Nuclear-capable bombers entered air defence zone, says Taipei, amid simmering row over competing bids to join regional trade agreementChina has voiced opposition to Taiwan joining a major trans-Pacific trade deal as it flew 24 planes – including two nuclear-capable bombers – into the self-ruled island’s air defence zone, the biggest incursion in weeks, Taiwanese officials said.Last week Beijing submitted its own application to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Continue reading...
Analysis: Threadneedle Street is adopting a wait and see policy and keeping interest rates unchangedHigher energy prices will send the annual inflation rate above 4% by the end of the year and keep it there well into 2022. On the face of things, the Bank of England is asleep at the wheel and should be taking steps to ease growing price pressures.It is not quite so simple as that. The minutes of the latest meeting of Threadneedle Street’s monetary policy committee show the Bank opposed immediate action, with only two of the nine members voting to halt the money creation programme known as quantitative easing (QE). All nine backed keeping official interest rates unchanged at 0.1%. Continue reading...
by Richard Partington Economics correspondent on (#5PX3J)
Interest rates kept at 0.1% as worker and material shortages slow Britain’s economic recovery from pandemicThe Bank of England has warned surging household energy bills will drive inflation above 4% this winter, with persistent pressure on living costs expected to last through to the middle of next year despite a slowdown in the economy.Voting unanimously to keep interest rates at the historic low of 0.1%, the Bank’s monetary policy committee (MPC) warned severe shortages of workers and raw materials were weighing on Britain’s economic recovery from lockdown. Continue reading...
by Richard Partington Economics correspondent on (#5PWYE)
Firms battling stock and worker shortages with Brexit cited as exacerbating pandemic issuesSevere shortages of workers and supplies have dragged down economic growth in Britain to the weakest levels since pandemic restrictions were eased in March, according to a closely watched business survey.The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed that growth in private sector output slowed in August as firms battled with severe shortages while costs rose at the fastest pace since the late 1990s. Continue reading...
Downgrade by Fitch reflects jitters in markets as boss of Asia-focused bank HSBC says problems ‘concerning’Ratings agency Fitch has downgraded its forecast for China’s economic growth because of concerns about a slowdown in the country’s colossal housing market and fears about struggling property giant Evergrande.China enjoyed a swift economic rebound from the Covid-19 pandemic, but strict new rules on the country’s developers have caused a deleveraging rush and helped push housing giant Evergrande to crisis point. Continue reading...
The combined challenges of an economic slowdown, rising energy costs and the transition to net zero loom over this governmentLong before there was talk of an energy crisis, the government had been looking vulnerable. Economic growth is slowing and inflation is rising. Despite the Indian summer, Covid-19 infection rates remain high, and the warm weather won’t last for ever.The prop provided to the labour market by the furlough scheme will be kicked away at the end of the month, and nobody can be sure of how that will affect the businesses that have grown used to the wages of their staff being met by the state. Millions of struggling people are about to become £20 a week worse off when universal credit reverts to its pre-crisis level. There will be tax increases next spring to bring down NHS waiting lists.Larry Elliott is the Guardian’s economics editor Continue reading...
From the warped housing market to the ‘knowledge economy’, the system increasingly works only for the uber-wealthyI travelled to New York City in August for the first time since the pandemic began, to visit friends who had just bought their first home. They are firmly upper-middle class and in their 40s. They took out a mortgage for $1.5m (£1.1m) to buy a place in a Brooklyn neighbourhood that was regarded until recently as an area immune to gentrification. So far, so typical. Asset ownership comes late these days.On the second day of my visit I saw a group of twenty- and thirtysomethings sitting together in a local park (of the type illuminated by sodium lights to discourage drug dealing). They had gathered around a banner announcing a meeting of the local tenants’ rights union. Almost every member of the group looked as if they could have featured in the pages of an Ivy League magazine. All bar one were white. Their neighbourhood was not.Mark Blyth is a political economist at Brown University Continue reading...
Economic observers should heed the warnings now – rising prices and slowing growth are a very real threatHow will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months.The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, supply bottlenecks in both goods and labour markets, and shortages of some commodities, intermediate inputs, final goods, and labour. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary. Continue reading...
Top economic thinktank says recovery from the Covid-induced recession is not yet completeThe west’s leading economic thinktank has warned governments and central banks against an over-hasty withdrawal of support for growth amid concerns that recovery from the pandemic-induced recession is incomplete.The Paris-based Organisation for Economic Co-operation and Development (OECD) said a continuation of the stimulus policies of the past 18 months was justified because the recent pickup in inflation was likely to prove temporary. Continue reading...
by Richard Partington Economics correspondent on (#5PSJ3)
Budget deficit drops to £20.5bn in August but is offset by high interest payments on national debtUK government borrowing increased by more than expected in August as rising inflation pushed up debt interest payments.The Office for National Statistics said the government’s budget deficit – the gap between spending and income – dropped to £20.5bn in August from about £26bn in the same month a year earlier as Britain’s economy recovers from lockdown. Continue reading...
by Richard Partington Economics correspondent on (#5PS6Z)
Report says employment opportunities more than 10% below pre-pandemic levels for quarter of workforceBritain’s worst labour market shortages in decades are being driven by employers struggling to recruit low-paid workers, research suggests, while vacancies in other areas are still significantly below pre-pandemic levels.A report by Institute for Fiscal Studies said that new job opportunities remain more than 10% below pre-pandemic levels for a quarter of the workforce – about 8 million people – despite reports focusing on severe shortages of staff in several sectors of the economy such as road haulage, care and warehouse work. Continue reading...
Nearly eight out of 10 of young Britons blame capitalism for the housing crisis and two-thirds want to live under a socialist economic system. How did that happen?The young are hungry and the rich are on the menu. This delicacy first appeared in the 18th century, when the philosopher Jean-Jacques Rousseau supposedly declared: “When the people shall have no more to eat, they will eat the rich!” But today this phrase is all over Twitter and other social media. On TikTok, viral videos feature fresh-faced youngsters menacingly raising their forks at anyone with cars that have start buttons or fridges that have water and ice dispensers.So should the world’s billionaires – and fridge-owners – start sleeping with one eye open? Hardly. It’s clear that millennials (those born between the early 80s and the mid-90s) and zoomers (the following generation) are not really advocating violence. But it is also clear that this is more than just another viral meme. Continue reading...
Chancellor should use income tax rather than student loan repayments, says Institute for Fiscal StudiesRishi Sunak will find it “essentially impossible” to save money on university tuition fees in England without hurting graduates on average earnings in favour of their wealthy peers, according to the Institute for Fiscal Studies.Instead, the IFS says the chancellor should use the income tax system rather than student loan repayments as a way of raising revenue from the highest-paid graduates. Continue reading...
As the UK economy enters a rough patch, government needs to give substance to its flagship soundbiteBritain’s economic recovery from lockdown is stalling and inflation is on the rise. With the approach of autumn, prophecies made earlier this year for a surge in consumer spending appear to have fallen flat, washed out by the wettest summer in a decade.It was all supposed to have been so easy for the chancellor, Rishi Sunak. Lockdown had helped households save more than £200bn and left consumers champing at the bit for the reopening of pubs, bars, restaurants and shops. Continue reading...
Immigration became the big issue in the EU referendum. It’s also why the supermarket shelves are emptyOn the eve of reshuffling his Alexander’s Ragtime Band of cabinet ministers, the prime minister let it be known that he intended to fight the next election “around Brexit”. No doubt this will have come as interesting news to the growing band of Brexiters who are complaining that it was not meant to be about a “high tax and high spend” economy.Yes, as we see daily evidence of the disaster that is Brexit, Johnson fantasises that, on the contrary, it is a success story. He has promoted to the role of foreign secretary Liz Truss, whose pathetic trade deals have produced far less satisfactory arrangements than we had as a member of the EU. Continue reading...
Soaring prices will have some at the Bank itching to put up interest rates, but others will stress that now is a very bad timeEconomic growth is losing steam and inflation is heading for boiling point. When the Bank of England’s rate-setters meet this week, there will be contrasting warning signs to consider.With the most severe disruption to company supply chains since the 1970s, the recovery from last winter’s lockdown is practically stalling. Companies are struggling to recruit staff to keep the tills ringing, raw material costs have surged, and energy prices have hit record highs. All of this threatens to feed into higher inflation this autumn, after the consumer prices measure of annual inflation made a record jump in August, to 3.2%. Continue reading...
by Jillian Ambrose Energy correspondent on (#5PKZ6)
Steelmakers warn of unprofitability and an extra half a million homes face falling into fuel povertyRecord energy prices have forced two fertiliser plants in the north of England to shut down and brought steel plants to a halt, in some of the clearest signs that the energy crunch engulfing Europe could deal a blow to the UK’s economic recovery.The US fertiliser maker CF Industries has halted production at its plants in Billingham in Teesside and Ince in Cheshire, which employ about 600 workers, because of rocketing gas prices, which have reached successive record highs across Europe in recent weeks. Continue reading...
New York-listed fertiliser group CF Industries Holdings halts production at its plants in Billingham in Teesside and Ince in Cheshire, amid gas price surge
PM’s tasteless remark | Maskless Tories | Climate v capitalism | Stinging criticismThe prime minister’s puerile remarks on penal policy (PM condemned for joke about UK becoming ‘Saudi Arabia of penal policy’, 14 September) plumb new depths in what passes for debate on the subject in this country. Short of conscription, the decision to imprison represents probably the most extreme manifestation of the state’s authority over individuals. Deciding how we exercise that power deserves better than a second-rate stand-up routine.
by Richard Partington Economics correspondent on (#5PJWC)
Analysis: Britain faces universal credit cut, public sector pay freeze and national insurance risePrices are climbing in the shops and consumers face an autumn crunch. Official figures show inflation rose at the fastest rate in a decade in August, as the impact of Covid-19 and Brexit drives up the cost of living.Surpassing the forecasts of City economists, the 1.2 percentage point increase in the consumer price index was the largest since January 1997, the year Gordon Brown would later handthe Bank of England independence to manage inflation. At 3.2%, the CPI is now the highest since March 2012. Continue reading...
by Richard Partington Economics correspondent on (#5PJNG)
Pandemic has added to their debts while wealthy nations limit access to vaccines, says annual reportThe world’s poorest countries will be left $12tn (£8.7tn) worse off by 2025 amid a weaker economic recovery from Covid-19 as wealthy nations limit their access to vaccines, the United Nations has warned.In its annual trade and development report, the UN Conference on Trade and Development (Unctad) said low-income countries had been hit much harder by the pandemic than during the 2008 financial crisis, adding to their debts and piling pressure on their public finances. Continue reading...
We’re keen to hear how people across the UK experience the impact of rising consumer pricesUK inflation has hit the highest figure in nearly a decade, having jumped to 3.2% in August, from 2% in July, the highest rate since March 2012.We’d like to hear how people in the UK are experiencing rising costs for food and drink, energy bills, transport, restaurants and hotels. Are you struggling to afford some things now that you could previously? Continue reading...
In survey, 19% of US adults 65 and over reported using their savings during pandemic – the highest percentage of 11 wealthy countriesOlder Americans were more likely to suffer pandemic-related economic difficulties compared with older citizens of other wealthy countries, according to a new survey from the Commonwealth Fund.In a survey taken by adults 65 and older in 11 of the world’s wealthiest nations, 19% of US adults reported using up all or most of their savings or losing sources of income during the pandemic – the highest percentage of any country. The percentage is nearly seven times higher than Germany, where 3% of older adults reported economic difficulties. Continue reading...
by Presented by Rachel Humphreys with Torsten Bell; p on (#5PJ04)
The government’s plan to fix the ailing social care system passed into law this week. But who will benefit most and who will pick up the bill?Last week Boris Johnson outlined what Downing Street is billing as a once-in-a-generation shake-up of adult social care and how it is funded. It is an attempt to tackle one of the thorniest issues in modern politics – how to meet the spiralling costs of an ageing population who are living longer with complex conditions and to do it in a way that people feel is fair.Rachel Humphreys met one woman, Lesley, who knows only too well the complexity and expense of England’s social care system. She has helped her 90-year-old mother to sell her home to pay for her continuing residential care. It’s a story that will be familiar to families across the country who have had to grapple with a labyrinthine system that can quickly burn through a lifetime’s savings. Continue reading...
by Richard Partington Economics correspondent on (#5PGR1)
Hotels, pubs and restaurants among those with biggest problems recruiting staffEmployers scrambling to hire staff amid widespread labour shortages after lockdown helped to return the number of workers on company payrolls to pre-pandemic levels in August, official figures show.The Office for National Statistics said the number of payroll employees increased by 241,000 to 29.1 million in August, lifting employment in all regions of the UK to pre-Covid levels except in London, Scotland and south-east England. Continue reading...
If the demand is stronger than forecast, UK will face reduced tax revenue and greater congestionIt all seems so simple. By the end of this decade the government will ban the sale of petrol and diesel vehicles. Cars will be greener and cleaner, making it easier to achieve the goal of a net carbon zero future.Boris Johnson will no doubt impress on fellow world leaders the rapidity of Britain’s transport revolution when he hosts the Cop26 meeting in early November. Rishi Sunak may even be persuaded to announce measures to speed up the transition in the budget in October, carefully timed for the week before the international gathering in Glasgow. Continue reading...
With a slew of bigger household bills approaching, Sunak is hampering growth and the green transition by being hawkishThere are plenty of nasty bills looming for the average British household that could persuade many to keep their savings firmly on deposit and prevent the economy from flourishing.Anyone looking for a secondhand car will pay 15% more this year than last – that is, if they can find one that suits their needs. Paying monthly energy bills is no fun since world prices rocketed. And the cost of essential services such as childcare are only increasing over time. Continue reading...
The most vulnerable people will bear the cost of sanctions, as services and the economy collapseWatching Afghanistan’s unfolding trauma, I’ve thought a lot about Mumtaz Ahmed, a young teacher I met a few years ago. Her family fled Kabul during Taliban rule in the late 1990s.Raised as a refugee in Pakistan, Ahmed had defied the odds and made it to university. Now, she was back in Afghanistan teaching maths in a rural girls’ school. “I came back because I believe in education and I love my country,” she told me. “These girls have a right to learn – without education, Afghanistan has no future.” Continue reading...
Readers react to the suspension of the triple lock on pensions and rise in national insuranceAnalysis: If NI must fund social care, at least make it fairIn what has been dubbed a “mini budget”, the government this week introduced sweeping tax reforms that will mean big changes for pensioners from next year.Designed to pay for the NHS and social care, the tax overhaul will result in about 1.3 million working pensioners over the age of 65 paying national insurance (NI) contributions on their earnings for the first time. Continue reading...
by Richard Partington Economics correspondent on (#5PCNF)
All you need to know about who is affected and why it’s the worst supply chain crisis since the 1970sFast food chains are running out of chicken. Hauliers’ wage bills are going through the roof. Crops are rotting in the fields. The scale of Britain’s supply chain meltdown is the worst since the 1970s, when the three-day week, power cuts and industrial disputes saw rubbish pile up in the streets.Fast forward four decades and the shortages in modern Britain stem from Covid-19 disrupting an intricate network of global supply chains where the slightest problem throws the whole system. Brexit has added to the rebooted anarchy in the UK, with years of chronic underinvestment in people and infrastructure, both from government and business, painfully exposed. Continue reading...
Robert Jenrick’s madcap policy will hand shops over to developers motivated by profit, not communityThe summer of 2021 may be remembered for Covid and the withdrawal from Afghanistan. But another lasting and insidious change took place: the death of the high street. By approving the building of residential homes on ailing shopping streets, planning minister Robert Jenrick effectively allowed any shop, restaurant, cafe or business premise in England to become a house. Since almost everywhere houses make more money, this puts every high street under threat.Although done in the name of creating “thriving town centres”, Jenrick’s policy will strip away the cohesion that still binds many communities together, urban as well as rural. The diversity of English towns and cities has long been protected by planners enforcing classes of use. Restaurants and shops could not simply become houses without planning permission. But as of last month, if any landlord thinks to profit by turning the use of one building into another, it will require no permission to do so. A building need only to have been vacant for three months (after Covid-19, this already applies to one in seven shops, and could easily be achieved by eviction). Hit by lockdown, online shopping and the end of rental holidays, high street shops are struggling to survive. They need time to recover, not Jenrick kicking them in the teeth and sending their landlords cheering to the bank. Continue reading...
A cosmopolitan analysis of what went wrong and how we can avoid it next time – because there will be a next timeEveryone has someone who made them feel inadequate in lockdown, whether it was a neighbour who grew tomatoes in their window box, one of those Twitter people who learned three languages between March and May, or just a friend who didn’t feel the need to get drunk every night. For me, that person was Adam Tooze.While I was struggling to teach long division to my kids and begging editors for deadline extensions, he was – seemingly effortlessly – being a voice of sanity on social media; writing an improbable number of lengthy articles about how Covid-19 was rewiring the world economy; coherently explaining the long-term consequences on multiple podcasts; and sending a regular email newsletter, which discussed China, the EU or Vasily Grossman with equal felicity. As if that wasn’t enough, he was also – it turns out – writing a book. Continue reading...
Research shows 10 students arriving from outside EU will generate £1m of net economic impact during studiesOne year’s intake of international students at British universities generates economic activity worth £390 for each person in the UK each year, rising to more than £700 for every inhabitant of London, according to a study published today.Overall, 272,000 students from outside the UK who began university courses in 2018-19 would generate close to £26bn in net economic activity once the costs of teaching support and their use of public services had been accounted for. Continue reading...