Economics | The Guardian

Fed said rates will rise a quarter of a percentage point to 2.25% to 2.5% but it is carefully watching ‘event risks’, including BrexitThe US Federal Reserve raised interest rates again on Wednesday despite intense, and unprecedented, pressure from Donald Trump to leave rates unchanged.After a two-day meeting, the central bank announced rates would rise a quarter of a percentage point, to a range of 2.25% to 2.5%, the ninth such move since late 2015. The rate rise further signals the Fed’s confidence in the US economy.Related: Why are markets falling, and are we heading for global recession?I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck! Continue reading...

Dow hits 2018 low after central bankers increase rates despite pressure from Trump to leave them unchanged

The US central bank went ahead with the interest rate rise, seemingly relaxed about the economyFor the past couple of months Donald Trump has been waging war against the US central bank. The Federal Reserve thinks strong growth and the lowest unemployment since the days when the US was putting men on the moon warrants a gradual increase in interest rates. Trump has been telling the Fed to stop before it craters the economy.In the end, the Fed on Wednesday did what it was always going to do: it went ahead with the planned rate rise.Related: Stock market volatile after Federal Reserve raises interest rates – business live Continue reading...

Compromise with European commission will reduce deficit target to 2.04% of GDPItaly has managed to avert EU sanctions after reaching a compromise with the European commission over its 2019 budget.The Italian prime minister, Giuseppe Conte, said the government had managed to reach an agreement to reduce the deficit target to 2.04% of GDP from 2.4%. This has been achieved without making drastic changes to key budget proposals such as the promise of a universal basic income and lowering the pension age. Continue reading...

Business leaders criticise curbs on migrants earning £30,000, proposed in new white paperThe government’s proposals for a post-Brexit immigration system will deal a “sucker punch” to the economy, leaving industry short of the migrant workforce they rely on, business leaders have said.The plans, unveiled in the long-awaited immigration white paper, introduce a new skills-based immigration system and the end of free movement of people from the EU.Related: May's cabinet split over £30,000 immigrant salary thresholdRelated: I’m a carer. The £30k immigration rule would decimate the sector | Karolina Gerlich Continue reading...

Stalling house prices, slowing inflation and Brexit will deter interest rate rise – analystsLondon house prices slipped in October, dragging the growth in average property prices to its lowest level since July 2013.The slump in the capital, which began after the Brexit vote in 2016 and reached a fall of 1.7% for the year to October 2018, pulled down the average increase across the UK to 2.7%, down from 3% in September, according to official data.Inflation is when prices rise. Deflation is the opposite – price decreases over time – but inflation is far more common. Continue reading...

Crashing out of the EU would imperil hundreds of thousands of jobs. Here’s how we can force the government to change courseTo fail to deliver Brexit would be to “break faith with the British people” said the prime minister earlier this week. And yesterday, in pursuit of that logic, she did an extraordinary thing. Recognising that there is no majority in parliament for her deal she began preparations in earnest for us to leave without one. And here is what that will mean.Gavin Williamson said we will “have 3,500 service personnel held at readiness” – he must anticipate civil unrest. Dominic Raab had confirmed we were taking measures to “make sure that there is adequate food supply” and Matt Hancock says we have begun to stockpile perishable medicines. And if that planning is adequate, we will continue to be safe and have enough to eat and there will be no further deaths. If it is adequate.Related: Ivan Rogers’ Brexit bombshell, digested | Martha Gill Continue reading...

The health service’s long-term plan won’t work if brave staffing decisions aren’t made, says incoming head of the King’s FundRichard Murray, a former academic, management consultant and civil servant, is about to take on the most high-profile role among the health thinktanks: as the King’s Fund’s new chief executive.Related: Long-term plan for NHS funding delayed amid Brexit chaos Continue reading...

Minimum salary threshold of £30k-a-year will also apply to migrants from the EU27Sajid Javid is expected to publish a long-delayed white paper on Britain’s tough new immigration regime on Wednesday, as the prime minister seeks to build the case for her Brexit deal by pledging to “take back control of our borders”.Related: Business leaders warn against plan to slash EU immigration to UKRelated: UK immigration: what is the government proposing?Related: Sajid Javid says freedom of movement ends, 'deal or no deal' Continue reading...

PwC analysis predicts India will rise to fifth as Brexit impact pushes UK to seventhBritain’s stalled economy will fall back in the international rankings next year to sit in seventh place behind India and France, according to a report by consultants at PwC.A fall in the value of the pound, combined with slower growth this year and next as Brexit takes its toll, will mean the UK drops from fifth in the GDP rankings to sit just above Italy in eighth place and Brazil in ninth. Continue reading...

Rolling coverage of the latest economic and financial news, as UK blue-chip index stocks drop to weakest close since late 2016

After heavy market losses, Wall Street faces its bleakest Christmas since the 1930s

Gender equality has stalled, says WEF, as women globally are paid 63% of what men getThe global pay gap between men and women will take 202 years to close, because it is so vast and the pace of change so slow, according to the World Economic Forum.The WEF, which organises the annual meeting of business and political leaders in Davos, said the global gender pay gap has narrowed slightly over the past year, but the number of women in the professional workplace has fallen. In 2017, the WEF estimated that it would take 217 years to close the pay gap.Related: Gender pay gap: when does your company stop paying women in 2018?Related: Carrie Gracie says BBC is blocking pay gap campaigners Continue reading...

Financial markets nervously eye the US Federal Reserve as it moves to raise interest ratesFinancial markets have been nervously eyeing the US Federal Reserve as it prepares to raise interest rates for the fourth time this year on Wednesday, with big investors fearing that higher borrowing costs could damage the global economy. Continue reading...

Amid Brexit uncertainty, online retailers are posting losses as well as Next, M&S and Dunelm

Rolling coverage of the latest economic and financial news, as online fashion group suffers a “significant deterioration” in pre-Christmas trading

The UK high street is suffering and now even online outlets are feeling the pinchTake a high street in the throes of structural upheaval. Add a large dollop of Brexit uncertainty, a pinch of unusually warm weather and what do you get? The sort of dish that will turn the stomach of even the toughest retailer.This is the crunch time for shops and online shopping outlets. Christmas is when consumers tend to spend more freely and many retailers make their profits. Last year, November and December accounted for more than 21% of all goods sold.Related: Asos issues shock profit warning after November downturn4 DecemberRelated: Laura Ashley to close 40 stores, putting hundreds of jobs at risk Continue reading...

National deficit increases after ONS says student loans count as government spendingPhilip Hammond is facing a £12bn hole in the public finances this year after changes to the way student loans are treated on the government’s books, reflecting that many will never be repaid.In a stroke of the pen from the Office for National Statistics, student loans will now be treated as part financial asset in the national accounts, because some will be repaid, while part will be classified as government expenditure, as some loans will never be paid back in full. Continue reading...

UK consumers are reining in spending as economic uncertainty dents footfall and hits salesRetailers vying for customers in the last full week of trading before Christmas are in for a tough time according to the latest predictions, with footfall expected to fall by about 3% this week as cash-strapped shoppers rein in spending.The forecast by retail analysis firm Springboard adds to the bleak picture facing the sector in the key festive trading season, as consumers uncertain about what Brexit will mean for the economy and their finances cut back on gift-buying this year.Related: Storm Deirdre batters UK and adds to retail woeMaplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts. Continue reading...

Trade monitor reveals firms also affected by ‘significant’ economic turmoil in EuropeBritain’s goods exports have “collapsed” to levels not seen for three years in response to growing Brexit uncertainty and slowdowns in the Chinese and the US economies, according to a quarterly trade monitor.Business consultants BDO found that the UK’s goods exports, which have suffered a slowdown in growth since the beginning of 2017, contracted in the last three months of the year to leave them at a level not seen since 2015.Related: UK economy slows as car sales slide Continue reading...

Despite Brexit chaos and the failures of austerity, Theresa May still says Britain’s greatest threat is a Corbyn governmentIt usually takes time for established preconceptions to catch up with reality. For political parties, conventional wisdom about their characteristic strengths and opponents’ weaknesses is their bread and butter. It underpins David Cameron’s now famously ironic tweet, ahead of the 2015 election, that the British faced a choice between stability with the Conservatives, or chaos with Ed Miliband. The tweet now stands, like Ozymandias’s hubristic boast, “Look on my works, ye mighty, and despair!”, an inscription on a diminishing Conservative party that has spent the last two years cannibalising itself.And yet, many have still not caught up with the new reality of the Conservatives, because there is another side to the party where perceptions haven’t changed. Last week the Wall Street Journal published a report announcing that there was only thing investors in the UK feared more than Brexit: Jeremy Corbyn. “It isn’t just Brexit that has investors on edge in the UK,” the article warned, “it’s the possibility of a new Labour government run by an avowed socialist.” Quotes from analysts described a Labour victory as a “lose-lose proposition”, “apocalyptic” and “Armageddon”.Related: Party activists pile pressure on Corbyn to back second vote Continue reading...

Possible decision by ONS would reopen question of funding of students in EnglandThe government faces an extra £10bn being added to its borrowing as the result of a radical shake-up in the accounting for student loans, with experts warning of increased uncertainty over the outlook for university funding.The Office for National Statistics is due to announce its plans to change provisions for student loans in the UK’s national accounts, with any change likely to affect the government’s public sector deficit policies and throw open questions about how students in England are funded.Related: Student loan shake-up puts £12bn hole in public financesRelated: Second parliamentary committee calls for means-tested student grants to be reinstated Continue reading...

The chance to mend the British economy’s well-documented problems is being lost in a sea of uncertaintyIt was supposed to be over by Christmas, yet the never-ending chaos that is Brexit and the search for a deal keeps rumbling on. Theresa May might have survived her confidence vote, yet with it she became the greatest lame duck prime minister in modern history.From the few options for the way ahead, none seem workable as things stand. May’s deal, even with a few tweaks, is unlikely to pass without wholesale reform. It appears dead in the water after her latest failed dash to Brussels. The best she could muster on her pre-Christmas shopping trip was the political equivalent of a limp bow to wrap around a gift that is as unappealing to her party as the proverbial lump of coal.Related: A people’s vote on Brexit used to be a distant hope. Not anymore | Matthew d’Ancona Continue reading...

The president has called the US central bank’s chairman, Jerome Powell, ‘too aggressive’ on policyAs the US Federal Reserve prepares to meet this week, storm clouds are gathering. It is widely expected that, despite protests from President Donald Trump, the Fed will raise interest rates – the latest in a series of increases which are expected to continue through to 2020.But while most Fed officials seemed confident last month about the future prospects for the American economy, a fresh poll of economists has shown more scepticism. Continue reading...

Wherever one goes, concerned people ask what Britain is doing. It seems clear from our actions that we don’t knowThis column comes to you from Perugia in Italy, a reasonably safe haven from the shenanigans of Westminster. We have been visiting our youngest daughter, who is a beneficiary at the university of one of the many privileges of the UK’s membership of the EU: namely the kind of Erasmus scholarship that might well be threatened if the Brexiters have their way.Although it is my fate to write about the threat of Brexit, I share the feelings of so many people I meet that there are times when one fears one is being driven insane by its prominence in the so-called national debate, when there are so many other pressing problems.With the House of Commons at sixes and sevens, the case strengthens for a referendum based on evidence, not emotion Continue reading...

Every shred of political energy is being tied up in Brexit, with detrimental effects on a nation facing other urgent challengesBrexit has paralysed British politics: it has left the government utterly incapacitated, ministers warring and both main parties riven by splits. It is absorbing every shred of political energy; in the words of one official, it has wiped the policy grid clean. Yet in every nook and cranny of the state – from understaffed hospitals to the schools sending parents begging letters for financial support – there are problems that demand urgent focus and resource. We also face huge social challenges that require action now, from how to care for an ageing society to how to prepare for the impact of technology on the world of work. All this is going ignored, with detrimental effects on people’s lives.There is a grim paradox at the heart of Brexit. The vote for Britain to leave the EU was partly fuelled by the sense among many voters that there are increasingly two Britains: a thriving capital barely touched by recession and boarded-up high streets outside the south-east. This has been a long project in the making, driven by decades of deindustrialisation and uneven economic growth that have contributed to some of the biggest regional inequalities in western Europe. Yet Brexit is going to make it far harder to respond to this gap, which has only got wider since the financial crisis.Deliberate political choices made since 2010 contributed to the economic dissatisfaction that paved the way for the voteRelated: Jeremy Corbyn slides in approval ratings in spite of Tory schismsThere are no Brexit-shaped shortcuts to better hospitals and schools, well-paid jobs and flourishing town centres Continue reading...

As the IMF warns a downturn could be coming, we examine how you can protect yourselfEvery 10 years or so a financial crisis hits global markets – and it’s 10 years since the last one. This week the IMF warned that not only are the storm clouds of the next global financial crisis gathering, but also that the world financial system is unprepared for another downturn.Will your pension be wrecked? The value of your house plummet? Will your industry be hit by a wave of redundancies? The bad news is that even the big investment houses, which traditionally talk up markets in the hope that you will invest, are pessimistic about 2019.Related: IMF warns storm clouds are gathering for next financial crisis Continue reading...

Figures also show dramatic slowdown in business activity across Europe and the USFears are growing about the state of the global economy after a slump in Chinese manufacturing output growth and a dramatic slowdown in business activity across Europe and the US.Stock markets sagged on Friday as China‘s government said industrial production and retail sales slowed in November. Traders were also spooked by surveys that showed French business activity contracted this month and the US economy slipped to its lowest growth rate for 18 months in December.Related: Pound falls after May's Brexit blow in Brussels - as it happened Continue reading...

The pound is down against the dollar and the euro after Theresa May failed to make progress during her Brexit trip to Brussels

The president of the European commission says Theresa May failed to bring a clear plan for future relations with the EU after Brexit. The British 'need to say what they want, instead of asking us what we want,' he told reporters early on Friday after a day of talks in Brussels

Juncker tells PM to tell Europe what she wants in ‘nebulous and imprecise’ debate

Growth forecast for currency bloc downgraded due to uncertainty, says Mario DraghiThe European Central Bank will halt its €2.6tn stimulus programme in January despite concerns that the eurozone is poised to slow down over the next couple of years.Mario Draghi, the ECB boss, warned that rising uncertainty had forced the bank to downgrade its outlook for the currency bloc next year and the effects would continue to be felt in 2020.Related: Eurozone growth slumps to lowest level in more than four years Continue reading...

Industry body says firms have already sent hundreds of millions of pounds out of UKBusinesses are in “despair” over Brexit and have already diverted hundreds of millions of pounds in investment out of the UK, the Confederation of British Industry has said.The CBI deputy director general Josh Hardie said companies around the country, who did not seek publicity, had already pressed the button on contingency plans for no deal. Continue reading...

European Central Bank warns that protectionism is hurting growth, as Mario Draghi addresses the press

Bonds rally after Rome bows to pressure but EU says more needs to be doneThe Italian government will be forced to cut “a few billion” across two of its flagship policies to meet the lower deficit target it has proposed to the European commission.Italian bonds rallied after the government bowed to pressure to reduce its deficit target for 2019 to stave off EU sanctions. The country’s prime minister, Giuseppe Conte, proposed cutting the target from 2.4% to 2.04%.Related: Italy's budget drama – all you need to know Continue reading...

Donald Trump says talks between Washington and Beijing are progressingFinancial markets around the world have rallied amid early signs of progress in the bitter trade standoff between the US and China, as hopes rise for a breakthrough in the dispute.Wall Street shook off days of volatility to post broad gains in early trading after Donald Trump said that talks between Washington and Beijing were progressing, while reports suggested that China was on the brink of redrawing its economic plans to give foreign companies more access to its domestic market.Related: Markets rally as China 'rewrites economic plan'; pound jumps over $1.26 - as it happened Continue reading...

Julian Dunkerton urges shareholders to help him take back control of brand after fresh profits warningThe co-founder of Superdry has said he needs to be back running the fashion chain within weeks if it is to be turned around by next Christmas – and has called on other shareholders to support his comeback campaign.Julian Dunkerton was speaking after the company issued its second profit warning in two months. Superdry shares collapsed by 38% to 354p on Wednesday, wiping £32m off the value of Dunkerton’s 18% stake.Maplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts. Continue reading...

Brexit’s unresolved problems mean the pound will still be vulnerable even if the PM staysNews that Theresa May was facing a confidence vote from her own MPs broke just before trading began in the City. But those expecting a market meltdown were swiftly proved wrong. Shares had one of their better recent days and the pound rose on the currency markets. If, as the old cliche has it, financial markets react badly to uncertainty it was hard to tell as much.The upbeat mood in the equity markets was easy to understand. Share prices around the world were higher on hopes of peace breaking out in the trade war between the US and China, and London surfed the same wave as all the other bourses. Continue reading...

Investors welcome signs that tensions between Beijing and Washington are thawing

Guardian journalists, supporters and industry experts discuss the failing health of UK high streets and the impact on communities. What can local spaces offer that out-of-town shopping centres and online giants can’t?UK high streets are facing the quietest Christmas since the credit crunch, according to forecasts. A combination of low consumer confidence caused by Brexit, more agile, online competitors and shoppers increasingly opting to buy experiences instead of products are just some of the reasons cited as being responsible for the shift in spending habits.This year has been particularly bleak in Britain as well known names such as Toys R Us, Maplin, Debenhams, House of Fraser, Evans Cycles and Mothercare have been either shrunk or terminated, with 85,000 retail jobs lost in the first nine months of 2018. Beyond retail, many towns are having to fight to save their local library, pub, nursery or community centre – the places that have always fulfilled an important social function as well as a commercial one. Continue reading...

Capital’s transport authority faces shortfall due to Crossrail delays and government cutsPlans to upgrade major parts of the London Underground will be put on hold after a decline in passenger numbers, government cuts and delays to the opening of Crossrail have left the capital’s transport authorities struggling to balance the books.Related: Delayed Crossrail could cost almost £3bn more than plannedRelated: TfL facing near £1bn deficit next year after journey numbers fall Continue reading...

Figures from John Lewis, Tesco and Sainsbury’s point to subdued consumer activityPoor figures from John Lewis, and a slowdown at Tesco and Sainsbury’s has raised fresh concerns that the uncertain political climate is taking its toll on consumer confidence this Christmas.December is the most lucrative time of the year for the retail sector but John Lewis said sales in its department stores fell by more than 5% last week. The picture from its fashion and homewares divisions was even weaker, with sales in both down by about 7%.Maplin, Toys R Us and Jacques Vert have all collapsed in recent months, but several retailers and restaurant groups are facing financial problems and are trying to close stores or negotiate rent cuts. Continue reading...

Despite high employment levels and good pay growth, Brexit uncertainty will weigh heavily on the economy for some timeEmployment is at record levels. Firms are struggling to hire workers. Pay growth is back to levels last seen before the financial crisis of a decade ago. So what does the Bank of England do?In normal circumstances, it would be a no-brainer. Some members of Threadneedle Street’s monetary policy committee would already be voting for an increase in borrowing costs and the City would be assuming action from the Bank in February. After all, at 0.75%, official rates are extremely low by historic standards.Related: Gilets jaunes protests continue despite Macron concessions Continue reading...

Average weekly earnings rose by 3.3% in October despite jump in unemploymentBritish workers secured their biggest pay rise in a decade in October, despite a rise in unemployment that revealed cracks in Britain’s previously robust labour market ahead of Brexit.Average weekly earnings, including bonuses, rose by 3.3% on the year, the biggest rise since July 2008 and comfortably beating forecasts by City economists.Related: Demand for NHS staff rises as EU applicants 'drop off a cliff' Continue reading...

Treasury select committee also criticises failure to look at economic impact of backstopThe government kept MPs in the dark when it presented an overly optimistic assessment of its Brexit deal, rather than a realistic prediction of the final relationship, an influential committee of MPs has found.The Treasury select committee, chaired by the former cabinet minister Nicky Morgan, found that the UK government had also failed to give adequate information on how the backstop mechanism would affect the economy.A backstop is required to ensure there is no hard border in Ireland if a comprehensive free trade deal cannot be signed before the end of 2020. Theresa May has proposed to the EU that the whole of the UK would remain in the customs union after Brexit, but Brussels has said it needs more time to evaluate the proposal.Related: Brexit chaos: what happens next?This soft Brexit compromise has been championed by the former Conservative minister Nick Boles as a plan B for leaving the European Union if Theresa May’s withdrawal agreement is defeated in the Commons. Continue reading...

The late president tried to tackle the budget deficit by doing a deal with Democrats to raise taxesWhen George HW Bush was laid to rest last week, the encomiums appropriately remarked on his general decency and competence, which tended to be followed by a “but”. For journalists and historians, it is “but he was only a one-term president”. He lost the 1992 election, in part because of the recession of 1990-91. For his fellow Republicans, however, it is “but he broke with the legacy of Ronald Reagan by repudiating his ‘no new taxes’ pledge”. Bush’s electoral defeat was blamed on that supposed betrayal.But Bush’s mistake was that he made that anti-tax pledge in the first place and stuck to it in the first part of his presidency. His courageous 1990 reversal on fiscal policy set the stage for a decade of economic growth that eventually achieved budget surpluses.Related: Cryptocurrencies are like lottery tickets that might pay off in future | Kenneth Rogoff Continue reading...

Deputy head David Lipton says global banking system is not prepared for another downturnThe storm clouds of the next global financial crisis are gathering despite the world financial system being unprepared for another downturn, the deputy head of the International Monetary Fund has warned.David Lipton, the first deputy managing director of the IMF, said that “crisis prevention is incomplete” more than a decade on from the last meltdown in the global banking system. Continue reading...

Capital no longer growing at a much faster pace than the rest of the UK, report saysSlowing growth in London since the Brexit vote has put the British economy on track to narrow the north-south economic divide over the coming three years, according to a report.The accountancy firm EY, despite warning of a weaker outlook for almost every region through to 2021 amid continuing Brexit uncertainty, said London would no longer continue to grow at a much faster pace than the rest of the country.Related: Brexit vote has cost each UK household £900, says Mark Carney Continue reading...

News that Theresa May will abandon plans for Tuesday’s vote on her Brexit deal is rocking the financial markets

Sterling slumps to below $1.26 after Theresa May postpones vote on her Brexit planThe pound has dropped to its lowest level for almost two years amid the growing risks to the British economy from political paralysis over Brexit and on a no-deal scenario.Theresa May’s decision to delay the parliamentary vote on her Brexit plan to avoid an embarrassing defeat for the government sent sterling tumbling by more than 1.3% against the dollar and by almost 1% against the euro on the foreign exchanges.Related: May roundly condemned by MPs after delaying Brexit vote to seek fresh backstop assurances – Politics live Continue reading...