February cost of food, non-alcoholic drinks, games, and toys increased at lower rate than in January

If economies recover and stimulus turbocharges pent-up demand, a lot of bank credit could result from central bank moneyThe increasing risk of a return of inflation in the US and Europe is beginning to galvanise debates among economists. One key source of inflation fears is the expectation that, once the Covid-19 pandemic has been overcome by vaccines, pent-up demand will explode in an orgy of consumption.Moreover, today’s unprecedentedly large government bailout programmes will have powerful inflationary multiplier effects.Related: Why central banks should forget about 2% inflation | Jeffrey FrankelRelated: BioNTech's Covid vaccine is a triumph of innovation and immigration | Hans-Werner Sinn Continue reading...

A further 18,000 may close in 2021 as researchers fears full impact of Covid crisis has yet to comeMore than 11,000 outlets permanently disappeared from high streets, shopping centres and retail parks in Great Britain last year, with independent retailers and villages faring far better than chain stores and city centres.A net total of 9,877 chain outlets and 1,442 independent retail, restaurant and leisure premises closed their doors in England, Wales and Scotland in 2020, according to the Local Data Company (LDC). The analysis covered 680,000 outlets in 3,000 shopping locations.Related: UK government urged to avoid third Covid lockdown after 67,000 retail jobs lost Continue reading...

Rolling coverage of the latest economic and financial news

Jobless rate drops to 5% in three months to January, representing 1.7 million people

Industrial Strategy Council says plan relies too heavily on infrastructure spending and one-off fundingA government watchdog led by the Bank of England’s chief economist has said Boris Johnson’s plans for “levelling up” Britain are unlikely to succeed because they rely too heavily on infrastructure spending and one-off funding schemes controlled from Westminster.Pouring cold water on the prime minister’s election promise to rebalance Britain’s regionally lopsided economy, the Industrial Strategy Council (ISC) said the levelling-up agenda risked failure even though its ambitions were vague and would struggle to stand up to scrutiny.Related: Tories accused of levelling up 'stitch-up' over regional deprivation fund Continue reading...

ONS figures come as report says youth unemployment could reach 1m without concerted action

Analysis: Rishi Sunak’s measures have held unemployment down, but cliff edges create instabilityIt is clear from the latest unemployment figures that the furlough scheme is working. With more than 5 million people on the government’s main wage subsidy, it has proved its worth yet again as a method of job protection, cushioning the blow from the pandemic as the UK entered a third lockdown.Thousands of British companies have learned from the first two lockdowns. They have adapted to life online and kept goods and services moving, albeit mostly within the boundaries of the UK after the government left exporters to deal with the worst possible exit from the EU short of leaving without a deal.Related: UK unemployment falls for first time in Covid-19 pandemic Continue reading...

Boris Johnson says ‘build back better’, but buried in the budget are plans for a new dose of austerity

Outsourcing catch-up tutoring to teenagers in Sri Lanka is part of a bigger project to weaken, and cheapen, public servicesThe erosion of job security and the prospects of millions of UK workers due to casualisation and outsourcing is widely recognised to have transformed the experience of work. Between 2000 and 2016, the number of zero-hours contracts increased fourfold. Such trends are meeting with increased resistance. Last week, Uber drivers won the right to a minimum hourly wage and holiday pay.Through the replacement of permanent staff with service contracts, public sector employers such as the NHS have been part of the shift towards more precarious employment. The exposure of a company that was paying Sri Lankan teenagers £1.57 an hour to tutor primary school pupils shows that schools in England are now being pushed down a similar path. Parents and teachers want to make the most of the £1.7bn catch-up fund provided by the government. But as difficulties with the scheme emerge, it seems far from clear that it will boost schools and teachers. On the contrary, the use of public funds to build a system that supplements lessons by qualified teachers with far cheaper ones delivered via the internet, by unqualified people thousands of miles away, could undermine them. Continue reading...

Some of the poorest areas will suffer disproportionate burden for longer if government does not act, warns CEBRA year of Covid-19 lockdowns has cost the UK economy £251bn – the equivalent of the entire annual output of the south-east of England or nearly twice that of Scotland, according to a report published on Monday.Analysis by the Centre for Economics and Business Research found that while the whole of the country had suffered huge damage from restrictions on activity since the first national lockdown began, some poorer regions had suffered the most. Continue reading...

Markets aren’t working when a system makes Elon Musk billions by adding his company Tesla to the US stock indexThe late economist Hyman Minsky was a pioneer in understanding finance’s grip on the US economy – and the consequences for society. In the 1980s, he predicted the rise of “money manager capitalism” and foresaw that institutional investors would become masters of the universe. Today, we are in a world of “money machine manager capitalism”, where algorithms control the buying and selling of securities. Those paid to pick shares, mindful perhaps that their sales pitch was being undermined, claim such passive investing is “worse than Marxism”. The rise of the robots has been undeterred by such criticism.The pioneer of this approach is the US firm BlackRock, which is the world’s largest asset manager and last year became Britain’s biggest one too. Humans still set the rules that computers follow. But artificial intelligence is blurring the distinction. Computers run investment portfolios offering cheap “exchange-traded funds” that automatically track indices of shares and bonds. This has been so successful that the big three – US firms BlackRock, Vanguard and State Street – now manage $19tn in assets, roughly a tenth of the world’s quoted securities. Continue reading...

Consumer price rises loom while dearth of semiconductors slow production from Samsung to FordConsumers are facing price rises and shortages of products from TVs and mobile phones to cars and games consoles as a global shortage in semiconductors grows.The shortage in chips, the “brain” within every electronic device in the world, has been steadily worsening since last year.Related: Honda to close UK plant for four days owing to supply chain problems Continue reading...

State power and capitalism’s innovation have staved off disaster, but the challenge is long-termTo the dates 4 August 1914 and 3 September 1939 can now be added a third: 23 March 23 2020, the day the government declared war on Covid-19 and announced a lockdown to combat the virus.It’s strange how history repeats itself. The same mixture of overconfidence and under-preparedness that marked the start of the first and second world wars was evident a year ago. Basic kit was in short supply and the country’s leaders were in denial about the threat. Continue reading...

Previous acts of British economic self-harm have been rectified through crisis. It seems we will be learning the hard way againIt has been well publicised that the collapse in economic activity last year, occasioned by the officially induced lockdown, was the biggest for some 200 years. The British economy experienced a bigger hit than most other advanced economies; but it was only the UK that suffered the additional blow of the self-harm caused by Brexit.The damage is already apparent to businesses and traders that are struggling to cope with the huge impact of the red tape imposed by Britain’s departure on exporters and importers. The recently published overseas trade figures were truly shocking. But, as my Guardian colleague Polly Toynbee observed last week, the extent of the crisis is not yet apparent to many readers of the Brexit-supporting tabloid press, for the simple reason that the problems are under-reported there, and the welcome early success of the British vaccine programme is being misleadingly attributed to the freedom of manoeuvre allegedly afforded by Brexit.The answer, notwithstanding all the conflict at present – and things may well get worse before they get better – is to acknowledge the folly Continue reading...

It’s a step forward that Uber drivers must now be treated as employees, but there’s still a long road to travelPutting the brakes on the gig economy is a good thing. Bingeing on something commonly makes you feel ill. But in the case of the stratospheric growth in online services and the deleterious effect of this on stressed-out, poorly paid workers, overindulging makes others sick.From Australia to Canada, Chile, Brazil and much of Europe, gig economy firms have faced legal action, government enforcement or both as countries try to improve the rights of their workers.The minister protests that Brexit was never a cloak behind which he would be busily downgrading workers' rights Continue reading...

Figures also appear to confirm that economic recovery will be faster than forecast

Leading industrial nations support a possible $500bn rise in IMF currency reserves to help poorer states cope with Covid crisisThe world’s leading industrial nations have moved a decisive step closer to providing pandemic financial support for developing countries after they backed plans to increase currency reserves provided by the International Monetary Fund.After the US dropped its opposition to a fresh allocation of the IMF’s special drawing rights, extra funds to help developing nations cope with the economic effects of Covid-19 looks certain to be rubber-stamped next month. Continue reading...

Analysis of budget highlights deep cuts to spending for Whitehall departments and local governmentBritain could be headed for a new era of austerity, the leading tax and spending thinktank has warned, after analysis of Rishi Sunak’s budget revealed deep cuts in spending plans for Whitehall departments and local government.The Institute for Fiscal Studies (IFS) said, despite the added pressures caused by Covid-19, areas of spending not singled out for special treatment by the Treasury were facing an 8% reduction in their budgets compared with pre-pandemic plans. Some of the departments now being lined up for fresh spending curbs – such as the Home Office and HMRC – had additional responsibilities as a result of Brexit, the IFS said.Related: Sunak defends budget plans and insists 1% rise for NHS staff is fairRelated: UK's economic recovery may be quicker than forecast – Bank of England Continue reading...

Rolling coverage of the latest economic and financial news

With the economy looking more resilient than expected under Covid, setting committee keeps rate at 0.1%The Bank of England has become less gloomy about unemployment amid signs that budget measures and a more resilient than expected economy will improve the UK’s jobs’ outlook.Announcing the decision of the latest meeting of its nine-strong monetary policy committee (MPC), Threadneedle Street said it was likely its next set of economic forecasts – due out in early May – would forecast a jobless peak below the 7.75% pencilled in last month. Continue reading...

Unctad agency says international cooperation has fallen well short of what is needed given scale of crisis

Rolling coverage of the latest economic and financial news

Fears of rapid rise in inflation after study finds 26% of savings made during lockdown will be spent

Rolling coverage of the latest economic and financial news

Smart watches and tracksuit bottoms also included, with more spent on keeping safe and fit

Governor says rising interest rates reflect growing optimism – but warns new Covid variants could derail progress

The White House is putting government at the heart of the post-Covid economic bounce-back. The implications affect us allDuring the pandemic, the world has been dazzled by the huge sums that governments have been willing to spend propping up their economies. Britain has spent £407bn in support measures, more than 40% of normal government spending in an entire non-Covid year. The European Union has launched an emergency new €750bn (£645bn) coronavirus recovery fund to help its 27 member states. Now the United States has topped them all, passing the $1.9tn (£1.4tn) stimulus package that President Biden signed this week. This takes pandemic-related spending by the US to around $6tn (£4.3tn) – more than it spent fighting the second world war.The Biden package is massive. It puts up to $1,400 into the pockets of low-paid workers and members of their families. It extends a wide range of welfare payments into the autumn, boosts parental tax credits, and maintains special unemployment reliefs and health care subsidies. Much of the support is unconditional. The poorest fifth of US households will see their incomes rise by 20%. Child poverty may be cut in half. Payments began to arrive over the weekend. Continue reading...

Delays and confusion at the UK’s ports threatens to put hundreds of small and medium-sized exporters out of businessThe collapse of Britain’s trade with the EU will continue into the summer after the failure to recruit up to 30,000 customs agents, despite government assurances that normal service has resumed, industry groups have warned.Delays and confusion at the UK’s ports, which have resulted in 40% of trucks crossing the Channel with empty containers, threatens to put hundreds of small and medium exporters out of business and cost the government millions of pounds in lost trade tariffs. Continue reading...

The Bank of England must be clear about its focus on jobs and growth – and that stimulus needn’t spoil anyone’s sleepTearing at the Tory party’s fabric is the thought of spiralling government debt. The subject triggers a cold sweat in some of the most emotionally resilient Conservative backbench MPs, such is the distress it generates.Much as the German centre-right parties have spent the past 90 years fearing a return of hyperinflation, their UK counterparts worry about paying the national mortgage bill, and the possibility it will one day engulf and sink the ship of state.If the past decade has taught us anything, it's that the Bank has done too little to help the economy, not too much Continue reading...

The president’s $1.9tn stimulus package should lift US GDP by up to 4% – and thus buoy up the whole of the global economyUS president Joe Biden did the world a favour last Thursday when he signed a bill handing $1.9 trillion (£1.4tn) of rescue funds to state and federal agencies, millions of students and workers and the US vaccination programme.The money will appear first as cheques landing on household doormats as early as this week, softening the blow of the pandemic for those in work and for the many who remain out of work and under severe financial strain.If anything the US economy needs a bit of inflation after more than 10 years without any Continue reading...

The former head of the Bank of England looks at the danger of putting a price on everything

Businesses cite higher costs, customs delays and paperwork as among the problems they faceThe first couple of weeks in January after Brexit were a disaster for Ronald Scordia’s shellfish exporting business. “The truck was late arriving, then took 48 hours to arrive in France, missed the connection on the Friday, and wasn’t able to be sent on until the Monday. You can imagine the quality of the produce when it got there; we lost a lot of money,” he said.Related: Massive drop in UK trade shows extent of Boris Johnson's Brexit own goal Continue reading...

The timetable for the major new controls that have already been imposed and those that have been delayedThe UK government has made eight major U-turns on its adopted timetable for customs controls on trade with the EU.In early March, ministers prompted a row with Brussels after unilaterally delaying two sets of controls on goods entering Northern Ireland from Britain. On Thursday, after warnings that controls on imports from the EU could lead to empty supermarket shelves in July, the government delayed a further six measures, a tally by the Guardian shows. Ministers set back to January 2022 the opening of a network of more than 30 customs posts, which had been scheduled for 1 July. Continue reading...

Australia’s longtime finance minister to pursue a ‘global’ approach to help countries become carbon-neutral by 2050Mathias Cormann says he cannot wait to start his new role as the head of the Organisation for Economic Co-operation and Development (OECD).Australia’s longest-serving finance minister will take over as secretary general of the Paris-based organisation from outgoing Angel Gurría.Related: Mathias Cormann elected OECD chief despite climate recordRelated: Climate experts in dismay at choice of Mathias Cormann as OECD chief Continue reading...

Former Australian finance minister’s candidacy was dogged by complaints from environmental groupsAustralia’s former finance minister Mathias Cormann has won a hard-fought election to become the new chief of the Organisation for Economic Co-operation and Development (OECD), despite grave concerns voiced by environmental groups over his record on climate change.Cormann narrowly defeated the Swedish former EU trade commissioner Cecilia Malmström in the election to lead the 37-member Paris-based organisation, which gives advice to member governments on economic trends, inequality, fighting corruption and trade and is seen as the world’s leading rulemaker on corporate tax.Related: Climate experts in dismay at choice of Mathias Cormann as OECD chiefRelated: UK warned not to back Mathias Cormann as new OECD head Continue reading...

Critics say election of former Australian finance minister with ‘atrocious record’ sends a dangerous signalClimate experts have expressed dismay at the choice of Mathias Cormann, a former finance minister in an Australian government with a record of strong hostility to climate action, as secretary general of the Organisation for Economic Co-operation and Development (OECD), an international institution that advises rich countries on policy and poor countries on how to become wealthier.Jennifer Morgan, the executive director of Greenpeace International, said: “We have little confidence in Cormann’s ability to ensure the OECD is a leader in tackling the climate crisis, when he has an atrocious record on the issue. If the OECD is to fulfil its mandate, it must confront the climate emergency, arguably the biggest social justice issue of our time.”Related: Mathias Cormann elected OECD chief despite climate record Continue reading...

Rolling coverage of the latest economic and financial news, including January’s UK GDP report

Analysis: trade could be a drag on recovery for years to come rather than the high-octane propellent the government promised

Fall in exports worth £5.6bn comes as UK economy in January suffers deepest drop since first wave of Covid pandemic

British retail, already challenged by digital, has been hammered by Covid. Thousands of jobs could be lostUnder capitalism, shops are one of the places where our society is supposed to feel most alive. Window displays beckon. Products are piled high. Stock changes constantly. Desires are created and never quite satisfied.For most of the past year, shops in Britain – one of the economies most driven by consumerism – have not been like that at all. Even the grandest London department stores were often eerie places during the few months they were open last summer and autumn: customers sparse, staff trying to keep busy, the same goods on the shelves for much longer than normal. In its most physical form, British consumerism has slowed down and frequently ground to a halt.Andy Beckett is a Guardian columnist Continue reading...

Rolling coverage of the latest economic and financial news

Rolling coverage of the latest economic and financial news

Inflation and other uncertainties could take shine off OECD’s strikingly optimistic prediction

Demand for US tech stocks pushes Dow above 32,000 while Stoxx 600 closes at highest in over a yearShare prices in the US and Europe have reached their highest levels since the start of the pandemic as optimism grows that Joe Biden’s $1.9tn stimulus package can reflate a battered global economy without triggering a surge in inflation.Demand for US tech stocks sent the Dow Jones Industrial Average above the 32,000 level for a brief period while the Stoxx 600, a key index of European shares, closed at its highest level since late February last year. Continue reading...

Rolling coverage of the latest economic and financial news

First official snapshot comes after collapse of export volumes in first month of Brexit deal

Thinktank upgrades forecasts for world economy, with US expected to drive recovery

A post-Brexit ‘Big Bang 2.0’ is the last thing finance needs: the rules are what make London an attractive place to do business

Charlie Bean of Office for Budget Responsibility says savings of higher earners more likely to be spent over several years