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Service sector inflation, monitored closely by Bank of England, barely budged in April

Drop in April is smaller than forecast but level is still lowest in almost three years

A reduction in the consumption of carbon-intensive products and services is not something to complain about, writes Terry CannonYou cannot have it both ways and complain that global warming will harm GDP (Economic damage from climate change six times worse than thought - report, 17 May). A drop in global GDP is one of the best things that can happen to reduce global warming if it reduces consumption of carbon-intensive products and services. GDP is a very poor way to measure the negative impacts of global warming.Much more relevant is to understand people's wellbeing and their livelihoods which, as is well known, are not measured verywell by GDP. What needs to be understood is how the different impacts of climate change affect the many types of livelihood. Continue reading...

With prices forecast to increase at their slowest pace since 2021, we look at the biggest risers in goods and servicesAfter three long years of feeling the pinch, UK consumers finally look likely to get some relief from surging prices on Wednesday, when the Office for National Statistics releases its inflation figures for April. The data is widely expected to show that prices are rising at the lowest rate since summer 2021.Inflation of about 2% is significant for economists, marking a long-awaited snap back towards the Bank of England's target. It still means prices are rising for the consumer, but not as steeply as they have been. The last few years of inflation have been the sharpest within at least 40 years, jumping the equivalent of 11 years of normal 2% inflation within just three years, a total rise of 22%. At the same time, real wages are down by 2.3% since early 2021, making it harder for most people to afford their energy bills and the weekly shop. Continue reading...

Body says 30bn fiscal gap cannot be filled by higher growth or extra borrowing. So how will No 11 ease pressure on public finances?A report that tells the UK government it faces a 30bn funding gap that cannot be filled by higher growth or extra borrowing is a blow to both the current chancellor and the next one.Tuesday's International Monetary Fund assessment of the UK economy and Whitehall spending argues that betting on the economy revving up over the rest of the decade will not be sufficient to pay for all the likely welfare bills associated with an ageing population. Continue reading...

The IMF has delivered its verdict on the UK economy, and signalling its opposition to pre-election tax cuts from Jeremy Hunt

World body's latest health check of UK economy says unpopular revenue-raising measures' may be neededJeremy Hunt is preparing a pre-election cut in national insurance despite a warning from the International Monetary Fund of a looming 30bn hole in the public finances, Downing Street has indicated.Rishi Sunak's spokesperson said the government rejected the IMF's argument that there was no room for a third cut in NI in less than a year and that the Treasury should instead be thinking about tax increases or spending cuts. Continue reading...

Comments come as Commission president hints EU could impose tariffs on Chinese electric vehicles

Bim Afolami's comments distance British government from protectionist moves by USThe UK cannot afford to give the cold shoulder" to China, the City minister said on Monday, in comments that will distance the British government from the Biden administration's protectionist crackdown.Addressing financial services bosses at the City Week conference in London's Guildhall, Bim Afolami said it was crucial" to engage with strategic competitors such as Beijing, and that the UK risked losing control of its economic future if it failed to find common ground. Continue reading...

US seafood restaurant chain has been struggling with lease and labor costs, and promotions such as its all-you-can-eat shrimp dealRed Lobster has filed for Chapter 11 bankruptcy protection days after shuttering dozens of restaurants.The US seafood restaurant chain has been struggling for some time with lease and labor costs piling up in recent years and also promotions such as its signature all-you-can-eat shrimp deal. Continue reading...

Ben Broadbent says direct impact of Covid and Ukraine war on inflation has faded and BoE is waiting for longer-term effects to decline

Protectionism in the form of tariffs is justified but the focus will be on whether Beijing retaliatesThe global economy is fragmenting and a new era of protectionism has dawned. Dreams by free marketeers of a frictionless world in which goods and services moved seamlessly from country to country are dead.That was the clear message from Joe Biden's decision last week to target China with a range of new, much higher tariffs on electric vehicles and a range of other products crucial to sectors seen by the White House as vital to the future health of the US economy and to national security. Continue reading...

Companies are deserting the FTSE because of a shortage of investment - but there is a solutionBritain had itin its power to be a genuine hi-tech superpower. Instead, the opportunity slipped through our fingers, as we have been tech-stripped" on a monumental scale. On one estimate, up to half the FTSE 100 could now be populated by vigorous British tech companies but those are all now foreign owned with one exception, Sage. The implications for our industrial, business, services and even defence base are dire - one of the most important condemnations of the last 14 years.The chancellor, Jeremy Hunt, complacently declared last week that this was just how capitalism operated - even as we learned that another 21 companies worth 24.6bn had joined the exodus from the UK's public markets this year alone. It was a variant of Philip Hammond's comment in 2016 on Japanese SoftBank taking over yet another of our tech jewels, the chip designer ARM. What was obviously an exercise in technological vandalism was instead proof positive that Britain was open for business", a view echoed at the time by that other high priest of wealth generation, Nigel Farage. This reflex mantra of Tory ministers and Brexiters alike is a necessity: to say anything else would reveal the paucity of their world view. Continue reading...

The chancellor will have good news to pass on this week. But he knows the cost of living crisis may not be over yetJeremy Hunt knows it. Rachel Reeves knows it too. The Office for National Statistics will come bearing good news on Wednesday when it releases the latest inflation figures. The only real question is just how good the news will be.In the year to March, annual inflation as measured by the consumer prices index stood at 3.2%. The figure for April will be a lot lower and if Hunt gets lucky it might even fall as low as the government's 2% target. Continue reading...

We and the EU must show the Russian leader we mean business and seize $300bn of his country's central bank fundsVladimir Putin is digging deep to win the war with Ukraine. And it could be only months before the tide turns in his favour. If he pummels Ukraine into submission, a military victory will quickly become a wider economic disaster, which is why we underestimate at our peril how much we need to focus on the war.The Russian leader, who was inaugurated for a fifth term as president a fortnight ago, ditched his old friend and defence minister Sergei Shoigu on Monday in favour of an economist to make sure Moscow's war machine runs more efficiently. That economist, Andrei Belousov, has been likened to Albert Speer, the architect who served as the minister of armaments and war production in Nazi Germany. Continue reading...

A 1C increase in global temperature leads to a 12% decline in world gross domestic product, researchers have foundThe economic damage wrought by climate change is six times worse than previously thought, with global heating set to shrink wealth at a rate consistent with the level of financial losses of a continuing permanent war, research has found.A 1C increase in global temperature leads to a 12% decline in world gross domestic product (GDP), the researchers found, a far higher estimate than that of previous analyses. The world has already warmed by more than 1C (1.8F) since pre-industrial times and many climate scientists predict a 3C (5.4F) rise will occur by the end of this century due to the ongoing burning of fossil fuels, a scenario that the new working paper, yet to be peer-reviewed, states will come with an enormous economic cost. Continue reading...

Barclays' analysis may be slightly off the mark, but the megastar is tapping into a new trend in spendingTaylor Swift has long been credited with an outsized influence on music, celebrity culture - even politics. But reviving the UK's flagging economy may be too much to ask, even of the sequinned megastar.Research published this week by analysts from Barclays pointed to the extraordinary spending surge that ensues when Swift touches down, and suggested she could bring a 1bn boost to the UK. Continue reading...

Strong quarterly results and hope of interest rate cuts drive DJIA to new alltime high

The Treasury has been quietly selling off the government's stake at ever-higher prices on a rising market. Why mess with that?The government's plan to sell shares in NatWest to the general public is so advanced that the odds on the chancellor pulling the plug on a pet project are slim. Investment bankers from Barclays and Goldman Sachs are doing their well-remunerated stuff, and M&C Saatchi is knocking up some adverts. The go-ahead for a rah-rah pre-election retail share offer is expected any week now.In a rational world, though, Jeremy Hunt would call the whole thing off. He already has a tried-and-tested method for disposing of the state's NatWest shares and - this is the point - it is working splendidly. Continue reading...

Peter Dutton has argued for a reduction in migration and a winding back of Labor's overhaul of industrial relations and environmental protections to make mining approvals faster. The opposition leader said his 'vision' was to 'get the country back on track'

Restrictions on collective power led to decades of exploitation and stagnant pay for workers. Why not try another way?Profiteering is nothing new. Stanley Baldwin had a pithy description for the new intake of Conservative MPs at the 1918 general election, noting that they were a lot of hard-faced men who look as if they had done very well out of the war". The future Tory prime minister was right. Many companies had found a war economy greatly to their liking, securing lucrative government contracts and making a mint in the process. Profiteering was rampant.Sharon Graham, the general secretary of the Unite union, says something similar has been happening since the war on Covid began in 2020. A study of the reports and accounts of almost 17,000 firms - big and small - showed that pre-tax profit margins were, on average, 30% higher in 2022 than they were in the years immediately before the pandemic began. Continue reading...

Cold and wet weather also thought to have led to more lambs dying in early season, as Morrison drops 100% British lamb pledgeThe price of British lamb has hit an all-time high as cold weather and disease in the UK and difficulties with imports have combined with a surge in demand.Wholesale prices have soared by more than 40% year-on-year to more than 8.50 a kg , while the amount of lamb expected to be produced in the UK this year is forecast to shrink by 1.4%, according to the Agriculture and Horticulture Development Board (AHDB). Continue reading...

Jobless rate increases from a revised 3.9% in March but it's a mixed picture with employers adding 38,500 jobs overall

There are alternatives to continued austerity - look at Labour's achievements in 1945, writes Derrick Joad, while Pete Lavender advises against Thatcherite economicsPerhaps the gaslighting is not restricted to the Conservatives (Rachel Reeves accuses Tories of gaslighting' public over economy, 7 May). Yes, the economy is in a mess, but there are alternatives to continued austerity and the continued impoverishment of increasing numbers of people. The Labour government in 1945 faced a much more difficult task than that facing governments today. Instead of listening to the siren voices of the City, it prioritised the wellbeing of people over reducing the national debt. The City may have disliked the radical policies of the government, but it could live with that, as it realised that there was a workable plan for economic recovery.A policy that prioritised people's wellbeing would be one that redistributed income from the wealthiest to the poorest. Labour faced a far worse housing crisis then than it does today. The government rejected the idea of subsidising private rents, realising it would be a cash bonanza for landlords who could keep increasing rents, knowing the government would pay. Instead, it introduced rent controls and security of tenure, and started a large social housing programme - all of which kept housing costs down to an affordable level. Vienna today offers a contemporary example of benign intervention in the housing market, to the benefit of the Viennese people. Continue reading...

Unite union study of 17,000 firms shows sectors from energy to banking, and vets to car dealerships, profited from inflation crisisThousands of UK companies have exploited their corporate power to increase profit margins since the pandemic, redistributing wealth from employees to employers and shareholders, according to the biggest study yet of data since 2019.A trawl through the accounts of 17,000 companies by the trade union Unite found pre-tax profit margins were 30% higher on average in 2022 compared with the average across 2018 and 2019. Post-tax margins were on average 20% higher. Continue reading...

Latest US inflation report shows prices rose at slower rate in April, while Daniel Ketinsky has raised offer for Royal Mail's parent company to 3.5bn

It is impossible for wages to drive inflation when they are actually rising slower than inflation

Policymakers have been surprised by stubborn price growth, which they hoped to bring down to 2%, in recent monthsInflation across the US eased slightly last month as concerns about the cost of living loomed over the battle between Joe Biden and Donald Trump for the White House.The closely watched consumer price index (CPI) rose at an annual rate of 3.4% in April, down from an annual pace of 3.5% the previous month. Continue reading...

Ministers ramp up anti-welfare rhetoric a day after data showed increase in UK unemployment

European Bank for Reconstruction and Development cuts growth forecasts for regions it operates in, saying war casting long shadow'Ukraine's war-torn economy faces a renewed threat as Russia's intensifying war takes its toll on power plants and forces Kyiv to send key workers to the frontline, the European Bank for Reconstruction and Development has warned.In its latest economic update, the EBRD cut its growth forecasts and said more than two years of fighting in Ukraine was affecting not only the warring countries but also their neighbours. Continue reading...

Joe Biden announced huge new tariffs on imports from China, in a move that Donald Trump says does not go far enoughJoe Biden has unveiled US tariffs on an array of Chinese imports, unleashing a potential trade war with Beijing, as the president seeks to woo American voters less than six months out from what's set to be a close election rematch with Donald Trump.The new measures affect $18bn in imports, including steel, aluminium, computer chips, solar cells, cranes and medical products - however it is the 100% tariff on Chinese-made electric vehicles (EVs) that has dominated headlines. Continue reading...

Latest UK labour market report shows more people out of work, or economically inactive, but wage growth remains higher than inflation

White House levy to protect US makers from cheap imports likely to inflame trade tensionsThe US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.In a move that is likely to inflame trade tensions between the world's two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn. Continue reading...

Failure to cut interest rates will take money out of the system, hitting businesses such as hospitality

Figures provide mixed message for Bank of England when it considers interest rate cut next month

Loyalist economist who thinks years ahead' inherits Kremlin's biggest challenge as it prepares for the long haul in UkraineIn 2014, Russia's bloc of economic strategists was panicked by Vladimir Putin's decision to annex Crimea and foment a war in east Ukraine, a move that led to western condemnation and sanctions against Russia that were seen as potentially ruinous.But his adviser Andrei Belousov was a rare economist who publicly stood by his side, calling the damage manageable and western sanctions insignificant" in terms of the Russian economy. Continue reading...

We know about the hardship of Thatcher's children', but a new generation of Tories has raised inequality to even higher levels

Thinktank says extra funding eaten up by higher inflation despite greater demand with service in poor state of repairSpending on the NHS in England has risen less quickly than the Conservatives promised at the last election despite the extra demand created by the pandemic and record waiting lists, a leading thinktank has said.The Institute for Fiscal Studies (IFS) said increases in funding from the government had been eaten up by higher than expected inflation and, as a result, NHS day-to-day spending had grown by 2.7% a year during the current parliament - below the 3.3% pledged by Boris Johnson in 2019. Continue reading...

Former prime minister proposes 3bn support package for more than 3 million of blighted generation'

Rolling coverage of the latest economic and financial news

Younger homebuyers are turning to ultra-long loans, prompting fears over the risk to their finances and the wider economyFor a long time the traditional length of a UK mortgage has been 25 years, but runaway house prices and, more recently, dramatically higher borrowing costs are prompting more and more people to go long" on their home loans.On Monday, the former pensions minister Steve Webb revealed that younger homebuyers were increasingly being forced to gamble with their retirement prospects by taking on ultra-long mortgages lasting beyond the end of their working life. Continue reading...

MP criticises policies on interest rates and bond-selling as Tory rightwingers call for review of Bank's independenceJacob Rees-Mogg has accused the Bank of England of miserable incompetence" over its failure to reduce inflation more quickly and its bond-selling strategy, as rightwing Tories prepare to renew their attacks on the Bank's independence.The former business secretary accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly in an attempt to reduce its balance sheet - a policy known as quantitative tightening (QT). Continue reading...

Mental health of young people is deteriorating, and shows up in employment data. More action is neededFrom the outset it was obvious the coronavirus pandemic would be brutal on the UK's young people. Just how brutal has only become apparent over time.Children, teenagers and adults in their early 20s were the least likely to have adverse physical consequences but suffered most from the restrictions put in place to prevent the virus spreading. Children were deprived of education. Teenagers were stuck in their homes and unable to see their friends in person. Continue reading...

Experts say Biden can win back working-class Americans if he hammers home the message that he is helping them on pocketbook issuesTo the dismay of Democrats, blue-collar voters have lined up increasingly behind Donald Trump, but political experts say Joe Biden can still turn things around with that large and pivotal group by campaigning hard on kitchen table" economic issues.With just six months to go until the election, recent polls show that Trump has stronger support among blue-collar Americans than he did in 2020. But several political analysts told the Guardian that Biden can bring back enough of those voters to win if he hammers home the message that he is helping Americans on pocketbook issues - for instance, by canceling student debt and cutting insulin prices. Continue reading...

Trade data is a long neglected subject, but it's never been more importantFor most of my career in economic policy, no one asked much about trade data - about developments with imports and exports. The subject just wasn't that controversial.That's all changed since 2016. Brexit has made trade data great again - at least in the sense of reinserting it into the centre of politics. But so far that attention is creating political heat, not the greater understanding we need of where the UK's economy is, and is not, performing. Continue reading...

UK manufacturers and retailers are not yet passing on all the costs of diverting ships round southern Africa - but can that last?When footage first appeared of Houthi rebels hijacking the cargo ship Galaxy Leader in the Red Sea last November, it sent shockwaves through the world of trade.The coordinated attack on the ship, which was partly owned by Israeli billionaire Abraham Ungar, was the start of a six-month campaign by Yemen-based militants to terrorise western vessels using the route, in response to the conflict in Gaza. Continue reading...

A weekend near the former chancellor's French residence induced a sense of wellbeing quite unlike Britain's beleaguered moodWith all the horrors in Ukraine, Gaza and Sudan - not to say (a touch of bathos here) the abysmal state of our Brexit-hit economy - a bank holiday weekend in La France profonde came as a most welcome relief. We were staying with a friend in the south-west region of Aveyron, near a village called La Salvetat-Peyrales.I was struck by the thriving nature of the local rural economy - no potholes in sight - and the general atmosphere of wellbeing. As usual, as on all my trips to the continent, I met people who expressed astonishment at the harm the UK had done to itself with the Brexit referendum. Continue reading...

Charities and campaign groups are calling on bodies to say they may stop funding country if legislation comes into effectThe World Bank and the International Monetary Fund are coming under pressure to use their financial might to persuade Ghana to reconsider a proposed law that could lead to anyone who identifies as LGBTQ+ being jailed for three years.Charities and campaign groups are calling on the global development bodies to tell Ghana they may stop funding the country if the proposed legislation - which will be challenged in the country's supreme court next week - comes into effect. Continue reading...