With global economy hooked on fossil fuels economists are drawing parallels with the the oil shocks of the 1970sEconomists are warning Russia’s invasion of Ukraine will fuel a sharper rise in inflation, despite the rising cost of living having already hit the highest levels for three decades.With Russia the world’s biggest natural gas exporter and second-largest for oil, the stakes are high in a global economy still hooked on fossil fuels – drawing parallels with the Yom Kippur war and oil price shocks of the 1970s which led to galloping inflation and economic crises worldwide. Continue reading...
Analysts warn of 10% inflation and weaker growth across western economies as Ukraine crisis raises oil price to $99 a barrelUK petrol prices are poised to hit a record 150p a litre later this week after the worsening tension in Ukraine added fresh pressure to the cost of living crisis facing households.Crude oil prices reached more than $99 a barrel at one point on Tuesday in response to Vladimir Putin’s decision to recognise the independence of two breakaway regions in eastern Ukraine. Prices later slipped back after markets viewed the west’s initial sanctions response as weak. Continue reading...
Analysis: The west will adopt step-by-step approach, leaving toughest sanctions as last resortAfter all the tough talk of the past month, the sanctions imposed on Russia by the west are unlikely to lose Vladimir Putin much sleep. The response to Boris Johnson’s announcement that five of the less important Russian banks and three individuals would be targeted was: is that it?The most dramatic news was Germany’s decision to halt approval of the Nord Stream 2 gas pipeline from Russia to western Europe. That will have an impact, but may end up affecting Germany more than it does Russia. Continue reading...
Survey highlights cost inflation as Bank of England’s Dave Ramsden predicts more interest rate risesThe largest number of British manufacturers plan to raise prices in the next three months than at any point since 1976, according to a business survey that underscores the inflationary pressures hitting the UK economy.With energy prices rocketing and wages on an upward path, the CBI said four-fifths of firms expect to increase the cost of manufactured goods in the next three months. Continue reading...
by Richard Partington Economics correspondent on (#5WCQM)
Government faces record monthly interest costs of £6.1bn on national debt pile of £2.3tnThe UK government has recorded the first monthly budget surplus since the start of the coronavirus pandemic, despite a weaker than expected January performance as rising inflation pushed up debt interest costs.The Office for National Statistics said public sector net borrowing was in surplus of £2.9bn last month – the first month in which income outstripped expenditure since January 2020. Continue reading...
Evidence of strongest performance in private sector since June convinces analysts of increase next monthThe prospect of a third successive interest rate rise from the Bank of England is looming larger after news that the easing of Covid restrictions is generating growth and inflationary pressure.Evidence of the strongest performance by the private sector since last summer left economists convinced Threadneedle Street would again increase borrowing costs when its monetary policy committee meets next month. Continue reading...
by Gwyn Topham Transport correspondent on (#5WBMM)
Labour fears public grants to operators will be slashed on Wednesday prompting cuts to up to one-in-three bus servicesLabour has urged the government to “come clean” on bus funding as operators prepare to slash services, with a critical moment for decisions over routes approaching on Wednesday.Almost one in three services are at risk, the industry and local authorities have warned, with the Treasury refusing to confirm if it will continue grant funding to support operators whose bus revenues have yet to recover to pre-pandemic levels. Continue reading...
It is time for the Tory chancellor to stand up – and there’s no better opportunity than the Mais lectureThere’s something odd about Rishi Sunak. The chancellor has rarely been out of the news since he took over at the Treasury from Sajid Javid two years ago and his approval rating with the public is high. His reputation as a safe pair of hands means he could be the next prime minister – yet we know little about what he believes.To the extent that while a picture of Sunak has emerged through the blizzard of budgets and mini budgets of a technocrat fascinated by Silicon Valley-style capitalism, in truth there have been only hints of an over-arching philosophy. Continue reading...
Persevering with this policy, as Labour suggests, is as bad for the country as persevering with this charlatan prime ministerMy Irish mother taught me always to try to see the good in people. But it has to be admitted that the attempt to see the good in Alexander “Boris” Johnson would, in another of her favourite sayings, “try the patience of Job”.It is already a commonplace in this country and around the civilised world that our prime minister is a charlatan on an industrial scale. John Major knew what he was about when declaring, as a prime minister himself, that Johnson should not even be allowed to fight a parliamentary seat. Continue reading...
Starbucks, McDonald’s, Chipotle, Amazon – all protect profits by making customers pay more. We need the political courage to say they can and should cover rising costs themselvesThe Biden White House has decided to stop tying inflation to corporate power. That’s a big mistake. I’ll get to the reason for the shift in a moment. First, I want to be clear about the relationship between inflation and corporate power.While most of the price increases now affecting the US and global economies have been the result of global supply chain problems, this doesn’t explain why big and hugely profitable corporations are passing these cost increases on to their customers in the form of higher prices. Continue reading...
by Richard Partington Economics correspondent on (#5WA65)
Analysis: official figures are fuelled by bumper City bonuses but many key workers still getting below inflation risesPay growth is picking up, official figures showed this week, but for key workers on the pandemic frontline the champagne is firmly on ice.The detail behind annual pay growth of 4.9% in December revealed the gulf between the size of awards being handed to public sector workers, and those in the private sector, boosted in part by swelling banker bonuses. Continue reading...
UK, US, Canada, Australia and New Zealand team up to identify collusion between suppliers and shippersThe UK competition watchdog is teaming up with its counterparts in the US, Canada, Australia and New Zealand in a drive to detect and investigate collusion between suppliers or shipping groups to hike prices.The Competition and Markets Authority said it was linking up with its fellow agencies in other “five eyes” nations after receiving “multiple complaints” from businesses about supply chains, where, for example, fees for shipping have soared by up to 10 times compared with pre-pandemic levels in the past two years. The CMA said that despite the complaints it was yet to find evidence of potential breaches of the law. Continue reading...
Nestlé joins other firms in passing on rising costs, adding to financial squeeze facing UK householdsThe KitKat-maker Nestlé and the Dettol manufacturer Reckitt have both indicated they will pass on rising costs in the form of higher prices this year, adding to the cost of living crisis facing consumers.Nestlé, which also makes Nespresso coffee pods, Häagen-Dazs ice-cream and Purina pet food, increased its prices throughout 2021, and by the final three months of the year they were 3.1% higher. Continue reading...
Former archbishop and campaigners say one-off tax on wealthiest 1% would help close gap between rich and poorRowan Williams, the former archbishop of Canterbury, has called on the UK government to impose a wealth tax on the super-rich to help tackle “spiralling inequality”, which he said was “deeply damaging to our collective morale and trust”.Williams, who was the most senior bishop in the Church of England from 2002 to 2012, on Thursday joined a growing group of moral leaders demanding a one-off tax on the richest 1% of the population to help close the “staggering” gap between the richest and poorest in society. Continue reading...
A free-market thinktank says it’s time to start selling off ‘plots of moon land’ – we need to act now before the plundering startsEver heard of the overview effect? It was coined by a space writer called Frank White to describe how looking down at our little blue planet from above can create a shift in how astronauts think about Earth: all of a sudden you realise how fragile the Earth is and how important it is that we all work together to protect it. “Looking at the Earth from afar you realise it is too small for conflict and just big enough for cooperation,” the astronaut Yuri Gagarin said.Alas, it looks like we needed to replace the overview effect with the avarice effect, because attitudes towards space seem to have shifted. Rather than making people imagine a better world, modern space exploration seems to be all about money, money, money. Elon Musk’s SpaceX has been working with a Canadian startup on plans to launch satellites with billboards on them into space so that adverts can light up the night sky. No doubt some of those ads will be for space tourism: on Wednesday Virgin Galactic opened ticket sales to the public for the first time. And by the “public” I mean that the small sliver of the public that can afford $450,000 for a joyride 300,000 feet above Earth. Continue reading...
Each month is the same – UK inflation rises and there are ‘I feel your pain’ messages from chancellorEvery month the story is the same. The annual inflation rate goes up and the chancellor puts out a statement saying he understands life is tough for the British public.The only real difference between this month and last was that, in the interim, Rishi Sunak announced his package of measures to soften – but by no means fully offset – the blow from the huge increase in energy costs households are facing in April. Continue reading...
Brewer predicts 15% increase in costs and says speed of Covid recovery uncertainHeineken has said beer prices will go up as it faces “crazy increases” in the cost of ingredients, energy and transport.The brewer said inflation was “off the charts” and its costs would increase by about 15%, forcing it to charge more – which could lead to lower beer consumption. Continue reading...
by Richard Partington Economics correspondent on (#5W5Z7)
As households face the biggest fall in living standards in three decades staff and businesses feel the pressurePay growth in the UK continued to lag behind inflation in December as households faced the biggest fall in living standards in three decades. Average weekly pay, excluding bonuses, fell in real terms, according to official figures. The Guardian spoke to workers and employers about the pressure to keep up with inflation. Continue reading...
Employees are in a strong position – but the Bank will be keen to avoid a wage-price spiralThe UK labour market was hit by two big shocks towards the end of 2021: the end of the government’s furlough scheme and the arrival of the Omicron variant.The good news from the latest official data is both were negotiated without the feared lengthening of the dole queues. Employment is up, job vacancies are at a new record high and the unemployment rate is down. Continue reading...
Ofcom research highlights pressure on household finances as consumers face inflation-busting billsUp to a fifth of UK households have struggled to pay their TV, internet and phone bills in the last year, with some having to cancel services or cut back spending on essentials such as food and clothing to make payments, according to research by Ofcom.The telecoms regulator’s annual affordability report highlights the rising pressure on household finances, with consumers facing a further inflation-busting increase in mobile, telephone and broadband bills of as much as 10% this year. Continue reading...
by Richard Partington Economics correspondent on (#5W56N)
Office for National Statistics says annual pay grew by 4.3% in three months to DecemberUK wage growth picked up in January as job vacancies hit a new record high, but pay failed to keep pace with the highest inflation rate for three decades.The Office for National Statistics said the annual growth rate for average total pay, including bonuses, increased to 4.3% in the three months to December, up from a rate of 4.2% in the three months to November. Continue reading...
by Phillip Inman and Richard Partington on (#5W55P)
Analysis: some want Bank to play catchup on rates; others say it risks engineering conditions for a recessionThe Bank of England is facing fierce criticism from both sides over its plans to raise interest rates. For hawkish economists, Threadneedle Street has fallen badly behind the curve, miscalculating the rise of inflationary pressures, and now needs to play catch-up to regain credibility.Others say the Bank is navigating the most dangerous moment for the economy in decades, but now risks a huge policy mistake. They argue that driving up borrowing costs will have little effect on inflation caused by global supply chain disruption, and that it risks engineering the conditions for a recession in an economy still grappling with Covid-19 and struggling for momentum. Continue reading...
Businesses struggling to fill vacancies will offer highest rise for a decade –but lower than inflationBritish employers are expecting to award pay rises of 3% in 2022, the highest in at least a decade, though well below the rate of inflation, as they try to recruit and retain workers, according to a new survey of businesses.The expected pay rise comes amid persistent signs of a tight labour market, with almost two-thirds of employers expecting to have difficulties filling job vacancies in the coming six months, according to a survey of more than 1,000 recruitment and human resources workers by YouGov for the Chartered Institute of Personnel and Development (CIPD). Continue reading...
They have the chance to be the hero of the hour, but if they get it wrong, we’ll be back in recessionCentral banks are getting twitchy about inflation. Cost of living pressures are rising just about everywhere and the relaxed mood of last autumn has been replaced by an urgency that could soon become panic.In the US, where inflation is at its highest in four decades, the latest chatter on Wall Street is that the Federal Reserve will take every opportunity to raise interest rates between now and the end of the year, seven times in all. Continue reading...
The high street lender may soon no longer be majority state-owned: and its fortunes are key to the wider UK economyIt has taken 14 years but a minor miracle is about to happen, probably within months: the state’s stake in NatWest will fall below 50%. We will no longer have to refer to the former Royal Bank of Scotland as “majority owned” by the government. Hallelujah.NatWest’s full-year figures for 2021, to be announced on Friday, won’t in themselves trigger further disposals of government-owned shares, but they should confirm that the climate is ripe to continue a sell-down programme that has been buzzing along in the background for the past year. Continue reading...
Events co-organised by People’s Assembly and trade unions held in at least 25 towns and citiesProtesters demonstrated in dozens of towns and cities across the UK on Saturday to highlight how the spiralling cost of living crisis is affecting the public.The demonstrations, co-organised by anti-austerity organisation People’s Assembly and supported by trade unions, were held in at least 25 towns and cities, from London to Glasgow to Bangor. Continue reading...
Labour is pushing for a windfall tax on the industry’s bonanza – and Sunak must grasp that this is not even an ‘un-Tory’ ideaNorth Sea oil producers are ripe for a windfall tax. Without moving a muscle, they have benefited from a doubling in the oil price and a quintupling of the gas price over little more than a year.There are big names in the frame, like BP and Shell, and some minnows that are now making hundreds of millions of pounds from wells offloaded a few years ago by these two lumbering giants of the industry. Continue reading...
by Larry Elliott and Richard Partington on (#5W2YH)
Soaring vacancy rates mean employers need to work to attract and retain staff, but this will require a shift in attitude• How welcoming is Britain to older workers?A deadly virus arrives from the east and sweeps through western Europe for two years. The pandemic devastates the country’s economy and drastically reduces the number of available workers. Those who survive find they are in a strong position to secure a higher price for their labour.That was the England of the 1350s in the aftermath of the Black Death, when emergency measures were brought in to cope with labour shortages. And, while the death toll from Covid-19 is nowhere near as severe as the drop – of at least a third – in England’s population between 1348 and 1350, the outcome for today’s economy is in some ways similar. Continue reading...
Diesel already at all-time high of 151.2p with petrol close behind as Opec production falls shortMotorists face the return of record high prices at the pumps as global oil markets continue to climb towards $100 a barrel after a slowdown in output from the Opec oil cartel.British drivers will now pay 151.21p a litre of diesel after pump prices on Thursday climbed above the previous all-time high of 151.10p a litre in November last year, compounding the national cost of living crisis. Continue reading...
by Richard Partington Economics correspondent on (#5W1ZT)
Figures show Brexit compounding Covid disruption, with clothing exports plunging 60%, vegetables down 40% and cars 25%UK exports of goods to the EU have fallen by £20bn compared with the last period of stable trade with Europe, according to official figures marking the first full year since Brexit.Numbers released on Friday by the Office for National Statistics (ONS) showed that the combined impact of the pandemic and Britain’s exit from the single market caused a 12% fall in exports between January and December last year compared with 2018. Continue reading...
Mixers at Schweppes and upmarket Fever-Tree on the rise as supply chain bottlenecks and soaring energy bills inflate costsIt is the kind of news that calls for a stiff drink: the cost of a home-poured G&T is bubbling up due to a jump in tonic prices at the supermarket.Shop price data from the research firm Assosia suggests that the price of mixers made by major tonic brands such as Schweppes and Fever-Tree has risen sharply this month. Continue reading...