Analysis: pressure to calm UK economy with higher borrowing costs has eased for now

Cheaper electronic goods also push down July rate to 2% from 2.5% in June

Claim that wages element of formula is distorted by pandemic backed by latest figures, which would mean rise of over 8%Rishi Sunak has come under further pressure to suspend the state pension triple lock after wage figures showed that the chancellor is on course to pay pensioners a rise of more than 8% next year.Sunak is understood to be considering telling Britain’s 12 million state pension claimants that the pandemic has artificially inflated the official wages figures and a new formula is needed to calculate the rise in the basic state pension for next year.Related: Ending pension lock is a start, but there’s no easy fix to the yawning generation gap Continue reading...

Analysis: chancellor warns of ‘bumps in the road’ as Covid, furlough and Bank verdict loom

June and July figures show rocketing demand for workers as country emerged from Covid lockdown

With service industries and foreign tourism decimated, the potential fall in ore prices and demand shows just how much the country relies on mining exportsIt seems not all that long ago all the talk was about how gloriously the economy was going and how the Covid recession was in the past. But now the two states encompassing 55% of the nation’s economy are in lockdown and the second half of this year looks to be tough for the economy – especially as our iron ore exports might be about to take a hit.One of weird things about the pandemic is that our major exports of iron ore and coal have seen an absolute prices boom:Related: Think Morrison was wrong about electric cars and weekends? Wait till you hear him on emissions | Greg JerichoRelated: Australia urged to embrace stronger 2030 climate targets in ‘crucial’ fight ahead of Glasgow summitRelated: The IPCC report is a massive alert that the time for climate action is nearly gone, but crucially not gone yet | Greg JerichoRelated: Pensioner slugged with jobkeeper debt accuses Coalition of double standardsGreg Jericho writes on economics for Guardian Australia Continue reading...

Economic output defies expectations to expand in Q2 – but analysts warn of contraction risk

Fewer than 25% intend to lure new recruits with better wages despite challenges, CIPD report showsFewer than a quarter of UK companies struggling to hire staff after the easing of pandemic restrictions plan to increase the wages they offer to lure new recruits, according to a report.Employers’ hiring confidence has hit a nine-year high as firms attempt to tackle what some recruiters have described as the worst staff shortages since the late 1990s, according to research from the Chartered Institute of Personnel and Development (CIPD).Related: Bottleneck Britain: turmoil has raised job vacancies and firms now jostle for staff Continue reading...

Readers respond to reports on the state of social care in England and lack of support for vulnerable familiesPatrick Butler is right that the pandemic has made the crisis in children’s social care “even more acute” (Crisis in children’s services in England is shocking if not surprising, 11 August). However, it is difficult to see how the government’s review of children’s social care will achieve the radical changes needed, for two reasons.First, it will require a commitment to more progressive taxation and increases in the minimum wage and universal credit to combat major inequalities, including those associated with the rising demand for children’s and youth services: childhood poverty, social deprivation, homelessness, poor health, ethnicity and disability. Continue reading...

Debbie Colson says the chancellor’s short-sighted approach to spending upfront will lead to a far larger global disasterYour article “Treasury blocking green policies key to UK net zero target” (13 August) suggests extreme myopia on the part of Rishi Sunak. This is surprising as he has shown with his coronavirus policies that it is possible to spend large amounts upfront to prevent large-scale future disaster. Climate change, if not addressed, will be a far larger global disaster. It needs a multi-pronged and global approach from central and local governments, the private and public sectors, and individuals. The state of the planet we leave to our children is, after all, a shared responsibility. Central governments must provide the lead, due to the scale and complexity of the challenge.Spending now will generate new technologies that will open up global business and economic growth opportunities. It will also save huge sums that will otherwise be needed – if we delay – to deal with worse flooding, drought and fires, as well as the physical and mental health consequences. Continue reading...

The decision has led to volatile financial markets, geopolitical tension and inflated asset pricesFew dates in economic history classify as turning points but one of them was 15 August 1971 when Richard Nixon went on TV to announce that the US would no longer exchange dollars held by foreign governments for gold.Nixon’s announcement 50 years ago this week had lasting ramifications. It was a statement to the world that the US was too weak to continue anchoring the global monetary system as it had done for the past quarter of a century. It would remain the world’s biggest and most important economy, but the days when it was uniquely dominant were at an end.In 2019, Mark Carney floated the idea of a global digital currency as a replacement for the dollar Continue reading...

All signs are that the chancellor will end his wage support initiative next month. If he does, it will be a chance missedIt seems inevitable that the Treasury will turn down requests from trade unions to maintain the furlough scheme as a permanent safety net beyond autumn.The TUC said it would be a step forward for the UK to have the kind of underpinning to incomes that German workers and many others across the world’s richest nations enjoy. The Kurzarbeit income protection scheme that Berlin has maintained through thick and thin since 1924 always comes to prominence in a major crisis, but it is in place to cope with a mini-crisis as much as a major one.An increase in universal credit is due to be cut back by Sunak in September. This tells everyone a permanent replacement for furlough is unlikely Continue reading...

Author of government study says Treasury resistance to green spending programmes could halt progress to net zeroImposing “premature austerity” again will undermine the fight against climate change and stop poorer households going green, one of the world’s leading climate economists has warned the government, amid claims that the Treasury is resisting policies to tackle the crisis.Nicholas Stern, the author of the seminal 2006 government study into the costs of climate change, said comprehensive programmes were needed to help poorer households make the switch to electric cars and away from gas heating, if the government hoped to bring all greenhouse gas emissions to net zero by 2050.Related: Calls for G7 spending restraint misguided, warns Lord Stern Continue reading...

HSBC analysis gives a good half-dozen reasons why buying a house will not get easier for years – which is very bad news for most British youngstersAnyone hoping for a property crash is going to be sorely disappointed. The main element of Rishi Sunak’s stamp duty giveaway may now be in the past and the Delta strain of the virus still ever-present, undermining consumer confidence, yet all the elements are in place for prices to continue moving up.Without the market having much time to catch its breath, the 7% to 8% increases of the past year will only moderate as the mania for property as an investment marches onwards. Continue reading...

The real worry is the gap between what the country produces and what average folks can afford to consume. Inequality is eating our economyHours after the Democrats passed their $3.5tn budget for Joe Biden’s American Families Plan – including childcare, community college, extended Medicare and measures to slow climate change – the West Virginia senator Joe Manchin, whose vote is necessary to get it through the Senate, made an ominous announcement. He had “serious concerns” about its size, warning it would add trillions of dollars to the national debt and spur inflation.One expects Republican lawmakers to demagogue about inflation and spending. To hear this from a Democrat is jaw-dropping.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist Continue reading...

UK inhaler maker plans to back tobacco giant Philip Morris International’s takeover bid, despite health charities urging them to oppose it

Analysis: GDP figures show attempts to revive business investment have not got off to a flying start

Official data shows 1% growth in June after further easing of lockdown restrictions

Rolling coverage of the latest economic and financial news, as UK mid-cap index hits new peak and blue-chip FTSE 100 closes at 18-month high

Rolling coverage of the latest economic and financial news

Sterling hit €1.1833 against the single currency, its highest level since February 2020The pound rose to an 18-month high against the euro on Tuesday as fears over rising Covid-19 infections triggered a sharp fall in German investor confidence.Sterling hit €1.1833 against the single currency, its highest level since February 2020, after investor morale in Europe’s largest economy fell to its lowest level in nine months. Continue reading...

Data collected from 38 member countries says UK among the major economies now in the slow lane

Some say the greenback’s dominance of cross-border payments will be erodedThis week marks the 50th anniversary of “the weekend that changed the world”, when the US president Richard Nixon suspended the dollar’s convertibility into gold at a fixed price and rang down the curtain on the Bretton Woods international monetary system. The subsequent half-century brought many surprises. From a monetary standpoint, one of the greatest was the dollar’s continued dominance as a vehicle for cross-border transactions.Under Bretton Woods, the dollar’s supremacy was readily explicable. The financial position of the US coming out of the second world war was impregnable. Changes in the price at which dollars could be converted into gold were unthinkable, first because of that financial strength and then, as the country’s monetary position weakened, because of the possibility that one devaluation would create expectations of another.The game gamechanger would be if central digital bank currencies were interoperable Continue reading...

Trade body calls for business rates reform to help boost investment in high streets battered by lockdownsThe end of lockdown has come too late to prevent fresh store closures on Britain’s high streets as businesses count the cost of 18 months of pandemic disruption, the latest update on consumer spending has shown.Despite a boost to activity after the lifting of restrictions, the trade body for the sector, the British Retail Consortium, said the pace of recovery was slowing and more town centre sites were falling vacant.Related: One in seven shops now vacant across the UK Continue reading...

Population, the size of the economy and inequality are all factors in deciding which nations perform wellSo who won the Olympics? The easy answer is to look at the medal table. But that table is very much loaded in favour of those with large populations. To answer the question we must consider a few other factors to discover who really won the Olympics and at what cost.Related: The Brisbane Olympic Games deserve a gold medal for hyperbole when it comes to economic benefits | Greg JerichoRelated: Ten of the best Australian stories of the Tokyo Olympic Games Continue reading...

The Thatcherite wing of the Conservative party desires a restoration of ideas whose time has come and goneThe Conservative party hooked British capitalism to the state’s life support system for the past 18 months. So it takes chutzpah to think, as business secretary Kwasi Kwarteng does, of putting the free market at the heart of a post-Covid recovery. Yet lengthening NHS waiting lists, hiking consumer energy bills and welfare cuts when poverty is rising all betray a mindset that regards the re-legitimation of state intervention as threatening a way of life rather than securing it.What the Thatcherite wing of the Conservative party desires is a restoration. For them this is an opportunity to go back to 1979 and use tried-and-tested ways to stabilise prices, crush labour and discipline poorer nations. These rightwingers yearn for higher interest rates, to prioritise financial returns on assets and the use of creditor power to squeeze the global south. Continue reading...

Rolling coverage of the latest economic and financial news, as cigarette maker Philip Morris and private equity group Carlyle battle to own UK health company

There are lessons to be learned from how and why GB Olympians have gone from under-performer to globally competitive in 25 yearsForget the feelgood factor. The warm glow generated by Team GB winning gold for three-day eventing or the modern pentathlon will quickly fade. Anybody who thinks sporting success will prompt a mini-economic boom is deluded.That, though, doesn’t mean the Tokyo Olympics have no bearing on the economy and its performance. There are important lessons to be learned from how and why Great Britain’s athletes have gone from serial under-performers to globally competitive in the past 25 years. Continue reading...

What it means to you, as the Bank of England predicts prices are set to rise by 4%, the highest in yearsWhen the Bank of England announced on Thursday that it had left interest rates on hold at just 0.1%, it made a prediction about inflation. The rate of price rises would increase in the near-term it said “and is projected to rise temporarily” to 4% in the winter.This would put it at its highest rate for 10 years, and would be double the level the Bank is tasked with targeting. After that, it forecast inflation running at 3.3% in a year’s time, 2.1% in two years and falling back to 1.9% by the summer of 2024. Continue reading...

All countries have suffered Covid, but the UK has uniquely been exposed to the economic and moral damage of Brexit tooSo far, the Johnson government has hidden behind the disruption of Covid to divert attention from the consequences of Brexit.But not for much longer. The chaos caused by the removal of the Team GB economy from the single market while leaving Northern Ireland within is already manifest. It is also abundantly clear that the disruption of Northern Ireland’s trade cannot be blamed on, or confused with, Covid-induced damage.It is not just Brexit. It is what Brexit brought in its wake: the erosion of respect for the rule of law, and a corruption and coarsening of standards Continue reading...

943,000 jobs were added last month, but 5.4% remain unemployed at a time when some employers are having difficulty recruitingThe American economy added 943,000 jobs in July, demonstrating another month of steady, positive growth. However, 5.4% remain unemployed at a time when some employers are having difficulty recruiting workers. Continue reading...

Frustration over choices is putting people at risk of scams but there are accounts worth consideringThings are going from bad to worse for savers. A few days ago the Bank of England reported that interest rates were continuing to fall “to new historically low levels” and providers are still sending out letters to customers telling them that returns are being hacked.That isn’t only causing frustration among those who rely on their savings for income or are trying to build up a nest egg – it is also tempting people to take extra risks and play into the hands of scammers. “Consumers looking around for more attractive savings rates is a fraudster’s dream,” Gareth Shaw, the head of money at the consumer group Which?, told Guardian Money this week. “With more people moving online to work, shop and bank since the start of the pandemic, and the ease in which scammers can post fraudulent content to attract would-be investors, consumers are at significant risk from this growing crime.”Related: Covid lockdown savings: how to make the most of spare cashThe top-paying one-year fixed rate bonds are offering a little over 1% Continue reading...

Rolling live coverage of business, economics and financial markets including July’s US jobs report

Analysis: a hawkish tone signals that at some point businesses will need to manage with less supportUnemployment has peaked. The pick-up in inflation will be temporary. All the ground lost during the biggest slump in 300 years will be regained by the end of the year. All in all, it was a pretty upbeat message from the Bank of England as it provided its quarterly update on the state of the UK economy.Albeit one with a sting in the tail, because the eight members of Threadneedle Street’s monetary policy committee (MPC) wanted to send the message that they see the day coming when consumers and businesses will have to get by with less policy help.Related: Bank of England warns inflation will hit 4% this year but holds interest rates Continue reading...

Rolling live coverage of business, economics and financial markets as UK car sales fall and construction growth eases

Studying hundreds of elections, we found that political parties increasingly cater to only the well educated and the richGiven the steep rise in economic inequality in many parts of the world since the 1980s, one might have expected to see increasing political demands for the redistribution of wealth and the return of class-based politics. This didn’t quite happen – or at least not straightforwardly.To make sense of the big picture, we studied the long-term evolution of political divides in 50 western and non-western democracies, using a new database on the vote that covers more than 300 elections held between 1948 and 2020.Amory Gethin, Clara Martínez-Toledano and Thomas Piketty are the authors of Political Cleavages and Social Inequalities: A Study of Fifty Democracies, 1948-2020 Continue reading...

Monetary policy committee resists pressure to increase the cost of borrowing, but hints at rise next yearInflation is forecast to hit 4% this year as Britain’s robust recovery from the pandemic accelerates at a blistering pace, the Bank of England has said, hinting that a modest increase in interest rates next year might be needed to keep rising prices in check.With most of the economy open and businesses reporting strong sales, the central bank’s monetary policy committee (MPC) said the economy would grow by 8% in 2021 – up from a forecast in May of 7.25% – to regain its pre-pandemic level of activity by the end of this year, rather than spring 2022.Related: The Bank of England’s message is upbeat, but there’s a sting in the tailRelated: Inflation and ‘pingdemic’ slow UK’s service sector recovery Continue reading...

The Iron Lady actually grew the state and put up taxes. But in her time, as today, high earners won and the poor lost outAmong the public services performed by journalism is alerting readers to scams, and the newspapers are currently full of them. When HMRC rings up, threatening a court case unless you press 1 on your keypad, slam down the phone. Texts from Royal Mail asking for money are about as kosher as marketing from Charles Ponzi. And if an email arrives from someone purporting to be from the sainted Martin Lewis, gushing over some new platform for trading bitcoin, it’s a hoax.Politics is also rife with scams ­– except that you can’t depend on these being exposed by the press. The biggest and most pernicious whopper doing the rounds today is about Boris’s Big State. It runs thus: the prime minister is an utterly alien breed of Tory. He loves public spending and big government, those things abhorred by Conservatives ever since Margaret Thatcher took charge of the party five decades ago and made it her central mission to roll back the state. The Iron Lady’s legacy is endangered by the blond Nero. Continue reading...

Costs rose at fastest pace in at least 25 years in July as firms hit by supply chain delays and worker shortages

Rolling live coverage as UK service sector data was impacted by inflation and ‘pingdemic’ staff shortages, while US jobs figures disappointed3.10pm BSTClosing summary - US stock markets have fallen at the open as a result of concerns about slowing economic growth, and fresh fears about the spread of Covid-19, especially the Delta variant.Following on from the disappointing US ADP jobs data, the Dow Jones Industrial average fell 0.2% or nearly 69 points at the opening bell, to 35,047. Meanwhile the S&P 500 and the Nasdaq Composite were about 0.1% down.The Delta variant now accounts for an estimated 93% of coronavirus cases in the US. The number is even higher in some parts of the country. https://t.co/r4OKdsW7n0Related: Coronavirus live news: WHO calls for moratorium on vaccine boosters to speed up global first doses2.35pm BSTGrowth in Britain’s dominant service sector has slowed to its weakest since March after businesses were hit last month by a triple whammy of bottlenecks, workers self-isolating and a less generous tax break for homebuyers.The latest monthly health check on UK services firms – which account for just under 80% of the economy – found costs rising at their fastest pace in at least 25 years in July, and raised concerns that the best of the UK’s economic recovery from the winter lockdown restrictions might be over.Related: Inflation and ‘pingdemic’ slow UK’s service sector recovery2.20pm BSTThe slowdown in US employment growth is also an indicator that staff shortages remain a problem, according to Capital Economics.Paul Ashworth, chief US economist at Capital Economics, said:

Rolling coverage of business and economics news as PepsiCo agreed to sell its Tropicana and juice brands for $3.3bn3.43pm BSTClosing summary - US stock indices have reversed gains made at the open and moved into negative territory.Stocks on Wall Street cut some of their losses after June factory orders data came in higher than anticipated at 1.5%. Despite this, the Nasdaq Composite has dipped into the red, while the Dow Jones and the S&P 500 remain flat.US Factory Orders (Jun) come in at 1.5%, exp: 1%, prev: 1.7%Related: Coronavirus live: England and Wales deaths at three-month high; row in Germany over jabbing childrenRelated: Covid hospitalizations reach highs of last summer as Biden tries to win over unvaccinated – live3.13pm BSTChina’s largest social media and video game company Tencent is limiting the amount of time children can spend playing its flagship video game.Honor of Kings, the world’s top-grossing game for the past two years, is is popular among students, some of whom reportedly play it for up to eight hours a day.Fears over Chinese regulatory interference aren’t going away, with Tencent the latest stock to slump on chatter about Beijing seeking to wield its power. [Tencent’s shares] are now down by more than a fifth year-to-date as investors reassess their willingness to have exposure to big Chinese names.Related: China’s Tencent tightens controls for children amid games addiction fears3.03pm BSTOil is having another volatile day today, and has been moving between positive and negative territory.Fears over rising cases of the Delta coronavirus variant have kept prices subdued, while on the other hand there are expectations that US inventories will decline.#Oil — continuation of yesterday so far #OOTT

Prediction of 3.1% in Citi/YouGov poll comes days before Bank of England meeting on interest ratesThe British public expects inflation to jump over the coming year before it stabilises, according to a survey conducted days before the Bank of England makes its own assessment of whether it should impose higher borrowing charges to calm rising consumer prices.The Citi/YouGov poll showed public inflation expectations for the next 12 months rose to 3.1% in July from 2.8% in June, taking this measure further above its long-run average, though below a peak of 3.8% reported last December.Related: Cautious optimism over Covid as inflation hits three-year high Continue reading...

The new US president has emerged with a neo-populist agenda closer to his predecessor than to ObamaAbout half a year into Joe Biden’s presidency, it is time to consider how his administration’s economic doctrine compares with that of Donald Trump and previous Democratic and Republican administrations.The paradox is that the “Biden doctrine” has more in common with Trump’s policies than with those of Barack Obama’s administration, in which the current president previously served. The neo-populist doctrine that emerged under Trump is now taking full form under Biden, marking a sharp break from the neoliberal creed followed by every president from Bill Clinton to Obama.Related: US senators unveil text of $1tn bipartisan infrastructure bill Continue reading...

Rolling live coverage as UK manufacturing PMI signals continued output growth despite supply chain struggles

Decline started before Covid pandemic and continued to drop as country entered first lockdown in March 2020Wellbeing in England has decreased in the last year while loneliness and mistrust in government has increased, analysis of ONS data shows.The new report from Carnegie UK comes in advance of the publication on Tuesday of the latest ONS GDP figures, which are expected to show that the UK economy grew in the second quarter of 2021.Related: Virtual contact worse than no contact for over-60s in lockdown, says study Continue reading...

Customers remain hesitant as lockdown habits and the prospect of crowded venues put people off going out

After 10 years of writing about capitalism I saw that the erasure of women is not only palpable, it’s bound to my own flesh and blood… is the economics profession a functionary and tool of patriarchy – or is patriarchy a functionary and tool of economics? – Marilyn WaringEconomically, the rupture of 2020 showed us two things: that our lives depend on care work, especially the unpaid care work still mostly done by women; and that another way is possible.Related: You can’t hide from the numbers: Australian women earn less than men in any job | Greg JerichoWomen’s unpaid domestic labour and all unpaid caring work are not counted and so don’t contribute to GDPRelated: Why women are more likely to suffer from long Covid | Susan Evans and Mark HutchinsonReproductive rights, freedom to leave abusive relationships and other freedoms are nothing without economic empowerment Continue reading...