Macron is feeling the heat

ZuT alors! even the usually charmed President Macron hasn’t been able to escape the ravages of inflation that have afflicted europe. until now, France has avoided some of the huge price leaps experienced elsewhere, mainly because of the country’s sensible nuclear energy strategy which has protected it from the worst of recent sky-high fuel prices.

So Macron won’t be pleased to see the latest inflation figures for February setting a French record at 7.2pc, up from 7pc in the previous month.

The jump reflects mainly higher food and services inflation now biting.

With both headline and core inflation set to continue rising over the coming months, French prices are unlikely to peak now until the summer. This suggests average inflation for the year of 5.5pc, and 6.3pc for what’s known as the harmonised index, much higher than had been forecast.

Spain also suffered from unexpected price rises last month. Both the headline and harmonised inflation rates were up to 6.1pc from 5.9pc in January, surprising economists who had been looking for a fall to 5.5pc.

With prices running so hot, it looks certain the european Central Bank will put up interest rates by another half a percentage when it meets next on March 16, and possibly even make a similar hike at the following meeting. After a slow start, the eCB has now lifted rates by 3 percentage points since last July.

What’s more, these latest rises have dashed any lingering hopes the eCB would pause the current tightening. In fact, forecasts are now for 4pc by the end of the year.

If there were any doubts about the direction, they were knocked on the head by the bank’s hard-line head economist, Philip Lane, who in an interview yesterday said that rate hikes will not end until it is sure that price growth is moving sharply back down to 2pc.

however, Lane did suggest there was some light at the end of the tunnel, saying there are signs that tighter monetary policy is working its way through the economy, bringing down the price of services and other core goods – apart from fuel and food prices which are more volatile. even so, Lane predicts they are on the way down.

We’ve seen just how volatile here in the uK. The latest Kantar figures showed grocery prices up a whopping record of 17.1pc over the last four weeks. eggs, milk and butter prices are still rising. Kantar estimates that food shopping bills will be £811 more this year unless consumers cut costs.

But where can they cut costs? With taxes going up in the forthcoming Budget, together with another rate hike likely from the Bank of england this month, many households will be asking what is left to cut.

Taxing issue

IT’S A question that should be keeping Jeremy hunt awake at night. The Chancellor has a tricky balancing act to pull off when he delivers his Budget the week after next.

On the one hand, the public finances are nowhere as bad as forecast, with up to £56bn of so-called headroom to play with.

On the other, hunt appears set on not giving away too much in his obsession with keeping to forecasts which are badly past their sell-by date. Yet the danger is that by increasing taxes now – particularly on business – he strangles what little confidence there is returning to the economy. If he needs convincing, he should chat to the CBI’s economist Alpesh Paleja, who warns the double-whammy of higher corporation tax and end of the super-deduction allowance will devastate business investment.

The latest CBI figures show that private sector activity has now fallen for the last seven consecutive rolling quarters.

More pertinently, manufacturing output fell over the last quarter at the fastest rate since September 2020 although that is likely to return to growth.

Looking forward, activity is expected to fall again over the next quarter at a similar pace to the last three months.

Why would you, as Chancellor, be so tonedeaf? Yet there is the wiggle-room for hunt to make some tweaks. either scrap the corporation tax increase or reduce it, or extend the super- deduction and drop R&D tax credit cuts. Something has to give. Nytol is not the answer.

Not delivering

AJ BeLL’S Russ Mould describes Ocado as offering ‘so much promise and so little joy’. The question is whether the promise will ever bring joy? Probably not as it’s difficult to see how the online distributor will ever make money.

Sadly, it may prove to be one of those great ideas whose time will never come.