Economics | The Guardian

Soaring pay growth puts pressure on the Bank to act again, but a slowing economy could tip into recession

Figures will add to Bank of England's dilemma over whether to increase interest rates again next week

Campaigners estimate about $3.7bn in trade finance was supplied to oil and gas projects despite bank's green pledgesThe World Bank poured billions of dollars into fossil fuels around the world last year despite repeated promises to refocus on shifting to a low-carbon economy, research has suggested.The money went through a special form of funding known as trade finance, which is used to facilitate global transactions. Continue reading...

Rating agency report amid local government crisis lists 20 most indebted authorities relative to sizeMore English councils are expected to fail owing billions of pounds in debts, a leading credit rating agency has warned, amid an escalating crisis for local government after years of budget cuts and mismanagement.In a report in the wake of the financial meltdown at Birmingham city council, Moody's said several other local authorities across the country were close to issuing pre-insolvency warnings and listed the 20 most indebted in England relative to size. Continue reading...

Warning against pumping money into people's pockets' comes amid hints Bank of England will again raise ratesJeremy Hunt has warned that the high pace of inflation in Britain will prevent pre-election tax cuts this autumn amid signals from the Bank of England that another rate rise to ease cost of living pressures is coming next week.Speaking in India, the chancellor said he would be wary of putting money into the pockets of consumers in his November package because of the danger that it would overstimulate the economy and make it more difficult for Threadneedle Street to bring inflation down. Continue reading...

Chancellor says focus is to fight inflation, while Bank of England policymaker argues for higher interest rates

S&P Global's chief economist Paul Gruenwald believes interest rates will stay elevated for some time

China the largest growth market for agricultural exports for the second year in a row in 2022-2023, led by a 66% increase in wheat exports

The American position depends not only on relations with Russia, China and the Brics countries, but on fixing its own economic and political problemsIs the dollar poised to lose its dominance of global economic and financial transactions? Many commentators apparently think so.Russia obviously hopes they are right, given that it has been shut out of the US banking system and suspended from the Society for Worldwide Interbank Financial Telecommunication (Swift). China evidently wants to help the process along by encouraging countries to undertake transactions in yuan. And the Brazilian president, Luiz Inacio Lula da Silva, has called for the Brics countries (Brazil, Russia, India, China and South Africa) to create a common currency as an alternative to the dollar. Continue reading...

European Commission forecasts 0.4% contraction for country amid high inflationGermany's economy will shrink this year as part of a wider eurozone slowdown triggered by higher inflation and the dampening impact of rising interest rates, the European Commission has said.In its interim quarterly update, the commission said Europe's powerhouse economy would be the worst-affected major country in the 20-nation single currency bloc and would record a 0.4% contraction in 2023. Continue reading...

Survey of businesses gives further indication that Bank of England could limit future interest rate risesBusinesses are pulling back on hiring and slowing their output under the strain of rising borrowing costs, according to a study that gives a further signal that the Bank of England could limit future interest rate rises.A modest pickup in manufacturing in August failed to prevent a slowdown in broader UK private sector economic activity, a survey of businesses by the accountancy firm BDO found. Continue reading...

Sunak faces headache over India trade deal as upheaval continues in handling overseas labourImmigration played a key role in the UK's decision in 2016 to leave the EU. Opinion polls showed strong support among leave voters for an end to free movement and for Westminster to decide who should be allowed to enter the country for work. That's what the slogan take back control" was largely about.Since the Brexit vote, the mood has changed. There is still a feeling ministers need to do more to stop people in small boats crossing the Channel. But legal immigration has ceased to be such a hot political issue. Other issues - such as the cost of living and rising interest rates - rank as more important. Continue reading...

The British PM did eventually meet his counterpart at the Delhi summit - but after a day's wait, and without an impressive photo opRead more: Sunak tells G20: UK will resist hair shirt' policies on net zero pledge When Rishi Sunak finally got to meet his Indian counterpart, Narendra Modi, on Saturday, it was not entirely what the British prime minister had hoped for.India and the UK are respectively the fifth and sixth biggest economies in the world, and the two countries' leaders had been scheduled to meet a day earlier, at Modi's grand residence in New Delhi. But diplomacy can be brutal and Sunak found himself, if not exactly snubbed, certainly shunted down the pecking order. Continue reading...

Work by Threadneedle Street's own analysts suggest that firms are intending to keep prices high, despite falling costsA rebound in corporate profit margins over the next year could prevent inflation falling as quickly as the Bank of England is expecting. That's not the conclusion of a leftist thinktank or trade union. It's a clear message from the central bank itself, or more precisely from a group of its in-house economists, whose published research examines how a wide spectrum of businesses plan to cope over the next few months and into 2024.The data is stark. According to the research, 45% of companies surveyed say they plan to increase their profit margins in the coming 12 months. Almost a third (32%) expect no material change" to margins and only 23% expect to suffer a fall. Continue reading...

Woking declared itself bankrupt in June. Now, residents want answers as care, arts and leisure facilities face funding cutsOn a clear day, the council's ambitious plan was for Woking's tall buildings to be seen from the viewing levels of the Shard in London. Residents, however, view the unfinished towers with much less pride and a symbol of the Surrey town's financial woes.Woking borough council this week announced a sweeping package of cuts to local services, after the local authority in effect declared itself bankrupt in June, revealing a 1.2bn deficit racked up from a risky investment spree overseen by its former Conservative administration. The towers were at the centre of the problem, with cost overruns adding to vast debts. Continue reading...

Slow domestic consumption, high youth unemployment and decline in exports among factors dragging on post-Covid recoveryChina's consumer price index rebounded in August as the world's second-largest economy emerged from deflation, official data released on Saturday suggested, despite sluggish domestic consumption that is complicating its post-Covid economic recovery.Last month's CPI, the main gauge of inflation, rose 0.1% year on year, the national statistics bureau said. Continue reading...

Government criticised as Britain's latest subsidy auction to help support new renewable energy projects awarded no contracts for offshore wind projects

Maintaining guarantee will put insurmountable pressure' on government to increase retirement age, according to instituteMaintaining the triple lock on state pensions could add as much as 45bn a year to the welfare bill by 2050, putting insurmountable pressure" on the government to increase the minimum retirement age, according to the Institute for Fiscal Studies.In a report published ahead of the release next week of official data for earnings growth, which will be used to set the annual increase in pensions, the IFS estimates spending on retirees could rise by a further 2bn from April 2024. Continue reading...

Halifax says prices fell by 4.6% as high interest rates dent homebuyer demand

Pound falls as Andrew Bailey's comments call into question need for further interest rate riseThe Bank of England governor, Andrew Bailey, expects inflation to fall quite markedly" this year, calling into question the need for a further interest rate rise when policymakers meet later this month.Delivering a positive message to MPs that inflation was on a downward path, Bailey said falling energy prices and a weakening labour market meant the cycle of interest rates rises was nearing its end. Continue reading...

Governor Andrew Bailey tells MPs that BoE is much nearer" to ending its run of interest rates increases

We would like to hear your stories of skimpflation and shrinkflation from recent monthsUK consumers are suffering from a bout of skimpflation", as manufacturers downgrade the ingredients in certain food and drink products.Have you noticed a reduction in quality or size of products while shopping? Tell us what you've spotted below. Continue reading...

Resolution Foundation predicts average Britons will be 4% poorer but better-off pensioners will be big winners'UK workers' living standards will flatline next year, leaving them on track to be 4% worse off heading into the next election than they were in 2019, according to a leading thinktank.The Resolution Foundation, which focuses its research on low- to middle-income households, said in a report that never in living memory have families got so much poorer over the course of a parliament". Continue reading...

Fresh signs of weakness in Chinese economy and weak UK and eurozone data spook investorsFears about the health of the global economy have intensified following downbeat news about service sector activity in China, the eurozone and the UK.Share prices fell in Asia and the pound dropped to a 12-week low against the US dollar after fresh signs of weakness in China triggered speculation that its post-lockdown recovery was running out of steam. Continue reading...

Boss says move needed to avoid unacceptable' delays as new controls threaten more disruption

Letter from almost 300 millionaires, economists and politicians says urgent action needed to prevent extreme wealthDeveloped and emerging economies must use a summit this weekend to forge an international agreement to increase wealth taxes on the global rich, campaigners have said.In an open letter to the G20 before its meeting in Delhi, the group of almost 300 millionaires, economists and politicians say urgent action is needed to prevent extreme wealth corroding our collective future". Continue reading...

Rolling coverage of the latest economic and financial news, as stocks rally as Country Garden agrees extension to its onshore debt payments

European stocks hit three-week high as China's government tries to prop up ailing economy

Thinktank Cebr expects Bank rate to rise twice more and predicts 28,000 insolvencies over next yearAbout 7,000 businesses are likely to fail every quarter in 2024 as high interest rates cause financial strain and the UK economy enters recession, according to a thinktank.The Centre for Economics and Business Research said debt taken on during the pandemic, higher borrowing costs and the cost of living crisis would drive an increasing number of businesses under, particularly in the retail and hospitality sectors. Continue reading...

Chancellor blames expected rise on fuel price increases but maintains inflation will halve by end of 2023The chancellor, Jeremy Hunt, has said the UK may experience a blip" increase in inflation this month, as data suggested that average fuel prices have jumped back above 1.50 a litre.Hunt said the government is on track to hit its target of halving inflation by the end of the year but suggested the rate of price rises could spike when the latest figures for August are published in September. Continue reading...

Exclusive: Sources believe deal will not be struck before meeting with Narendra Modi at G20 summitRishi Sunak has ruled out a quick-fix trade deal with India, making it impossible to get an agreement over the line in time for this week's G20 summit in Delhi - and possibly even by next year's elections.Multiple sources close to the negotiations said the prime minister has rejected the idea of an early harvest" deal, which could have lowered tariffs on goods such as whisky but would not have dealt with trickier subjects such as professional services. Continue reading...

The chancellor says the economy is resilient but forward-looking indicators suggest otherwiseManufacturing is struggling and house prices are sliding. There is precious little money in the kitty for pre-election tax cuts. Inflation is proving hard to shift and strikes by hospital doctors and railway workers are set to continue. The Bank of England is slowly throttling the economy with its increases in the cost of borrowing.Having dodged the recession bullet last year, there are signs the UK may not do so again in the coming months. Any good news from lower energy prices is outweighed by the impact of higher interest rates, the full effects of which have yet to be felt. It is a rotten prospect for a government that is 20 points behind in the opinion polls and has to fight an election by January 2025 at the latest. Continue reading...

A long-term lack of investment has left our infrastructure in pieces. Instead we are prey to dire fallout from events that should be within our controlOur national malaise is that nothing works and that the country is falling apart. Two recent episodes have captured the gloomy zeitgeist. On Monday, the national air traffic services (Nats), thrown into crisis by the input of a small amount of mismatching data, went down for several hours, spreading mayhem across Britain's skies, with 1,600 flights cancelled and many others delayed, and the lives of hundreds of thousands of returning holidaymakers disrupted. And on Thursday, days before the start of the new school year, we learned that more than 100 schools are to be closed, all or in part because of fears the light concrete with which they are made could collapse.These disparate events have common roots: they underline the lack of system resilience of so much British infrastructure and the unwillingness to plan for unforseen contingencies, so that reactions to unexpected failures are ad hoc and on the hoof. And when things do go wrong, the processes for redress and compensation are feeble - in these cases, organised around minimising a duty of care to schoolchildren and parents, and to airlines and passengers. There is a complete lack of accountability. Be sure the same is true for so much else. Continue reading...

A trip to Portugal, Britain's oldest ally, was a painful reminder of the benefits of EU membershipThe media has been replete this summer with reports of British holidaymakers returning from EU countries proclaiming - and complaining - that our neighbours enjoy a better way of life than is now the case in Brexit Britain.In years gone by a popular English phrase was mustn't grumble". These days it has been superseded by nothing works" and things are falling apart". Continue reading...

Signs of distress from very different parts of economy will add to Bank of England's dilemma over interest ratesPolicymakers in the UK have been put on recession high alert after surging interest rates triggered a slump in factory output and the biggest annual drop in house prices since the global financial crisis of the late 2000s.Amid growing evidence that the 14 successive increases in the Bank of England base rate have been slowing the economy, the monthly health checks of manufacturing and the property market both pointed to a tough winter ahead. Continue reading...

Resolving economic and political inequality is vital if we want people to reject authoritarianismThere has been much handwringing about the retreat of democracy and the rise of authoritarianism in recent years - and for good reason. From the Hungarian prime minister, Viktor Orban, to the former Brazilian president Jair Bolsonaro and the former US president Donald Trump, we have a growing list of authoritarians and would-be autocrats who channel a curious form of rightwing populism. Although they promise to protect ordinary citizens and preserve longstanding national values, they pursue policies that protect the powerful and trash longstanding norms - and leave the rest of us trying to explain their appeal.While there are many explanations, one that stands out is the growth of inequality, a problem stemming from modern neoliberal capitalism, which can also be linked in many ways to the erosion of democracy. Economic inequality inevitably leads to political inequality, albeit to varying degrees across countries. In a country like the US, which has virtually no constraints on campaign contributions, one person, one vote" has morphed into one dollar, one vote". Continue reading...

Trousers are 1.90 more than 2018, and trainers 6.57 more ... add an item to our visual tool to see how prices have risen in the past five yearsParents braced for the back-to-school rush have an extra problem on their plate this year, with the cost of a packed lunch rising by almost three times the UK rate of headline inflation.A typical packed lunch, made up of a sandwich, an apple and a small yoghurt, costs 2.17 - 32p more a serving than a year ago and equivalent to 61 more over the course of the school year than last year, an 18% rise. That is 105 more a child for each school year than in 2018-19. Continue reading...

From the South Sea Bubble to the undoing of Trussonomics, this month of the year keeps providing lessonsBe afraid. That's the message from history to policymakers returning from holiday this week as they contemplate negotiating the trickiest few weeks of them all.For while TS Eliot called April the cruellest month in The Waste Land, in economics and finance that unwanted label would better be attached to September, the time of the year - from the 18th century to the modern day - when problems that have been quietly developing over the summer come to a head. Continue reading...

Huw Pill says he prefers longer, more steady use of interest rates of Table Mountain model over sharp rise and fall of Matterhorn approach

Live, rolling coverage of business, economics and financial markets with focus on whether price pressures will ease across big economiesEurozone unemployment stayed stable at 6.4%, so it is the inflation data that will be the focus for economists.Food, alcohol and tobacco was the main driver of inflationary pressure, Eurostat said.Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in August (9.8%, compared with 10.8% in July), followed by services (5.5%, compared with 5.6% in July), non-energy industrial goods (4.8%, compared with 5.0% in July) and energy (-3.3%, compared with -6.1% in

Deregulation and financialisation cause environmental, economic and social harms - but the party aims to give finance even more powerThe City is a jewel in the crown" of the UK economy for the Conservative government, which aims to keep the sector growing by seriously weakening regulatory standards. This approach will come as no shock given the City's current form has its roots in Margaret Thatcher's big bang, but what is surprising is that the Labour party too is pushing for further deregulation.In nearly 30 years campaigning on finance, I cannot recall both major political parties promoting the interests of finance so aggressively. Yes, the UK needs a successful financial sector, but deregulation and financialisation - a process whereby financial markets and institutions gain greater influence over policy and economic outcomes - is dangerous and costly for the rest of us.Mick McAteer is co-director of the Financial Inclusion Centre and a former board member of the Financial Conduct Authority and Financial Services Authority. He writes in a personal capacity Continue reading...

Labour seems spellbound by the Tories' economically illiterate cult of austerity - but there is another way to help Britain thrive

Bank report says companies making excess profits confined to certain sectors of economy such as energy and retailOnly companies able to exploit market power have been able to increase profit margins since the start of the Ukraine war, according to a Bank of England study that found no widespread evidence of businesses gouging their customers.The report published on Threadneedle Street's Bank Underground blog said excess profits were confined to certain sectors of the UK economy such as energy and retail. It added that across the economy as a whole profits had fallen because businesses were facing higher costs. Continue reading...

The shadow chancellor, Rachel Reeves, has tied her party's hands and placed it on the wrong side of the argumentLabour's shadow chancellor, Rachel Reeves, confirmed last weekend what many progressives have long feared: the party has no serious plans for reforming Britain's regressive taxation system. There will be no new property taxes or wealth tax. Nor will tax rates on capital gains - unearned income from increases in the value of property or financial assets - be raised to match those on wages.

July is traditionally busy month for home buying but surge in interest rates has begun to take its toll'The number of mortgage approvals fell to its lowest level in five months in July, amid fresh evidence of the impact of the sharp increase in borrowing costs on the housing market and the wider economy.Bank of England figures showed the number of new loans approved but not yet completed decreased from 54,600 in June to 49,400 in July - a drop of 10%. Continue reading...

Signs of weakness needed before monetary policy is eased in west, says strategist advising chancellorCentral banks will push western economies into recession in order to be sure of winning the battle against inflation, one of Jeremy Hunt's advisers has warned.Rejecting the idea of a soft landing", Karen Ward, a member of the chancellor's economic advisory council, said there would need to be signs of weakness before policymakers felt able to ease their tough approach. Continue reading...

Government move means new controls will not begin until end of January next yearThe introduction of post-Brexit checks on food, plant and animal produce arriving in Britain has been delayed for the fifth time, the government has confirmed, meaning they will not begin until the end of January next year.The decision to once again push back the beginning of new controls on imports, which was widely anticipated, means the phased introduction has been delayed by a further three months from late October. Continue reading...

The two countries need to pursue policies that will reduce economic tensions and foster cooperationThe US and China remain on a collision course. The new cold war between them may eventually turn hot over the issue of Taiwan. The Thucydides trap" - in which a rising power seems destined to clash with an incumbent hegemon - looms ominously. But a serious escalation of Sino-American tensions, let alone a war, can still be avoided, sparing the world the cataclysmic consequences that would inevitably follow.There will always be at least some tensions when a rising power challenges the prevailing global power. But China is facing off against the US at a moment when America's relative power may be weakening, and when it is committed to preventing its own strategic decline. Both sides are thus becoming increasingly paranoid about the other's intentions, and confrontation has mostly supplanted healthy competition and cooperation. Both sides are partly to blame. Continue reading...

Alan Walker says ill-health is stopping many over-50s from returning to work, while Frances Lawrence points out that a number of older adults are already working as unpaid carers, and Paul Martinez says some just have better things to doThe decline in the employment rate of older workers is due, in large part, to policy failure (The Guardian view on unretirement': older workers could help with labour shortages, 21 August). Primarily, it is the failure to prevent the present epidemic of chronic conditions, such as heart disease, diabetes and arthritis, which manifest themselves in later life - and now, increasingly, at younger working ages.In comparison to Sweden, for example, the UK's prevention and occupational rehabilitation services are poor, and the employment rate among those aged 55-64 is significantly lower. Large numbers of older workers are simply not fit to work - and no amount of return-to-work policies will change that.

While we shouldn't read too much into the Brics expansion, the geopolitical landscape is shiftingTwo big international gatherings took place last week. The one that was held in the Rocky Mountain resort of Jackson Hole was a demonstration of the grip the US has on the global economy. The one that was held in Johannesburg was evidence of the challenge posed to America from the leading emerging market countries.Let's start with Jackson Hole, where Jerome Powell took centre stage. What the head of America's central bank had to say about interest rates clearly mattered for the US, where the economy has so far emerged relatively unscathed from the severest tightening of policy in four decades. The message was that the battle against inflation was not over and further increases in interest rates were possible. Continue reading...