Rolling coverage of the latest economic and financial news, including the OECD’s new economic outlook

Global gateway infrastructure strategy aims to counter belt and road initiative impact in Asia, Africa and EuropeThe EU’s plan to invest €300bn (£255bn) in global infrastructure will be better than China’s belt and road initiative, the European Commission president has said, as she announced a strategy to boost technology and public services in developing countries.Ursula von der Leyen said the EU’s global gateway strategy was a positive offer for infrastructure development around the world and based on democratic values and transparency. Continue reading...

Fears variant will amplify shortages, driving up inflation, or even force repeat of earliest phase of pandemic

Some investors accuse European Central Bank to allow inflation to run out of controlInflation across the 19-member eurozone soared to 4.9% in November, outstripping City forecasts and putting pressure on the European Central Bank to review its policy of ultra-low interest rates.With some investors reacting to the news by accusing the ECB of allowing inflation to run out of control, the European statistics agency Eurostat said its early flash reading of inflation in November had reached the highest level since relevant records began in 1997, two years before the euro was launched. Continue reading...

Rolling coverage of the latest economic and financial news

The trade liberalisation of the 1990s did not lead to higher economic growth rates. This should raise serious concerns for backers of globalisationPutting off the crunch meeting of the ministerial World Trade Organization won’t defer the chronic malfunctions of the world economy. The currency and debt crises experienced by developing nations, the eurozone’s turn to austerity and the great financial crash are symptoms of a broken trading system built on the global role of the dollar. Deeply embedded within the world’s trade and capital regime is a hierarchy where cheap labour goods from developing nations keep rich world wages down. Meanwhile, elites in the developing world run their nations in order to be able to consume in the manner of the developed world. Greed sees income hoovered away from most of the population by a wealthy layer.The extensive trade liberalisation of the 1990s did not lead to higher economic growth rates. This should raise serious concerns for backers of globalisation. Are wealthier nations interested in raising the living standards in poorer countries? Or are they only really bothered about ensuring that debtor nations pay back their loans and open their economies to international trade and finance? The evidence suggests the latter: since the 1950s the evidence is that poor countries are financing rich ones through net resources transfers, rather than the other way round. Continue reading...

Rolling coverage of the latest economic and financial news

The inflation rate keeps going up – and some economists are warning that it’s time to take urgent action. So what is causing the change, what does it mean for ordinary people, and what’s the best way to deal with it?Many younger people won’t remember a time when inflation was a big political issue, or a subject that might affect their day to day lives. But recent increases in the cost of living, partly caused by the coronavirus pandemic and the supply chain crisis, have started to have a real impact. Last week, the CBI warned that shoppers would face the biggest price rises in more than 30 years this Christmas – and with the inflation rate expected to hit 5% next year, the Bank of England is under pressure to take urgent measures to do something about it.In this episode, the Observer’s economics editor, Phillip Inman, explains to Hannah Moore exactly what’s going on, setting out how the situation came about, what the options are for dealing with it, and why it affects people’s daily lives. And he examines the arguments for the Bank of England increasing interest rates – as well as the risk that such a move would be premature if the change is largely the result of the coronavirus crisis. Continue reading...

Sector faces ‘unprecedented combination’ of rapidly rising costs, supply chain woes and high debts from the pandemicBritain’s manufacturers are facing a “perfect storm” crisis of rapidly rising costs and towering debts that many fear could push them over the brink, according to a new survey.The leading industry trade body on Monday urged the government to introduce payment holidays on loans, warning that thousands of firms faced a “tipping point” that could make their business models unviable. Continue reading...

Using GDP to assess wellbeing is a flawed view which has led us to narrow, short-term decision-makingGross domestic product as a measure of welfare is like exam results as a measure of intelligence. Neither is especially good. However both are widely cited and heavily relied upon.Why? They’re not great – but they’re the best we’ve got. Continue reading...

Sharing vaccines with poorer countries is the right thing and the self-interested thing to do. The west needs to stop being so short-sightedMandatory face masks are back in England. The fear factor has returned. After months of assuming the Covid-19 pandemic was all but over, the UK government has imposed new restrictions in an attempt to curb the spread of the new Omicron variant of the coronavirus.Financial markets didn’t wait for the announcement from Downing Street. It is far too early to know how big a threat the new strain poses but investors assumed the worst as soon as the reports arrived from southern Africa. Share prices fell heavily, with airline stocks the hardest hit as travel bans were re-introduced. Continue reading...

The failure of Germany’s second biggest bank in 1931 was a factor in the rise of the NazisFinancial crises are a really bad idea. We learned that in the UK with the 2008 banking crisis. It doubled our national debt and was followed by a decade of lost earnings growth. But banks going under contributes to grim politics, too.That’s the lesson from some economic and political history contained in new Bank for International Settlements’ research. It examines Germany’s 1931 banking crisis and the link to the rise of the Nazis. In July that year, the country’s second largest bank – Danatbank – failed, triggering a bank run, financial crisis and big income falls.Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org Continue reading...

Leaving the EU has had a terrible impact on all parties. We must grasp that it is a policy that cannot be made to work‘Excuse me, sir, but why are you wearing a poppy? Remembrance Day was on Thursday.” The speaker was a Spanish gentlemen. The scene: the breakfast room of a hotel in Valladolid, an hour’s train ride north-west of Madrid, on Saturday, the 13th of this month. I was struggling with the toaster. You know how it is when one arrives at a self-service breakfast room.I replied that I always wore a poppy until Remembrance Sunday, when there was the traditional Cenotaph parade in London. “Ah,” he said. “Forgive me, but why on earth did your country vote the way it did?” Continue reading...

Northern Ireland faces economic problems similar to those of rest of the UK, with some extras all of its own. Now what it has achieved is threatened by a looming trade warBars are full, restaurants are turning away customers who don’t have reservations and, judging by the people laden with bags, the Christmas shopping season is already under way. Belfast has known plenty of crises down the decades but this doesn’t feel like one of them.Instead, on a Thursday evening in November, Northern Ireland’s capital has the air of any other big provincial UK city, with a thriving hospitality sector and plenty of money changing hands. Were it not for the accents, it could be Leeds or Manchester. Continue reading...

Inflation is an issue of real concern to many Americans. It’s also a chance for Democrats to name and shame price-gougersInflation is rapidly becoming a problem for the Democratic party and President Joe Biden. They need to get a grip on it before it imperils their wider agenda and sinks their chances of keeping control of Congress in the midterm elections next year. As they think about how to address it, one thing is certain: what they’ve been doing so far isn’t working. A recent poll found that two-thirds of Americans disapprove of how Biden is handling inflation, and the same number consider the issue “very important” in their evaluations of his presidency. Among those Americans concerned about the state of the economy, nearly nine in 10 ranked inflation as a reason why. Clearly something has to change.But inflation, a complicated product of economics and mass psychology, is also devilishly difficult to understand, and even more difficult to control. Presidents have few tools to tame it, and the ones they do have can backfire. The inflation of the 1970s crippled Gerald Ford’s presidency and was doing the same to Jimmy Carter until he opted for an extreme cure – installing a chair of the Federal Reserve who dramatically raised interest rates, stopping inflation but also plunging the economy into a deep recession which handed the White House to Ronald Reagan. These experiences left inflation with a reputation as a presidency-killer, with either the disease itself or the medicine taken to combat it ultimately killing the patient.Andrew Gawthorpe is a historian of the United States at Leiden University, and host of the podcast America Explained Continue reading...

Data from banks and card issuers suggests consumers on track to spend almost £9.2bn this weekendThe UK has rung up its biggest Black Friday sales day ever, data suggests, with shoppers spending more than one-fifth more than last year as the high street bounced back from pandemic lockdowns.The number of payments via Barclaycard, one of the UK’s biggest debit and credit card issuers, were up 23% between midnight and 5pm compared with the same period in 2020, when most of the UK high street was in lockdown, and was up 2.4% on 2019. Continue reading...

Analysts say prospect of interest rate rise has diminished despite Huw Pill’s address to a CBI conferenceThe Bank of England appears to have move a step closer towards increasing the cost of borrowing next month after its new chief economist, Huw Pill, said the UK’s recovery from the pandemic was strong enough for the central bank to take “policy action”, despite fears over the new Covid strain.Pill, a member of theBank’s nine-strong monetary policy committee (MPC), indicated he was preparing to vote in favour of an increase in interest rates on 16 December after official figures suggested concerns about a jump in unemployment at the end of the furlough scheme had proved unfounded. Continue reading...

As demand returns since initial pandemic slump, central banks need to balance recovery and rising costs

Policymakers ‘behind the curve’ as calls grow for slow rises in interest rates and end to quantitative easing

Rolling coverage of the latest economic and financial news

CBI snapshot finds firms running down stocks to meet order books and raising concerns about inflationBritain’s factories are struggling to meet the record demand for their goods as severe supply constraints put a brake on production lines, the latest snapshot of activity has shown.The Confederation of British Industry (CBI) said manufacturers were running down their stocks of finished goods to meet the strongest order books since records began in 1977. Continue reading...

Why prices are rising, how long this might last, and why inflation is a psychological as well as an economic phenomenonJobs are coming back, wages are rising, stock markets are hitting record highs. In many ways, the US economy is booming. And yet as we officially enter the holiday season, consumer confidence is at its lowest level in a decade. The reason? Inflation.The US inflation rate in October was the highest it has been since the early 90s, when Nirvana released Smells Like Teen Spirit and the Gulf war was just beginning. Continue reading...

RBNZ says homeowners must be ‘incredibly wary’ of rising costs, as focus shifts to policymakers in US, UK and EuropeNew Zealand’s central bank has lifted interest rates for the second time in as many months to 0.75%, with many forecasters expecting borrowing costs to rise to at least 2% by next year and possibly higher.In a warning signal for central banks around the world as they struggle to contain inflationary pressures, the Reserve Bank of New Zealand (RBNZ) raised the official cash rate by 25 basis points to 0.75% as expected in its final policy meeting of the year on Wednesday. Continue reading...

Noble it may have been, but AO’s plans to offer all staff good bonuses hinged on dreamily optimistic salesAbout 15 months ago John Roberts, the founder, 23%-owner and chief executive of the online electricals retailer AO World, did a fine thing. He created an all-staff incentive scheme that is very different from other companies’ executive-only affairs. It was, he said in his folksy way, one he’d be “proud to tell my mum about”.Senior executives at AO would still shoot for multimillion-pound rewards (capped at £20m) but lower-paid workers would chase meaningful sums rather than “a round of drinks”. There was talk of AO’s warehouse workers, on £18,000-£20,000 a year, being awarded £30,000 bonuses if maximum targets were reached. Continue reading...

Mervyn King questions theory that ‘inflation will remain low because we say it will’Central bankers have been caught unawares by rising prices that have exposed their “King Canute” theory of inflation, the former governor of the Bank of England Mervyn King has said.In a strong attack on how policymakers around the world have reacted to the Covid-19 crisis, Lord King accused them of relying too heavily on models that showed inflation always coming back to its target whatever the level of interest rates. Continue reading...

Rolling coverage of the latest economic and financial news

With debt rising and prices spiralling up, households are going to find it harder to fork out for the necessities, let alone any luxuries, and politicians are worriedHouseholds now face a reduction in spending power, unless after-tax wage increases match accelerating price rises.In Australia, the September 2021 quarter consumer price index rose 0.8%, or 3% over the year. In the US, the corresponding measure has reached 6.2%, the highest in nearly 30 years. Official figures probably understate the true extent of cost-of-living increases. Continue reading...

Analysts say reports of high demand and jobs growth could give green light for interest rate riseBritish companies came under intense pressure to push up prices this month after they suffered the fastest rise in the costs of production on record.Steep increases in the price of raw materials, higher fuel costs and strong wage demands in November combined to increase the average cost burden at the most rapid rate since 1998 when comparable records began. Continue reading...

Resolution Foundation says more than half a million more people are now economically inactiveThe economic fallout from the coronavirus pandemic has made Britain’s workforce smaller, younger and more female after a sharp rise in people leaving work during lockdown, according to a report.The Resolution Foundation said that while mass unemployment had been avoided during the Covid-19 emergency, there had been an increase in people who had exited the workforce and were no longer looking for a job. Continue reading...

Mask wearing | Ancient Christmas puddings | Lobsters | Wordsearch | Ole Gunnar SolskjærAt my local garage, three police officers were buying coffee recently. None wearing masks. Do police personnel routinely take lateral flow tests? Is it controversial to say that when people don’t wear masks, other people unnecessarily get hospitalised and some die? Or to say that when people in authority don’t wear masks, others think, “Why should I?” Daily cases on Sunday: 40,004.

Rolling coverage of the latest economic and financial news

White House praises Republican’s ‘steady leadership’ of central bank during Covid pandemicJerome Powell’s handling of the economic fallout from the Covid-19 pandemic has won the chair of the Federal Reserve the backing of the White House for a second term running the world’s most important central bank.Despite speculation that he might sack Donald Trump’s appointee, Joe Biden cited the “decisive action” taken by Powell during the early stages of the crisis as a reason to reappoint the 68-year-old Republican for another four years. Continue reading...

The average cost of a bird is up 24% but fears of shortages appear overblownHemlock Hill Farm, a 120-acre organic farm near Cortlandt, New York, has been in the same family since 1939. As they prepare their turkeys for this Thursday’s Thanksgiving celebrations, farmer Trish Vasta says they are facing a strange holiday season for the second year in a row.Last week the American Farm Bureau Federation (AFBF) warned that costs of the traditional turkey feast has risen 14% over the past year. The cost increase, up from an average of $46.90 for a family group of 10 last year to $53.31 in 2021, works out at $6 a person. Continue reading...

As Labour leader journeys north again the task of building a new narrative has only just begunIt is a cold night on a Stoke-on-Trent industrial estate and Keir Starmer is in town again. It’s at least his seventh trip here in search of redemption after Labour’s historic defeat in 2019, in a sign of how important he sees the Potteries to the party’s future.“I feel I’m getting to know Stoke quite well,” he tells me. “And we’ll keep on coming. I think it’s very, very important. The sort of discussion we want to have tonight is not a discussion we could have in London. You’ve got to have it where people live, in their place, in their town, about the issues that matter to them.” Continue reading...

Northern cities need a flourishing capital, so there will be no winners from the downgrading of transport schemesThose MPs in the north and west of England who believed Boris Johnson when he promised to level up the regions will be drowning their sorrows this weekend. The prime minister’s flagship integrated rail plan was revealed to be not much more than reheated and piecemeal improvements to existing rail lines.Leeds will be allowed to move ahead with a tram system connecting the city and its nearest neighbours. A couple of electrification projects mothballed in 2017 have secured another lease of life. But otherwise the word “integrated” in the document’s title falls foul of the Trade Descriptions Act. Continue reading...

After the pandemic more women are choosing to work from home but that choice could damage career prospectsEmployees want it, employers know they have to offer it; flexible working has transformed almost every office during the pandemic and it’s here to stay.It is a change that has been demanded for decades by groups including women, those with caring responsibilities and disabled people. But economists and employment experts are warning it could lead to more inequality at the office, particularly for working mothers. Continue reading...

Rolling coverage of the latest economic and financial news.

Bank of England’s Huw Pill says ‘burden of proof’ now in favour of December interest rate riseThe Bank of England’s chief economist has warned that the UK’s buoyant labour market and rapidly rising inflation is pushing the central bank closer to raising rates at its next meeting in December.Huw Pill said the “burden of proof” was now in favour of increasing the cost of borrowing, though he said a rate rise would not be a quick fix that could bring down inflation in the short term. Continue reading...

The year 2020 exposed the risks and weaknesses of the market-driven global system like never before. It’s hard to avoid the sense that a turning point has been reached. By Adam Tooze Continue reading...

October clothes and toys spending drives first increase in six months, with people fearing goods shortageRetail sales in Great Britain rose for the first time in six months in October as consumers started their Christmas shopping earlier than usual to avoid missing out if there was a shortage of goods.The total volume of goods bought rose by 0.8% last month, according to the Office for National Statistics, compared with flat sales in September, driven by a rise in spending on toys and clothes. Economists had forecast a smaller rise in sales of 0.5%. Continue reading...

Rolling coverage of the latest economic and financial news, as latest Turkish rate cut leaves central bank credibility ‘in tatters’

Colin Hines and Richard Murphy call for ‘climate quantitative easing’ to keep up hopes of hitting climate targetsRebecca Solnit’s inspiring long read (Ten ways to confront the climate crisis without losing hope, 18 November) correctly emphasised the need to maintain hope when tackling the climate crisis by acting collectively, being tenacious through constant campaigning, despite setbacks, and listening to those whom the climate crisis most directly affects.However, she left out the one factor crucial to achieving the systemic change required to protect the planet: to campaign to make clear how to pay for the enormous upfront costs required for such a fundamental transition. Continue reading...

Those most at risk warn countries such as Australia they will lose out economically if they do not raise targetsSome of the countries most vulnerable to climate breakdown have called on the UN and the UK and other countries who want to lead the climate fight to help them ensure high emitters upgrade their carbon targets, as called for at the Cop26 summit.They added that countries such as Australia, which has refused to embrace strong carbon-cutting targets, would lose out economically. Continue reading...

Johnson’s boosterism has worked for him so far. But the answers to the big questions are coming from the leftInflation has hit its highest level in a decade. For most people, prices are rising faster than wages. Energy bills are soaring. The Bank of England is poised to raise interest rates next month. Personal taxes are going up in the spring. A tough winter looms.It’s not hard to see why Boris Johnson has hit the panic button with his plan to ban MPs from holding consultancy jobs. On its own, the government could perhaps ride out a sleaze scandal on the grounds that voters think (wrongly) that politicians are all as bad as each other. But sleaze plus a struggling economy is a potentially toxic mixture, especially since a long period of one-party rule makes voters susceptible to that most powerful of political messages: time for a change.Larry Elliott is the Guardian’s economics editor Continue reading...

Median basic pay rose 2% in three months to end of October, unchanged for seventh month in a rowThe average pay deal across the UK is worth just 2%, despite a rise in prices that pushed the retail prices index (RPI) – a widely used measure of inflation in pay bargaining – to 6% this month.According to the latest figures from the consultancy XpertHR, pay bargaining across some of Britain’s biggest private and public sector employers showed median basic pay increased 2% in the three months to the end of October, unchanged for the seventh consecutive month. Continue reading...

Rolling coverage of the latest economic and financial news

Increase to 4.2% in October from 3.1% driven by squeeze on living standards and soaring energy bills

As inflation hits 10-year high, Covid-hit sectors are sounding the alarm on spiralling pricesInflation has barely stirred for most of the 14 years since the start of the global financial crisis. Yet the coronavirus pandemic has disrupted almost every aspect of the global economy, and businesses are having to face up to what to many feels like an unusual phenomenon: rapidly rising prices.It has taken those who watch the economy by surprise. A year ago independent economists polled by the UK Treasury expected consumer price index inflation to reach only 1.9% by the fourth quarter of this year. On Wednesday, the Office for National Statistics reported CPI had risen 4.2% over the year to October – almost double the Bank of England’s 2% target and the highest in a decade. Continue reading...