Economics | The Guardian

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...

Optimistic forecasts based on comparisons with the US or eurozone ignore the unique dynamics of British inflationCore inflation in the UK, which excludes volatile items such as energy and food, peaked in May at 7.1% - later and a little higher than in the US and some other high-income economies. If it now follows the headline rate on a downward path, the difference could be easily attributed to the implementation of Brexit and the idiosyncrasies of British energy pricing.In that case, there would be nothing surprising in a smaller economy than the eurozone or the US suffering a bit more from a common shock, and its inflation path being a bit harder to predict. Core inflation, however, is not yet trending down. Continue reading...

Jay Powell tells symposium in Wyoming that inflation is still too high but that US central bank will keep at it until the job is done'The Federal Reserve chair, Jerome Powell, used a closely watched speech on Friday to warn that the fight against inflation in the US is not over.Speaking at the Federal Reserve Bank of Kansas City's annual gathering of central bankers in Jackson Hole, Wyoming, Powell said inflation was still too high and that interest rates might have to rise further to tamp it down. Continue reading...

We need a redesign of taxation to reverse the gross inequality that causes poor health, writes Rob Perrin. Plus letters from Ewan Hamnett, Angela Vnoucek and Dr James AndradeSally Davies, a former chief medical officer for England, echoes the fears of so many experts and commentators, informed by the research of Michael Marmot, among others (Last time Britain was this sick, drastic action was taken. This time, politicians don't seem to care, 18 August). Low productivity, stagnant wages, austerity and the steady dismantling of public institutions leads vast swathes of the UK population down the road of poverty, poor diet, ill health, educational failure, menial employment, substandard housing and state dependency.The links between gross inequality, overwhelmed healthcare and our rapidly declining status as a western economy are plain to every politician, business leader and media mogul in the land, yet we collectively limp along, wallowing in our misery, in the naive belief that an election will put it to rights. Continue reading...

Fed's performance over next six months is key but challenges may be bigger than many analysts expectThe global economy this year is full of puzzling surprises. Japan's GDP growth is currently surpassing that of China, and July retail sales in the US were double the consensus forecast, despite the US Federal Reserve pursuing one of the most concentrated rate-hiking cycles in decades.In the UK, wage growth has risen to an annualised rate of 7.8% and core inflation has remained high, even after 14 consecutive rate increases by the Bank of England (with more to come). Meanwhile, Brazil and Chile have cut interest rates, diverging from market expectations that the Fed will keep rates high for a prolonged period. Continue reading...

Barometer of retail activity falls for fourth consecutive month to lowest level since March 2021

Rolling live coverage of business, economics and financial markets as hopes for end of the rate hike cycle also boost sharesUK retail sales volumes dropped in the year to August at the fastest pace since coronavirus pandemic lockdowns in March 2021, according to new data from the Confederation of British Industry (CBI).The balance of retailers that reported a sales decline rose to 44%, a level seen only once between the pandemic and the global financial crisis in 2008, according to a weighted poll of CBI retailer members, which is concentrated among the largest companies (albeit with significant changes since the scandal over sexual misconduct).Retail sales in August fell at their quickest pace in over two years, culminating a summer that many retailers would rather forget.Against a backdrop of rising interest rates and weak demand, retailers foresee cuts to investment over the next year, while employment is expected to fall again next month. Continue reading...

Even if taxes rises are chosen, system needs root-and-branch reforms as all main levies are flawed, finds studyBritain faces a stark choice between paying higher taxes or accepting an inevitable deterioration in public services and the welfare state, a report says.In an in-depth study of the UK tax system, the Institute for Fiscal Studies (IFS) thinktank said the already high level of taxes and the weak prospects for growth meant voters faced a tough choice. Continue reading...

Experts surveyed by Reuters expect inflation to continue falling in fourth quarter

Analysts say Jerome Powell unlikely to suggest mission accomplished' in address to central banking summitThe world's most powerful central banker, Jerome Powell, is expected to disappoint investors looking for reassurance that US interest rates have peaked when he gives a much-awaited speech to his peers on Friday.Topping the bill at the three-day annual conclave of central bankers that begins on Thursday at Jackson Hole in Wyoming, the chair of the Federal Reserve will leave the door ajar for further increases in US borrowing costs over the coming months should inflationary pressures persist. Continue reading...

The Conservative fixation on shrinking the state is fiscally reckless and detached from political realityJust as every problem resembles a nail to someone equipped only with a hammer, the faintest glint of good economic news entices Conservative MPs to call for tax cuts. Earlier this week, new data showed that government borrowing in the second quarter of the year was 11.3bn lower than had previously been forecast by the Office for Budget Responsibility (OBR). The windfall is explained by higher revenues. That in turn is largely a function of frozen income tax thresholds - a stealthy tax rise that scoops more people into the higher rate as their earnings increase.Tory MPs have not hesitated to call for cuts. Most frame the argument in terms of economic stimulus - the conviction that growth will be restored as people spend money that would otherwise have been deducted from their pay. Iain Duncan Smith made an auxiliary motive explicit: If the economy is not growing we will lose the election," the former Tory leader said. Continue reading...

My friend Jonathan Perraton, who has died aged 58 of a heart attack, was a senior lecturer and post-Keynesian economist with an internationalist outlook. Publishing extensively across a range of economics journals, he famously identified strong and weak versions of Thirlwall's law, pivotal to the literature on the constraints placed on low-income countries by export demand.He was a long-serving and well-regarded member of the economics department at the University of Sheffield, and a rep for the University and College Union. He taught international economics to a generation of students, for whom he was a wonderfully inspiring lecturer. Continue reading...

She made the comment in response to repeated claims she is neglecting her duty as an MP. This live blog is now closedRishi Sunak is expected to carry out a reshuffle this year. At one point No 10 was keeping open the option of holding it straight after the Uxbridge, Selby and Somerton byelections, and more recently the assumption has been that it would happen after recess.This morning in the Times Steven Swinford says that it is coming in two parts. He says that a limited reshuffle will take place soon, primarily to replace Ben Wallace, who is standing down as defence secretary, and that a wider reshuffle has been postponed until later in the year.NEW A mini-reshuffle among ministers is expected at the end of next week.Tipped to leave the Cabinet are Defence secretary Ben Wallace and Scottish secretary Alister Jack. Both are quitting as MPs next year. @Steven_Swinford says there will be a wider reshuffle in October.Environment minister Trudy Harrison, Health minister Will Quince and Levelling Up minister Dehenna Davison also set to leave HMG. All MPs quitting Parliament. Liam Fox, Penny Mordaunt, Anne Marie Trevelyan, Mark Harper are tipped to replace Ben Wallace. Continue reading...

Poor performance in services industry and manufacturing is mirrored in eurozoneBritain's policymakers have been put on recession alert after a closely watched measure of economic health showed the UK gripped by a Europe-wide slump in private sector activity.In a sign that higher interest rates are leading to a rapid slowdown in growth and choking inflation, the latest monthly business health checks showed weakness in the UK services and manufacturing sectors and the poorest performance since the Covid lockdown in early 2021. Continue reading...

Former CEO Alison Rose, who stepped down in July, will be paid as she sees out a 12-month notice periodThe pound, which started to drop in the wake of the poor Eurozone PMI data, has taken another tumble after UK figures pointing to similar woes at home.The pound is currently down around 0.5% versus the US dollar at $1.26. Continue reading...

The country's property crisis is causing damage that requires Xi to make liberal or market reformsThe long days of summer are proving to be rather too long for the government in Beijing. In an attempt to stabilise the faltering real estate market, the authorities announced earlier this week a modest decline in interest rates that was underwhelming in scale and intent.Those who recall the bad old days in which the west was buffeted by successive crises such as those involving Northern Rock, Bear Stearns and Lehman Brothers will recognise the futility of lower interest rates in stemming systemic problems in real estate and finance when the problem has nothing to do with interest rates being too high. And so it is in contemporary China, where the government is battling to stabilise an unstable economy. Continue reading...

Data from the High Pay Centre thinktank showed FTSE 100 bosses collected an average 500,000 pay rise last year, taking their median pay to 3.9mJeremy Hunt has played down the prospect of pre-election tax cuts despite news that the public finances are in less bad shape than the government's spending watchdog forecast in the spring budget, our economics editor Larry Elliott writes.Stronger tax receipts from an economy that has so far avoided recession meant the UK's budget deficit stood at 4.3bn last month - the fifth highest for a July since modern records began in 1993 but 1.7bn below the estimate from the Office for Budget Responsibility.As inflation slows, it's vital that we don't alter our course and continue to act responsibly with the public finances. Only by sticking to our plan will we halve inflation, grow the economy and reduce debt.The Treasury thinks changes to growth, inflation and interest rates put pressure on the public finances and insists it will not be deterred from its focus to get debt - which now stands at just under 2.6tn - falling over the medium term. Continue reading...

CBI data showing slowdown in activity is latest sign Bank interest rate rises are slowing economy

Labour leader says sluggish economy has driven up prices and is holding back students and apprentices

Chancellor says government must not alter course as interest rate rises add to cost of debtJeremy Hunt has played down the prospect of pre-election tax cuts despite news that the public finances are in less bad shape than the government's spending watchdog forecast in the spring budget.Stronger tax receipts from an economy that has so far avoided recession meant the UK's budget deficit stood at 4.3bn last month - the fifth highest for a July since modern records began in 1993 but 1.7bn below the estimate from the Office for Budget Responsibility. Continue reading...

This blog is now closed.

Political tightening and an anti-espionage law make it harder for outsiders to gauge the situation. How accurately can insiders do so?A spate of recent statistics shows that the Chinese economy is faring poorly. The country was supposed to rebound after ditching its draconian zero Covid" policies, but, after an initial revival, things have gone awry. Earlier this month it slipped into deflation. Key indicators, including industrial production, investment and retail sales, came in well below expectations.The most concerning figure, however, is the one that we can't see. The youth unemployment rate was suspended from the monthly economic data release, having reached a record 21.3% in June - suggesting not only that July was grimmer, but that improvement is not expected soon. The government has stopped publishing swathes of statistics in recent years. While there are many reasons for that, and while some may still be released to data firms, it has probably helped to bury some bad news, and makes it harder to cross-reference information. Chinese economists are also under pressure to avoid discussing negative indicators. Continue reading...

A profit warning from housebuilder Crest Nicholson compounded fears of a housing market slowdown, as Rightmove data revealed a further drop in asking pricesAJ Bell investment director Russ Mould said that while weak house price data (as was hardly a surprise", Crest Nicholson's profit warning has laid bare the the scale of the impact of a housing slowdown on the housebuilding sector."Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove's latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning.The 7,000 drop in the average asking price observed by Rightmove in the last month, allied to a big drop in transaction volumes, is the kind of statistic to make estate agents distinctly uneasy. Continue reading...

We'd like to hear from non-EU immigrants to the UK - particularly from Nigeria, Zimbabwe and India - who have been granted UK work visas in the past yearWe're interested to hear from non-EU immigrants who have recently been granted work visas for the UK.Whether you're already in the UK or intend to come and work in the UK in the near future, we'd like to hear when you applied for your work visa, how long it took to be approved, what jobs your visa allows you to work in and what motivated you to apply. Continue reading...

Some blame falling global demand, but borrowing by government and property sector has held back growth

Central bank reduces one-year loan prime rate but surprises analysts by leaving five-year rate unchanged

Whether it is on the economy, the NHS or small boats, the prime minister is failing to meet the targets by which he said his government should be judgedEven when seen through Daily Mail headlines, things do not look good right now for Rishi Sunak's five priorities. At the new year, the prime minister announced five measures by which he expects to be judged. Two were social: reducing NHS waiting lists and stopping the Channel small boats. Three were economic: halving inflation (at that time running at 10.7%), growing the economy and reducing national debt. With an election looming, such goals matter more than usual.Last week was duly designated NHS week" in the government's summer publicity push. It was not a success. Embarrassingly, the NHS waiting list for England has just risen to 7.6 million people, the highest since the figure began to be consistently monitored in 2007. In a hospital photocall last week, Mr Sunak himself admitted that progress had stalled". Continue reading...