Economics | The Guardian

Chancellor has asked the OBR to prepare forecasts for the economy and public finances to be presented to parliament

Over the holidays, this column will explore next year's urgent issues. Today we look at how the past helps us understand the dollar's power and pitfallsNext year marks the 110th anniversary of a global financial crisis that shaped the world. The crash of 1914 was the biggest systemic crisis that the City, the centre of imperial rent extraction, had faced. It was also, at the time, a largely unremarked upon event. The unprecedented closure of the London Stock Exchange did cause headlines, with this paper noting that the shutdown left brokers swarming outside like ants around the destroyed heap". In the summer of 1914, however, Britons could be forgiven for being preoccupied by a life-and-death struggle emergingonthe continent.What makes the episode historically significant is the UK government's unprecedented scale of spending to save the City. In 1914, the Bank of England invented quantitative easing by purchasing bad loans from the banks in order to support the economy. Britain's declaration of war on Germany effectively rendered banks bust, since international bills of exchange, bills of trade and other financial instruments issued by enemy nations were unenforceable and hence in default. Since these were traded in London, the losses began to pile up in the City's finance houses. Something had to be done. Continue reading...

UK economic prospects are bleak but an agenda-setting fiscal event such as sweeping tax cuts in March offers another roll of the diceTo grasp the nettle, or wait in the hope that things somehow miraculously improve. This is the choice Rishi Sunak will be weighing for the next general election, as the Conservatives limp towards the finishing line of another challenging year.After Jeremy Hunt announced the government would hold an earlier than anticipated budget, with a date set for 6 March, the possibility of a poll in May, in the afterglow of some electioneering tax cuts, is clearly being given considerable thought. Continue reading...

Our politicians must stop crushing hope for a better future by talking about fiscal rules that can doom us all, write Richard Murphy and Colin HinesIt's not just the future of the EU that is threatened by the straitjacket of fiscal rules" (Editorial, 19 December). Far too many UK politicians are threatening to take the UK down the dead-end path ofwhat your editorial correctly terms the discredited economics of austerity".The public wants the next government to supply a more secure future, where wages and conditions improve and more local jobs are available. This will require a massive investment programme to build the foundations of the socially equitable and environmentally sustainable future that people crave. Continue reading...

Influx of high street shoppers should cheer retailers with numbers up by nearly 9% on 2022Bargain hunters flocked to Britain's high streets in greater numbers this Boxing Day than last, with crowds of shoppers in central London returning to pre-pandemic levels for the first time.Full-day footfall was up by 4% compared with 26 December 2022 on a national level, according to figures from the retail analysts MRI Software, improving on initial estimates at midday of a 1.4% increase. On high streets the picture was even better, with a full-day rise of 8.8% year on year. Continue reading...

Rolling coverage of the latest economic and financial news, as news publisher says AI tools use its content without permission

Inequality and poverty arose by design, not chance and stories of human rights abuses and failures in development have deep roots. Here, Prof Benjamin Selwyn recommends key non-fiction texts to help unravel some global complexitiesOne of the key questions in development is, can all countries become rich, and if so, how? Rostow, a US academic and adviser to JFK, rising to national security adviser to President Lyndon Johnson in the mid 1960s, said they can. Continue reading...

Weaker Christmas spending amid cost of living crisis and fewer shops opening cut visitor numbers by 30% on 2019Retailers have recorded a small pickup in Boxing Day footfall, but visits to stores remained well below pre-pandemic levels as several high street chains stayed shut.Retailers have been braced for weak spending over the Christmas period as the UK economy stagnates amid the cost of living crisis. Continue reading...

The big seven firms are weighted as much on global indices as all Japanese, British, French, Canadian and Chinese companiesIn the old days, there were the FAANGs, the five big US tech stocks that dominated the investment landscape - Facebook (now Meta), Amazon, Apple, Netflix and Google (now Alphabet). That picture is now out of date. Say hello instead to what is variously called the Super Seven or the Magnificent Seven - four of the above (the dropout being Netflix) plus Microsoft, Tesla and the chip-maker Nvidia. This group's domination is the stock market story of 2023.The chart below is one for the ages", says Duncan Lamont, the head of strategic research at the fund manager Schroders. It shows how, even if you invest via one of the broadest and most widely used global" stock market indices, you will end up with a portfolio that is very American and very skewed towards US tech. Continue reading...

Some big retailers stay shut as Black Friday overshadows traditional sales and people watch their budgetsShoppers are expected to spend 3.7bn this Boxing Day - but that's 3% less than a year ago as the sales are now overshadowed by Black Friday events and shoppers remain cautious about their budgets.The fall in spend marks a big drop in the volume of items being bought, given that inflation remains at about 4.3%. Continue reading...

Employees who fill up their schedule with them and do little should take a hard look in the mirror and change their waysWant to have a successful meeting? Don't meet at 2.36pm.According to a new survey of more than 2,000 employees, people typically hit the wall" around that time. The post-lunch slump" may be caused by personal habits such as lack of sleep, not drinking enough water, not getting enough exercise and an overall poor diet. But the problem is exacerbated by the meetings themselves, which are oftentimes monotonous" and overly lengthy". Continue reading...

Importers, exporters, private citizens and the Labour party all urgently need the economy to function better than thisFor a long time, people would ask me: Why do you go on all the time about Brexit?" My answer would take various forms, but essentially it boiled down to: Because it is the biggest self-inflicted British economic crisis of my career." Brexit affects businesses and what economists call consumers" every day - almost always adversely.More recently, the consistent message from readers I encounter, when Brexit comes up in the conversation, has been please don't stop". Indeed, it is time to get Brexit undone". Continue reading...

The government's reliance on the private sector has led to a UK economy on the brink of recession and a crumbling stateThe economy will end the year on the brink of recession and it is not hard to see why. After 13 years of Conservative misrule that reached its nadir last year during Liz Truss's brief tenure as prime minister, the country is crawling towards a light that flickers dimly. Even the so-called recovery since Truss's calamitous mini-budget has proved a mirage. Official figures on Friday showed that the economy shrank in the summer, when previous estimates told a story of modest growth. The signs are already flashing red for a further contraction in the autumn and winter months.If a technical recession - one that charts a decline in gross domestic product (GDP) across a six-month period - comes to pass, it will reveal that Rishi Sunak's mix of income tax rises and public sector cuts have backfired, as many experts said they would, leaving the UK worse off in almost every way possible. Continue reading...

The ghosts of Brexit, immigration and recession decide not to wake the prime minister Continue reading...

Inventor defends economic policies of Kwasi Kwarteng and Liz Truss that sent economy crashingSir James Dyson has criticised the government for not going for growth" after the latest official figures revealed an increasing likelihood of a recession in the UK.The inventor said wealth generation and growth had become dirty words" while praising the economic policies of former chancellor Kwasi Kwarteng and former prime minister Liz Truss, whose disastrous mini-budget sent the pound crashing against the dollar and brought the near collapse of pension funds and soaring mortgage costs. Continue reading...

Fun-size packs of bars, Milk Tray and Quality Street up by at least 50% since 2022 as cocoa, sugar and packaging costs balloonSupermarkets have increased the price of some festive chocolate treats by more than 50% on last year as inflation takes its toll on cocoa, sugar and packaging, research has shown.Top of the Christmas inflation pack was Green & Black's miniature chocolate bar collection which was up by just over 67% on last year to 6 at Asda, according to analysis of supermarket pricing by Which?, the consumer group. Continue reading...

Many UK cheese makers could face 245% duty from 1 January, making exporting unaffordableA priceless opportunity to sell more affordable high-quality cheese to Canada" was one of those many Brexit boons that Boris Johnson championed with his customary blather as prime minister.A bespoke UK-Canada trade deal was going to open up the Canadian market to cheddar, stilton and wensleydale in a way that had never been possible under a trading agreement struck between the EU and Canada. Continue reading...

Lagos loves to wine, dine and dance in the month leading up to Christmas, but soaring prices and rampant inflation mean would-be revellers are staying homeA normal December for Nigerian student Ibukun Ometesho involves a seemingly endless roll of music concerts and dinners out with friends. This year, however, she is hosting friends at home because she can't afford to party.Ometesho wanted to attend the Palmwine music festival in Lagos, but a student ticket costs 21,100 naira (20) - double what she paid last year, and three times more than in 2021. I saw the prices and I was shocked. It just does not make sense," she says. Continue reading...

UK GDP fell by 0.1% in July-September, worse than first estimated, raising fears of a recessionThe 0.1% fall in real GDP in Q3 may mean that the mildest of mild recessions started in Q3, says Ashley Webb, UK economist at Capital Economics.Webb adds:But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024.Rishi Sunak is a Prime Minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.Thirteen years of economic failure under the Conservatives have left working people worse off with higher bills, higher mortgages and higher prices in the shops. Continue reading...

Rising cost of food and drink, as well as presents such as books, takes shine off festivitiesChristmas is supposed to be the season of good cheer, but this year the rising cost of festive treats across Europe is taking the shine off celebrations.Whether it's food and drink or presents such as books, higher prices are making life tougher for European households. Here we examine the effect that inflation has had on various countries across the continent and on the items that make up a traditional Christmas in each one. Continue reading...

Whether or not a recession materialises, the GDP figures are bad news for government

Inflation fall to 3.2% fuels calls for Federal Reserve to cut rates sooner as UK GDP figures push economy towards recession

A strike by Channel Tunnel workers has blocked train travel between France and Britain, while powerline problems hit West Coast mainline

Analysts blame rises in welfare costs and debt interest bill for monthly deficit of 14.3bn in NovemberGovernment borrowing was higher than expected last month despite an increase in tax revenues and a reduction in the level of energy support for millions of households.Analysts blamed increases in the cost of welfare benefits and the debt interest bill for a monthly deficit of 14.3bn in November. That was lower than the 15.2bn in the same month last year, but higher than City economists expected. Continue reading...

Firm says it is weighing up options to secure product availability amid Yemeni rebel attacks on shippingIkea has warned that the disruption to global trade caused by Yemeni rebel attacks in the Red Sea could delay its deliveries and affect availability of some products.The world's largest furniture company said it was evaluating other supply options to secure the availability of our products" after many big shipping companies stopped sending vessels through the Suez canal in response to the attacks by Houthi militants' protests against the Israel-Gaza war. Continue reading...

New libertarian president accused of drawing up a battle plan against working people'Thousands of protesters have poured on to the streets of Buenos Aires after Argentina's new president announced a far-reaching emergency decree containing dozens of controversial economic measures - a move one prominent critic compared to the actions of an absolute monarchy.Javier Milei, a radical libertarian economist who was inaugurated less than a fortnight ago, won power promising a dramatic shake-up of Argentina's moribund economy amid rampant inflation and widespread poverty. On Wednesday night Milei appeared on television, flanked by 12 stony-faced ministers and top officials, to unveil a decree he claimed would haul the South American country out of the economic hell we are now living through". Continue reading...

Falling inflation and tax cuts in a February budget would signal a spring poll but weak growth and rising mortgage bills bode cautionGo early or postpone election day in the hope that things will look brighter at some point in the future. It is a dilemma that James Callaghan, John Major, Gordon Brown and Theresa May all faced. To that list, now add the name of Rishi Sunak who ends 2023 with a tricky call to make.The Labour party has been on election footing for months, suspecting that the prime minister might call a snap election in the spring. But it was Jeremy Hunt's announcement in the autumn statement that he was cutting employee national insurance (NI) contributions that really alerted Westminster to the possibility of a May poll. Continue reading...

Soaring prices and worsening insecurity on the roads is spoiling a cherished tradition of family reunions during the holidaysEmmanuel Ejeh has a barbershop set in a park in Maitama, an affluent area of Nigeria's capital city, Abuja. The last time he travelled to his home town in Benue state more than 200 miles away to see his elderly mother was eight years ago.Since then, things have continually gotten worse and worse," he says of his business and personal finances. Instead of spending so much money on transportation to Benue and back to Abuja, it is better to send part of that money to my mother instead. It does not make up for seeing her, but what other option do I have?" Continue reading...

Developing countries are right to want to fight illicit financial flows and combat aggressive tax strategies that rob them of cash they needIt has long been a paradox that the rich countries whose professional services firms are responsible for most of the world's cross-border tax abuse also write global tax rules. That, pleasingly, may not be the case in the future. Last month, developing countries at the UN won a historic vote to set up a tax convention, over the objections from the body that wields power today - the Organisation for Economic Co-operation and Development (OECD), a club of wealthy countries, including the US, the UK and Japan. This is a long-overdue and much-needed change. Poor nations' ability to feed, educate and provide healthcare to their people is hobbled by illicit and hidden movements of capital worth billions each year.The vote was overwhelming. More than 120 mostly developing countries, representing 80% of the world's population, called for a framework convention on international tax cooperation". The UK, rather shamefully, tried to scupper the vote by bringing forward an amendment to strike out the word convention" and remove the possibility of having a legally binding outcome. Thankfully, this attempt at wrecking the proposal failed. Critics say that many UN conventions are commendable, but they are more honoured in the breach. This misses the point. Having a tax convention is better than not having one; it allows pressure to be applied on governments to take ambitious positions and stick to agreed deals. Continue reading...

Treasury says post-Brexit tie-up to be signed on Thursday will ease cross-border market access for financial servicesThe UK and Switzerland will agree to forge closer links on Thursday in a post-Brexit accord that aims to deepen ties between the City and the Swiss banking system.In a move that brings Europe's largest financial centres closer together, the mutual recognition agreement will be signed on Thursday by the chancellor, Jeremy Hunt, during a visit to Berne. Continue reading...

Forecast-beating drop in November takes rate to lowest level in more than two years

Typical household bill predicted to fall to 1,660; pound drops below $1.27 as data adds pressure on Bank of England to lower interest ratesLet them eat cake! Prices of a number of bread products, including white and wholemeal sliced loaves, and packs of cakes all fell between October and November, but rose a year ago.Other smaller downward contributions to the change in the inflation rate came from meat; milk, cheese and eggs; and soft drinks. The only partially offsetting upward effect came from fruit, where prices of strawberries rose this year by more than a year ago.Yet in absolute terms, core inflation in Britain is still more than twice the Bank of England's 2% inflation target. And even though the pace of easing is more than welcome, the Bank of England is still last in line to join the pivot party.Therefore, hawkish BoE expectations should limit the pound selloff if, of course, investors continue to divest from the US dollar on the back of softening Fed expectations. Continue reading...

The implications of the 3.9% rate for shoppers, savers, borrowers and pensioners

From sugar to bread and transport to recreation, how the cost of everyday items varies

Food prices were 29% higher last month than in September 2021, leaving many households still under pressure

This online tool will help you discover what is contributing to your household's cost of living increasesInflation has been soaring in the UK, with people being hit by higher prices for everyday essentials, but cost of living pressures are finally starting to ease.The latest inflation rate for the 12 months to November 2023 means that goods and services cost 3.9% more than they did a year ago - in most cases, surpassing any pay rises workers can expect to receive. Continue reading...

Though Johnson promised no non-tariff barriers', firms say they are struggling under compliance burden' of customs and safety checksAlmost two-thirds of British exporters have said selling to the EU has become harder in the past year, according to the British Chambers of Commerce, which is calling on the government to do more to smooth trade frictions post-Brexit.Three years on from Boris Johnson signing the Trade and Cooperation Agreement (TCA) with the EU, the small businesses which make up much of the BCC's membership are still struggling to negotiate trade barriers. Continue reading...

Plans to reintroduce the straitjacket of fiscal rules, at a time when the union faces exceptional challenges, are a mistakeAs last week's fraught summit discussions on Ukraine underlined, the European Union faces daunting and costly challenges in the years ahead. The decision to open membership talks with Kyiv was both a welcome affirmation of continued solidarity and a recognition of the reality that Europe's security is intertwined with Ukraine's resistance to Vladimir Putin's revanchist ambitions. But talks about a new 50bn aid package have had to be prolonged into the new year, following Viktor Orban's blocking tactics in Brussels.Eventually, some kind of modern Marshall plan will be required to reconstruct a shattered country. That will be a very expensive business. Similarly, achieving the ambition of making Europe the first climate-neutral continent by 2050 will require a massive injection of public funds. The European Commission estimates that about 700bn a year will need to be invested to meet the EU's green targets. That kind of fiscal firepower will be difficult to sustain after the EU's Covid recovery fund dries up in 2026. Continue reading...

Rolling coverage of the latest economic and financial newsMPs have heard that the complicated complex ownership structures used by private equity allow them to evade accountability, and stop unions asking asking questions about how business is being done.Nadine Houghton, national officer at GMB union, tells the Business and Trade committee that in the case of Asda, they have made formal financial disclosure requests" asking about the gap in its operating costs, and around where dividends are being declared.That's just about creating a structure that prevents working people from understanding what's happening in their employer, and their union being able to do their job and represent those members.Cashing in in a very big way because private equity is a wonderful reward system.Their fees are phenomenal, both direct and indirect. They have reaped a very big harvest.What you will see is much poorer performance figures coming out of the industry.I think the going will be tougher for the institutional investors who back them as well as for the fund managers. Continue reading...

Adobe's proposed $20bn merger with product design software company Figma has been terminated, following competition probes in EU and UKBP Plc said it will pause all its oil tanker shipments through the Red Sea.The move follows an escalation of attacks on merchant shipping being mounted from Yemen's ports by Houthi forces.The safety and security of our people and those working on our behalf is BP's priority.In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea." Continue reading...

UK ministers had hoped to agree foundational trade partnership' before both countries head to pollsMinisters have given up on signing a trade agreement with the US before the next election, after the Biden administration signalled it had no interest in agreeing one.British officials had been hoping to agree a foundational trade partnership" before both countries head to the polls in the next 12 months, having already decided not to pursue a full-blown free trade agreement. Continue reading...

Conservatives are pointing to Venezuela's economy and 20-year-old lawsuits about dogs to try to damage Labour's prospects. With the country so broken already, will anyone buy their arguments?I'm sure there used to be a festive statute of limitations; a point in the year when it was no longer classy to launch into one's political opponents. Even at the height of Corbyn-phobia - when the guy couldn't walk down the street without someone finding the colour of his socks disrespectful to the queen - he caught a break just before Christmas.Not so Keir Starmer, who is under attack on two flanks. Jordan Peterson, the Canadian philosopher-king spinning life lessons out of pure gold such as be a man" and sit up straight", warned in an interview with the Daily Telegraph that, should the UK elect a Labour government, you're gonna be Venezuela for 20 years". Continue reading...

Deputy governor feels MPC will need more convincing that wage pressure is abating

Plan, which aims to support domestic producers, will also apply to iron, ceramics and cement

Tough first few months of 2024 forecast for the industry as consumer confidence remains lowRetailers are facing a tough new year as weak consumer demand is expected to combine with a barrage of increased costs, including the higher minimum wage.Shoppers are likely to keep their spending on pause during the first months of 2024, according to forecasts published today by the Retail Think Tank, a group of industry experts who analyse the health of the sector, as mounting mortgage and rental costs weigh on consumer confidence. Continue reading...

Advertised salaries also rise, for first time since June, with social work recording biggest annual increase

The inflation shock may be fading but 13 years of Conservative-led governments haven'tRishi Sunak is approaching the end of the year with little to celebrate. Of the five priorities set by the prime minister in January, four are in a mess: the economy is shrinking, the national debt will only fall if you believe in tax and spending fantasy, NHS waiting lists remain sky-high, and stopping the boats", through the Rwanda policy, is both failing and blowing the Tories apart.This week there will, however, be one crumb of comfort: from official figures expected to show another fall in inflation, from 4.6% in October to 4.4% in November; no doubt to be accompanied by a flurry of government fanfare taking credit that the pledge to halve inflation, from over 10% at the start of the year, has been met. But even here Sunak could find trouble. Continue reading...

The drive to make ill and disabled people productive again needs joined-up thinking, not a punitive regime of sanctionsA basic tenet of Anglo-Saxon capitalism has come into conflict with the post-pandemic workplace in a way that is confounding Tory politicians.Mel Stride, the work and pensions secretary, wants ill and disabled people and the disaffected to find gainful employment, taking up many of the almost 1m job vacancies in the UK that need filling. Continue reading...

BoE insists that monetary policy must remain restrictive for an extended period', after money markets anticipated five rate cuts in 2024

Threadneedle Street says Britain faces tougher job to crush inflation than other advanced nationsThe Bank of England has said Britain is facing a tougher job to crush persistently high inflation than other advanced nations, as it kept interest rates on hold at the highest level since the 2008 financial crisis.Pushing back against expectations in financial markets for a deep round of interest rate cuts next year, the central bank said there was still a long way to go before it could declare victory on inflation, despite a worsening outlook for the UK's stagnant economy. Continue reading...