Economics | The Guardian

Short, shallow recession is over, as UK economy grows faster than forecast in January-March quarter, by 0.6%, fastest quarterly growth in over two years

GDP rose by 0.6% in first quarter of 2024 but forecasters expect economy to grow slowly this year

President likely to add sectors such as electric vehicles, batteries and solar cells to range of levies set up under Donald TrumpJoe Biden is expected as early as next week to announce fresh tariffs on Chinese trade, with levies focused on strategic sectors including electric vehicles, in a review of measures first put into place under Donald Trump.An announcement planned for Tuesday will keep the blanket tax rises introduced by the president's predecessor but supplement them with targeted levies on industries connected to EVs, including batteries and solar cells, according to reports. Continue reading...

While the government will seize on any crumbs of comfort it can find, the bigger picture on growth tells a different story

Even as neoliberalism destroys our dreams of a better life, politicians tell us there is no alternative'. But there isThe news should have stopped us in our tracks. Astonishingly, however, it was scarcely reported here. The latest map of mental wellbeing published by the Global Mind Project reveals that, out of the 71 countries it assessed, the United Kingdom, alongside South Africa, has the highest proportion of people in mental distress - and the second worst overall measure of mental health (we beat only Uzbekistan). Mental wellbeing has plummeted in the UK further than in any comparable nation. How was this not headline news?More importantly, why has it happened? The Global Mind Project blames smartphones and ultra-processed food. They doubtless play a role, but they're hardly peculiar to the UK. I think part of the reason is the sense that life here is, visibly and obviously, spiralling backwards.George Monbiot is a Guardian columnist. His latest book, The Invisible Doctrine: The Secret History of Neoliberalism (& How It Came to Control Your Life), is out on 16 May Continue reading...

Bank of England governor Andrew Bailey is briefing reporters after BoE left UK interest rates on hold again in a dramatic 7-2 split

It seems just matter of time before the two MPC members already in favour of a cut are joined off Table Mountain

Policymakers say they want to see more evidence that price pressures are easing before reducing rates

Niesr says current limits on government borrowing fail to stimulate growth and hinder net zero ambitionsThe next government will be forced to hit voters with post-election tax rises and delay net zero investment unless it is prepared to rip up Treasury rules for managing the state finances, a leading thinktank has said.The National Institute for Economic and Social Research (Niesr) called for a radical overhaul of the self-imposed constraints imposed on government borrowing and debt as it warned that persistently weak growth and lower inflation would make hitting the rules more difficult. Continue reading...

The former world bank economist argues that neoliberalism paves the way for populismIn 1944 the Austrian-born economist Friedrich Hayek, displaced to Britain, was disquieted by his leftwing academic peers. As Hayek saw it, their political philosophy committed the same error as the fascism that was ravaging his homeland. He wrote that the desire to plan an economy centrally was - in what became the title of his most famous book - The Road to Serfdom: many who sincerely hate allof nazism's manifestations are working for ideals whose realisation would lead straight to the abhorred tyranny". Hayek cast fascism not as a reaction to progressive success, but as its natural endpoint.Joseph Stiglitz, a former chief economist of the World Bank and adviser to Bill Clinton, tackles this idea head on in The Road to Freedom, his rejoinder to Hayek's work and that of his libertarian fellow traveller Milton Friedman. As Stiglitz sees it, rather than too much government leading to tyranny, the shift to neoliberalism hasreduced freedom and provided fertile ground for populists". Social democracy, with its greater role for the state, generates freer, robust societies that are resilient to authoritarians like former president Donald Trump. Continue reading...

Defence secretary makes statement after 270,000 payroll records belonging to members of Britain's armed forces been exposed to hackers. This live blog is closedReeves says Labour has a vision for the country. Stability will be change, she argues.I know - warm words are not enough. I do not underestimate the challenges we face. But I am so ambitious for our country. I know the huge potential found all across Britain and the constraints that are holding that potential back are not immutable forces.They require vision, courage, and responsible government. Vision - to pursue a different approach, drawing on new economic thinking shaping governments in Europe, America and around the world - but which this Conservative government resists. Continue reading...

Leader of major cybercrime group has been unmasked and sanctioned by the UK, US and Australia, authorities say

Miatta Fahnbulleh is running for parliament - and, as a black female economist, hopes to broaden parliament's outlook on the rules of the game'Miatta Fahnbulleh has been talking about economic transformation for as long as she can remember. After she and her family fled civil war in Liberia as a child, the main topics of conversation around the breakfast table in London were politics and economics.When other people were talking about EastEnders, we were on about changing the economic settlement," says the 44-year-old former chief executive of the New Economics Foundation (NEF), who is standing as Labour's candidate in Peckham, south London, at the next election. Continue reading...

First-time buyers targeting smaller properties, with flats closing growth gap' on houses, says Halifax

Consumer caution over high interest rates and energy bills adds to bleak start to the year for sectorCold wet weather and caution about spending amid high interest rates and energy bills have delivered a dismal start to spring for retailers and restaurants, the latest industry figures show.Sales were virtually flat across March and April against the same period a year ago, according to the latest figures from the British Retail Consortium (BRC) trade body and advisory firm KPMG. That was despite prices continuing to rise with inflation, suggesting a drop in the volume of items sold over the important Easter period. Continue reading...

Tories will crow about falling inflation and Britain's waning recession. But the public sees the reality in its shopping basketLabour's tanks roll relentlessly across Tory lawns, not pausing a heartbeat to celebrate phenomenal local election results in England. It treated the local polls as a military rehearsal for the general election, with ruthless focus on places that will deliver most seats: that includes the south, as well as the north and Midlands, and the party is heading for Scottish turf too.But the mesmerising ferocity of blue-on-blue abuse is the current news-making drama. Fighting bare-knuckle over post-election ideology, the Tory right are looking forward to an election defeat as long as one of their own isn't at the helm. Besides, they have Sunak in their grip, while the Mail calls Boris Johnson a coiled mamba" waiting to save the Tories from total annihilation". Mournful one-nationers echo the losing West Midlands mayor Andy Street's dignified call for moderation, unheeded. Sunak can stay or go: Labour relishes either equally.Polly Toynbee is a Guardian columnist Continue reading...

Bloc will not waver' from making tough decisions to protect economy and security, says Ursula von der Leyen

Jane Dent calls out Labour's hypocrisy about the party. Plus a letter from Tom ParkinRe the letters on the Liberal Democrats losing their way (Letters, 1 May), all I can say is that life is more complicated than the dogma that some espoused. All parties make mistakes and the Lib Dems have not been immune. But please excuse me while I reach for the smelling salts after reading the hypocrisy of the words and actions of Labour and its acolytes. The Lib Dems have been shouting from the rooftops about Brexit, but mealy-mouthed Labour didn't support our attempts to correct the disaster that has befallen Britain in its wake. Now it has also rejected the youth mobility scheme between the EU and the UK.Labour will continue to inflict untold damage if it can't allow itself to talk positively about Europe. It should stop thrashing the Lib Dems and start owning up to its deficits.

Three key economic indicators loom large but none offer great hope for the Conservatives' survivalTory MPs have been busy this past week and probably not found the time to watch Shardlake, the adaptation of CJ Sansom's book set during the dissolution of the monasteries in the 1530s, but once the dust has settled from last week's elections they might want to take a look.This was a turbulent period. Having forced through his own version of Brexit through the break with Rome, Henry VIII then in effect nationalised the assets of religious houses dotted around England, Wales and Ireland. It was a seminal moment in the development of British capitalism and the nation state. Continue reading...

The business and trade secretary played into the ideological tosh that the wonders of the Industrial Revolution were funded by beer brewers and sheep farmersBritain ran an empire for centuries that at its peak 100 years ago occupied just under a quarter of the world's land area. Yet if you believe Imperial Measurement", a report released last week from the rightwing Institute of Economic Affairs (IEA), the net economic impact of this vast empire on Britain was negligible, even negative.If you thought the empire profoundly shaped our industry, trade and financial institutions, with slavery an inherent part of the equation, helped turbocharge the Industrial Revolution and underwrote what was the world's greatest navy for 150 years, think again. The contribution of the transatlantic trade in enslaved people to our economy was trumped by domestic brewing and sheep farming, opines the IEA. The tax burden" of defending this barely profitable empire was not worth the candle. Instead, it was free-market economics that unleashed British economic growth - a truth that must be restated before Marxists and reparation-seeking ex-colonies start controlling thenarrative.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...

Reticence over the seizure of Russian state assets in Europe betrays a fatal underestimation of the threat Moscow posesEurope has plotted an elegant decline that suits the needs of its ageing population, and the Ukraine war cannot be allowed to interfere with that plan.That is how it seems when EU countries consider circumventing the financial rulebook to offer Ukraine what it needs to overcome waves of drones and break the deadlock on its eastern front. Continue reading...

The UK is expected to come out of recession, but it would be wise not to expect a reduction any time soonIt would come as a shock to most economists if the Bank of England opted to cut interest rates at its policy meeting this week.Financial markets, which were baying for a cut last May, are these days betting that August or possibly September will be the point at which the Bank starts to lower interest rates from their current level of 5.25%. Continue reading...

April's figure was lower than forecast and unemployment rate ticked up over the month but still market remains strongHiring in the US slowed in April with the workforce adding another 175,000 jobs and wage growth slowing.The news cheered investors hoping that a cooling labor market will prompt the Federal Reserve to cut interest rates - which have been driven to a 20-year high as the US fights stubbornly high inflation. All the major US markets rose on the news. Continue reading...

UK's growth will be least in G7 by 2025, OECD expects, as low business investment and multiple pressures bear down

Rolling coverage of the latest economic and financial news, as the OECD cuts UK growth forecasts to back of G7 pack for 2025

As the fortunes of the super-rich soar, a proposed annual levy of 2% could offer a corrective - and they will fight it tooth and nailThe idea is simple. There are about 3,000 billionaires in the world and in recent years they have been getting richer and richer. Demands on hard-up governments from ageing populations and the drive to achieve net zero are growing all the time. Rather than expect voters already struggling to make ends meet to pay more, how about a wealth tax on Jeff Bezos, Elon Musk and their like?This is an idea that has obvious attractions. As Joe Biden has pointed out, US billionaires make their money in ways that are often taxed at lower rates than the ordinary wage income of American workers. Overwhelmingly, their wealth comes from the rising value of their assets, and they use tax loopholes and legal accounting moves to minimise the tax they pay. Wealthy Americans pay an average tax rate on their incomes of just 8%. Biden thinks they should be paying a minimum of 25%.Larry Elliott is the Guardian's economics editor Continue reading...

UK constrained by high interest rates, price rises and staff shortages but thinktank offers optimistic outlook for global economyThe UK will be the worst-performing economy in the G7 next year, according to the Organisation for Economic Cooperation and Development, as high interest rates and the lingering effects of last year's surge in inflation drag on growth.In a downbeat assessment, the Paris-based thinktank also downgraded its forecast for UK growth this year to 0.4% from a November forecast of 0.7%. Continue reading...

Big economies such as the US must change fiscal policy as the realities of debt and inflation biteFor more than a decade, numerous economists - primarily but not exclusively on the left - have argued that the potential benefits of using debt to finance government spending far outweigh any associated costs. The notion that advanced economies could suffer from debt overhang was widely dismissed, and dissenting voices were often ridiculed. Even the International Monetary Fund, traditionally a stalwart advocate of fiscal prudence, began to support high levels of debt-financed stimulus.The tide has turned over the past two years, as this type of magical thinking collided with the harsh realities of high inflation and the return to normal long-term real interest rates. A recent reassessment by three senior IMF economists underscores this remarkable shift. The authors project that the advanced economies' average debt-to-income ratio will rise to 120% of GDP by 2028, owing to their declining long-term growth prospects. They also note that with elevated borrowing costs becoming the new normal", developed countries must gradually and credibly rebuild fiscal buffers and ensure the sustainability of their sovereign debt". Continue reading...

The UK's manufacturing sector suffered a fresh downturn last month as disruption to shipments in the Red Sea hit firms

With hopes for a rate cut gone, there is speculation of another rise before the end of 2024. What factors will sway the Reserve Bank's decision?

Fastest growth in 18 months as GDP expands by better-than-expected 0.3% in Q1 2024, after two quarters of contraction

France, Spain, Germany and Italy helped by lower inflation and prospect of interest rate cuts

Prices in non-food stores are lower in April than a year earlier as stores offload summer stock

The accelerating slide in the value of Japan's currency could ultimately be bad news for people in Japan who are heavily reliant on importsThe value of Japan's currency has tumbled so much, that its value is back to where it was in 1990, shortly after Japan's famous bubble economy" burst. For a moment on Monday it was trading at 160 yen to US$1. A few years ago, it was closer to 100 yen to US$1.The yen's accelerating slide could ultimately be bad news for people in Japan. A weaker yen squeezes households by increasing import costs. Japan is heavily reliant on imports for both energy supplies and food, meaning inflation could rise. Continue reading...

Irish GDP returned to growth at the start of the year, while 19% of Ocado shareholders oppose pay policy that could give boss Tim Steiner a 15m bonusNew inflation data today has shown that prices rose in four German states this month.In Bavaria, the annual inflation rate rose in April to 2.5% from 2.3% in March, in Brandenburg it rose to 3.0% from 2.8%, in Saxony it rose to 2.7% from 2.5%, and in Hesse it rose to 1.9% from 1.6%. Continue reading...

Dublin records near-doubling of tax revenue from duties on imports of clothing, food and other goods from Great BritainIreland has landed a 700m (600m) Brexit bonanza with a steep increase in tax revenues flowing from customs duties now applicable to imports of clothing, food and other goods from Great Britain.Before Brexit, Britain enjoyed customs-free exports to Ireland and the rest of the EU because it was part of the single market and customs union. Continue reading...

Analysts say impact on wheat, barley, oats and oilseed rape harvests means price rises on beer, bread and biscuits and more food importedUK harvests of important crops could be down by nearly a fifth this year due to the unprecedented wet weather farmers have faced, increasing the likelihood that the prices of bread, beer and biscuits will rise.Analysis by the Energy and Climate Intelligence Unit (ECIU) has estimated that the amount of wheat, barley, oats and oilseed rape could drop by 4m tonnes this year, a reduction of 17.5% compared with 2023. Continue reading...

Exclusive: Concerns over effect on UK's finances lead officials to believe utility should be renationalised before general electionSenior Whitehall officials fear Thames Water's financial collapse could trigger a rise in government borrowing costs not seen since the chaos of the Liz Truss mini-budget, the Guardian can reveal.Such is their concern about the impact on wider borrowing costs for the UK, even beyond utilities and infrastructure, that they believe Thames should be renationalised before the general election. Continue reading...

Gordon Brown challenged Conservative ideas to fix the economy. His successors unfortunately will notWhen Labour's Gordon Brown embraced post neo-classical endogenous growth theory" in 1994, he was ridiculed by his opponents. This said more about his critics than Mr Brown. His speech reflected an engagement with academic debates as well as a worldview and diagnosis distinct from Tory narratives. He judged education to be key, as growth depended on human capital. By contrast, today Labour's top team struggles to say exactly what they believe will drive growth and how they will achieve it.Part of the reason is that mainstream economics is proving incapable of giving sensible answers to important questions. Whether it is the financial crash, the pandemic or inflation shocks, the response is that spending cuts are needed as public debt threatens to bankrupt the nation. Many economists are questioning their discipline's worth. Last month, the Nobel laureate Angus Deaton blogged that economics was in disarray" and had largely stopped thinking about ethics". JeremyRudd of the US Federal Reserve writes scornfully in his latest book, A Practical Guide to Macroeconomics, that economists' role today is to justify what elite interests want to do anyway: deregulate, pay fewer taxes, keep wages as low as possible". Continue reading...

Council budgets look a likely target when the Tory government seeks to balance the books and pay for its promisesTalking tough on sicknote culture", stopping the boats and offering billions of pounds extra for defence spending. Ahead of local elections in England and Wales this week, Rishi Sunak has been in campaign overdrive.With the prime minister suffering the joint-lowest satisfaction rating of any Conservative or Labour leader since 1978, experts are predicting a drubbing for the Tories, with the party expected to lose as many as half the seats it is contesting. The prominent Tory mayors in the West Midlands and Tees Valley, Andy Street and Ben Houchen, could be ejected from power. Continue reading...

Starmer wants to make Tory policy on the economy a central theme of its election campaign ... without mentioning BrexitNow, let me get this straight. We have a fissiparous, Brexit-supporting government, many of whose MPs are stepping down, convinced that their party is heading for its wilderness years. Correspondingly, we have a Labour opposition that is riding high in the polls, led by Keir Starmer, who - unlike his predecessor Jeremy Corbyn - played a noble part in the remain campaign and argued passionately for a second referendum.Proponents of a second referendum hoped that the country would acknowledge its historic mistake, and return to the European Union it should never have left. I was one of them. We failed. Continue reading...

Sort of: this week will see inspections of some goods. But the hit to businesses and inflation will be inescapableWhen Michael Gove announced the first delay to post-Brexit checks on plant and animal products coming into the UK from the EU, he was keen to make one thing clear.Although we recognise that many in the border industry and many businesses have been investing time and energy to be ready on time, and indeed we in government were confident of being ready on time," the then minister for the Cabinet Office said, we have listened to businesses who have made a strong case that they need more time to prepare." Continue reading...

Analysts say investor confidence is improving, as shares in London post their best week since last September

For first time since August 2021 people expect position to be better in a year, Paul Thwaite addsConsumer confidence is bouncing back in the UK, with people predicting a brighter financial future for the first time in two years, NatWest has said.Paul Thwaite, the bank's chief executive, said easing price pressures as inflation comes down seemed to be feeding through to the general public. Headline consumer price inflation is still above the Bank of England's 2% target at 3.2% but has fallen sharply from a peak of 11.1% in October 2022. Natwest's own economic forecast suggests inflation will fall to 2.5% by the end of this year. Continue reading...

Commerce department says gross domestic product growth decelerated to 1.6% at start of year as consumers slowed spendingAmerica's leading stock indices came under pressure on Thursday after official data revealed that US economic growth slowed sharply to its weakest rate in almost two years.But as high interest rates take their toll on the world's largest economy, inflation continues to loom large. Continue reading...

Increase in cost of crude could drive inflation up and force central banks to keep interest rates high Business live - latest updatesA serious escalation of tensions in the Middle East would push the price of oil above $100 (80) a barrel and reverse the recent downward trend in global inflation, the World Bank has said.The Washington-based institution said the recent fall in commodity prices had been levelling off even before the recent missile strikes by Iran and Israel - making interest rate decisions for central banks tougher. Continue reading...

Green Finance Institute report said further pollution could cut 12% off GDP by 2030sThe destruction of nature over the rest of the decade could trigger a bigger economic slump in Britain than those caused by the 2008 global financial crisis and the Covid pandemic, experts have warned.Sounding the alarm over the rising financial cost from pollution, damage to water systems, soil erosion, and threats from disease, the report by the Green Finance Institute warned that further breakdown in the UK's natural environment could lead to a 12% loss of gross domestic product (GDP) by the 2030s. Continue reading...

PM has faced scepticism over costing of his commitment to spend 2.5% of Britain's GDP on defence by 2030Rishi Sunak has suggested he will not shy away" from further public spending cuts to boost defence spending as he faced questions over how the policy will be funded.He said the plan would not affect the government's ability to cut taxes and was the right thing to do" in an increasingly dangerous world. Continue reading...

Wealthy nations exploit their position as the world's bankers to siphon off hundreds of billions from the needyDeveloping nations have long complained that globalisation has enthroned western currencies in such a way as to subsidise living standards in the rich world. Last year, Brazil, Russia, India, China and South Africa - the Brics - even talked of an alternative common currency to replace the dollar. Wealthy countries, perhaps, think that their ambitious goals for aid defuse arguments over their exorbitant privilege".As TS Eliot put it, between the idea and the reality ... falls the shadow". A paper out last week calculates that the bottom four-fifths of humanity finance the richest fifth to the tune of $660bn a year. The reason, say Gaston Nievas and Alice Sodano of the Paris School of Economics, is that wealthy countries have become the world's bankers, able to squeeze debtors. Poor nations borrow in rich-world currencies because they run deficits in energy and food, while exporting low-value goods relative to their imports. Markets are liberalised in poor countries and profits flow to the global north.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Economists had tipped CPI growth for the March quarter of 0.8%, and an annual inflation rate of 3.5%