The logo of shower toilet and plumbing supplies maker Geberit is seen at its headquarters in Rapperswil-Jona, Switzerland October 30, 2018. REUTERS/Arnd Wiegmann

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• Higher raw materials costs trigger profit dip
• Company will lift prices by an average 7.5% in July
• Group sees good demand across building sector

ZURICH, May 4 (Reuters) – Geberit (GEBN.S) will raise prices again this year as it tackles “an unprecedented surge” in raw materials costs hitting the construction industry, the Swiss plumbing products maker said on Wednesday.

The company – seen as a proxy for the broader construction sector, as its products, such as bathroom ceramics and pipes, are so widely used – had already imposed one extraordinary price hike in January and an annual price rise in April.

“Due to the expected acceleration in raw materials price inflation we will implement another extraordinary price increase of an average of 7.5% as of July this year,” Chief Executive Christian Buhl told reporters.

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That would come on top of the 1.5% price rise in January and the April increase of 2.5%.

Geberit said it expects the raw materials it uses to become 10% more expensive during the second quarter compared with the first three months of the year, making them 28% more expensive than a year earlier.

The company is just the latest to warn about rising costs for inputs like energy, metals and plastics. Reuters reported earlier this week that Italy plans to set aside around 7 billion euros ($7.35 billion) to help construction firms cope with spiraling costs.

Higher input costs took the shine off a near 8% rise in sales during Geberit’s first quarter, with the company’s operating profit falling 5% in the same period.

Buhl said the company was able to find the raw materials it needed to make its products, but faced difficulties.

“Every week we have a new challenge,” he said. “It’s a long list of raw materials… some smaller things like pallets, but it’s really across the board.”

Still, demanded remained strong in both the new build and renovation sectors, he said, despite higher prices and interest rates.

The company also plans a new share buyback program of up to 650 million francs, to start in the third quarter at the latest.

($1 = 0.9796 Swiss francs)

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Reporting by John Revill; Editing by Michael Shields and Jan Harvey

Our Standards: The Thomson Reuters Trust Principles.

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The fear that a “very tight” US labor market will demand fuel wage demands is producing a consensus in Fed policy-making circles on the need for a 0.5 percentage point rise in its base interest rate at its next meeting in May, with possible further hikes of that magnitude at subsequent meetings.

Acting US Federal Reserve Chair Jerome Powell announces interest rates increase on March 16, 2022 (Source: CSPAN)

The president of the San Francisco Fed, Mary Daly, is one of those adding her voice to what is a growing chorus for a bigger rate rise than the 0.25 percent (25 basis points) the Fed instigated at its meeting last month.

In an interview with the Financial Times (FT), Daly said the case for a half percentage point rise in May had grown. She was commenting in the wake of the latest data from the Labor Department showing the unemployment rate had dropped to 3.6 percent, the lowest since before the pandemic.

The remarks by Daly are significant because she is generally regarded as one of the more “dovish” members of the Fed’s governing body.

“The case for 50 [basis points], barring any negative surprise between now and the next meeting has grown,” she told the FT. “I’m more confident that taking these early adjustments would be appropriate.”

As with all her counterparts in the Fed, starting with the chair Jerome Powell, Daly is focused on the issue of the labor market. The fear in ruling circles is that inflation is leading to upsurge in demands by workers for pay rises to compensate for the losses over the past two years and more.

Daly said the latest data showed the labor market is “very strong” and “tight to an unsustainable level.”

Her views echo previous remarks by Powell who has made clear he is prepared, if necessary, to take the road of former Fed chair Paul Volcker in the 1980s who lifted interest rates to record highs, inducing a deep recession, to crush wage demands.

Daly did not go that far but, according to the FT, they acknowledged the economy may have to slow to bring inflation back into line with the Fed’s 2 percent target.

The Fed’s interest rate moves have nothing to do with bringing down price hikes. They will not reduce the price of oil, lower the price of food and other necessities, or free up global supply chains, impacted by the refusal of governments internationally to take action to eliminate the pandemic.

Higher interest rates are aimed entirely at the working class, with the objective, as Powell has put it, of bringing back the demand for labor in line with supply—that is, by slowing the economy and lifting the jobless rate.

Other members of the Federal Open Market Committee, the Fed’s interest rate setting body, want to go further than a one-off 50 basis point rise. Their ground was staked out by James Bullard, president of the St Louis Fed, who dissented from the 25 basis point increase in March and called for a rise of 50.

In an article last week entitled “Expectations grow that Fed will deploy jumbo-sized rate rises,” the FT noted predictions by Morgan Stanley that the Fed will deliver back-to-back 50 basis point rises starting in May, followed by 25 basis point adjustments at each of the four subsequent meetings for the year. These rises will accompany moves by the Fed to start winding back its holdings of nearly $9 trillion of financial assets which will add to upward pressure on market interest rates.

Citigroup has forecast four 50 basis point increases by the Fed at each of its next four meetings, so that the Fed rate reaches 3 percent by the end of the year.

Summing up the expectations last week, Simona Mocuta, chief economist at State Street Global Advisors, told the FT: “The signaling clearly has been very much on the hawkish side for some time, but that has gotten to a fever pitch in recent days. ” State Street Global Advisors is the investment management division of the State Street Corporation, the world’s fourth largest asset manager.

The expectation of higher Fed rates has led to the phenomenon of yield curve inversion where the rate on shorter-term Treasury bonds rises to a level higher than that on the 10-year bond. Under normal circumstances the rate on the longer-term debt is higher than the short-term rate because lending longer term involves greater risk and uncertainty and therefore demands a higher rate of return.

But last Friday the rate on the two-year Treasury bond reached 2.44 percent while that on the 10-year was 2.38 percent.

Yield curve inversion is regarded by many market analysts as a warning of a forthcoming recession as investors consider that the Fed has pushed up interest rates to levels that will induce a credit squeeze, leading to a recession and lower rates in the longer term.

Previous recessions have often been preceded by a yield curve inversion. Whether it takes place on this occasion remains to be seen. Experience is an increasingly uncertain guide because of the transformation of the US financial system as the result of 15 years of “quantitative easing” (QE). The Fed has pumped in trillions of dollars into the market, first after the crisis of 2008 and then following the market meltdown of March 2020 at the start of the pandemic.

The Fed is now treading a fine line. On the one hand it wants to raise rates to clamp down on a wages upsurge, while on the other it is fearful that a too rapid rise will bring down the financial house of cards it has created by its low interest rate and QE regime.

The actions by the Fed will have international ramifications as central banks around the world also move to lift rates to counter wage demands. It will also exacerbate the already large debt servicing problems for many developing economies and so-called emerging markets.

The class agenda driving central bank and monetary policy was indicated by former Treasury secretary Larry Summers in an interview with Bloomberg over the weekend.

Summers, who often indicates the thinking in financial circles—he was one of the first to take issue with the Fed’s claim for much of 2021 that inflation was “transitory”—pointed to the effect of higher rates on government debt.

He began by denouncing the call for a so-called billionaire tax as a “bad idea whose time will never come” and then turned to the issue of government debt. The very low interest rates being used to calculate its impact “look comical today.” With the ratio of government debt to GDP now at more than 100 percent, Summers said using more realistic rates would likely add 5 percent to the debt to GDP ratio.

This raises the ever-growing question of how the debt will be paid and, having ruled out tax rises, Summers left no doubt about where the ax should fall.

“We’re moving towards a moment when we’re going to have to start to think about fiscal policy as well as monetary policy as an anti-inflationary tool,” he told Bloomberg.

The cuts will come not through any reduction in military spending which has risen to record highs, a move Summers fully supports, but on vital social spending which hits the working class.

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Over the course of about 35 years I have written descriptions of more than 100 hikes to remote locations in what I call the Magic Circle around the city of Guadalajara, where all five of Mexico’s ecosystems happen to converge.

Every now and then I was asked to organize a hike to one of these scenic spots, and I inevitably chose a route that involved climbing cliffs, squeezing under barbed wire fences, dragging yourself through swamps, or climbing overhead at a cliffside for dear life 100 meter fall: exactly the kind of excursion that I found challenging and fun in my youth.

I would think, “They wanted an adventure, and what an adventure they got!”

However, the most common request I received from the participants on these hikes was: “When are you organizing something I can take my children to?”

In all honesty, I’ve had so many inquiries about hikes that are suitable for a five-year-old that I finally started looking for trails that could meet that criterion. I chose caminos (paths) that were interesting, challenging and not very long.

Investigating a scorpion on the Chuyville Loop, a relaxing nature trail in Jalisco.

Loops are of course always more fun than trails that you have to ride back on, so I focused on loops with a maximum length of three kilometers. To make the whole thing more interesting, I got botanists, biologists, geologists and archaeologists to help me tell me about special features along the way that I could later present to the families on the hikes.

The Chuyville Loop is one of those educational trails that I believe will delight not only kids and their parents, but abuelitos and abuelitas (grandpas and grandmas) as well. It is entirely located in the vast Primavera Forest, which is next to Guadalajara along the city’s western border.

The hike starts in the Río Seco (dry river) canyon next to the municipality of Pinar de la Venta.

The tall, steep canyon walls have a story to tell, the story of a giant explosion 94,000 years ago that hurled 40 cubic kilometers of volcanic ash and pumice stone into the air, leaving a large hole in the ground that geologists call the Primavera Caldera.

Long horizontal lines on the canyon’s walls – indicating layers of sediment – tell us that the caldera filled with water and became a lake for 10,000 to 20,000 years. Eventually volcanoes appeared in the lake, spitting out their volcanic foam, which then solidified into light pumice stone.

These large “icebergs” made of pumice stone floated for a while on the surface of the water and then sank to the bottom of the lake, forming a layer or layer several meters high, which is now known as the giant pumice stone horizon.

A golden scorpion. Chuy Moreno advises his children: “Put your hands in a place where you cannot see your fingers.”

It’s easy to spot, even for a five year old.

In the Dry River we also find pieces of obsidian, volcanic glass that was perhaps more valuable than gold to the pre-Hispanic natives here.

They didn’t have metal tools, but an obsidian knife can be sharpened much finer than a steel blade. Obsidian was also the raw material for much-needed cutting and scraping tools and a really clever flat sword called the Macuahuitl.

This weapon was made of hardwood with a groove on the edge into which sharp obsidian blades were glued with chicle (natural rubber). It’s hard to believe, but the Spaniards testified that this native sword could behead a horse.

From the Río Seco we dive into a pine and oak forest. There is no hiking trail along this 325 meter stretch.

We hike uphill through a large piece of aromatic wild sage plants, interspersed with wild flowers. If it’s around October we’ll likely see the Flor de San Francisco, and the sage will be replaced with jarra plants, the stems of which were traditionally used to make charcoal sticks, a favorite of Mexican wall painters.

A short hike gives you plenty of time to stop and appreciate the shape of a beautiful pine tree.

Now we dive into the forest, hike on a carpet of pine needles and occasionally avoid the sharp spines of the agave guadalajarana, which is endemic to the region.

In this forest neck, the most common pine is Pinus oocarpa, known in Spanish as el pino amarillo and in English as eggcone pine. This species was the progenitor of many other Mexican pine trees.

As the name suggests, its small, oval pine cones are easy to spot.

It seems that the pine nuts in these little cones are delicious too, with dozens of pine cone kernels littered all over the hillside that were recently gnawed by hungry squirrels.

Here we also find many robes with large, broad leaves and encinos with long, slender leaves. Oddly enough, both are oaks, but it’s only the Encinos acorns that the local woodpeckers store in hundreds of holes not drilled in oak but rather in the soft bark of the cone pines.

Arrived on a high ridge, we follow a very old and well-trodden path to Chuyville, that’s what I called a shallow forest clearing that looks like a small village. It’s littered with rustic shelters made of branches and other ad hoc material.

“This shelter was built by kids like me,” says a young visitor to Chuyville.

Each animal shelter represents a project carried out by children who over the years have taken part in one-month summer courses organized by nature photographer Jesús “Chuy” Moreno.

In these courses, around 80 children of all ages spend eight hours a day – rain or shine – learning everything about flora and fauna by searching, finding, collecting, measuring, dissecting, drawing and sometimes eating the wonderful plants and creatures hide in the woods.

Moreno’s hands-on approach to teaching science has drawn hundreds of Mexican children to the outdoors, inspiring many of them to choose biology, botany, or agronomy for their careers.

The Chuyville Loop takes about two hours at a leisurely pace, but that can easily grow to three hours if you can’t resist looking at every praying mantis, mushroom, or woodpecker you come across.

If you’ve never visited the famous Jalisco Primavera Forest, you can agree with Luis López who commented, “I think this caminata (walk) was the perfect introduction to Bosque la Primavera!”

If you live near Guadalajara and want to do the Chuyville Loop, you can preview the route on Wikiloc.

Deep gorges descend on both sides of this narrow ridge.

If you’d rather have a guide, you can join one of the short walking tours I organize on occasion. Just send me an email ([email protected]) and I’ll sign you up for the next one.

The author has lived near Guadalajara, Jalisco for 31 years and is the author of A Guide to West Mexico’s Guachimontones and Surrounding Area and co-author of Outdoors in Western Mexico. You can find more of his writing on his website.

Most of the Senderos in Mexico are very different from the well-maintained trails in US National Parks.

The acorn woodpecker, Melanerpes formicivorus, can be recognized from afar by both its red cap and its loud scream.

During the rainy season, the forests of the Primavera Forest are filled with mushrooms.

Acorn pines are a popular place for woodpeckers to store their acorns.

In this gorge wall you can see the giant pumice stone horizon right above many layers of sediment that have deposited on the bottom of Primavera Caldera Lake. Bakpak Adventure Magazine

The silhouette of Pinus oocarpa, whose pine cones are small and egg-shaped.

The Mexican aster, or flor de San Francisco, is said to bloom around October 4th, the feast of Saint Francis of Assisi, each year.

What’s left of pine cones after squirrels remove all of the pine nuts.

The three kilometer long path meanders through a forest of oak and pine trees.

This narrow arroyo (stream) is about to turn into a slot canyon. Bakpak Adventure Magazine

A narrow opening in a canyon wall is the hidden entrance to the starting point.

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