Economics | The Guardian

Expert sounds warning as Bank of England economist says inflation ‘uncomfortably high’ amid cost of living crisisThe squeeze on British households from high inflation could be bigger and last longer than expected, amid a series of economic shocks from Brexit, Covid and Russia’s war in Ukraine, economists have warned.Michael Saunders, a member of the Bank of England’s rate-setting monetary policy committee (MPC), said inflation was “uncomfortably high” as households come under pressure from soaring energy, food and fuel bills. Continue reading...

FTSE 100 and S&P 500 among those to slide as investors worry that worldwide growth is weakeningGlobal markets fell sharply on Monday as fears over rising inflation and a slowdown in China’s export growth fuelled worries about the health of the world economy.Stocks in Asia-Pacific markets, Europe and the US all dropped into the red as investors fretted that global growth is weakening, at a time when central banks are raising interest rates to rein in surging inflation. Continue reading...

Worries over global growth hit stocks and metals prices, and the pound falls again

Pressure for summer mini-budget will increase as economic effects of Russia-Ukraine war take holdLess than three months after Russian troops moved across the border into Ukraine the economic implications of the war are gradually sinking in. There have been other conflicts since 1945 but it is hard to think of one that has had such a dramatic and sudden impact. The only real comparison is with the Yom Kippur war of 1973.Support for Ukraine has been widespread in the west, among governments and the public, but only now are the consequences of sanctions and embargos starting to be felt. This week, the US Federal Reserve and the Bank of England raised interest rates in the face of annual inflation rates heading towards 10%. The European Central Bank will follow suit in the months to come. Continue reading...

The idea that central banks have rediscovered their mojo is not borne out by the diverging policies on rates they are makingThere is a school of thought that says central banks, after a decade of running scared, have found their mojo again.Their anxiety stemmed from the 2008 crash, when banks panicked in the wake of the US sub-prime property crash and drained the financial system of funds. Only the central banks could make up the difference – with a lending programme known as quantitative easing – and it has been the same story ever since. Continue reading...

Analysis: The chancellor has been warned that the UK is heading for a recession, but he is reluctant to actThe pressure is mounting for Rishi Sunak – the question is when will he crack? After the Bank of England warned the economy was heading for a recession caused by the cost of living crisis, with inflation set to top 10% by the autumn, demands on the chancellor for a fresh package of emergency support for struggling families have reached a crescendo.Threadneedle Street forecasts the second-biggest income squeeze since modern records began in 1964, with inflation racing to the highest level since the 1980s. Continue reading...

The chain said discussions with lenders collapsed on Friday as creditors refused to extend a deadline for the retailer to find more cash

Employers added 428,000 jobs with unemployment rate at 3.6%, close to its pre-pandemic lowUS employers continued hiring at a strong pace in April, adding 428,000 jobs as the unemployment rate held steady at 3.6%, close to its pre-pandemic low.Hiring continued despite worries about the Federal Reserve’s plans to hike interest rates at their fastest pace in decades in an attempt to curb soaring inflation. April represented the 12th consecutive month of jobs gains above 400,000. Continue reading...

The pound slides following gloomy forecasts and confusion within the Bank of EnglandAt least the Bank of England has stopped dancing around the idea that inflation will hit double digits this year. Back in March, the prospect wasn’t spelled out starkly; instead, there was a warning that the peak would be “several percentage points” higher than the 7.25% previously forecast. Now there’s no fudging: 10.2% is the official forecast for the fourth quarter of this year.And, frankly, the figure should surprise nobody who has been tracking wholesale energy prices and projections for household bills, where the open question is how close the price cap (currently £1,971, having been £1,277 at the start of this year) gets to £3,000 when it is next revised in October. The Bank used £2,800 in calculations, which was entirely reasonable since half the six-month measurement period for calculating the cap has already passed. Continue reading...

There are three things agricultural businesses need to watch carefully in 2022: Australian interest rates, the US economy, and China’s lockdowns

Analysis: As the Bank of England raises interest rates the message is clear – the 1970s are back

Sterling tumbles to lowest since June 2020 as Bank of England lifts interest rates to 13-year high, cuts growth forecasts, and sees inflation hitting 10%

The interest rate going up to 1% has implications for borrowers and savers. Here’s how it could affect youThe Bank of England has increased the base rate to 1% in an attempt to curb inflation. It’s the fourth increase since the start of December, when the base rate was at 0.1%. Here, in numbers, is what it could mean for your finances: Continue reading...

Rise to 1% is fourth successive increase and highest level since February 2009The government is facing calls to launch a fresh package of emergency financial support for households after the Bank of England warned Britain’s economy could plunge into recession before the end of the year.As the nation went to the polls in the local elections, the Bank raised interest rates from 0.75% to 1% to tackle spiralling inflation made worse by Russia’s war in Ukraine. With a fresh jump in home energy bills expected in October, it forecast inflation would rise above 10% this year, the highest level since 1982. Continue reading...

Economists predict minimum 0.25 point rise as households contend with cost of living crisisThe Bank of England is likely to raise interest rates to the highest level since the recession caused by the 2008 financial crisis, despite mounting concern that the economy is weakening amid the cost of living crisis.City economists widely expect the Bank will increase its base rate by at least 0.25 percentage points to 1% on Thursday, lifting borrowing costs to the match the level set in February 2009 when it was in the process of cutting rates to historic lows as the global financial system imploded. Continue reading...

At the moment, you might ask how Keir Starmer’s party could possibly fail. Yet things may not be quite so simpleThis week’s local government elections take place against the backdrop of a deepening cost of living crisis. Inflation is at its highest level in three decades, and the worst is yet to come. With wages struggling to keep pace with rising prices, living standards are being eroded fast.Throw in Partygate and the fact that it is mid-term for the current parliament, and all the conditions are in place for voters to give the government a proper kicking. The Conservatives expect to perform terribly, with good reason.Larry Elliott is the Guardian’s economics editor Continue reading...

London’s Elizabeth line finally launching, while German exports to Russia fell nearly two-thirds in March and climate activists have disrupted two bank AGMs

Analysis: New Labour’s chancellor revealed his plan to a surprised Eddie George and his private secretary, now governor, Andrew BaileyGordon Brown had a surprise in store for Eddie George when he summoned the then governor of the Bank of England to a meeting at 11 Downing Street on bank holiday Monday, 25 years ago this week.For the past two years, Labour’s new chancellor had been working on a plan to give Threadneedle Street the right to set interest rates and now he was ready to tell George about it. Secrecy was complete. The first the City heard of the idea that henceforth it would be the Bank’s job to hit the government’s inflation target, was when it was announced 24 hours later. Continue reading...

Think tank says pay and bonus deals have risen by about twice as much as other UK sectorsInequality in Britain risks being driven up by the biggest boom in City bonuses and pay since the 2008 financial crisis, the country’s leading economics thinktank has warned.The Institute for Fiscal Studies (IFS) said the return of bumper finance industry payouts meant the top 1% highest-paid workers were beginning to pull further away from the rest of the UK workforce despite the cost of living crisis hitting the country at large. Continue reading...

Inflation on toys, furniture and clothing rose to 2.2% last month, the highest rate for 15 yearsThe cost of household goods such as toys, furniture and clothing is rising by the fastest rate in more than 15 years as the impact of the war in Ukraine combines with Covid lockdowns in China.Non-food inflation accelerated to 2.2% in April, up from 1.5% in March, according to the latest shop price index from the British Retail Consortium (BRC) and market research group NielsenIQ, the highest rate since the monitor began in 2006. Continue reading...

Kyiv School of Economics estimates cost of conflict could rise to $600bn, almost four times the nation’s GDP

Rolling coverage of today’s economic and financial news

Rise to 0.35% increases median monthly home loan repayment by up to $118, but rates predicted to reach 2% in a year’s time

Small business owners are already being hit as consumers cut back on non-essentialsThese are worrying times for Claire Tasker’s jewellery business. With soaring living costs putting acute pressure on households across the country, the Hertfordshire-based goldsmith has seen first-hand how consumers are cutting back.“If people haven’t got money to spend then it’s items like mine they’re not really going to think about buying any more,” says the small business owner, who sells her handmade fine jewellery from her home studio in Hitchin. Continue reading...

Thinktank says workers would have £2,100 a year more on average if wages over past two decades matched shareholder payout risesWorkers in Britain would be paid about £2,100 per year more on average if wages had matched a boom in company dividends handed to shareholders over the past two decades, according to a report.Highlighting a gulf between earnings from work and company ownership, the Common Wealth thinktank said far-reaching reforms were needed to rebalance power amid rising levels of inequality. Continue reading...

Ex-official says policymakers must shrink the UK economy to limit upward pressure on prices made worse by BrexitBritain’s central bank policymakers are “duty bound” when they meet this week to push the UK into recession to cap rising inflation, a former Bank of England (BoE) official has said.Adam Posen, who runs Washington-based thinktank the Peterson Institute, said that while the Bank of England would not want workers to lose their jobs, it should hike interest rates now to squeeze out inflationary pressures made worse by Brexit trade and immigration restrictions. Continue reading...

Price of UK’s most popular meat is rising faster than any other protein, according to retailer’s bossChicken’s relative affordability has helped make it the country’s meat of choice but one of the UK’s biggest food retailers has warned it could soon be as pricey as beef as production costs soar.Steve Murrells, chief executive of the Co-op, said that feed costs had become a huge challenge for the poultry industry. “Chicken could become as expensive as beef. Chicken, which was incredibly cheap and great value for money, is rising quicker than any other protein.” Continue reading...

Governments need accurate and detailed information about citizens to tackle anything from Covid to climate changeNext slide please. We soon caught on to the way it worked. Chris Whitty would give the word and up would pop a chart detailing the progress being made in the fight against Covid-19. There are memes and mugs to commemorate the catchphrase of England’s chief medical officer.Whitty’s presentations detailed infection rates, hospitalisations and deaths. Within weeks of the pandemic’s arrival in early 2020 the public knew about the R number – a way of assessing how fast the virus was spreading. Continue reading...

Cost of living crisis, inflationary pressures and uncertainty about Ukraine mean the UK’s pandemic rebound is running out of steamCompany directors fear the cost of living crisis and tumbling consumer confidence will cause greater harm than previously estimated, increasing the risk of an economic downturn this year, according to a major new study.The Institute of Directors (IoD) said in a survey last month that a lack of confidence in the economic outlook was “the number one issue” facing British businesses as inflationary pressures combined with the uncertainty caused by the Russian invasion of Ukraine to heighten the risk of a recession. Continue reading...

Macron’s victory against Le Pen should give hope that the nationalist Leave narrative is not yet set in stoneReflecting on the depressing economic prospects facing this country and many parts of the world, I am reminded of a line in PG Wodehouse’s Much Obliged, Jeeves.The narrator – that Boris Johnson-like figure Bertie Wooster – sinks back in his chair, face buried in hands. “It is always my policy to look on the bright side,” he says, “but in order to do this you have to have a bright side to look on …” Continue reading...

Cabinet ministers’ glib shortcuts are dire response to economic crisisLiving standards are set to fall at their fastest rate since records began in the mid-1950s. Last month, the Office for Budget Responsibility predicted that real household incomes will fall by 2.2% this year, as energy and food prices increase but wages fail to keep pace with rising bills.The impact will not be felt equally. For some, it will barely register. For other families, it will mean difficult decisions about what to cut back on. For others still, it will be profound, stretching precarious budgets in which there is already no give, forcing impossible choices between essentials such as putting food on the table and keeping the heating on, and sharpening the fear of the unexpected outlay that can trigger a debt spiral from which there is no escape. One estimate suggests lower-income households will face a drop in income of £1,300 this year. Continue reading...

Large corporations are passing on higher-than-needed price increases to customers under the cover of inflation, war and supply chain squeezes, experts sayOutside a Dollar Tree in Detroit, Latasha Holmes lamented the rising cost of toilet paper, beverages, food and other items she had just purchased. The price increases, she said, were forcing her to choose among necessities for her and four kids.“What am I going to do? Prices are up everywhere, all over town,” she said. “I can’t afford everything.” Continue reading...

Rolling coverage of the latest economic and financial news, including growth figures from across the eurozone

France’s economy stalls and Italy’s shrinks but Germany rebounds from contraction

Poorer countries – hampered by Covid debt and aid cuts – are facing hunger and unrest as conflict pushes up the cost of staplesPrices were rising before Russia’s invasion of Ukraine, which has further disrupted energy markets and food exports, forcing developing countries to pay more to import staples at a time when they are already struggling with increased debts taken on to pay for pandemic responses.While panic over inflation has led news agendas all over the world, the IMF’s World Economic Outlook released this week estimated it would reach 8.7% in developing economies compared with 5.7% in rich countries. Experts fear millions more will be driven into poverty and that transport and food networks will be affected. Continue reading...

Germany, Hungary and others are devising ways they can use roubles to pay Gazprom and not be in breach of sanctions

Rolling coverage of the latest economic and financial news

Nancy Pelosi says oil companies ‘hoarding the windfall while keeping prices high at the pump’ amid concerns over US inflationThe Biden administration is to propose legislation that would allow US federal and state agencies to “go after” oil companies on wholesale and retail sales practices, lambasting the industry over price gouging and profiteering.As American voters express increasing concerns about the high prices of a wide range of consumer goods, including energy and food, Senate majority leader Chuck Schumer said passing legislation to bring down retail gasoline prices “is at the very top of our list”. Continue reading...

US economy contracted by -0.4% in first quarter, its weakest quarter since the early days of the pandemicThe US economy shrank in the first three months of the year, contracting by -0.4% in the first quarter, or -1.4% on an annualized basis, its weakest quarter since the early days of the pandemic.Economic growth slowed markedly at the start of the year. In the last three months of 2021 US gross domestic product (GDP) – a broad measure of the economy – grew by 1.7% or 6.9% on an annualized basis. Continue reading...

Supermarket also points to rising business costs and supply difficulties as it warns of lower profits.Sainsbury’s has said its customers are starting to watch “every penny” as the cost of living crisis mounts, which combined with significant cost increases and difficulties with supplies will lower profits at the supermarket chain in the year ahead. Continue reading...

Bank puts aside extra cash to cover potential loan defaults amid fears over effects from Ukraine warBarclays has become the latest UK bank to warn over the impact of the cost of living crisis, saying that its customers were already facing “harder conditions” as a result of surging inflation.It came as the bank put aside an extra £141m to cover potential defaults on its loans in the first quarter, nearly three times the amount put aside during the same period in 2021, but lower than the £299m that analysts had forecast. Continue reading...

Rise in energy and ingredient costs suggests consumers will have to pay more for well-known brandsThe consumer goods firm Unilever has said “unprecedented cost inflation” lies ahead as Russia’s war on Ukraine has added to a surge in energy and ingredient costs, and said that shoppers will pay even more for well-known brands in the coming months.The company, which makes goods ranging from Dove soap to Magnum ice-cream and Marmite, said on Thursday it expected its costs to rise by €2.7bn (£2.3bn) in the second half of 2022, after an already steep increase on the €2.1bn expected for the first half. Continue reading...

Threat of synchronised global downturn may recede by late 2022 but collapse in one region will affect othersIs the global economy flying into a perfect storm, with Europe, China, and the US all entering downturns at the same time later this year? The risks of a global recession trifecta are rising by the day.A recession in Europe is almost inevitable if the war in Ukraine escalates, and Germany, which has been fiercely resisting calls to pull the plug on Russian oil and gas, finally relents. China is finding it increasingly difficult to sustain positive growth in the face of draconian Covid-19 lockdowns, which have already brought Shanghai to a screeching halt and now threaten Beijing. In fact, the Chinese economy may already be in recession. And with US consumer prices currently increasing at their fastest rate in 40 years, prospects for a soft landing for prices without a big hit to growth look increasingly remote. Continue reading...

NFU president responds to reports ministers are considering lowering import taxes to stem inflationLowering food tariffs will not solve the cost of living crisis and it would be “misleading” to suggest as much to consumers, the president of the farmers’ union said after reports ministers were considering slashing import taxes.Minette Batters, the president of the National Farmers’ Union (NFU), which represents the interests of 55,000 food producers in England and Wales, said lowering the tariff wall for imported foods “does not even begin to deal with the problem” of soaring grocery prices. Continue reading...

British Business Bank to ‘call out’ lenders that failed to carry out due diligence when awarding pandemic support loansThe British Business Bank has pledged to “call out” banks that took taxpayer cash to cover losses on fraudulent Covid loans, but failed to apply the minimal checks.Patrick Magee, the state-owned business bank’s chief commercial officer, told MPs on the Treasury Committee on Wednesday that nearly £63m had been paid out on potentially fraudulent coronavirus business loans to UK banks so far. Continue reading...

A Guardian analysis uncovers how companies enriched themselves and their investors while boasting about jacking up pricesAs inflation shot to a new peak in March, cost increases exacted a deep toll on the economy, eating into most Americans’ wages and further imperiling the financially vulnerable. But for many of the US’s largest companies and their shareholders it has been a very different story.One widely accepted narrative holds that companies and consumers are sharing in inflationary pain, but a Guardian analysis of top corporations’ financials and earnings calls reveals most are enjoying profit increases even as they pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics. Continue reading...

Illness, mental health problems and NHS disruption have led to 400,000 workers vanishing, says thinktankBritain’s economy will suffer an £8bn hit this year from a reduction in the size of the workforce caused by a pandemic-induced rise in ill-health, research from a thinktank has shown.A report from the Institute for Public Policy Research said a combination of long Covid, NHS disruption and an increase in mental illness meant 400,000 workers had gone “missing” since the global health crisis began. Continue reading...

Rolling coverage of the latest economic and financial news, including the latest on Elon Musk’s takeover of Twitter

World Bank says biggest commodity shock since 1970s raises spectre of stagflation

Associated British Foods says its brands, including Twinings and Ryvita, also feel the inflationary heatThe owner of Primark has saidthe clothing chain will have to raise prices on its autumn and winter ranges as it is no longer able to offset cost increases with savings.Associated British Foods (ABF) said its food businesses, which include Twinings, Kingsmill and Ryvita, face increasing inflationary pressure in many areas including raw materials, commodities, energy and supply chain costs made worse by the war in Ukraine. Continue reading...