Economics | The Guardian

Becoming better at explaining and justifying their decisions to the public should be on the agendaThe US president Donald Trump’s decision to nominate the economist Judy Shelton for one of the vacant positions on the Federal Reserve Board has put the future of central bank independence back on the agenda. Shelton has cast doubt on the desirability of, and legal basis for, Fed independence, saying last year, “I don’t see any reference to independence in the legislation that has defined the role of the Federal Reserve.” And she has argued for “a more coordinated relationship with both Congress and the president”. If Fed policy were “coordinated” with Trump, then it is fairly clear who would be calling the shots.Of course, one new Fed governor could not upturn decades of practice. But there are suggestions that if appointed, Shelton could replace Jay Powell when his term comes up for renewal in 2022, leaving a fox in charge of the chicken coop.Related: Will coronavirus trigger a global recession? | Jeffrey Frankel Continue reading...

Markets around the world are being spooked by the coronavirus crisis

Dow plunges 1,190 points as analysts say virus could inflict as much damage as 2008 crisis

Australian share prices have fallen for the fourth day running after overseas markets were gripped by virus panicAirlines, carmakers and beer companies are among the businesses warning of tough times ahead as the financial impact of the coronavirus outbreak spreads through the economy.Australia’s benchmark stock exchange index, the ASX200, fell on Thursday for the fourth day running, slipping 0.75% after overseas markets that had been set to rally were gripped by virus panic on Wednesday afternoon.Related: Australia declares coronavirus will become a pandemic as it extends China travel banRelated: Australian Grand Prix to go ahead despite coronavirus concern, minister says Continue reading...

Campaigners say move is ‘blatant contradiction’ of lender’s climate commitmentsThe World Bank has been criticised for providing $55m (£43m) to aid fossil fuel extraction in Guyana, at the same time that it has pledged to stop direct funding of oil and gas production.The Washington-based institution, which provides loans and grants to aid the development of poorer countries, will provide $20m to pay for the training of Guyanese oil and gas officials, including those involved in the marketing of oil. Continue reading...

Rolling coverage of the latest economic and financial news, as Britain’s FTSE 100 recovers after hitting its lowest level in a year

World economy’s prospects look bleak owing to Covid-19 outbreak and Donald Trump’s trade policyAt the start of this year, things seemed to be looking up for the global economy. True, growth had slowed a bit in 2019: from 2.9% to 2.3% in the US and from 3.6% to 2.9% globally. Still, there had been no recession and as recently as January, the International Monetary Fund projected a global growth rebound in 2020. The new coronavirus, Covid-19, has changed all of that.Early predictions about Covid-19’s economic impact were reassuring. Similar epidemics – such as the 2003 outbreak of severe acute respiratory syndrome (Sars), another China-born coronavirus – did little damage globally. At the country level, GDP growth took a hit but quickly bounced back, as consumers released pent-up demand and firms rushed to fill back orders and restock inventories.Related: Donald Trump isn't safe yet, but the economy is working well for him | Michael Boskin Continue reading...

Thinktank says taxes hike in budget needed or chancellor risks breaking borrowing rulesThe chancellor, Rishi Sunak, faces a tough choice at next month’s budget between raising taxes, entrenching austerity or abandoning Tory manifesto promises on government borrowing, according to the Institute for Fiscal Studies.The tax and spending thinktank said the government was on-track to ramp up borrowing to about £63bn next year – £23bn more than the most recent official forecasts – amid a rapid increase in spending under Boris Johnson. Continue reading...

Switzerland, Austria and Croatia report first cases as outbreak worsens across Europe

European markets have suffered a second day of heavy losses as new coronavirus cases are reported

Dow Jones lost 877 or 3.1%, the tech-heavy Nasdaq dropped 2.7% and the S&P 500 fell 3% following similar losses across the Atlantic

Travel companies hit hard as mounting fears over spread of disease lead to global sell-off

Canadian billionaire’s rescue plan suddenly doesn’t look so rosy given the epidemic’s economic falloutAt what point does the coronavirus crisis qualify as a “material adverse change” for City deal-making purposes? Lawrence Stroll, would-be rescuer of Aston Martin, may be asking the question right now. As things stand, he is set to pay 400p-a-pop for a 16.7% slice of the luxury carmaker, versus a market price that fell as low as 360p on Tuesday.Related: Coronavirus: Europe on alert as four more deaths reported in Italy – updates Continue reading...

Biggest English cities expected to benefit as EY urges policies to address regional imbalancesThe economic fortunes of Britain’s smaller towns are set to fall further behind those of the biggest cities over the next three years, according to a report urging radical steps to tackle regional divisions.Economic imbalances between the north and south of England are expected to widen until 2023 unless greater action is taken, forecasts from the accountancy firm EY show. Small towns across the north-east, Yorkshire and the West Midlands are expected to be worst hit by the widening gap. Continue reading...

Shares on Wall Street tumble after surge in cases of virus in Italy

US, European and Asian stock markets gripped by pandemic fears

Ex-justice secretary speaks out as Rishi Sunak faces pressure to raise government borrowingA former Conservative cabinet minister has said the chancellor, Rishi Sunak, will want to avoid becoming a “creature of No 10” amid pressure on the new appointee to raise government borrowing sharply.David Gauke, the former justice secretary who was expelled from the Conservatives for defying Boris Johnson over Brexit, said that Sunak risked putting the public finances on an unsustainable path, given the headwinds facing the British economy. Continue reading...

Resolution Foundation says government borrowing will rise to 40% of GDP, eclipsing the Tony Blair yearsBoris Johnson is planning to ramp up government borrowing to spend more than £1tn a year, increasing the size of the British state to make it bigger than at any point under the 10-year premiership of Labour’s Tony Blair.Analysis from The Resolution Foundation predicts government spending will rise above the £1tn mark for the first time in history by 2023-24. The report, published on Monday, comes as the chancellor, Rishi Sunak, prepares to deliver what is widely expected to be one of the most expansionary Conservative budgets in a generation.Related: Government spending 'set to return to levels last seen in the 1970s'Gross domestic product (GDP) measures the total value of activity in the economy over a given period of time. Continue reading...

New data to show steep fall in Chinese factory output as outbreak in Italy ramps up eurozone fears

Group’s first ever reference to global heating signals growing economic concerns over climate changeThe G20 group of the world’s wealthiest nations have agreed for the first time to collectively sound the alarm over the threat to the financial system posed by the climate emergency.Overcoming objections from Donald Trump’s US administration, G20 finance ministers and central bank governors meeting in Saudi Arabia over the weekend agreed to issue their first ever communique with references to climate change, according to reports from Reuters.China produces the most heat-trapping pollution, followed by the US. But historically, the US has contributed more carbon dioxide to the atmosphere than any other nation. The US also has high emissions per capita, compared to other developed countries. And Americans buy products made in China, therefore supporting China's carbon footprint. Continue reading...

Chancellor Rishi Sunak needs to satisfy competing audiences, but there is a way he can do itEvery budget is billed in advance as the most crucial in recent times, but then most are instantly forgotten. The one Rishi Sunak will deliver in just over two weeks’ time may be one of the few that justifies the hype.The reason so much is resting on the shoulders of the tyro chancellor is that the budget needs to satisfy a number of different audiences: the voters in the Midlands and the north of England who gave Boris Johnson his 80-seat majority; traditional Conservative voters; the financial markets; and foreign governments looking to see whether the UK will take a lead before the Cop26 climate change conference in Glasgow in November. Continue reading...

The OECD is alarmed at how much states and firms owe. UK chancellor Rishi Sunak would be wise not to be reckless in the budgetIn 2010, in the wake of the global banking crisis, 34 of the world’s richest nations – those that belong to the Organisation for Economic Cooperation & Development (OECD) – ramped up their borrowing to $10.9 trillion. In 2019, the OECD revealed last week, those same governments took their borrowing to a fresh high of $11.4tn.The Paris-based thinktank says the new figure is a cause for worry, especially when those same governments have only managed to grow their national economies at a snail’s pace over the past 10 years. Without strong growth, debts become a bigger burden on government finances when things turn nasty, as they did 10 years ago.Greece, once the pariah of the bond markets and forced to borrow at 40%, can now borrow at 1% less than the US government Continue reading...

Promoting his new book, the Frenchman is happy to talk Marx and money, but less forthcoming about a domestic violence claim that has resurfacedSeven years ago a French economist named Thomas Piketty published a book entitled Capital in the Twenty-First Century. It was 700 pages long and featured in-depth empirical analysis of various historical tax systems, amounting to a forensic argument against widening inequality. You wouldn’t say that it spelled international bestseller, and yet it has sold 2.5 million copies to date.Hailed as a modern successor to Karl Marx’s monumental Capital, it rejuvenated radical leftwing critiques of capitalism and earned Piketty (it rhymes with spaghetti) the epithet of “rock star” economist. Seldom has a media cliche been more misleading. Continue reading...

If Javid’s departure means austerity is over, then thank heavens. But Tories also have a history of overheating the economyI have found over the years that the general public shows little interest in the chancellor of the exchequer except on budget day. Often people have no idea who he is (so far there has never been a she). In the past week or so, however, I have been struck by the number of casual acquaintances who have commented on the farce of the recent sacking of chancellor Sajid Javid before he even had the chance to present a budget.What this bizarre episode has achieved is to focus people’s attention on no fewer than three revealing aspects of the character and behaviour of the man we have for the time being to call our prime minister. The first is his rampantly duplicitous nature: Javid had been assured repeatedly that his position was safe.Once again we have a prime minister who wishes to override Treasury caution and 'go for growth' Continue reading...

Hospitality and travel have already been hard hit, while there are concerns of looming shortages of products such as iPhones and batteriesWith the coronavirus outbreak in China affecting the import and export trade, Australian retailers and suppliers are concerned that consumers will soon start experiencing shortages of products ranging from iPhones to batteries. There are widespread factory shutdowns in China as millions of people remain in lockdown and subject to strict travel restrictions and quarantine measures.While some retailers say it is too soon to see a noticeable impact on stock, with many shipyard and factory workers taking time off for lunar new year anyway, they are preparing for shortages in coming weeks.Related: Coronavirus: two Australians evacuated from Diamond Princess test positive in DarwinRelated: Coronavirus fallout could leave Australian tourism and retail sectors in the doldrumsAnaconda, camping etc gear store. Staff told me it was because of the China lockdown.Just had a quote today for plantation shutters by Accent who told me of delays b/c corona in ChinaRelated: Apple warns of coronavirus causing iPhone shortagesYep. Empty/low sock on shelves in Bunnings Aundel QldRelated: Explainer: how worried should I be about coronavirus in Australia? Continue reading...

Stronger public finances come as Rishi Sunak prepares to unveil budget next monthThe chancellor, Rishi Sunak, has been handed a modest boost before next month’s budget from public borrowing rising by less than previously expected, despite the government failing to hit targets set four years ago.The Institute for Fiscal Studies, Britain’s foremost thinktank for the government finances, said the country was on track to record a budget deficit for the 2019-20 financial year around £3.5bn smaller than forecast in December. Continue reading...

Wages | Alien life | Northern accents | Marmalade | school | YellowbelliesIt’s welcome news that the average weekly pay is now £474, but this highlights the danger of using averages to help paint a picture. I bet the majority of the 974,000 people on zero-hours contracts would be delighted to earn that amount (Lost decade limps to an end as wages creep above pre-crisis levels, 19 February).

Rolling coverage of business, economics and markets as textiles, clothing and footwear sales drive stronger-than-expected 0.9% improvement

‘Boris bounce’ theory is disproved by industry, with CBI painting relatively downbeat pictureTills are ringing merrily in the high streets and it is all down to Boris Johnson. Thanks to the prime minister the dark clouds of uncertainty are scudding away and a grateful nation feels free to start spending again.Really? Sure, there was a chunky rise in retail sales in January but in the latest three months – a better guide to the underlying trend – they were up by only 0.8% on the same period a year earlier. This is the weakest annual growth since 2013. Continue reading...

Rise of 0.9% in January is likely to persuade Bank of England not to cut interest ratesRetail sales rebounded last month as consumers flocked to buy discounted clothing and footwear, giving the high street a welcome boost after a dire 2019.The Office for National Statistics said sales increased on average across the high street and online by 0.9%, reversing a 0.6% decline during December. Continue reading...

As climate, privacy, globalisation and demographic developments accelerate, adjustments are neededFirms and governments must increasingly internalise the possibility – indeed, I would argue, the overwhelming probability – of an acceleration of four secular developments that influence what business and political leaders do and how they do it. Decision-makers should think of these trends as waves, which, especially if they occur simultaneously, could feel like a tsunami for those who fail to adapt their thinking and practices in a timely manner.The first and most important trend is climate change, which has evolved from a relatively distant concern, on which there is ample time to take remedial action, to an imminent and increasingly urgent threat.Related: The white swan harbingers of global economic crisis are already here | Nouriel Roubini Continue reading...

Thinktank says nations need to focus on social prosperity in the fight against extremismThe G20 needs to move beyond economic growth and GDP as a measure of progress and factor in human wellbeing and social prosperity, one of its key advisors has said in a new report.In a hard-hitting report due to be submitted to the G20 group of leading developed and developing countries, experts said that issues including the climate emergency and mental health meant judging progress required a different yardstick of success. Continue reading...

TUC says jump to 1.8% would put squeeze on living standards at time of falling wage growthInflation jumped to a six-month high of 1.8% in January after a surge in petrol prices and an increase in the cost of gas and electricity over last year.Related: UK cash economy close to collapse, campaigners tell chancellor Continue reading...

Deaths in mainland China pass 2,000 and Foreign Office tells Britons to stay on the Diamond Princess cruise ship

Former Labour MP Kelvin Hopkins on hopes for a resurgence in the economic ideas of John Maynard KeynesI threw my metaphorical hat in the air and gasped “at last” when I read your editorial (Keynes’ ideas worked in the 1940s, and now they are due a comeback, 17 February). Between 1945 and the 1970s, working-class living standards rose at an unprecedented rate, with full employment, housing standards transformed for millions by the building of quality council housing, free healthcare and secondary education, the establishment of the wider welfare state and much more. The genius of Keynes was at the heart of this revolution. I grew up in that world and was taught Keynesian economics as a student in the 1960s.It was a tragedy that Keynesianism was later trashed and suppressed by the intellectual inferiors of monetarism, neoliberalism and globalisation. They were vengeful and profoundly wrong in all they propounded in their counter-revolution. JK Galbraith and others spelt this out, but were ignored in a rampant ideological drive to the right. Continue reading...

UK is not in early stages of wage-price spiral, with little sign of inflationary pressure in pipeline

In rebuke to ministers, ISC says Johnson’s goal of rebalancing UK economy is being put at riskBoris Johnson’s goal of rebalancing Britain’s lopsided economy is at risk of failure because of the government’s neglect of its industrial strategy, the watchdog established to monitor progress of the flagship policy has warned.In a critical report, the Industrial Strategy Council (ISC) said the policy to earmark government support for key sectors of the economy had made only limited progress since Theresa May first unveiled the plan three years ago. Continue reading...

Rolling coverage of business, economics and markets as British prices rise faster than expected

The celebrated French economist is back with an ambitious and optimistic work of social science, which argues that inequality always relies on ideologyIt is a journalistic convention that any author who writes a doorstopper of a book with the word “capital” in the title must be the heir to Karl Marx, while any economist whose books sell in the hundreds of thousands is a “rock star”. Thomas Piketty’s 600-page, multi-million selling Capital in the Twenty-First Century won him both accolades, but both were wide of the mark. There is nothing Marxist about Piketty’s politics, which are those of a liberal reformer, while his concept of capital is closer to an accounting category (a proxy for “wealth”) than the exploitative force that Marx saw it as.And despite his unexpected celebrity, Piketty makes for an implausible rock star. In contrast to the suave rebellion of Yanis Varoufakis or the frat-boy know-alls of the Freakonomics franchise, Piketty comes across both on stage and in print as cautious and nerdish. He is fixated on statistics, in particular on percentiles. Not only does he mine them from unlikely sources, such as 18th-century tax records and Burke’s Peerage, he is clearly fascinated by the mechanics of how data came to be collected in the first place. Piketty is a brilliant and relentless anorak.He might be right: given the climate crisis and other factors, current levels of inequality cannot long be maintained Continue reading...

Seismic risks for the global system are growing, not least worsening US geopolitical rivalries, climate change and now the coronavirus outbreakIn my 2010 book, Crisis Economics, I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller but as “white swans”. According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution. But I argued that financial crises, at least, are more like hurricanes: they are the predictable result of builtup economic and financial vulnerabilities and policy mistakes.There are times when we should expect the system to reach a tipping point – the “Minsky Moment” – when a boom and a bubble turn into a crash and a bust. Such events are not about the “unknown unknowns” but rather the “known unknowns”.Related: Trump's 'America first' policy offers Beijing and Brussels a chance to lead | Barry Eichengreen Continue reading...

Rishi Sunak urged to enshrine right to access cash in budget with 8m people at risk of exclusionThe new chancellor, Rishi Sunak, is being urged to include measures to protect access to physical money as part of the March budget, as experts warn the UK’s cash system has edged closer to collapse.Authors of the Access to Cash Review are calling for extra safeguards to support the UK’s cash infrastructure, which has come under severe strain in the 12 months since the original report was published last March.Related: New chancellor Rishi Sunak challenged over hedge fund past Continue reading...

Points-based plan makes it hard for low-skilled migrants to work – it pulls up the drawbridge rather than takes back controlThe self-employed Polish plumber will be a thing of the past. Uber taxis in Britain’s big cities could be harder to come by. Anybody who wants to hire a Lithuanian nanny will have to pay them £500 a week – and make sure the taxman knows about it.Welcome to the government’s new points-based immigration system, which will administer the biggest structural change to the UK labour market in decades when it comes into force next year.Related: UK productivity slowdown worst since Industrial Revolution – study Continue reading...

The country followed a rabbit down the austerity hole, but there’s no Brexit wonderland for Britain’s workersHas Britain turned a corner? If you believe the headlines it would certainly seem so. Wages are up, and unemployment appears the lowest for decades. If you believe the hype then the last decade has been a journey where the country followed a rabbit into the austerity hole and emerged into a Brexit wonderland. This is a fiction and the facts are more troubling. If Britain had full employment there ought to be a sharp rise in wage growth as businesses see the pool of labour – Marx’s reserve army of the unemployed – dry up. Yet wage growth has dropped from 4.1% in April last year to 2.8%. Pay packets are still smaller than they were a decade ago. Total pay is £503 a week, well below the £522 a week workers took home before the crisis began in 2008.The “employment miracle” hailed by ministers is in fact a symptom of a British disease of economic insecurity. Unstable, precarious, low-paying and temporary jobs have become the norm for too many. The number of part-timers who can’t find full-time jobs is rising by 18,000 a month. In the middle of 2018, there were 781,000 people on zero-hours contracts. There are now 974,000. Then there is the growth in self-employment. In 2000 around 11.7% of those employed set up businesses on their own, where they earn considerably less than those with full-time jobs. That number is now 15.2%, the highest on record. Continue reading...

Rolling coverage of the latest economic and financial news

UK prepares evacuation flight for cruise ship passengers. Follow the latest news

Outbreak is supply and demand shock for tech giant and markets must wake up to the global risksThere are plenty of signs of the strains China’s economy is coming under as a result of the coronavirus. The sharp fall in German business confidence is one because Europe’s biggest economy suffers when demand for its exports falls. The decision by Cathay Pacific, Hong Kong’s flag carrier airline, to cancel 40% of its flights in February and March is another.But the best bellwether of what has been happening in China is Apple, which has warned that it is on course to miss its revenue forecasts in the first three months of 2020. China is a big market for Apple – accounting for about one-sixth of its global revenues – and is the source of most of its products. The coronavirus represents a demand and a supply shock to the company.Related: Businesses worldwide count cost of coronavirus outbreakRelated: Average UK wages rise above pre-financial crisis levels Continue reading...

Wages finally end 12-year squeeze but zero-hour contracts at new highAverage real wages – which take account of the impact of inflation – have risen above their pre-financial crisis level for the first time as workers begin to repair the damage to their finances after a 12-year squeeze on living standards.In a significant moment after a lost decade for British workers, the Office for National Statistics said average weekly earnings, excluding bonuses, have reached a fresh peak in real terms. This means pay packets adjusted for inflation are worth more than they were before the 2008 crisis – although only just. Continue reading...

International trade slump and coronavirus outbreak combine to weaken consumer demandJapan’s economy is heading for a recession this year after figures showed the world’s third largest economy slumped by an annual rate of 6.3% during the last quarter of 2019.Germany, the world’s fourth largest economy, is also expected to stumble as the coronavirus epidemic and a slump in trade with China combine with weak consumer demand to drag growth lower. Continue reading...

Moderate leftists need an argument and an inspiring leader, writes John Pawsey, while Dariel Francis says the threat of populism is best countered with a dose of Keynesian economics

Rolling coverage of the latest economic and financial news, as Japanese GDP falls at the fastest pace in five yeas