Pound drops to nine-month low against dollar after PMI for December signals further contraction in manufacturing

With threats of recession, global fracturing and increasingly angry voters, Labour's sticky start is unlikely to get any easierThe 2020s have been a dismal decade. Five years ago, when the first reports emerged of a new virus that had its origins in the Chinese city of Wuhan, it was hard to imagine that Covid-19 would have such a devastating impact. Yet within months, the UK was in lockdown, the global economy was in a chokehold, trade flows had dried up and governments were spending freely to prevent deep recessions turning into something even more catastrophic.A second Great Depression was avoided, but half a decade on, the long-term effects of the pandemic are still being felt. Predictions that the development of new vaccines to combat the virus would prove the catalyst for a new roaring 20s" have proved wide of the mark. The second half of the decade should be an improvement on the first half - but that's not saying much. The good news is that a few green shoots have started to emerge.Larry Elliott is a Guardian columnistDo you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Good for equities, good for the US, and good for crypto but the year spawned mixed blessings for the UK, China and EuropeGlobal stock markets climbed in 2024, helped by falling inflation and the US economy's success in avoiding a hangover from a strong post-pandemic recovery.While Europe and the UK struggled to make headway, the US maintained pole position at the top of the rich nations' growth league, pushing shares in New York to new record highs. Continue reading...

Cautious optimism' forecast despite end to key stamp duty relief and fears of higher taxes and interest ratesExperts have predicted a buyer's market" for house hunters in the year ahead, giving them greater negotiating power as the mood of the housing market shifts to cautious optimism".However, even the more hopeful expectations for 2025 were met with caution, as an important stamp duty relief for first-time buyers was scheduled to end in the spring, as well as potentially high interest rates and taxes bearing down on the market. Continue reading...

Rolling coverage of the latest economic and financial news, on the final trading day of the yearWall Street is set for a calm final session of 2024, judging by the latest futures prices which show the Dow flat:European gas prices are also higher today, with the month-ahead contract up 0.8% at 48.25/MWh.Gazprom said it would send only 37.2 million cubic metres on Tuesday compared to 42.4 mcm on Monday. Flows are expected to fall to zero from the early hours of Jan. 1 after the expiry of the five-year transit agreement.Its demise marks the almost complete loss of Moscow's once mighty hold over the European gas market. Ukraine refused to negotiate a new deal because of the war. Continue reading...

President seeks to allay fears that world's second-largest economy will falter in 2025 because of high US tariffsChina's economy is on course to expand by 5% in 2025, according to its president, Xi Jinping, meeting official growth targets and rebutting concerns that Donald Trump's incoming US administration will harm Beijing's prospects in the new year.Using his annual address to the nation, Xi sought to allay fears that the world's second-largest economy would falter over the next 12 months after the government battled to prevent a slide towards recession during 2024. Continue reading...

Relaxing financial rules risks undermining stability, ignoring post-crash lessons and prioritising short-term gains over the long-term health of the economyRachel Reeves's enthusiasm for the City of London - the crown jewel in our economy" - raises concerns. Economists were worried enough to publicly warn her this month that liberalising financial sector regulations could undermine the government's efforts to grow the economy, posing particular risks to the government's wider industrial strategy". They also stressed the importance of not forgetting the painful lessons of the 2008 global financial crisis.The experts were responding to the chancellor's November Mansion House speech, in which Ms Reeves suggested that post-crisis regulations have gone too far". This is a troubling statement. Those rules were implemented to curb the sector's excesses, prevent systemic risks and ensure that the Treasury does not have to bail out its failures. Rolling back such measuresin the name of economic growth ignores thestability and protection they've provided.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Rolling coverage of the latest economic and financial newsJapan's blue-chip stock index has ended the year at its highest year-end finish on record, despite a small selloff today.The Nikkei stock average ended down 386.62 points, or almost 1%, today at 39,894 points.There was much optimism in the first half of the year with hope for a favorable cycle in which wages increase in tandem with prices, alongside the weak yen for corporate profits." Continue reading...

Study predicts an intention economy' where companies bid for accurate predictions of human behaviourArtificial intelligence (AI) tools could be used to manipulate online audiences into making decisions - ranging from what to buy to who to vote for - according to researchers at the University of Cambridge.The paper highlights an emerging new marketplace for digital signals of intent" - known as the intention economy" - where AI assistants understand, forecast and manipulate human intentions and sell that information on to companies who can profit from it. Continue reading...

Economic confidence polls reveal that 70% expect turnover to rise and 73% expect profitability to riseA majority of UK businesses expect a positive start to 2025, according to two economic confidence surveys which show managers planning for growth after a challenging period for the economy.About 70% of UK businesses expect their turnover to increase over the next year, up from 62% in December 2023. Meanwhile, 73% are confident of greater profitability, according to research from Lloyds bank. Continue reading...

Biden's loan forgiveness efforts have faced major resistance, but people are bracing for worse under president-electJoe Biden has pushed during his presidency to cancel student debt for tens of millions of Americans. Now Donald Trump, who has branded such efforts vile", is preparing to succeed him - leaving borrowers at risk of losing relief they received, or had been waiting for.Mary Ann Rockwell, 72, is a librarian in upstate New York. She has grappled with her student loans for years, as interest ballooned while she often struggled to afford to make payments. Continue reading...

While Labour's critics are circling, pay growth is resilient and inflation is coolingNot everything has gone smoothly for Keir Starmer. At the end of Labour's first calendar year in power since Gordon Brown was in Downing Street a decade and a half ago, the prime minister is on the back foot after a run of disappointing economic updates.With a backlash over several unpopular tax and spending decisions, and as pressure mounts for a change in course early in the new year, the new government is in danger of losing control of its primary mission to revive Britain's misfiring economy. Continue reading...

Treasury secretary says extraordinary measures' needed to avoid default, and urges lawmakers to raise borrowing limitJanet Yellen, the treasury secretary, has said her agency will need to start taking extraordinary measures", or special accounting maneuvers intended to prevent the nation from hitting the debt ceiling, as early as 14 January, in a letter sent to congressional leaders on Friday afternoon.Treasury expects to hit the statutory debt ceiling between January 14 and January 23," Yellen wrote in a letter addressed to House and Senate leadership, at which point extraordinary measures would be used to prevent the government from breaching the nation's debt ceiling - which has been suspended until 1 January. Continue reading...

Unpredictable change will sweep through America, while old problems, from war to inflation, are likely to afflict other countriesThe global economy is entering the new year with rising geopolitical tensions looming over its prospects, as the world's leading central banks attempt to cut interest rates after the worst inflation shock in decades.Donald Trump's second term in the White House is expected to dominate the economic agenda. Global trade tensions are on the horizon as the president-elect threatens to impose sweeping tariffs on US imports. Continue reading...

Rolling coverage of the latest economic and financial news

Economists say EU countries hardest hit by 2010s debt crisis now in stronger position than France and GermanyThe European Central Bank is facing a tough balancing act in 2025 as it tries to navigate a reversal of fortunes in eurozone economies, as the hardest-hit nations of the 2010s debt crisis outperform the traditional core.Highlighting a potential shift in power dynamics within the single currency bloc, economists said countries in the EU periphery ravaged by last decade's sovereign debt crisis were in a stronger position than northern Europe's most powerful nations, including France and Germany. Continue reading...

Household incomes to stagnate or fall but will be offset by better public services, says Resolution FoundationHousehold incomes will stagnate or fall next year but the chancellor, Rachel Reeves, will be hoping people feel better off as a result of improvements to public services, a leading thinktank has said.The Resolution Foundation calculated a new measure of real living standards" that took into account both disposable income and the in-kind" benefits of public services. Continue reading...

Policy easing and stronger exports have helped economy, but country still faces property crisis and weak demandThe World Bank has lifted its growth forecasts for China's economy, but called for deeper reforms and warned that the country will continue to face headwinds from a lingering property downturn.The Washington-based institution said that it expected China's gross domestic product to rise by 4.9% in 2024 as a result of recent policy easing and stronger exports. That is up from June forecasts of 4.8% and is just shy of Beijing's own 5% growth target. Continue reading...

Campaigners call for action in 2025, as crippling repayments prevent spending to cut poverty and tackle climate crisisCampaigners are urging Labour to lead the charge for global debt relief in 2025, as new analysis shows lower-income countries spent 15% of their revenue on repayments this year - the highest level for three decades.Calculations by the charity Debt Justice, based on data from the World Bank, show repayments from poorer countries bottomed out at 4.4% of income in 2011 but have since trebled. Continue reading...

Rolling coverage of the latest economic and financial news, on a shortened Christmas Eve trading session in London

Brics nations' plan to create rival to greenback is bound to fail even without president-elect's measuresIn 2023, the leaders of Brazil and the other Brics countries at the time - China, India, Russia, and South Africa - discussed collaboration on a new shared currency. The Brazilian president, Luiz Inacio Lula da Silva, has been a vocal proponent of an alternative to the US dollar, the dominant global currency for the past 75 years, and the Russian president, Vladimir Putin, publicly promoted the idea during the Brics summit in October by brandishing a symbolic Brics banknote. The bloc's new members - Egypt, Ethiopia, Iran, and the United Arab Emirates - would presumably also be included in the new joint currency.The proposed challenge to the dollar has already drawn the ire of the US president-elect, Donald Trump, who has threatened to impose punitive tariffs of 100% on countries that move away from the greenback. At the end of last month, Trump warned Brics countries against creating or supporting an alternative reserve currency. We require a commitment from these countries that they will neither create a new Brics currency nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs," he declared on Truth Social, his social media platform. Continue reading...

Financial markets don't expect a cut until April but a fall in the Australian dollar on Monday suggests confidence one is on the cards

Peter Malinauskas calls situation tricky' but says state government will continue to monitor Sanjeev Gupta's GFG Alliance and act where it can

UK GDP flatlined in the July-September quarter, ONS reports, as companies warn October budget has hurt economy too

The UK's number-crunching body is still playing catchup over job figures after the pandemic, with validity of survey data being questioned

Tories point finger at Rachel Reeves's budget but economy has been misfiring for best part of a decade

Unexpected downgrade to show zero GDP growth in third quarter underlines Labour's challenging start in power

CBI survey finds firms planning to reduce hiring amid weakest expectations for growth since November 2022British firms are predicting a sharp fall in business activity in the new year, in the latest economic snapshot to warn of an increasingly gloomy outlook for the UK in 2025.The growth indicator survey from the Confederation of British Industry (CBI) indicates firms are preparing to cut down on hiring and reduce output over the next three months. Continue reading...

Chancellor's visit to EU meeting looks for smoother trade to improve growth but youth mobility scheme remains sticking pointRachel Reeves is seeking a deeper, more mature relationship" between Britain and the EU: this was her central message to the bloc's finance ministers in Brussels a fortnight ago.In her brief speech to the meeting of her European counterparts - the first a UK chancellor had attended since Brexit - Reeves mentioned the UK's relationship with the EU nine times. Continue reading...

The Labour party's determination to stick to Brexit simply condemns the UK to fight a lone hand against the far-right forces ranged against itThe sight of other world leaders toadying up to the US president-elect - the criminal Donald Trump - and his henchman Elon Musk is distasteful enough, but in the world of realpolitik they probably feel they have no option.The great American journalist HL Mencken did not live to see the fulfilment of his 1920 prophecy that one day the White House will be occupied by a downright fool and complete narcissistic moron" but he is no doubt turning in his grave. Continue reading...

Despite spy' scandal, Philip Hammond says Britain should now adopt a pragmatic approach to Beijing'China should be encouraged to build electric cars and renewable energy technology in the UK as part of a new pragmatic trading relationship that would benefit both countries, a former Tory chancellor has said ahead of a landmark visit by Rachel Reeves to Beijing early in the new year.Philip Hammond, who was chancellor from 2016 to 2019, and the last UK minister to take part in formal economic discussions with China before the process was abruptly ended, told the Observer that while Reeves should never compromise security for trade", there were vital economic sectors where deals could be struck. Continue reading...

Nothing seems to stop the relentless march of property values, even with a stamp duty increase loomingIt's been a bumpy ride for the housing market in recent years, after Liz Truss's disastrous mini budget of September 2022 created a surge in borrowing costs that have cost many households dearly.But despite elevated mortgage and rent costs, the market this year has turned out to be surprisingly resilient", according to Nationwide building society. Experts had expected house prices to stay flat or fall, but average prices are expected to have risen by more than 3% in 2024, after falling by 1.4% in 2023. Continue reading...

Rolling coverage of the latest economic and financial newsNewsflash: Russia's central bank has surprised economists by leaving interest rates on hold.At their final monetary policy meeting of the year, the Bank of Russia Board of Directors decided to keep the key rate at 21.00% per annum.The Bank of Russia will assess the need for a key rate increase at its upcoming meeting taking into account further lending and inflation dynamics.According to the Bank of Russia's forecast, given the monetary policy stance, annual inflation will decline to 4.0% in 2026 and stay at the target further on.I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas.Otherwise, it is TARIFFS all the way!!!." Continue reading...

Dramatic economic slowdown means chancellor could face lower receipts and higher borrowing costs in 2025A dramatic slowdown in economic growth and rising borrowing costs since the budget could undermine the government's finances and force the chancellor, Rachel Reeves, to U-turn on pledges not to further increase taxes, analysts have said.With inflation on the rise again, the London stock market at its lowest point for more than a month and the Bank of England forecasting economic stagnation in the final three months of 2024, the government heads into the Christmas break weighed down by a gloomy outlook for the new year. Continue reading...

President-elect reignites fears of a trade war as he says bloc must make up its tremendous deficit' with USThe US president-elect, Donald Trump, has warned the EU that it will face trade tariffs on its exports to the US unless its member states buy more American oil and gas.Trump reignited fears of a looming trade war between the US and the EU in his first public statement regarding trade since he was elected president in November. Continue reading...

November drop to 11.2bn a welcome figure for chancellor after backlash from business leaders to budget

Even before he assumes the presidency, Trump has sent the Canadian government into paroxysms with trade threatsOne person, at least, was clearly delighted by the political upheaval triggered in Canada by this week's sudden resignation of the country's deputy prime minister.Chrystia Freeland, who stood down on Monday, had clashed with Justin Trudeau over the appropriate response to stiff tariffs threatened by Donald Trump - and the US president-elect was relishing the drama. Continue reading...

Sarah Davidson says the government has a shot at solving profound generational challenges and Bryan Merton welcomes Polly Toynbee's positive perspective. But Bernie Evans wants to see more action right now, and Philip Oliver urges Labour to keep voters engagedPolly Toynbee is correct that there are few quick fixes for the biggest problems facing the country (Labour seems to be flailing, but keep faith: Starmer's long-term plans are both radical and sound, 17 December). But we shouldn't delude ourselves that political leadership alone is enough to shift the dial on many of these generational challenges.While I have critiqued the detail of Whitehall reforms announced by Labour this winter, most of us who have worked in or with Whitehall would accept the need for these institutions to work differently. Central government must pay proper respect to the distinct contributions and roles of others - the devolved administrations; local government; public bodies; and the third and private sectors. Continue reading...

Central bank downgrades growth forecast amid threat from budget fallout, rising inflation and Trump trade tariffs

Investors are betting on just one more rates cut this year, which could bring stagnation, undermining government efforts to drive the economy forward

Final UK interest rate decision of the year, as Spain's Navantia agrees a deal to purchase Harland & Wolff's four shipyards

Japan's complex defence alliances built up over years as protection against China could be put at risk in a Trump-launched trade warArguably, no country in Asia has better reason to be in a state of anxiety over the return of Donald Trump to the White House than Japan, since the US has been the linchpin of Japanese foreign and security policy since the second world war.Back in 2017, well before he became prime minister, Shigeru Ishiba described Trump's method as one of placing his counterpart in a state of anxiety and tension, creating psychological instability and then initiating a deal". Continue reading...

Central bank lowers benchmark federal funds rate by a quarter of a percentage point to between 4.25% to 4.5%The US Federal Reserve cut interest rates on Wednesday, but suggested it would make fewer rate cuts than expected in 2025 amid questions over its fight to bring down inflation across the world's largest economy.Jerome Powell, the Fed chair, said inflation had been stubborn", but insisted the central bank believed its rate hikes would continue to erode the pace of price rises. Continue reading...

Institutional investors traditionally shy away from social housing because returns are too low but Labor initiative may change that

Annual increase in November driven by rising cost of petrol and groceries and hike in tobacco duty in budget

Starmer says more to do on economy so growth is felt in the pockets of working people'; US Federal Reserve widely expected to cut interest rates by a quarter pointHere's more detail from the inflation snapshot.Clothes retailers offered fewer discounts than last November, when they cut prices due to mild weather.Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago.This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century.We think there is a good chance airfares will rebound very strongly in December.Looking ahead, we expect headline inflation to reach 3.1% in April 2025 and stay at or above 3.0% until October 2025. We expect core goods price rises to tick up, reflecting somewhat stronger cost growth. Motor fuels inflation will boosted by base effects, and duty hikes will raise tobacco inflation. Inflation rising above the MPC's target is one reason why we expect rate-setters to cut interest rates gradually.The big declines in inflation are behind us. Next year inflation is likely to run closer to 3.0% than to its 2.0% target. Wage growth of over 5.0% and a surge in government spending could keep inflation higher for longer. Continue reading...

Increase extinguishes expectations of interest rate cut this week and underlines tough challenges policymakers face

With voters distracted by Christmas, the government has saved major announcements for 2025, using the mini-budget to prove it can get its sums right

UK wage growth has risen to 5.2% per year, making Bank of England highly likely to leave interest rates on hold on ThursdayToday is a crunch day for struggling UK utility Thames Water.Thames is heading to the High Court this morning to seek appoval for a 3bn emergency loan designed to keep the company afloat. Continue reading...

Labour market figures do not yet show effects of Rachel Reeves's tax rises on employers in the budget