Economics | The Guardian

Huw Pill warns inflation could rebound as UK business survey signals economy strengthened over last monthThe prospects of a summer cut in UK interest rates have receded after the Bank of England's chief economist said inflation must be squeezed out of the economy and cautioned against cutting too soon.After a key survey signalled strong sales across the private sector over the past month and the London stock market rose to a record high, Huw Pill said concerns remained that inflation, which is expected to fall below its 2% target within a few months, could then rebound as the economy strengthens. Continue reading...

Rolling coverage of the latest economic and financial news, as FTSE 100 hits alltime high of 8076 points

UK's blue-chip index reaches 8,076, surpassing previous high of 8,047 in February 2023

Rishi Sunak has announced that UK defence spending would be boosted to 2.5% of GDP by 2030. 'Over the next six years, we'll invest an additional 75bn in our defence. And it will be fully funded with no increase in borrowing or debt,' he said on a visit to Poland, adding that UK spending would be put on a 'war footing'

Borrowers urged not to panic as banks including Barclays, NatWest and HSBC readjust cost of loansAt least five leading lenders increased rates on their fixed mortgage deals on Tuesday in response to market uncertainty", adding to pressure on homebuyers and those looking to remortgage.Barclays, HSBC, NatWest, Accord Mortgages (part of Yorkshire building society) and Leeds building society have all upped the cost of some fixed-rate deals. In some cases these have risen by up to 0.4 percentage points. Continue reading...

Government borrowed 120.7bn in the last financial year, with just under 12bn in MarchJeremy Hunt's scope for a substantial pre-election tax giveaway has been hit after the latest set of official figures showed the UK's public finances in worse shape than thought at last month's budget.Figures from the Office for National Statistics (ONS) showed the government borrowed 120.7bn in the 2023-24 financial year - 6.6bn more than the Office for Budget Responsibility (OBR) had expected. Continue reading...

Rolling coverage of the latest economic and financial news

UK's blue-chip index ended trading at 8,023, its highest close ever, as pound falls against dollarThe UK stock market has hit a record closing high, amid optimism that the Bank of England will cut interest rates twice this year, and easing geopolitical tensions in the Middle East.The FTSE 100 index of blue-chip stocks listed in London ended trading on Monday above its previous closing peak, set in February 2023, helped by rate cut hopes and a weakening pound. Continue reading...

David Redshaw is staggered by Keir Starmer's admiration for her, Brian Hughes says her government created the illusion of an economic miracle, while Charles EL Gilman disputes her total hostility to the EUAndy Beckett's takedown of the Thatcherite myth is timely (Margaret Thatcher set Britain's decline in motion - so why can't politics exorcise her ghost?, 12 April). Most remarkable is Keir Starmer's admiration for the entrepreneurialism" she let loose. Starmer is clearly stuck in his New Romantic era and hasn't done his history.The biggest burst of entrepreneurship came in the pre-Thatcher 1960s. The young Turks who burst into the music industry through the side door. The fashion revolution in Carnaby Street and Kings Road. The new magazines, including the very first glossy women's rights publication. And, sneering rightwingers might note, I don't think there was the proverbial politics of envy. I think we rather admired Terence Conran, whose airy Habitat emporiums offered well-designed homeware at affordable prices. It all made Britain suddenly world famous. Continue reading...

The former PM's whingeing, unintentionally hilarious and scapegoating rant about the economy-crashing disaster of her time in No 10 is best read as a cautionary tale of hubristic zealThree people, none of them the author, emerge from this book looking prophetic. One is her constituency agent in Norfolk. Told she is thinking about running for the Tory leadership, he tells Liz Truss it would be for the best if she lost. Another is her husband, Hugh. He faithfully backs the tilt at No 10, but predicts that her prime ministership will all end in tears". The third prescient person is the late queen, who concludes the formalities appointing Truss as prime minister with the warning: Pace yourself."Maybe I should have listened," muses the author, one of the very few acknowledgments she offers to the reader that she might have got the odd thing wrong. Continue reading...

IMF has revised up growth forecasts but medium-term prospects remain poor as globalisation goes into reverse

Chief economist says common framework has failed to provide any new money to world's poorest countries since it was set up in 2020The mechanism for providing debt relief to the world's poorest countries is failing to produce results and requires a major rethink, a senior official at the World Bank has said.Indermit Gill, the bank's chief economist, said that after four years the G20's common framework - designed to speed up and simplify debt restructuring - had not provided a single dollar of new money. Continue reading...

Retail inflation has lessened, but businesses are still swamped by huge price increases in materials and servicesConsumer prices ticked up again in March, rising to anywhere from 3.2% to 3.8% year-over-year, depending on the rate you're tracking. Of course, that's way down from what it was back in 2022. But don't tell that to any of my clients - or people running businesses in just about every industry across the country. For them, prices are not only rising but are significantly - significantly! - higher than they were when Joe Biden took office.Want some examples?If you're in the manufacturing business, you're paying 11% more for plastics and resins, 24% more for industrial gases, 23% higher prices for machinery and equipment, 35% additional cash for the oil and grease that lubricates those machines, and 18% more for industrial chemicals (which get used in just about everything) since 2021. Overall, your total costs of manufacturing are 26% higher than they were just three years ago.In the construction business the good news is that lumber prices have actually fallen 25% since 2021. But that's been more than offset by a rise in iron and steel (27%), cement and concrete (42%), and staples, nails, spikes and tacks (21%). Overall, construction materials costs have increased about 30% since the last inauguration.My clients in the food manufacturing and service industries are also feeling the pain. Food manufacturing costs have risen 24% since 2021, the cost of fertilizer is up 34% and animal feeds are up 10%. Now do you understand why restaurant owners are struggling to stay in business and have resorted to adding surcharges for credit card and other fees?Once you make any of your products, you'll be paying 8% more for domestic freight and a whopping 49% more to ship or receive stuff overseas. Packaging all your products with paperboard boxes and other components will also cost you 38% more than it did three years ago.Since 2021, hourly wages are up 16% and health and property insurance rates are up 8% to 10%. And interest costs have quadrupled, with most of my clients paying two to three points over the 8.5% prime rate. Continue reading...

Social cohesion can only flourish in a society that has an inclusive and equitable economy, where safety and respect are assured and fear is minimisedIf only nation-building could happen by putting a sign on a building and creating a capital A authority.Rob Sitch's stunning embodiment in Utopia of a public servant trapped in a world of risk matrixes, carefully managed announceables, spreadsheets and asphyxiating political caution crystallised a collective sense of faintheartedness. Continue reading...

Keir Starmer must learn from the Tories' failures and ensure green projects are well planned and resourcedIn the energetic pursuit of net zero, billions of pounds could be squandered needlessly. That's the lesson from countries as diverse as Italy, the US and UK, where the rush to subsidise green projects suggests vast sums are at risk. Worse, they could be lining the pockets of multinational businesses and City financiers.In the UK, 14 years of austerity has left the public sector struggling to make coherent, strategic decisions. When a decision is finally made, it is a panic measure that quickly unravels. The fallout could be that voters become disenchanted with green tech, especially if the dash for net zero leads to higher taxes and higher borrowing while early adopters unwittingly pay for costly mistakes. Continue reading...

Behind a veneer of progress, injustice and inequality propped up by corruption and the caste system haunt the subcontinentThis year, more than 80 countries and half the world's population face elections. While many islands in the Caribbean go to the polls, their people are usually more occupied with US and British elections than those in their ancestral homes in Africa and India.This may be excusable, there is an old saying: When America sneezes, the Caribbean catches a cold." It may also seem strange that some identify as Republican or Democrat, and Conservative or Labour, while living in a region that has to endure a rigorous process and heavy expense to obtain a visa to even holiday in those countries. Continue reading...

Annual health check to examine whether tax increases or spending cuts will be needed after electionJeremy Hunt's plans for a fresh tranche of pre-election tax cuts will be put under the microscope when the International Monetary Fund conducts its in-depth look at the UK economy next month.IMF officials said the team sent to London to conduct its annual health check would be looking closely at whether tax increases or spending cuts would be needed after the general election. Continue reading...

Rolling coverage of the latest economic and financial newsAlthough European stock markets certainly aren't in a full-blooded plunge, yet anyway, the main indices are all in the red - following losses across Asia overnight (see 7.21am).The European Stoxx 600 is at a one-month low, as investors fret about events in the Middle East.FTSE 100: -36 points or -0.46% at 7842 pointsGermany's DAX: -152 points or -0.9% at 17,681 pointsFrance's CAC: -45 points or -0.6% at 7,976 pointsItaly's FTSE MIB: -345 points or -1% at 33,533 pointsWall Street is heading for losses when it opens in four hours, too, with the S&P 500 down 0.5% in pre-market trading.Asian markets bore the brunt of the breaking news of a retaliatory attack on Iran by Israel, also sending Dow futures sharply lower and resulting in further spikes in gold and oil prices.US markets will not have the opportunity to react directly to the developments until later, but the escalation will put pressure on the main indices, which were already lining up for a weekly drop. The Dow Jones managed a wafer-thin gain on Thursday, whereas the Nasdaq and S&P500 continued on a downward trend which is eroding the heady gains made over recent months. Continue reading...

Trade bodies say ongoing confusion about when checks will come in is incredibly challenging'

Shoppers cut back in March, with data likely to increase pressure on Bank of England over interest rates

The anti-growth coalition, Bank of England and the OBR are among those under fire from Liz TrussRaw free-market economics is missing in action. Somewhere between its 1980s ascendancy and today, the media, politicians, civil service and even the corporate mainstream abandoned small government and low taxes.At the heart of Liz Truss's new book, Ten Years to Save the West, the former prime minister reckons this is the reason for Britain's economic drift, alongside unelected technocrats" overruling the wishes of the people". Continue reading...

Kristalina Georgieva says Kyiv will need $42bn of financial support this year as G7 considers ways to use seized Russian assetsRussia's war with Ukraine is stoking geopolitical tensions and damaging the recovery prospects of the global economy, the head of the International Monetary Fund has warned.Kristalina Georgieva urged an end to the two-year conflict, saying it was both a human tragedy and a barrier to growth. Continue reading...

Reserve Bank and Treasury had predicted unemployment rate would rise from February's 3.7% as interest rates bite

Andrew Bailey says inflation is in line with BoE forecasts but view of markets is that data will delay interest rate cuts

IMF says reduction in national insurance may have made cutting UK national debt more difficultThe International Monetary Fund has issued a strong warning to Britain and other countries facing elections this year to avoid voter giveaways that might pose risks to their public finances.In its half-yearly fiscal monitor, the IMF said the reduction in national insurance contributions (NICs) announced by Jeremy Hunt in his budget last month may have already made cutting the UK's national debt more difficult. Continue reading...

Treasurer and finance minister hail remarkable achievement' as monitor finds balance to be behind only Canada among G20 countries

City investors trim their forecasts for rate cuts this year, after inflation falls by less than expected to 3.2%

Shift in rate reduction predictions to autumn hits prime minister's strategy of winning back mortgage payers

Pressure piles on World Bank and IMF to steer countries to low-carbon transition at spring summitGovernments of wealthy countries must pledge hundreds of billions more in overseas aid payments channelled through the World Bank to avert the worst effects of the climate crisis, civil society experts and economists have said.The International Development Association fund, the arm of the World Bank that disburses loans and grants to poor countries, is worth about $93bn (b75n) but that figure must be roughly tripled by 2030, according to economic experts. Continue reading...

Hi-tech golden triangle' of Oxford, Cambridge and London risks deeper regional inequalities, says thinktankInvestments in new technologies such as artificial intelligence (AI) are profoundly skewed" towards the golden triangle" of Oxford, Cambridge and London, and risk deepening existing regional inequalities in England, according to research.Ministers have promised to level up the country, narrowing the gap between the best- and worst-performing areas, but the rapid rollout of generative AI and automation could cut against that aspiration, according to the Institute for the Future of Work (IFOW). Continue reading...

US central banker says recent data have clearly not given us greater confidence' that inflation coming fully under controlThe Federal Reserve chair, Jerome Powell, cautioned on Tuesday that persistently elevated inflation will probably delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.Recent data have clearly not given us greater confidence" that inflation is coming fully under control and instead indicate that it's likely to take longer than expected to achieve that confidence", Powell said during a panel discussion at the Wilson Center. Continue reading...

In the UK, anxiety over the crisis after Iran's missile strike on Israel drives down UK sharesAn escalating Middle East conflict risks leading to higher oil prices, a reversal of the recent fall in inflation and a puncturing of the optimistic mood in financial markets, the International Monetary Fund has warned.The Washington-based IMF said it was closely monitoring events in the region after Iran's missile strike on Israel at the weekend and stressed the possibility that a war between the two countries could lead to higher interest rates. Continue reading...

Growth per head will remain flat this year as the effects of high inflation take time to abateBritain's households will endure a second year without an improvement in their living standards in 2024 as the effects of high inflation take time to abate, the International Monetary Fund has revealed.In its flagship World Economic Outlook (WEO), the Washington-based IMF said it was forecasting modest 0.5% UK growth this year - but only as a result of a rising population. Continue reading...

Many low-income nations are having to spend more on interest payments than vital sustainability goals. That needs to changeBlighted by the effects of global heating, beset by food insecurity and rising poverty, and hobbled by dollar-denominated debt that leaves no fiscal room for manoeuvre, some of the world's poorest nations are enduring a perfect storm. In the wake of Covid and then the war in Ukraine, inflation and high interest rates have tipped many over the edge: between 2020 and 2023 there were 18 sovereign defaults in 10 developing countries - more than in the previous two decades. Others are either in debt distress or close to it.As the World Bank and the International Monetary Fund hold their annual spring meetings in Washington this week, this dismal state of affairs should be at the top of delegates' agendas. Prior to the pandemic, the 2020s had been earmarked as a transformative decade - one in which developing nations would make vital progress towards climate targets and eliminating extreme poverty and hunger. Instead, due to events beyond those countries' control, there has been what a World Bank report this week described as a great reversal". In countries classified as eligible for grants and loans from the bank's International Development Association (IDA), a quarter of the population is now surviving on less than $2.15 a day - the global definition of poverty. Continue reading...

Pay growth is stronger than expected, underlining dilemma over when to cut interest rates

Continuing levels of inactivity due to ill-health and caring responsibilities suggest all is not well

Figures show sales rose 3.5% in March, the first increase above inflation since early in the crisisHigh street retailers benefited from a jump in consumer spending over the Easter bank holiday weekend, according to industry figures showing an increase in footfall and sales despite the cost of living crisis.Data collected by doorway sensors at thousands of shops across the UK showed footfall increased by 7% compared with Easter 2023 over the four days from Good Friday to Easter Monday, while the value of sales measured by debit card transactions increased by a similar amount. Continue reading...

Brent crude dips to $90 per barrel as markets monitor Israel-Iran, while 14,000 jobs could be cut at Tesla

Poverty reduction drive all but halted across many nations as Bank calls for more money to tackle a great reversal'

Brazilian president Lula's proposals have the backing of the World Bank. Now we need actionAll things considered, the world's richest countries have emerged from the global pandemic in better shape than they could have imagined when Covid-19 first appeared just over four years ago.To be sure, the impact of lockdown and its aftermath has been painful, but the effects on poor countries have been far more severe. Continue reading...

When I met the Dutch politician Geert Wilders years ago, he was set on Nexit'. Now he too would rather stay in the EUExports are performing badly, pace the fantasy world of the Daily Express; supply lines for imports once regarded as routine are disrupted or discontinued altogether; staff shortages owing to new restrictions on travel and employment of our fellow Europeans are hurting the hospitality trade in what we used to boast about as our service economy". The UK's economy is 5% worse off than it would be in the EU" according to a recent well-researched report by Goldman Sachs. Welcome to Brexit Britain!In the early days of the Brexit disaster, I met Michel Barnier, the EU's impressive negotiator, at a high-powered conference on Lake Como organised by the Ambrosetti Institute. We agreed what a disaster was in store if the UK did not come to its senses. Continue reading...

Fragile recovery, low growth, global debt, AI, the climate ... The organisations founded in 1944 have lots to talk about this weekThere is likely to be a sense of relief when the International Monetary Fund and the World Bank hold their half-yearly meetings in Washington this week. Not because the world is crisis-free - it clearly isn't - but because since they met six months ago no fresh crisis has emerged.The past half-decade has been as tough as any period in the history of the two organisations. First there was the pandemic, then the surge in inflation as lockdown restrictions were lifted. The cost of living problems were amplified by the war in Ukraine. Then, last October, two days before the start of the IMF/World Bank meetings in Marrakech - and just as things appeared to be calming down - Hamas launched its attack on Israel. Continue reading...

The government might be celebrating falling inflation, but higher prices for goods and services are here to stayTwo years ago, a two-litre bottle of supermarket olive oil cost about 7. Step into your local branch today and that same bottle will set you back more than 16. Grab a packet of pasta, or some broccoli, and you will pay 95% and 50% more, respectively, than in 2022. If your car insurance renewal is due, that will be an extra 35%-50%.The Russian invasion of Ukraine almost 26 months ago set off a chain reaction that caused energy and food bills to jump, and ultimately sent inflation in the UK spiralling, reaching a peak of 11.1% in October 2022, the highest rate in 41 years. Continue reading...

Chancellor cheers 0.1% rise in GDP, but IoD fears economy still fragile

Former US Fed boss Ben Bernanke criticises failure to admit mistakes and change course

Report by former US Federal Reserve boss reveals faulty economic model and reluctance to admit mistakes

February growth of 0.1% comes despite construction and retail being hit by wet start to year

Kristalina Georgieva also cautions of danger of tepid twenties' - a decade of sluggish economic growth

European Central Bank says rate cuts would be appropriate if inflation keeps falling, as BoE policymaker Megan Greene argues UK rate cuts are a way offThere's takeover drama in the self-storage world this morning, as another UK company falls to a foreign buyer.Europe's Shurgard has agreed a deal to buy London-listed Lok'nStore, in a deal worth 378m. Continue reading...

Exclusive: Australian Energy Markets Commission set interim value for cutting emissions that should reach $420/t CO-e by 2050