Economics | The Guardian

The FTSE 100 has plunged 10% since May and Wall Street suffered its biggest drop in 8 months this week. What’s going on?A volatile week across global stock markets has escalated into a heavy sell-off, with European stock markets plunging to their lowest level in 20 months on Thursday. In the UK, the FTSE 100 entered correction territory – falling 10% from its peak in May - after Wall Street suffered its biggest drop in eight months on Wednesday. Continue reading...

Panic selling on Wall St spreads amid concern over trade disputes, inflation and Trump’s clash with FedThe City has felt the full impact of a sell-off in global financial markets with shares in the FTSE 100 index of leading companies now more than 10% below their record peak in May.On a second day of turbulence, aftershocks from panic-selling on Wall Street rippled through Asian and European bourses as dealers took fright at trade tensions, the prospect of higher inflation and Donald Trump’s attempts to put pressure on America’s central bank over interest rates. Continue reading...

Ornua, owner of Kerrygold and Pilgrims Choice brands, says it is preparing for uncertaintyThe Irish dairy company behind well-known brands such as Kerrygold has started stockpiling cheddar in the UK to guard against the risk of a major price hike for Britain’s favourite cheese in the event of a no-deal Brexit.World Trade Organization tariffs on cheddar are as high as 42%, but Irish cheese manufacturers fear sales would plummet in British supermarkets if it passed on the full extra cost to the consumer. Continue reading...

OBR says crashing out of EU would weaken economy and cause stockpiling of foodA chaotic and disorderly Brexit would have damaging consequences for the British economy and might trigger border delays and prevent aircraft landing from the EU, the government’s economic forecaster has warned.The Office for Budget Responsibility said Britain crashing out of the EU without a deal in six months’ time was likely to harm economic growth, could lead to households and businesses stockpiling goods, and spark a sharp fall in the value of the pound. Continue reading...

Women working until 64 on average, reversing 80s and 90s trend of earlier retirementWomen are on average working until the age of 64, in a dramatic reversal of the trend towards early retirement that marked the 1980s and 1990s.Figures from the Department for Work and Pensions show that both men and women are remaining at work for much longer than before, but for women the change has been more rapid.Related: The Guardian view on women and pensions: this generation deserves better | Editorial Continue reading...

Christine Lagarde says policy of raising US interest rates ‘legitimate and necessary’The boss of the International Monetary Fund has defended the Federal Reserve’s interest rate rises as “legitimate and necessary”, after Donald Trump said the central bank had “gone crazy”.Christine Lagarde made the comments at the IMF’s annual meeting in Bali, against a backdrop of tumbling stock markets and the biggest fall on Wall Street in eight months, which President Trump partly blamed on the Fed’s actions. Continue reading...

Rising US interest rates, trade war tensions and uncertainty in Italy provide a volatile mixA volatile week across global stock markets has escalated into a frenzied sell-off, with European stock markets plunging to their lowest level in 20 months on Thursday. In the UK the FTSE 100 fell to a six-month low after Wall Street suffered its biggest drop in eight months, with the Dow Jones losing more than 800 points.Related: World stock markets dive as Trump attacks 'crazy' US rate hikes Continue reading...

Europe suffers heavy losses and sell-off drags FTSE 100 into a correctionA jittery, volatile week on global financial markets has burst into a frenzy of selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing US interest rate rises as “crazy”.Europe suffered heavy losses in morning trading on Thursday. The Stoxx 600 index, which tracks the biggest shares in the region, tumbled by 1.6% to its lowest level since the start of February 2017. The MSCI world stock index hit an eight-month low.Related: Why are markets plunging and which stocks are worst hit?The Australian market has been caught up in the global sell-off amid worries that rising US long-term interest rates will impact economic growth. Keep across the day's news at https://t.co/HBM7UKKl3C #ausbiz pic.twitter.com/rJMmt3qz1V Continue reading...

The storm clouds are gathering, but the world’s economies now have far fewer shelters from disaster than they did in 1929Late last month Indonesia was hit by a devastating earthquake and tsunami that left thousands of people dead and missing. This week the International Monetary Fund arrived in the country to hold its annual meeting on the island of Bali. On the day when the IMF issued a warning about trouble ahead for the global economy, the latest report from the UN’s intergovernmental panel on climate change said the world had only a dozen years left to take the steps necessary to prevent a global warming catastrophe. The message is clear for those willing to hear it: get ready for a time when economic failure combines with ecological breakdown to create the perfect storm.Even without the added complication of climate change, the challenge facing the finance ministers and central bank governors gathered in Bali would be significant enough. The IMF has cut its forecast for global growth, but the chances are that next year will be a lot worse than is currently forecast. The risks, the IMF says, are skewed to the downside. You bet they are.Related: World economy at risk of another financial crash, says IMF Continue reading...

Former PM’s thinktank predicts impact could be twice that felt by export industries, with Chequers little better than no dealBrexit will inflict long-lasting pain on Britain’s service sector, Tony Blair has warned as a report said Theresa May’s plans will be only marginally better than no-deal on the dominant industry.An analysis carried out for the former prime minister’s Institute for Global Change said that crashing out and trading on World Trade Organisation (WTO) terms would see productivity 4.91% lower in 12 years’ time than if Britain remained in the customs union and single market.Related: May faces Brexit battle as DUP threatens to sabotage government Continue reading...

Divisions over whether month points to underlying weakness in economy, or was just a blipThe UK economy ground to a halt in August, according to official figures that suggest a slowdown in growth after the World Cup.The Office for National Statistics said the rate of GDP growth in August dropped to 0% from 0.4% in July, missing City economists’ forecasts of 0.1%. Continue reading...

Deal could be done by next Wednesday but PM must abandon red line, says EU negotiatorMichel Barnier has claimed a Brexit deal could be within reach by next Wednesday but warned the prime minister that only by abandoning a key red line and agreeing to a customs union can impediments on trade between Northern Ireland and the rest of the UK be avoided.The British government would have to give up on its plans for free-trade deals with China and the US under such an agreement, the EU’s chief negotiator insisted, but otherwise a customs and regulatory border within the territory of the UK will have to be erected.Related: Brexit: Barnier says May’s Chequers plan would give UK 'huge competitive edge' over EU – Politics liveRelated: DUP threatens to vote against budget if May crosses Brexit red lines Continue reading...

Union says foreign investment funds are exploiting ancient sites in GreeceStriking trade unionists in Greece are forcing the shutdown of the country’s prime ancient sites, including the Acropolis, in a one-day protest over privatisation fears.The 24-hour walkout on Thursday is expected to close the majority of Greece’s 275 archaeological sites, monuments and museums, which generate about €100m (£87m) in revenue, mostly from ticket sales, every year.Related: Austerity is the wrong prescription for the world's wellbeing | Larry Elliott Continue reading...

Annual report says continuing uncertainty could adversely affect market confidenceA no-deal Brexit would send shockwaves through the global financial system and is one of the main risks to economic stability, the International Monetary Fund has said.Echoing concerns from the Bank of England, the Washington-based organisation said the potential for millions of financial contracts between City banks and their counterparts across rest of Europe to collapse in the event of the UK leaving the EU without a deal was a major worry.Related: Bank of England warns EU over Brexit risk to financial stability Continue reading...

Britain’s economy ground to a halt in August but quarterly growth hit 0.7%, boosted by demand for retail and food and drink during the heatwave

The surprise hit movie should lead to many more such stories being told by HollywoodIn the surprise hit movie Crazy Rich Asians (based on a 2013 Kevin Kwan novel), a New York University economics professor (Rachel), travels with her boyfriend to Singapore to meet his family. There, she learns, apparently for the first time, that her significant other (Nick) is heir to one of Asia’s largest fortunes and has a mother intent on making sure her son does not marry a commoner, Asian American or not.Partly because of its (terrific) all-Asian cast (an extreme rarity), and partly because it recalls earlier eras of great romantic comedies, the film has caused a lot of buzz. Perhaps there will even be a long overdue Oscar for Michelle Yeoh (from Crouching Tiger, Hidden Dragon), who plays the steely but loving mother.Related: Crazy Rich Asians – a sugary delight Continue reading...

Health check shows almost £1tn wiped off wealth of public sector since 2008 crashBritain’s public finances are among the weakest in the world following the 2008 financial crash, according to a fresh assessment of government assets and liabilities by the International Monetary Fund (IMF).The Washington-based lender said a health check on the wealth of 31 nations found almost £1tn had been wiped off the wealth of the UK’s public sector – equivalent to 50% of GDP – putting it in the second weakest position, with only Portugal in a worse state.Related: World economy at risk of another financial crash, says IMF Continue reading...

Readers including Fawzi Ibrahim and Caroline Lucas MP discuss ways to combat greenhouse gas emissions and tackle climate changeThe “final tick box” to limit global warming is not just political (Global warming must not exceed 1.5C, landmark UN report warns, 8 October), it is also economic. Capitalism, the cause of global warming, cannot be its remedy. Industrial production came about when commodity production became dominant – an economic system in which commodities are produced for the sole purpose of being sold, upon which they return more money to the investors than their original outlay.Related: Environmental warnings should stop drivers taking the road to ruin | LettersRelated: The time is now for a global pact for the environment | LetterRelated: The need to invest in renewables | LettersRelated: US must play leading role to save planet | LetterRelated: France offers lessons on plastic bags | Brief letters Continue reading...

Italy’s finance minister confirms plans to run a budget deficit of 2.4% of GDPThe International Monetary Fund has thrown its weight behind Brussels in its battle with Italy’s coalition government over plans to increase the indebted country’s borrowing in its next budget.The Washington-based lender of last resort, which is holding its annual conference in Bali this week, warned Rome to abide by the EU’s financial rulebook or risk a rebellion by investors that could trigger a debt default.Related: Italy aims to cut budget deficit after EU criticises spending plansRelated: European markets fall after Italy's deficit-widening budget plans Continue reading...

Rolling coverage of the latest economic and financial news, as the International Monetary Fund says UK has ‘flexibility’ to raise spending in the budget

All the deal really needed was a new name – and USMCA literally puts ‘America First’Donald Trump acts as if he has pulled off a smashing victory by replacing the North American Free Trade Agreement (Nafta) – supposedly “the worst trade deal ever” – with the new United States-Mexico-Canada Agreement. But the truth is that, while this outcome is better than an end to free trade in North America, the USMCA is no improvement over the status quo.Of course, this is Trump’s modus operandi: threaten to do something catastrophic, so people are relieved when things get only a little bit worse. That is what he did with North Korea, when he insulted its leader, Kim Jong-un, and threatened to rain down “fire and fury” on the country. Compared with nuclear conflict, his eventual meeting with Kim seemed like a triumph, even though it produced little actual progress.Related: Trump hails 'wonderful new trade deal' with Mexico and Canada Continue reading...

Conservatives in charge of stricken local authorities faced with closing basic services are voicing their sense of betrayal by the partyThe anguish of austerity cuts may have come late to the leafier Conservative-run councils of England but there is no doubt it has arrived. Reflecting on the eye-watering spending cuts stricken county halls must push through this year and next, the Kent county council leader Paul Carter declared to a Tory conference fringe meeting last week that “no Conservative came into local government to do this”. The room, packed with councillors, exploded into applause, accompanied by booming cries of “hear, hear”.Related: 'Territorial injustice' may rise in England due to council cuts – studyRelated: Don't blame councils for the harm done by government ideology | Joanne Fry Continue reading...

Employers’ organisation seeks help before Brexit on investment, skills and business ratesThe CBI has demanded that Philip Hammond use the budget on 29 October to prepare companies for a post-Brexit future with a £2bn package of measures to bolster investment, raise skills and ease the burden of business rates.The employers’ organisation said action was needed to lift Britain from the bottom of the G7 league table and it was time for the chancellor to “put warm words for business into action – no ifs, no buts.” Continue reading...

UK’s outlook for 2019 stays at 1.5% but previous forecast for 1.3% this year cut to 1.1%Donald Trump’s trade war with China and Europe is forecast to hit global growth this year and reverberate through 2019, the International Monetary Fund has warned in its latest health check on the global economy.The escalation of the US president’s protectionist policies, which has resulted in the world’s largest economy doubling import duties on some Chinese goods, has dragged down the forecast for growth this year and next, with the world’s largest trading countries, including the US, France, Germany and China, among the hardest hit.Related: World economy at risk of another financial crash, says IMF Continue reading...

Research shows post-industrial cities in north of England are being hit hardest by austerityDisproportionately harsh spending cuts to local public services in England’s poorest areas are likely to intensify perceived “territorial injustice” between deprived and wealthy parts of the country, a study has shown.Post-industrial cities in the north of England, together with some inner-city London boroughs, have been hit by the deepest cuts to local government spending since the start of austerity in 2010, says the research by the University of Cambridge.Related: Even Tory councils are now calling on ministers to ease the pain of cuts | Patrick Butler Continue reading...

World Cup-inspired summer spree ends as total sales growth slumps, figures showBritain’s retailers experienced a sharp slowdown in consumer spending last month, bringing to a close the World Cup-inspired summer spree on the high street.According to the British Retail Consortium (BRC) and the accountancy firm KPMG, growth in total sales dropped to the weakest level in almost a year. Continue reading...

The Sveriges Riksbank Prize in Economic Sciences has been awarded to two American men for work on climate change and sustainable growth

William Nordhaus and Paul Romer honoured over two of most ‘basic and pressing’ issuesTwo American economists at the forefront of work on climate change and the role of governments in boosting growth have been jointly awarded the prestigious Nobel Memorial prize for economics.The Royal Swedish Academy of Sciences said William Nordhaus and Paul Romer were being honoured for their research into two of the most “basic and pressing” economic issues of the age.Related: Nobel prize in economics goes to Nordhaus and Romer for climate change and growth - live Continue reading...

More bosses rein in hiring and investment plans amid concerns of no deal – DeloitteBritish businesses are the most anxious they have been about Brexit since the 2016 referendum, with more bosses reining in hiring and investment plans, a study has found.The accountancy group Deloitte has warned that worries over the long-term impact of Brexit are mounting. This is pushing down optimism over future prospects as firms fear their trading relations with customers in the European Union could be disrupted next year.Related: Macron makes overtures to UK car firms as Brexit talks enter critical week Continue reading...

Findings about the impact of a course of heavy-duty cuts on life expectancy make grim readingThe quack doctors rolled into town just as the global economy had come off the critical list. It was 2009 and the message from the austerity medicine show was simple: the only way back to full health was a course of heavy-duty cuts.Expert opinion was divided. There were other diagnoses available. There were economists who said austerity was the equivalent of going back to the days of blood-letting – but they lost the argument. The prescription, though it varied a bit from country to country, was pretty much the same across the developed world: get those budget deficits down.Under Greece's bailout, health spending fell from 9.8% of GDP in 2008 to 8.1% in 2014 Continue reading...

In Bali this week, the mood of the world’s gathered finance ministers will be darker than a year agoThe alarms bells have already started to sound. And this week it is expected to be announced formally that the global economy is running out of steam.As finance ministers, central bankers, academics and other delegates prepare to travel to Bali for the annual meeting of the International Monetary Fund (IMF), optimism about the future is at a low ebb. Continue reading...

There is no exit model that improves economic growth, and this disastrous project has stopped us tackling real social illsI know that Theresa May is beleaguered on all sides – not least her own – but did she realise what she was saying when she “warned” the Conservative conference that divisions over Brexit “could stop the UK leaving entirely”?Since stopping the UK leaving entirely is just what we Remainers wish to achieve, one can but marvel at the prime minister’s pronouncement. I am tempted to add “long live the divisions”, but the truth is that the sooner this Brexit fantasy is put to rest, the better.To bring public services up to scratch, there needs to be a general increase in the willingness to cough up Continue reading...

Tory delegates breathed a sigh of relief at Theresa May’s conference speech, but the chancellor has a rather different attitude to the country’s purse stringsTory cheers during Theresa May’s conference speech when she declared the end of austerity were an audible cry for freedom. The party faithful who attended last week’s annual bash in Birmingham wanted to break the chains of spending cuts that could deny them victory whenever the next general election comes along.The pain inflicted on much of the population since 2010 has energised voters, prompting many of them to join the Labour party, which staged a dramatic resurgence in 2017 and denied the Tories an outright victory. Another election, especially against a backdrop of even more severe cuts, could spell the end of even that slim majority. Continue reading...

We have great plans to build a country with opportunities for allI want the Conservatives to be a party for the whole country. I believe that the principles that guide us – security for families and the country, freedom under the rule of law and opportunity for everyone – can unite our people and help build a better future for our country.That responsibility also rests on our shoulders because of what has happened to Labour over the past few years. Millions of people who have supported Labour all their lives are appalled by what has happened to a once-great party under the leadership of Jeremy Corbyn. Antisemitism has grown, the party’s response to threats to our country’s security has become equivocal, and moderate Labour MPs have become targets for deselection and harassment. These are all alien to Labour’s best traditions. Continue reading...

We’re told the world is turning middle class, but those at the bottom have little to cheerHalf the world is now middle class. So ran the headlines reporting a Brookings Institution analysis of global poverty, according to which 3.8 billion people can now be defined as “middle class” or “rich”. We have, Brookings suggested, reached a “global tipping point”.Economic development, in China and India in particular, has helped pull millions out of poverty, a shift reflected in these figures. What is striking about the report, though, is as much what it obscures as what it reveals. The four categories in the Brookings analysis are: poor, vulnerable, middle class and rich. Notice what’s missing? The working class. Continue reading...

Increase in non-farm payrolls of 134,000 in September is smaller than expectedUS figures have shown the lowest jobless rate since the year of the first moon landings, keeping the world’s largest economy on course for further interest rate rises.Eagerly awaited figures for jobs and wages showed less inflationary pressure in the world’s biggest economy than had been feared, but still pointed to more hikes by the Federal Reserve. Continue reading...

Asian shares fall again as countries that borrowed heavily in dollars could be hit by further US interest rate riseMounting concern about the inflationary impact of falling US unemployment has sent tremors through global financial markets amid fears that the long post-financial crisis rally in asset prices is nearing its end.The effective interest rate on 10-year benchmark US bonds reached their highest level for seven years after the latest snapshot of the American labour market showed fewer workers claiming jobless benefits.Related: Soaring US dollar threatens trouble for emerging markets Continue reading...

Fifth of UK men who left education at earliest stage are in vulnerable sectors, says IFSMale workers with few qualifications will be the hardest hit by fresh barriers to trade erected after Britain leaves the European Union, according to one of the UK’s leading thinktanks.The Institute for Fiscal Studies said men in manufacturing jobs who had left school with GCSE qualifications or below were the most exposed to curbs on the flow of goods after Brexit. Continue reading...

Readers react with some scepticism to the prime minister’s claims to the Tory conferenceSo “austerity is over” (Back me on Brexit and I will end decade of austerity, pledges May, 4 October). Who is Theresa May kidding? For millions of adults and children living at or below the poverty line because of the savage cuts of the past few years, for those on NHS waiting lists that daily grow longer, for those in substandard housing or who cannot even get on the housing ladder, it will be a permanent legacy of Tory government callousness and indifference to their plight, while rich donors and multinationals get away with tax dodging on a truly stupendous scale.My county council (like many others), having cut £145m over recent years, cutting services to the elderly, underfunding schools, closing waste tips for two days a week, failing with pothole repairs, is now having to look at another £145m of cuts over the next few years, as the government grant reduces to zero. Ceasing altogether to provide housing support to vulnerable groups, leading potentially to more homelessness and NHS demand, and slashing support to troubled children and families are just two of the cuts being considered, with inevitable consequences. Continue reading...

People are crying out for economic justice and cultural security. Whoever grasps this will control the immediate political futurePolitical parties are governed by ideology. That ideology works when it offers the best explanation of reality to the party’s activists, members and voters. But when reality shifts – when the experience of people is no longer legitimated or explained by the politics they are offered – then that party and that ideology are in mortal danger.At the close of this autumn’s party conference season, it is clear we are in the middle of a significant reframing of our political reality. The shift is probably equal to, if not greater than, the 1945 moment that founded welfare states across Europe or the Thatcher revolution in 1979, which began the dismantling of them in the name of free-market economics. Continue reading...

PM’s announcement doesn’t reflect current Treasury policy as departments still face cutsTheresa May announced an end to austerity in her Conservative party conference speech this week. However, the statement raised questions about how the Tories’ cornerstone economic policy can be unwound.Did Theresa May give a timeframe for ending austerity this week? Continue reading...

So easy to say, so difficult to do. May’s scant offerings will barely touch the damage that’s been wreaked on this countryPut out more flags! Ring the bells and light the beacons, the austerity war against the people is over! The prime minister said: “The British people need to know the end is in sight. And our message to them must be: we get it.”But “getting it” doesn’t mean doing it: announcing it may be all that matters. Consider how easily her promised £20bn a year for the NHS has taken the ongoing crisis in hospitals and GP surgeries off the front pages, without a penny spent and winter approaching. Paul Johnson of the Institute for Fiscal Studies said today that, on top of this, £20bn extra by the end of the parliament would only stop further cuts, with the funds consumed by rising numbers of older people. That’s a sobering thought – such a large sum just to stand still.Related: The Guardian view on Theresa May’s speech: getting by on borrowed time | EditorialRelated: Nissan becomes latest manufacturer to warn against hard Brexit Continue reading...

CEO says bank already more cautious about lending, especially in retail and construction sectorsThe chief executive of the bailed-out Royal Bank of Scotland has warned a no-deal Brexit could tip the UK into a recession.Ross McEwan said a “bad Brexit” could result in negative growth in Britain and that RBS had become more cautious about lending to some sectors, including retail.Retailers that have gone bust 2017-18 Continue reading...

Strong economy and hawkish monetary policy pushback greenback ever higher – and other currencies are sufferingThe US dollar continued to soar in value over Wednesday night, signalling the likelihood of more interest rate rises and spelling trouble for developing countries that have borrowed heavily in the greenback.With impressive service sector data published on Wednesday and strong jobs figures in the non-farm payrolls expected on Friday, the dollar hit an 11-month high against the yen and drove US treasury yields to their highest since mid-2011. The pound slipped below $1.30.Related: World economy at risk of another financial crash, says IMFRelated: Argentina, Turkey, Mexico ... fear of contagion haunts emerging markets Continue reading...

‘Flexible hours’ was draw for only 28% taking gig economy contracts, finds labour studyAlmost half of people on zero-hours contracts want more regular work and greater levels of job security, according to a study that challenges the idea that workers want such terms for the flexibility they offer.According to the report from three labour market economists, to be presented at an international conference in Austria this week, 44% of workers in a survey of 20,000 people on zero-hours contracts said they would like more working hours.Related: Deliveroo couriers win six-figure payout in employment rights case Continue reading...

PM makes several policy pledges in effort to show Brexit has not blown her off course

Economy minister Tria says Italy plans to cut budget deficit starting in 2020, earlier than previously said, after clash with EU

Debt is above 2008 level and failure to reform banking system could trigger crisisThe world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned.With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.Related: Gordon Brown is wrong to say British banking is still a free-for-all | Alex Bailin Continue reading...

Giant’s minimum wage rise is down to a looming labour shortage and more stick from politicians, from Trump and Sanders to CorbynAmazon is a trillion-dollar company run by the world’s richest man. It has come from nowhere to be an online behemoth in less than one-quarter of a century. Yet even the biggest company, this behemoth of behemoths, is vulnerable to concerted political pressure and has to live with the basic laws of demand and supply.That, put simply, is the explanation for Amazon’s announcement of seriously big increases in minimum wages for its workers in the US and Britain. On the other side of the Atlantic, no worker will be earning less than $15 (£11.50) an hour – double the federal minimum. Here, the minimum has been raised by 28% for workers in London and 18% for those in the rest of the UK.Related: Jeff Bezos: where the $106bn man belongs on the all-time rich list Continue reading...

Loan for enclave still affected by bad debts from 2008 financial crisis equates to £7,500 per residentLeaders of the medieval enclave of San Marino are preparing to ask the International Monetary Fund for a €250m (£222m) loan to bolster its banks, still weighed down by bad debts 10 years after the global financial crisis.The microstate, which is landlocked within central Italy, has struggled to recover from the effects of the 2008 crisis, which not only exposed the secret bank accounts that helped to generate a hefty amount of its wealth over the years but also embroiled its largest bank – Cassa di Risparmio della Repubblica di San Marino (CRSM) – in a money-laundering scandal. Continue reading...