GDP grew faster than forecast in second quarter as fewer Covid restrictions prompted households and companies to spendHigher NHS spending, stronger investment and a bounce back in exports helped the UK economy to recover more quickly from the lockdown at the start of the year, official figures have shown.After shrinking by 1.4% in the first three months of the year, the economy grew by a record 5.5% in the second quarter as restrictions on activity were eased. Continue reading...

Output, orders and employment all fell in September, according to official data, as Beijing turns to Russia to ease its electricity shortages

Rishi Sunak criticised for cutting off wage-subsidy lifeline that still supports over a million jobsRishi Sunak’s decision to wind up the furlough scheme today will intensify Britain’s economic woes, an array of unions, business groups, employment experts, City firms and politicians have warned.With signs of activity slowing even before pressures on supply chains began to mount over the past few weeks, the chancellor was criticised for cutting off a wage-subsidy lifeline that is still supporting well over a million jobs. Continue reading...

Burger King and Starbucks leaders also sign up to new body to discuss mounting challengesBosses from chains including Nando’s, Starbucks and Prezzo have been drafted in to advise the government on its plans to boost the hospitality sector after the easing of lockdown this summer.Amid mounting concern over staff shortages and supplies across the economy, ministers said the group of executives would help to identify and oversee actions that the government could take to smooth the post-pandemic recovery for pubs, hotels, cafes and restaurants. Continue reading...

Latest rail franchise to hit the buffers at least arrived at the destination via an unconventional route

The long-running series in which readers answer other readers’ questions on subjects ranging from trivial flights of fancy to profound scientific and philosophical conceptsHow much poorer would the rich need to be to provide a basic minimum income for everyone? Robin DevanyPost your answers (and new questions) below or send them to nq@theguardian.com. A selection will be published on Sunday. Continue reading...

Andrew Bailey says inflationary pressures strengthen the case but ‘we are monitoring situation closely’The inflationary pressures building in the UK has made a rise in interest rates next year more likely, the central bank chief has warned.Against a backdrop of rising fuel prices and the prospect of higher transport costs pushing up the price of food in the run-up to Christmas, the Bank of England’s governor said there were signs that inflation could be sustained and the central bank’s monetary policy committee (MPC) may need to increase borrowing costs in 2022. Continue reading...

Average price of litre of petrol rises from 135.9p on Friday to 136.6p on Sunday, with further jump expected

With Britain facing multiple challenges, Keir Starmer’s party is right to promise prudenceLabour is not much cop at winning elections. In its entire history, the party has won only five elections with a comfortable majority. The brutal truth is that Labour should be good at opposition because it has plenty of practice at it.Just about every political pundit has advice for Sir Keir Starmer on how to avoid a fifth successive defeat, an outcome that would be dismal even by Labour’s own standards. To win, it is said, Labour needs to be seen as a solid government-in-waiting but also have radical policies to put before the public. It must challenge the Tories for the support of older voters while appealing to the young; and win back Brexit supporters in former “red wall” seats while at the same time hanging on to those who backed remain in 2016. There are, no question, easier jobs than being the leader of the opposition. Continue reading...

After the success of the chancellors’s £70bn programme, there is uncertainty about the future direction of the economyThe biggest state intervention in the UK’s labour market in peacetime comes to an end this week when the government finally winds up its furlough support.Barring an unlikely last-minute change of heart, a wage subsidy that has been in place for 18 months and has cost £70bn will no longer be open to struggling firms. Continue reading...

The growth of mechanisation brings many benefits, yet vigilance is needed to keep it in check

Rolling coverage of the latest economic and financial news

With inflation set to rise, alongside the cost of shopping and transport, the economic fallout will squeeze Britons’ budgetsThe Bank of England warned this week that surging energy bills will lead to inflation topping 4% this winter, piling pressure on already tight household budgets. The economic fallout from the pandemic and Brexit is pushing up the cost of essentials such as food and clothing as well as travel and even doing up your home. We look at how this perfect storm is affecting you. Continue reading...

There are signs that previously struggling social democratic parties are drawing the right lessons from the pandemicIn the wake of the financial crash in 2008, hopes were high on the left that a bona fide crisis of capitalism would significantly shift the political dial in its favour. Isolated victories and movements aside, it didn’t really happen. Instead, in the early 2010s, the bailout of the bankers was followed by the imposition of austerity across Europe and in America as governments sought to balance the books.Premature predictions on the nature of post-Covid politics in the west are therefore to be avoided. But certain themes do seem to be emerging. Sketching out broadly communitarian territory, they chime with many people’s experience of how the pandemic played out and what it exposed; and there is some evidence that, in northern Europe, they might inform a revival and renewal of centre-left parties and movements. Continue reading...

Cryptocurrencies are a baffling entity but adopting it as legal tender is the strangest, most worrying aspect of allEl Salvador this month became the first country to adopt a cryptocurrency – in this case, bitcoin – as legal tender. I say the first, because others might follow. But they should think twice, because the idea is highly dubious – and likely to be economically dangerous for developing countries in particular.I will admit that I don’t understand the need for cryptocurrencies at all. Like many economists, I fail to see what problem they solve. They aren’t well designed to fulfil any of the classic functions of money – a unit of account, store of value, or means of payment – because their prices are so extraordinarily volatile. This volatility is not surprising, because cryptocurrencies are backed neither by reserves nor by the reputation of a well-established institution, such as a government or even a private bank or other trusted corporation. Continue reading...

Nuclear-capable bombers entered air defence zone, says Taipei, amid simmering row over competing bids to join regional trade agreementChina has voiced opposition to Taiwan joining a major trans-Pacific trade deal as it flew 24 planes – including two nuclear-capable bombers – into the self-ruled island’s air defence zone, the biggest incursion in weeks, Taiwanese officials said.Last week Beijing submitted its own application to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Continue reading...

Inflation expected to rise ‘slightly over 4%’ in the final quarter of this year, as energy and goods prices surge

Analysis: Threadneedle Street is adopting a wait and see policy and keeping interest rates unchangedHigher energy prices will send the annual inflation rate above 4% by the end of the year and keep it there well into 2022. On the face of things, the Bank of England is asleep at the wheel and should be taking steps to ease growing price pressures.It is not quite so simple as that. The minutes of the latest meeting of Threadneedle Street’s monetary policy committee show the Bank opposed immediate action, with only two of the nine members voting to halt the money creation programme known as quantitative easing (QE). All nine backed keeping official interest rates unchanged at 0.1%. Continue reading...

Interest rates kept at 0.1% as worker and material shortages slow Britain’s economic recovery from pandemicThe Bank of England has warned surging household energy bills will drive inflation above 4% this winter, with persistent pressure on living costs expected to last through to the middle of next year despite a slowdown in the economy.Voting unanimously to keep interest rates at the historic low of 0.1%, the Bank’s monetary policy committee (MPC) warned severe shortages of workers and raw materials were weighing on Britain’s economic recovery from lockdown. Continue reading...

Firms battling stock and worker shortages with Brexit cited as exacerbating pandemic issuesSevere shortages of workers and supplies have dragged down economic growth in Britain to the weakest levels since pandemic restrictions were eased in March, according to a closely watched business survey.The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed that growth in private sector output slowed in August as firms battled with severe shortages while costs rose at the fastest pace since the late 1990s. Continue reading...

Downgrade by Fitch reflects jitters in markets as boss of Asia-focused bank HSBC says problems ‘concerning’Ratings agency Fitch has downgraded its forecast for China’s economic growth because of concerns about a slowdown in the country’s colossal housing market and fears about struggling property giant Evergrande.China enjoyed a swift economic rebound from the Covid-19 pandemic, but strict new rules on the country’s developers have caused a deleveraging rush and helped push housing giant Evergrande to crisis point. Continue reading...

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The combined challenges of an economic slowdown, rising energy costs and the transition to net zero loom over this governmentLong before there was talk of an energy crisis, the government had been looking vulnerable. Economic growth is slowing and inflation is rising. Despite the Indian summer, Covid-19 infection rates remain high, and the warm weather won’t last for ever.The prop provided to the labour market by the furlough scheme will be kicked away at the end of the month, and nobody can be sure of how that will affect the businesses that have grown used to the wages of their staff being met by the state. Millions of struggling people are about to become £20 a week worse off when universal credit reverts to its pre-crisis level. There will be tax increases next spring to bring down NHS waiting lists.Larry Elliott is the Guardian’s economics editor Continue reading...

Australian Strategic Policy Institute says Coalition should take pre-emptive action with global trade umpire in case demand for commodity dries up

From the warped housing market to the ‘knowledge economy’, the system increasingly works only for the uber-wealthyI travelled to New York City in August for the first time since the pandemic began, to visit friends who had just bought their first home. They are firmly upper-middle class and in their 40s. They took out a mortgage for $1.5m (£1.1m) to buy a place in a Brooklyn neighbourhood that was regarded until recently as an area immune to gentrification. So far, so typical. Asset ownership comes late these days.On the second day of my visit I saw a group of twenty- and thirtysomethings sitting together in a local park (of the type illuminated by sodium lights to discourage drug dealing). They had gathered around a banner announcing a meeting of the local tenants’ rights union. Almost every member of the group looked as if they could have featured in the pages of an Ivy League magazine. All bar one were white. Their neighbourhood was not.Mark Blyth is a political economist at Brown University Continue reading...

Economic observers should heed the warnings now – rising prices and slowing growth are a very real threatHow will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months.The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, supply bottlenecks in both goods and labour markets, and shortages of some commodities, intermediate inputs, final goods, and labour. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary. Continue reading...

Rolling coverage of the latest economic and financial news

Top economic thinktank says recovery from the Covid-induced recession is not yet completeThe west’s leading economic thinktank has warned governments and central banks against an over-hasty withdrawal of support for growth amid concerns that recovery from the pandemic-induced recession is incomplete.The Paris-based Organisation for Economic Co-operation and Development (OECD) said a continuation of the stimulus policies of the past 18 months was justified because the recent pickup in inflation was likely to prove temporary. Continue reading...

Budget deficit drops to £20.5bn in August but is offset by high interest payments on national debtUK government borrowing increased by more than expected in August as rising inflation pushed up debt interest payments.The Office for National Statistics said the government’s budget deficit – the gap between spending and income – dropped to £20.5bn in August from about £26bn in the same month a year earlier as Britain’s economy recovers from lockdown. Continue reading...

Report says employment opportunities more than 10% below pre-pandemic levels for quarter of workforceBritain’s worst labour market shortages in decades are being driven by employers struggling to recruit low-paid workers, research suggests, while vacancies in other areas are still significantly below pre-pandemic levels.A report by Institute for Fiscal Studies said that new job opportunities remain more than 10% below pre-pandemic levels for a quarter of the workforce – about 8 million people – despite reports focusing on severe shortages of staff in several sectors of the economy such as road haulage, care and warehouse work. Continue reading...

Energy price crisis and worries over contagion from China’s Evergrande property giant have hit the markets

Nearly eight out of 10 of young Britons blame capitalism for the housing crisis and two-thirds want to live under a socialist economic system. How did that happen?The young are hungry and the rich are on the menu. This delicacy first appeared in the 18th century, when the philosopher Jean-Jacques Rousseau supposedly declared: “When the people shall have no more to eat, they will eat the rich!” But today this phrase is all over Twitter and other social media. On TikTok, viral videos feature fresh-faced youngsters menacingly raising their forks at anyone with cars that have start buttons or fridges that have water and ice dispensers.So should the world’s billionaires – and fridge-owners – start sleeping with one eye open? Hardly. It’s clear that millennials (those born between the early 80s and the mid-90s) and zoomers (the following generation) are not really advocating violence. But it is also clear that this is more than just another viral meme. Continue reading...

Chancellor should use income tax rather than student loan repayments, says Institute for Fiscal StudiesRishi Sunak will find it “essentially impossible” to save money on university tuition fees in England without hurting graduates on average earnings in favour of their wealthy peers, according to the Institute for Fiscal Studies.Instead, the IFS says the chancellor should use the income tax system rather than student loan repayments as a way of raising revenue from the highest-paid graduates. Continue reading...

As the UK economy enters a rough patch, government needs to give substance to its flagship soundbiteBritain’s economic recovery from lockdown is stalling and inflation is on the rise. With the approach of autumn, prophecies made earlier this year for a surge in consumer spending appear to have fallen flat, washed out by the wettest summer in a decade.It was all supposed to have been so easy for the chancellor, Rishi Sunak. Lockdown had helped households save more than £200bn and left consumers champing at the bit for the reopening of pubs, bars, restaurants and shops. Continue reading...

Immigration became the big issue in the EU referendum. It’s also why the supermarket shelves are emptyOn the eve of reshuffling his Alexander’s Ragtime Band of cabinet ministers, the prime minister let it be known that he intended to fight the next election “around Brexit”. No doubt this will have come as interesting news to the growing band of Brexiters who are complaining that it was not meant to be about a “high tax and high spend” economy.Yes, as we see daily evidence of the disaster that is Brexit, Johnson fantasises that, on the contrary, it is a success story. He has promoted to the role of foreign secretary Liz Truss, whose pathetic trade deals have produced far less satisfactory arrangements than we had as a member of the EU. Continue reading...

Soaring prices will have some at the Bank itching to put up interest rates, but others will stress that now is a very bad timeEconomic growth is losing steam and inflation is heading for boiling point. When the Bank of England’s rate-setters meet this week, there will be contrasting warning signs to consider.With the most severe disruption to company supply chains since the 1970s, the recovery from last winter’s lockdown is practically stalling. Companies are struggling to recruit staff to keep the tills ringing, raw material costs have surged, and energy prices have hit record highs. All of this threatens to feed into higher inflation this autumn, after the consumer prices measure of annual inflation made a record jump in August, to 3.2%. Continue reading...

Rolling coverage of the latest economic and financial news

Steelmakers warn of unprofitability and an extra half a million homes face falling into fuel povertyRecord energy prices have forced two fertiliser plants in the north of England to shut down and brought steel plants to a halt, in some of the clearest signs that the energy crunch engulfing Europe could deal a blow to the UK’s economic recovery.The US fertiliser maker CF Industries has halted production at its plants in Billingham in Teesside and Ince in Cheshire, which employ about 600 workers, because of rocketing gas prices, which have reached successive record highs across Europe in recent weeks. Continue reading...

New York-listed fertiliser group CF Industries Holdings halts production at its plants in Billingham in Teesside and Ince in Cheshire, amid gas price surge

Anne-Marie Trevelyan dismisses those who believe in global heating as ‘fanatics’ in resurfaced posts

PM’s tasteless remark | Maskless Tories | Climate v capitalism | Stinging criticismThe prime minister’s puerile remarks on penal policy (PM condemned for joke about UK becoming ‘Saudi Arabia of penal policy’, 14 September) plumb new depths in what passes for debate on the subject in this country. Short of conscription, the decision to imprison represents probably the most extreme manifestation of the state’s authority over individuals. Deciding how we exercise that power deserves better than a second-rate stand-up routine.

Analysis: Britain faces universal credit cut, public sector pay freeze and national insurance risePrices are climbing in the shops and consumers face an autumn crunch. Official figures show inflation rose at the fastest rate in a decade in August, as the impact of Covid-19 and Brexit drives up the cost of living.Surpassing the forecasts of City economists, the 1.2 percentage point increase in the consumer price index was the largest since January 1997, the year Gordon Brown would later handthe Bank of England independence to manage inflation. At 3.2%, the CPI is now the highest since March 2012. Continue reading...

Pandemic has added to their debts while wealthy nations limit access to vaccines, says annual reportThe world’s poorest countries will be left $12tn (£8.7tn) worse off by 2025 amid a weaker economic recovery from Covid-19 as wealthy nations limit their access to vaccines, the United Nations has warned.In its annual trade and development report, the UN Conference on Trade and Development (Unctad) said low-income countries had been hit much harder by the pandemic than during the 2008 financial crisis, adding to their debts and piling pressure on their public finances. Continue reading...

We’re keen to hear how people across the UK experience the impact of rising consumer pricesUK inflation has hit the highest figure in nearly a decade, having jumped to 3.2% in August, from 2% in July, the highest rate since March 2012.We’d like to hear how people in the UK are experiencing rising costs for food and drink, energy bills, transport, restaurants and hotels. Are you struggling to afford some things now that you could previously? Continue reading...

Jump in August to a nine-year high of 3.2% will have an impact on pay packets and savings

Leap to 3.2% from July’s 2% is largest increase in annual rate from one month to next since records began

In survey, 19% of US adults 65 and over reported using their savings during pandemic – the highest percentage of 11 wealthy countriesOlder Americans were more likely to suffer pandemic-related economic difficulties compared with older citizens of other wealthy countries, according to a new survey from the Commonwealth Fund.In a survey taken by adults 65 and older in 11 of the world’s wealthiest nations, 19% of US adults reported using up all or most of their savings or losing sources of income during the pandemic – the highest percentage of any country. The percentage is nearly seven times higher than Germany, where 3% of older adults reported economic difficulties. Continue reading...

The government’s plan to fix the ailing social care system passed into law this week. But who will benefit most and who will pick up the bill?Last week Boris Johnson outlined what Downing Street is billing as a once-in-a-generation shake-up of adult social care and how it is funded. It is an attempt to tackle one of the thorniest issues in modern politics – how to meet the spiralling costs of an ageing population who are living longer with complex conditions and to do it in a way that people feel is fair.Rachel Humphreys met one woman, Lesley, who knows only too well the complexity and expense of England’s social care system. She has helped her 90-year-old mother to sell her home to pay for her continuing residential care. It’s a story that will be familiar to families across the country who have had to grapple with a labyrinthine system that can quickly burn through a lifetime’s savings. Continue reading...

Rolling coverage of the latest economic and financial news