Britain’s economy shrank by a fifth in the last quarter, much worse than the US or the eurozone

The dire economic stats reflect a perception that the government’s Covid strategy is at best confused and at worst chaotic

High numbers of workers furloughed in both towns but tourists drive Lakes boom, while airline-dependent centre strugglesIf there was a corner of the UK that felt the sharp impact of recession first, it was the tourist honeypot of Windermere. Visitors disappeared overnight, just as shops and bars were readying for the booming spring and summer months.Nearly 19,000 workers in the area were furloughed – 40% of the eligible workforce – earning South Lakeland the unwanted title of “furlough capital of the UK”. The neighbouring area of Eden had the country’s second highest furlough rate, with 39% of the workforce placed on the government scheme that covers 80% of a temporarily laid off employee’s wages. Continue reading...

Decline of 20.4% caused by coronavirus is worst among G7 for a number of reasons

Job losses and possibility of second closures likely to hinder emergence from recession

'I’ve said before that hard times were ahead and today’s figures confirm that hard times are here,' says the chancellor.Britain has entered the deepest recession since records began, as official figures on Wednesday showed the economy shrank by more than in any other G7 nation during the coronavirus outbreak in the three months to June.The Office for National Statistics said gross domestic product (GDP) fell in the second quarter by 20.4% compared with the previous three months – the biggest quarterly decline since comparable records began in 1955

Latest slump deeper than 2008-09 financial crisis, deindustrialisation of 80s or oil shocks of 70s

GDP falls 20.4% – the worst of any G7 nation in the three months to June

The falling value of the greenback heralds a larger, gradual fragmentation of the international economic orderA near 10% drop in the value of the US dollar since its March high has given rise to two distinct narratives. The first takes a short-term perspective, focusing on how a depreciation could benefit the US economy and markets; the second takes the long view, fretting over the dollar’s fragile status as the world’s reserve currency. Both narratives contain some truth, but not enough to justify the emerging consensus around them.Several factors have combined to put downward pressure on the greenback (as measured by the DXY index of trade-weighted currencies) in recent weeks, resulting in a depreciation that has reversed almost half of the appreciation of the last 10 years within the space of months.Related: Will Covid make countries drop cash and adopt digital currencies? | Kenneth RogoffRelated: Trump's weaponisation of the dollar could threaten its dominance | Jeffrey Frankel Continue reading...

Many have taken jobs in new industries, while others are underemployed and struggling with bills

S&P edges towards all-time record with oil prices and hospitality stocks rising as investor optimism reboundsUS stock markets moved closer to record highs on Tuesday after investors bet on a fresh round of government spending to lift the economy and counter the effects of the Covid-19 pandemic.The S&P 500, seen as the broadest measure of US investor sentiment, raced to a 10-point gain by mid afternoon to leave it just 16 points short of the all-time high reached in February.Related: Global stock market rally is a gamble, IMF warns investorsRelated: Reality and the stock market don't always align. Don't be fooled into thinking the economy is back on track | Greg Jericho Continue reading...

Rolling coverage of the latest economic and financial news, as nearly three quarters of a million people drop off payrolls since March

State and local governments facing deep shortfalls wrestle with the devastating economic impact of the coronavirusEvery day, New Yorkers throw out 10,000 tons of trash – a third of which is food and yard scraps that could skip the incinerators and landfills and be turned into compost.Over the last several years, a curbside pick-up program allowed New Yorkers to compost their food and yard scraps by putting them in a brown bin from the city that would be picked up just like trash. Continue reading...

Sunny weather and reopening of shops boost sales, but GDP figure expected to confirm recession

Rolling coverage of the latest economic and financial news, as fast food chain tries to recover severance pay from ex-CEO

Personal loans and credit card debt expected to fall 16% as lending to businesses surgesConsumer borrowing from UK banks will fall at the fastest rate on record in 2020, amid the recession caused by the coronavirus pandemic, forecasts suggest.Banks are expected to lend 15.9% less to consumers via personal loans and credit cards, according to forecasts by EY Item Club, the economic forecasting arm of the accounting firm. Continue reading...

Survey of 2,000-plus employers suggests wave of job losses will hit when furlough scheme endsAs many as a third of UK employers expect to cut jobs by October, according to a survey that suggests that the economic impact of the coronavirus pandemic will accelerate in the coming weeks.About 33% of more than 2,000 companies, charities and public sector bodies in the poll said they expected to make redundancies in the third quarter of 2020, according to figures from the Chartered Institute of Personnel and Development (CIPD) and Adecco Group, a staffing company. Continue reading...

Official measure to be declared this week as coronavirus lockdown shrinks GDP by 21% in second quarterBritain’s economy will be officially declared in recession this week for the first time since the 2008 financial crisis, as the coronavirus outbreak plunges the country into the deepest slump on record.Figures from the Office for National Statistics on Wednesday are expected to show that gross domestic product (GDP), the broadest measure of economic prosperity, fell in the three months to June by 21%.Related: Negative UK interest rates were once unthinkable. But tough times lie ahead | Larry Elliott Continue reading...

Bans on junk food ads and five-a-day advice miss the point. To cut obesity people need support and jobsBoris Johnson has made obesity a political issue. The prime minister accepts that one of the reasons he nearly died from Covid-19 was that he was carrying too many pounds.Johnson is not the first prime minister to “declare war” on obesity. In recent decades there have been plenty of campaigns designed to make people exercise more and eat more healthily. There have been exhortations to eat five a day, sugar taxes, bans on the advertising of junk food, but none of them have made a difference. Obesity levels in England have doubled in the past quarter of a century.Related: No 10 plans weight loss drive to ready UK for expected Covid-19 second wave Continue reading...

Shareholder payout to stay despite 73% fall in quarterly profits due to impact of Covid-19Saudi Arabia’s state-owned oil giant still plans to pay $75bn (£57bn) to its shareholders this year even as the impact of the coronavirus caused its profits for the last quarter to plummet by 73%.The global slowdown in oil demand during the pandemic pushed Saudi Aramco’s net income for the second quarter down to $6.57bn, from $24.7bn in the same period last year and $16.6bn in the first quarter of 2020. Continue reading...

Dominic Cummings’s trust-breaking trip to Barnard Castle has become this government’s Black Wednesday momentFor many years, the phrase “Whitehall farce” denoted long-running comedies at the Whitehall theatre, a stone’s throw (or two) from Downing Street and assorted government departments. One of my favourite stories is of the time my friend the economist Lord Peston – father of the broadcaster Robert – returned unexpectedly to the office he shared with Lord Rix, once a star of Whitehall farces, and expressed his embarrassment at the sight of Rix changing for dinner with his trousers down. “No need to be so shocked, Maurice,” said Rix: “In the old days people used to pay to see me like this.”Well, the lockdown may have closed theatres, but the Whitehall farce is alive and well, and has been taking place at least twice daily in Downing Street. We are undergoing the worst economic depression in memory – some believe in history – and we have as a prime minister a man who is all at sea and so dependent on his key adviser, Dominic Cummings, that he could not bring himself to sack him even though Cummings made a laughing stock of the government’s entire lockdown policy with his trip to Barnard Castle “to test his eyesight”.How do they confront these enormous events? They decide to conduct a war on the civil service whose loyalty and trust they require Continue reading...

In a dramatically unequal society, a one-off wealth tax provides a clear and decisive route to balancing the Treasury’s booksEven before the coronavirus pandemic struck, the divisions between the super-rich and the rest of society were growing increasingly extreme. But as the virus infects the world economy, plunging millions into unemployment and pushing finances to breaking point, those divisions are set to get worse.Last week, Mark Zuckerberg’s fortune passed $100bn (£76bn) for the first time, adding him to an exclusive club of the world’s centibillionaires, after Facebook’s shares surged on news it was to launch a rival to the video-sharing app TikTok.History suggests wealth taxes can help repair government finances while promoting inclusive growth for the future Continue reading...

The president thinks that as long as they buoy the stock market, they’re helping the US economy – and that’s pure rubbishSince the start of the pandemic, American billionaires have been cleaning up. As more than 50 million Americans filed for unemployment insurance, billionaires became $637bn richer. Facebook’s Mark Zuckerberg’s wealth has ballooned 59%. Amazon’s Jeff Bezos’s, 39%. Walmart’s Walton family has added $25bn.Big drug company CEOs and their major investors are doing nicely, too. Since the start of the pandemic, Big Pharma has raised prices on over 250 prescription drugs, 61 of which are being used to treat Covid-19. Continue reading...

Official economic data for June will be out this week. But unconventional indicators can help gauge conditions right nowThis week it will be confirmed that Britain’s economy is in the deepest recession for at least a century. Yet only a few days ago, the Bank of England heralded a return to growth, forecasting a more rapid recovery than previously feared.Official growth figures due to be published on Wednesday by the Office for National Statistics are expected to show a 21% plunge in gross domestic product (GDP) in the three months to June. After GDP slumped by 2.2% in the first quarter, this will confirm two consecutive quarters of falling output – the technical definition of a recession. Continue reading...

Unemployment rate falls to 10.2% from 11.1% but remains three times pre-pandemic figureThe US economy added 1.8m jobs in July after a record gain in June, as signals mounted that a resurgence of coronavirus cases in some states is weighing on the labor market recovery.Related: Coronavirus US: death toll tops 160,000 as relief package impasse continues – live updates Continue reading...

Rolling coverage of the latest economic and financial news, as BoE warns one million jobs will be lost by Christmas

The list of government failures as we enter the worst economic slump in 30 years should be a gift to Keir StarmerOn Monday the job axe fell at Hays Travel and DW Sports. On Tuesday it was the turn of Pizza Express and Currys PC World. On Wednesday it was WH Smith and M&Co delivering the grim news. A brutal shake-out of Britain’s labour market, caused by the deepest slump in three decades, has begun.Unemployment will carry on rising as companies that have kept staff on thanks to the furlough scheme are now having to make a contribution to their employment costs. Wage subsidies will be history by October, even for those businesses that remain shut. With the benefits bill rising and tax receipts falling, a Conservative party that once accused Gordon Brown of maxing out on the nation’s credit card is on course to borrow upwards of £300bn this year, comfortably a peacetime record.Related: The government must up its game to prepare for a second wave of Covid-19 | Keir Starmer Continue reading...

Economists worry expiration of $600 weekly lifeline will lead to sharp drop-off in household spending and set back the economyAnother 1.18 million people filed for unemployment benefits last week as economists worry the expiration of enhanced unemployment benefits will lead to a sharp drop-off in household spending and set back the US economy’s near-term recovery.Claims dipped last week after two weeks of rises and were the lowest since March but the latest figure from the department of labor marked the 19th week in a row that claims have topped 1m. Before the coronavirus pandemic gripped the US, the record for weekly claims was 695,000 in October 1982.new predictions of effects of alternative UI benefit supplements

Bank of England is considering pros and cons of drastic move as Covid-19 weighs on economy

With the power of ultra-low rates and QE fading, the Bank of England is now considering going negative

A second statewide lockdown could be on the cards if infections continue to rise but the economic impact worries residentsBusiness is slow at Studio 23, a hair salon just off the main drag in Pikeville, a small city in rural eastern Kentucky, so barber Derek Harris is outside chewing the fat with two maskless police officers while waiting for his first client.The salon reopened at the end of May, but business is down by about 20%, and Harris fears another statewide lockdown could be on the cards if coronavirus infections continue to rise. In Kentucky Covid-19 may not, yet, be a big problem but the economic impact is everywhere. Continue reading...

The complex history of how China and the US once embraced each other should inform how the current showdown is tackledThe Trump administration has floated the idea of sanctioning Chinese officials and members of the Communist party of China. Before we ask whether this is a good idea, let’s ask how Sino-US relations got to this stage.The US cold war with the Soviet Union was over ideology, but today’s standoff with China is different. The Chinese state has no ideology, no religion, no moral agenda. It continues wearing socialist garb but only as a face-saving pretence. It has, in fact, become a state-capitalist dictatorship. What the world sees today is a contest between the US system of free-market capitalism and Chinese state capitalism. How should we read this chessboard?Related: The US and China are entering a new cold war. Where does that leave the rest of us? | Timothy Garton AshAi Weiwei is an artist and activist. This article was translated from Chinese by Perry Link Continue reading...

Consumer spending rise cheers Bank but unemployment will double and GDP fall significantly

Coronavirus has accelerated the shift away from banknotes – central banks must act fast to catch upAs the Covid-19 crisis accelerates the long-term shift away from cash (at least in tax-compliant, legal transactions), official discussions about digital currencies are heating up. Between the impending launch of Facebook’s Libra and China’s proposed central-bank digital currency, events now could reshape global finance for a generation. A recent report from the G30 argues that if central banks want to shape the outcome, they need to start moving fast.Much is at stake, including global financial stability and control of information. Financial innovation, if not carefully managed, is often at the root of a crisis, and the dollar gives the US significant monitoring and sanctions capabilities. Dollar dominance is not just about what currency is used, but also about the systems that clear transactions and, from China to Europe, there is a growing desire to challenge this. This is where a lot of the innovation is taking place.Related: Will coronavirus mean the demise of banknotes? | Howard Davies Continue reading...

Number of visitors to UK retail destinations fell almost 40% in July from a year earlierShoppers continued to stay away from UK high streets last month despite the reopening of non-essential shops, pubs and restaurants following the lifting of lockdown measures.The number of visitors to UK retail destinations dropped by 39.4% in July compared with the same month a year ago, according to figures from Springboard, a data company that tracks footfall at consumer hotspots.Related: Shoppers shun high streets in England and Northern Ireland, data shows Continue reading...

The world owes solidarity to a people exhausted by decades of corrupt and negligent governmentBeirut has come to know the sound of explosions too well in its recent past, but none looked or felt like the blast that laid waste central districts of the city on Tuesday. The devastation is on a scale more usually wrought by earthquakes. The port at the heart of the Lebanese capital was annihilated. Shock waves ripped the facades from every building in neighbouring districts – and behind every shattered window are shattered lives. There are not enough hospital beds or a reliable supply of electricity. Infrastructure for storing and importing many of the city’s essential goods has been destroyed, making scarcity of food an imminent threat. A vast crater at the site of the detonation scars the coastline, but deeper still are the wounds to a nation that was already reeling from economic crisis, debilitated by pandemic and weary from political chaos and corruption.The explosion appears to have been accidental, a conflagration of chemicals taken from an impounded ship and left in a warehouse for six years, but tragic accidents are not random acts of nature. They have causes that can be investigated, roots in the choices that people have made. Sadly, citizens of Beirut know better than to expect answers. They are familiar with the negligence of a state that has been captured by sectarian interests, running services and utilities as mafia-style racketeering portfolios. A well-regulated port would not have been so vulnerable to industrial accidents of seismic proportions. Authorities in a functional democracy would be scrutinised and held to account. Continue reading...

Rolling coverage of the latest economic and financial news

People and businesses were already over-indebted before coronavirus. The government’s schemes have made things worseThe UK is drowning in private debt. At least £6bn of household debt – and probably much more – has been racked up by 4.6m people during the pandemic. More than one in eight people on furlough have defaulted on a payment. The Institute for Fiscal Studies has warned of a wave of “zombie companies”, kept afloat by Covid-19 loans, going bust this autumn. There will be no “V-shaped recovery” – and recognising the scale of over-indebtedness is key to understanding why.UK households and businesses were already over-indebted before the pandemic. Many were struggling to make ends meet. This made our economy extremely fragile – even more so than before the crash of 2008. And yet, back in April, the government chose to deal with the shutdown in large part by loading households and businesses with even more private debt. Businesses were encouraged to take out state-backed loans. Households got payment “holidays” on mortgages and credit cards. These measures did not lighten the increased financial burdens people were shouldering. They simply kicked the can down the road – with added interest.These debt burdens will not only ruin lives, they will also drag back the economic recovery itselfRelated: UK consumers repay record £7.4bn of debt in Covid-19 lockdown Continue reading...

Leading lobby group warns Rishi Sunak’s summer statement plans risk mass unemploymentBusiness leaders have warned Rishi Sunak that his multibillion-pound summer statement plan to save jobs is failing to prevent an unemployment crisis from taking hold.The British Chambers of Commerce (BCC) is demanding an urgent rethink from the chancellor, as the government starts scaling back its Covid-19 economic response, and warned that fewer than half of firms were planning to take up jobs support measures announced by Sunak last month. Continue reading...

The carbon economy amplifies racial, social and economic inequities, creating a system that is fundamentally incompatible with a stable futureFrom deep-rooted racism to the Covid-19 pandemic, from extreme inequality to ecological collapse, our world is facing dire and deeply interconnected emergencies. But as much as the present moment painfully underscores the weaknesses of our economic system, it also gives us the rare opportunity to reimagine it. As we seek to rebuild our world, we can and must end the carbon economy.Related: Environmental racism is killing Americans of color. Climate change will make it worse | Mustafa Santiago AliThis moment creates an opportunity to bring about a better future for ourselves and our childrenThis letter has been signed by more than 100 economists. See the full list of signatories here Continue reading...

From February to May, 11.5 million women lost their jobs compared with 9 million men – underlining how women are more vulnerable to sudden losses of incomeDenise Frederick hasn’t stopped working since the pandemic began. But the nanny and home carer in New York City has also seen her pay cut in both jobs and she is uncertain about how long she will have either with the coronavirus outbreak far from under control.Like many women, the economic fallout from the coronavirus pandemic has hit Frederick hard. For the first time in history, the US is in a “shecession” – an economic downturn where job and income losses are affecting women more than men.Related: Plan to slash $600 lifeline threatens misery for millions of AmericansWe didn’t do enough in the 2008 recession to make sure there was an even recoveryThe cracks in our system that were here before the pandemic have now become catastrophesThis article was amended on 4 August 2020 to correct a fact about primary caregivers. Continue reading...

Data shows nearly 30% more people visited high streets compared with same time last weekBritish high streets received a boost from the launch of the government-backed discount dining scheme on Monday, according to industry figures, as restaurants also reported a rise in interest from customers.Data on shopper visits showed that by 3pm on Monday the number of people hitting the high street was up nearly 30% on the same day last week, while across all destination including retail parks and shopping centres the rise was 19%. Although the numbers from the retail specialist Springboard capture all shopping outlets, they will have covered many of the 72,000 cafes, pubs and restaurants that have signed up to the half-price “eat out to help out” scheme.Related: Back to normality? Businesses hope for 'eat out to help out' scheme boost Continue reading...

To achieve greater happiness we need to see ways in which society’s product is distributed more equally, writes Jeremy CushingLarry Elliott (New UK coronavirus restrictions will test optimism over economic recovery, 2 August) suggests we will soon be able to see whether the absence of growth will make people happier and society more stable. I don’t believe it is part of the anti-growth thesis that a reduction in growth as such will make us happier.First, the basis of the thesis is that growth is dysfunctional because in so many ways it is leading us to disaster. Reversing growth is required if we are to avoid disastrous outcomes, but will not in itself make us happier. Continue reading...

There is an urgent need for wide-ranging debt relief in the midst of the coronavirus pandemicWhile the Covid-19 pandemic rages, more than 100 low- and middle-income countries will still have to pay a combined $130bn in debt service this year – around half of which is owed to private creditors. With much economic activity suspended and fiscal revenues in free fall, many countries will be forced to default. Others will cobble together scarce resources to pay creditors, cutting back on much-needed health and social expenditures. Still others will resort to additional borrowing, kicking the proverbial can down the road, seemingly easier now because of the flood of liquidity from central banks around the world.From Latin America’s lost decade in the 1980s to the more recent Greek crisis, there are plenty of painful reminders of what happens when countries cannot service their debts. A global debt crisis today will push millions of people into unemployment and fuel instability and violence around the world. Many will seek jobs abroad, potentially overwhelming border-control and immigration systems in Europe and North America. Another costly migration crisis will divert attention away from the urgent need to address climate change. Such humanitarian emergencies are becoming the new norm. Continue reading...

Some have reasons to be cheerful despite the gloom but flip-flopping in Whitehall is not helping growthRecords are there to be broken, so it would be unwise to claim that there will never be a worse performance by the US or eurozone economies than was seen in the spring of 2020. It would, though, take something truly spectacular: a nuclear war, a meteor strike, a pan-continental climate catastrophe or a more severe pandemic than Covid-19.It is worth reflecting for a moment on just how dire the recent economic news has been. The UK is a bit behind the US and the eurozone and does not report its second-quarter growth figures until 12 August but it is already known that the economy contracted by about 25% in only two months – March and April. Even with a pick-up in activity in May and June, activity was probably still about 15% below its pre-crisis level at the start of the third quarter.Related: Coronavirus England: Boris Johnson looking at second-wave lockdown scenariosGovernments, even rightwing governments, have been forced into wartime-like levels of intervention Continue reading...

New graduates and school leavers across the UK have paid the price of lockdown, says survey

The EU probe of the search engine’s deal for Fitbit is a harbinger of a future in which Big Tech is central to healthcareHealthcare is going to be one of the biggest corporate battlegrounds of the next 20 years.In the UK, public and private health spending already accounts for 10% of national income (GDP). In the US, health spending eats up around 17% of the economic pie. As the last of the baby boomers settle into retirement by 2030, those figures are expected to rise by at least half and, if social care is added, possibly double by 2040.There is little appetite in the US Congress to tackle corporate overreach, though a reinvigorated anti-trust agenda is part of the Joe Biden manifesto Continue reading...

Resolution Foundation claims half of those furloughed in April have not returned to work

Pandemic creates employment boom in new sectors despite devastation of economy