Centrica profits triple to over £3bn
The owner of British Gas has reported a surge in annual profits this morning, becoming the latest energy giant to benefit from the jump in energy prices since the invasion of Ukraine.
Centrica made total operating profits of £3.3bn, a record, and more than three times as much as the £948m adjusted profits it made in 2021.
The jump in earnings comes just weeks after British Gas suspended the forced installation of prepayment meters due to concerns over its treatment of vulnerable customers.
Centrica says it benefitted from “strong gas production and electricity generation against a backdrop of higher commodity prices”.
The company operates oil and gas production in the North Sea, plus holds interests in Britain’s nuclear power plants and operates an energy trading business. These divisions, rather thatn British Gas, provided the bulk of Centrica’s profits.
Such high profits, when the energy crisis is fuelling the cost of living crisis, will intensify calls for tougher windfall taxes on the industry, with BP and Shell have also reported record profits for 2022.
Chris O’Shea, Centrica chief executive, says:
“Our performance in 2022 demonstrates the benefits of our balanced portfolio and our strong balance sheet.
The energy crisis and cost of living pressures have created a challenging environment for customers and communities, but we have been able to provide much needed stability and support.
We invested £75m in supporting our energy customers in 2022, which was greater than the £8 post-tax profit per customer earned by British Gas Energy. Whilst customers may see some relief given recent easing of prices, it remains clear that some will continue to need help and we will do what we can to support them in the year ahead.”
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Centrica’s record profits have made the front of the Evening Standard, who report that the surge in earnings has ‘sparked fury’.
They quote Liberal Democrat Leader Ed Davey saying:
“This is a betrayal for British Gas customers across the country who are struggling to keep their heating on. Once again the government’s failure to implement a proper windfall tax is allowing oil and gas businesses to make billions off the back of hardworking families.
Worryingly, a gauge of factory activity in the Philadelphia region has moved further into negative territory.
The Philadelphia Fedreal Reserve’s index of manufacturing activity has fallen to -24.3 this month, down from -8.9 in January,.
This is the sixth consecutive negative reading, and the lowest reading since May 2020.
The Philly Fed Manufacturing Index has moved down to -24, its lowest level since May 2020.
In the past (data since 1968), every time this indicator was at or below current levels the US economy was either in or approaching a recession. pic.twitter.com/xXEhFwqDFh
— Charlie Bilello (@charliebilello) February 16, 2023
Turkey’s central bank could cut interest rates next week, to support the economy after the devastating earthquake that struck last week.
JP Morgan has prediced that the Central Bank of the Republic of Turkey will lower its headline rate by a full percentage point, to 8%.
The Wall Street bank has also estimated that direct costs from the destruction of physical structures in Turkey from the devastating earthquake on Feb. 6 could amount to 2.5% of growth domestic product or $25 billion.
European Union countries are said to be “on good track” to adopt new sanctions against Moscow in time for the first anniversary of Russia’s invasion of Ukraine on 24th February.
Diplomats in Brussels have told Reuters that talks are underway between EU members over proposed new sanctions estimated to be worth some 11 billion euros ($11.8 bln) in trade flows.
One EU diplomat familiar with the discussions said:
“The package should be concluded well in time for February 24th, it’s on good track, there are no major sticking points.”
Switzerland, meanwhile, has ruled out confiscating private Russian assets to pay for the reconstruction of Ukraine, saying it would undermine the Swiss constitution.
The Swiss Justice Ministry said on Wednesday that:
“The confiscation of frozen private assets is inconsistent with the Federal Constitution and the prevailing legal order and violates Switzerland’s international commitments.”
Switzerland has frozen financial assets worth around 7.5 billion Swiss francs (£6.7bn) under sanctions against Russians.
Bond prices are also weakening, pushing up the yield (or interest rate) on US Treasury bills.
So much for the markets focusing more on the labor market than inflation. Inflation data, as witnessed by this week’s CPI and PPI reports, are still very much driving yields higher. pic.twitter.com/Aj65RgvgOm
— Kathy Jones (@KathyJones) February 16, 2023
UK government bond yields are also higher, another sign that the markets are disappointed that inflation pressures are higher than hoped.
Stock markets are taking a knock from the strong US PPI inflation report just released.
The FTSE 100 has sunk back from its earlier record highs, and is now back below the 8,000-point mark which it cleared for the first time yesterday.
US producer prices inflation higher than expected
US goods and services producers hiked their prices by more than expected last month, dampening hopes that inflation is easing.
The Producer Price Index for final demand rose by 0.7% in January, the US Bureau of Labor Statistics has reported.
On an anual basis, producer prices jumped by 6% in the year to January. Economists had expected it would fall to 5.4%, from 6.5% in the year to December.
Goods prices rose by 1.2% in Janary alone, which is the largest monthly increase since last June.
This was driven by higher energy costs, with prices for gasoline increasing by 6,2% in the month.
This is a sign that US inflation may be stickier than hoped, which may push the US Federal Reserve to raise interest rates still higher, and hold them their for longer than expected. Especially with the US jobs market still strong last week.
The dollar is rallying in response, pushing the pound down below $1.20.
not as much disinflation in US then thought perhaps and labour market still strong #USD
— Michael Hewson ???????? (@mhewson_CMC) February 16, 2023
Just in: the number of Americans filing new unemployment claims has dropped, suggesting the jobs market is still strong.
There were 194,00o fresh ‘initial claims’ for jobless support last week, down from 195,000 the previous week, and lower than expected – suggesting firms are holding onto workers.
These are low figures in historic terms, which may indicate that the increase in US interest rates has not yet cooled the labour market.
???????? *US JOBLESS CLAIMS 194,000 IN FEB. 11 WEEK; EST. 200K – BBG
*US CONTINUING CLAIMS ROSE TO 1,696K LAST WEEK; EST. 1,695K— Christophe Barraud???????? (@C_Barraud) February 16, 2023
Richard Partington
Millions of consumers with O2 and Virgin Mobile contracts are to be hit with an inflation-busting 17.3% increase in their bills for making calls, sending texts and using data, adding to pressure on households amid the cost of living crisis.
The price hike is the latest in a series of big increases imposed on consumers for vital utilities, and will add to pressure on the government to step in with tougher protections.
The telecoms operators – merged under the same umbrella company since 2021 – confirmed the cost of their airtime contracts, or what customers pay for calls, texts and data, would go up by the annual rate of retail prices index (RPI) inflation announced this week, plus 3.9 percentage points.
Official figures on Wednesday showed RPI stood at 13.4% in January, landing consumers with a 17.3% increase in their airtime bills in total – almost triple the rate of growth for average workers’ pay. Consumers will see the increase from April.
More here:
New: O2 and Virgin Mobile customers to pay inflation-busting 17.3% more for calls, texts and data
It comes as Rishi Sunak has pledged to halve inflation, and is insisting public sector workers take real-terms cuts.
Govt under pressure to act on telcos
https://t.co/GWHVz9TqLR— Richard Partington (@RJPartington) February 16, 2023
France’s stock market is also celebrating a record high today.
France’s CAC 40 index broke over its previous lifetime high this session, hitting 7,387.29 points.
France’s CAC 40 index briefly hits record high as European stocks continue to sizzle
The CAC 40 is up by around 1% so far today pic.twitter.com/Snoi9Lr4If— AnirudhSethi-Chart Surgeon (@CHARTISKING) February 16, 2023
Hopes that Europe’s economy will avoid a recession have boosted stocks in Paris, as have Beijing’s push to reopen China’s economy
Reuters explains:
French stocks have risen nearly 14% so far this year, following a battering in 2022, boosted by hopes that the euro zone will narrowly avoid a recession and surging shares of luxury goods groups that rely heavily on Chinese shoppers.
“France has particularly leveraged the faster-than-expected Chinese reopening,” said Andrea Cicione, head of research at TS Lombard.
“The fact that there is significant chunk of consumer discretionary in there, particularly luxury goods as opposed to Germany for example, where consumer discretionary is mostly autos, is definitely a positive for France.”
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