs have “further accelerated” through the first three months of the year.

It plans to pass these costs onto consumers – having already raised prices by over 8% year-on-year in the last quarter.

With the Ukraine war driving up raw material inflation, Unilever now expects its costs in the second half of this year to rise by €2.7bn. That’s up from a forecast of €1.5bn three months ago, and on top of input cost inflation of around €2.1bn in the first half.

Unilever says:

This period of unprecedented inflation requires us to take further pricing action with some impact on volume as a result.

CEO Alan Jope explains the company is navigating ‘unprecedented cost inflation’, adding:

Underlying sales growth of 7.3% was driven by strong pricing, with a limited impact on volume in the quarter.

This performance was delivered against the backdrop of significant rises in input costs that have further accelerated through the first three months of the year, and the human tragedy of the war in Ukraine.

While prices soared 8.3%, sales volumes were down 1% — suggesting consumers may have sought out cheaper options as inflation hit household budgets.

Unilever now expects full-year underlying sales growth to be towards the top end of its 4.5-6.5% guidance range, but the full-year underlying operating profit margin could be the bottom end of its 16-17% range.

Supermarket chain Sainsbury’s is also seeing the impact of rising costs, with the Ukraine war having driven up energy costs, and a wide-range of agricultural products including cooking oil and wheat.

It told shareholders this morning:

The year ahead will be impacted by significant external pressures and uncertainties.

Sainsbury’s warned shareholders that profits this year will be hit by soaring inflation and a fall in customers’ disposable incomes.

It now expects underlying profit before tax to fall to between £630m and £690m, from the £730m underlying profit in the last 12 months.

Sainsbury’s CEO Simon Roberts says it’s been a year of unprecedented change:

“The dreadful situation in Ukraine continues to have a profound impact. We’re doing everything we can to help with the humanitarian effort, and are working to manage the supply chain impacts.

“We have a clear long term focus on keeping prices low and we remain committed to helping everyone eat better, whatever the external environment may bring.”

Cost pressures in the hospitality sector are rising too. Whitbread, which runs the Premier Inns hotel chain, has warned that cost inflation this financial year is now expected to hit around 8%-9%, which is 1% higher than previously guided.

Whitbread says it will use its ‘pricing power’ to offset these higher costs, along with cost efficiencies, and growing its estate.

The firm has also returned to profit last year, with a pre-tax profit of £58.2m – compared with a loss of around £1bn – due to the easing of Covid-19 restrictions.