Millions of the wealthiest still live comfortably

Significantly higher interest rates, rising inflation and a prolonged energy crisis indicate that the global economy is heading for recession, but many do not feel the crisis thanks to the savings accumulated during the pandemic

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"Hermes" Birkin bag, Photo: Reuters
"Hermes" Birkin bag, Photo: Reuters
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

While millions of people are worried about whether they will be able to allocate another thousand euros for electricity this year, others do not regret paying ten thousand euros for "Hermes" handbags, because the increase in prices almost does not touch the richer people.

A range of companies, from spirits group Diageo to Birkin bag maker Hermes, reported this Sunday that they are making money from their most expensive products and expect that trend to continue despite a cost-of-living crisis that shows no signs of abating. , writes the Reuters agency.

Significantly higher interest rates, rising inflation and a long-term energy crisis lead to the conclusion that the global economy is heading for recession, but millions of richer consumers are still living comfortably thanks to the savings accumulated during the covid-19 pandemic and are not shying away from treating themselves after two years of restrictions, he points out. Reuters.

inflation
photo: Graphic News

Hermes reported a record quarterly profit yesterday as sales surged due to strong growth in Europe and the US, and recovery in China. Chairman Axel Dima said he sees no signs of slowing down in any region, even though the company has raised prices by four percent this year.

Automaker Renault said its strategy of focusing on selling fewer but more profitable cars is backfired, and raised its full-year profit forecast. The most expensive Renault cars can cost more than 100.000 euros.

"The surprising resilience of European consumers is also visible in the strong results of the owners of luxury brands, Louis Vuitton, especially in their fashion and leather goods, Fendi and Christian Dior," said Rebecca Chesworth from the investment firm State Street SPDR ETF.

"Consumers enjoying the reopening of travel boost wine and spirits sales."

Many consumers around the world are bracing for a rapidly worsening economy this winter.

Reuters reports that in Britain, for example, the cap on household electricity bills is expected to jump from £1.277 (€1.520) earlier this year to more than £3.500 by October, while the price of food has jumped 10 percent from to the previous year. This will put hundreds of thousands of people in financial jeopardy and unable to afford anything but basic necessities.

Food and consumer goods companies such as Nestle and Unilever have been locked in tough negotiations with retailers since the end of last year, with supermarkets reluctant to raise prices on essentials because they risk alienating consumers struggling to survive. .

prices
photo: Reuters

"Not all companies can raise prices, only those that have pricing power and are doing relatively well - that have a dominant position in their sectors," Wei Li, chief global investment strategist at BlackRock Investment Institute, told Reuters. "Focusing on quality players in the sector is important."

Although inflation continues to erode the savings of wealthier consumers, it seems that they are now focused on enjoying the freedoms that have returned with the easing of covid restrictions.

IAG, the owner of British Airways, posted a profit yesterday for the first time since the pandemic, as more people flew across Europe between April and June.

"Reports suggesting that advance bookings are showing no sign of abating support the argument that strong travel demand continues to greatly outweigh the impact of the cost of living crisis," said Mat Brickman of financial services firm Hargreaves Lansdown.

IAG's sales, on flights mostly booked from Britain, Spain and the US, more than quadrupled to 9,35 billion euros in the first half of this year compared to last year.

"We had rapid growth in the recovery due to increased travel," Dijadzi CEO Ivan Menezes said Thursday as the maker of Don Hulio vodka and Johnnie Walker whiskey beat sales expectations for the full year.

Menezes, however, warned: "In order to return to the old way, it will probably take another two years, maybe a little longer."

European banks also had some positive earnings surprises this week, although investors are watching for signs that a weakening economy, rising inflation and the war in Ukraine could threaten their outlook.

'Stop the inflation monster': Hamburg port workers strike
"Stop the Inflation Monster": Hamburg port workers strike photo: Reuters

Eurozone inflation hit another record high in July and may be months away, keeping pressure on the European Central Bank to decide on another big interest rate hike in September, according to a Reuters analysis.

The European Statistics Agency announced yesterday that the eurozone economy grew much faster than expected in the second quarter, but economists said it could be the last bit of positive news for the economy before further inflation and supply chain problems trigger a mild recession in the the second half of the year.

The stronger growth came despite stagnation in Germany, the bloc's biggest economy, where high inflation and fears of a gas crisis sparked by the war in Ukraine have dampened consumer and business sentiment, economists said.

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