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...

Report after report is reaching the same conclusion: exporters, including many in the red wall, will be suffering for a long timeBrexit is beginning to take its toll. Trade with the EU is suffering and foreign investment is heading south. Neither trend is temporary and both harm the government’s stated aim of “levelling up” regions that until now have depended on overseas trade to create well-paid jobs.It’s not clear whether the red wall has noticed. Or anyone among the 17.4 million people who voted for Brexit. So far, all the in-depth polling shows there is little movement on the vexed question of EU membership.Businesses in the north-east are already nursing their wounds – a point made by the chamber of commerce last week in an open letter to Boris Johnson Continue reading...

Germany’s economy grew by only 1.5% after manufacturing was hit by computer chip shortage

Spending is up. The world has been fighting a war against Covid, and in wartime the power of the state always increasesOver the past 18 months, the world has been amazed at how slippery an enemy Covid-19 has proved to be. The virus first detected in China at the end of 2019 has mutated on a regular basis. Vaccines need to evolve because the virus is changing to survive.The shock to the global economy from the pandemic has been colossal, but things are now looking up – especially for advanced countries. Some are surprised by the pace of recovery, but they perhaps shouldn’t be, because alongside new variants of the virus there has been a new variant of global capitalism.Related: Cautious optimism over Covid as inflation hits three-year highRelated: Another roaring 20s? We need to do better than that | Dan Davies Continue reading...

US GDP grew 6.5% in the second quarter of 2021, but fears of a slowing recovery persistThe US economy has returned to its pre-pandemic level despite growing at a weaker rate than expected in the second quarter.Gross domestic product (GDP) increased at a 6.5% annualised rate in the three months to the end of June, according to figures from the US Commerce Department on Thursday, as government financial support helped power a sharp rise in consumer spending.Related: US inflation hits 13-year high in June Continue reading...

Our latest snapshot of key economic indicators finds supply chain disruption and a dip in house prices

The real-world impact of this government’s lack of grip is all too clear, not least when it comes to the economy

Post-Brexit trade adviser Tony Abbott ‘heartened’ by review into takeover of Newport Wafer FabBoris Johnson may block a Chinese-owned company from purchasing the UK’s largest producer of semiconductors, a senior government adviser has suggested, as they warned Beijing was on the brink of initiating a new “cold war”.Tony Abbott, the former prime minister of Australia recruited by Johnson to advise on post-Brexit trade, said he was heartened by a review being launched into the takeover of Welsh microchip manufacturer Newport Wafer Fab by Nexperia and suggested it meant the process could be paused.The global shortage in semiconductors, the microchips that are an essential component in every electronic device in the world, started as a temporary delay in supplies as chip factories shut down when the coronavirus pandemic first hit.Related: Global shortage in computer chips 'reaches crisis point' Continue reading...

Better-off countries should be concerned by the north-south divide caused by the pandemic

Fund calls on rich nations to help halt spread of infectious variants through countries with low vaccination rates

Jan Vlieghe says Threadneedle Street should be cautious about raising interest rates to counter inflationBritain’s economy is not out of the woods and the damage caused by the Covid-19 pandemic has been only partly repaired, a Bank of England policymaker has said.Speaking as fresh figures showed only a modest impact on consumer activity from “freedom day”, Jan Vlieghe said Threadneedle Street should be cautious about raising interest rates to counter higher levels of inflation emerging after lockdown.Related: Inflation isn’t out of control yet, governor, but can you reassure us it won’t be? Continue reading...

Rolling live coverage of business, economics and financial markets as European stock markets decline after Chinese selloff

EY Item Club’s prediction of recovery to pre-pandemic levels by year-end also comes with health warning

Keir Starmer says initiative to provide good jobs is necessary as economy emerges from Covid crisisLabour is to launch a “new deal for working people” this week, as Keir Starmer seeks to put creating more secure, better-paid jobs at the heart of his offer to voters.The world of work is one of two areas, together with tackling crime, where Starmer’s team believe they have a distinctive offer and a strong line against Boris Johnson’s government. Continue reading...

A Brexit and Covid-induced pay boom won’t last long while employers hold all the the cardsThe past few days have had a hint of the late 1970s about them. A shortage of lorry drivers has led to fears of food shortages. Nurses are thinking about taking industrial action over pay. The Bank of England has been fretting about rising inflation.Holed up in Chequers, the self-isolating Boris Johnson has been as unconvincing as a bronzed Jim Callaghan was on his return from Guadeloupe in January 1979, when he was misquoted as saying, “Crisis? What crisis?”.Related: UK recovery slows amid weakening consumer demand and staff shortages Continue reading...

In Northern Ireland, the Leavers’ folly is now manifest. How can the opposition stay silent about the root cause of the crisis?‘He did not want to die until Brexit was reversed.” These words were spoken at the funeral last week of my dear friend and former Observer colleague Dick Leonard.Dick died a month ago at the ripe old age of 90. The speaker was his widow, Irène Heidelberger-Leonard, before a group of mourners who included the Labour leader Keir Starmer, to whom Dick had been something of a political mentor.One wonders whether Cummings now thinks that, on top of all the other well-publicised prime ministerial gaffes, the chaos of Brexit may contribute to Johnson’s downfall Continue reading...

Snapshot of the economy in 10-day period to 21 July prompts concerns that recovery is stalling

TUC says high proportion of people who will be affected by planned £20-a-week benefit cut are in workThe south-west of England will have the highest proportion of low-income workers affected by a £20-a-week cut later this year in universal credit payments, according to analysis by the TUC that illustrates the widespread culture of low pay from Cornwall to Gloucestershire.More than four in 10 universal credit claimants in the south-west have a low-paid job that qualifies them for benefits, a larger percentage than any other region, said the trade union body. Continue reading...

Rolling coverage of the latest economic and financial news

CBI says post-lockdown surge likely to break output records but leaves industry with acute cost pressuresThe number of people employed in Britain’s factories rose at its fastest rate in almost half a century in the past three months as manufacturers sought to cope with a surge in post-lockdown order books, the CBI has said.The business lobby group said jobs, investment, output, costs and prices were all rising rapidly in the strongest period of growth since the early to mid-1970s.Related: Isolate if ‘pinged’ by NHS Covid app, says No 10, despite minister’s claims Continue reading...