Economics | The Guardian

Rolling coverage of the latest economic and financial newsAlthough European stock markets certainly aren't in a full-blooded plunge, yet anyway, the main indices are all in the red - following losses across Asia overnight (see 7.21am).The European Stoxx 600 is at a one-month low, as investors fret about events in the Middle East.FTSE 100: -36 points or -0.46% at 7842 pointsGermany's DAX: -152 points or -0.9% at 17,681 pointsFrance's CAC: -45 points or -0.6% at 7,976 pointsItaly's FTSE MIB: -345 points or -1% at 33,533 pointsWall Street is heading for losses when it opens in four hours, too, with the S&P 500 down 0.5% in pre-market trading.Asian markets bore the brunt of the breaking news of a retaliatory attack on Iran by Israel, also sending Dow futures sharply lower and resulting in further spikes in gold and oil prices.US markets will not have the opportunity to react directly to the developments until later, but the escalation will put pressure on the main indices, which were already lining up for a weekly drop. The Dow Jones managed a wafer-thin gain on Thursday, whereas the Nasdaq and S&P500 continued on a downward trend which is eroding the heady gains made over recent months. Continue reading...

Trade bodies say ongoing confusion about when checks will come in is incredibly challenging'

Shoppers cut back in March, with data likely to increase pressure on Bank of England over interest rates

The anti-growth coalition, Bank of England and the OBR are among those under fire from Liz TrussRaw free-market economics is missing in action. Somewhere between its 1980s ascendancy and today, the media, politicians, civil service and even the corporate mainstream abandoned small government and low taxes.At the heart of Liz Truss's new book, Ten Years to Save the West, the former prime minister reckons this is the reason for Britain's economic drift, alongside unelected technocrats" overruling the wishes of the people". Continue reading...

Kristalina Georgieva says Kyiv will need $42bn of financial support this year as G7 considers ways to use seized Russian assetsRussia's war with Ukraine is stoking geopolitical tensions and damaging the recovery prospects of the global economy, the head of the International Monetary Fund has warned.Kristalina Georgieva urged an end to the two-year conflict, saying it was both a human tragedy and a barrier to growth. Continue reading...

Reserve Bank and Treasury had predicted unemployment rate would rise from February's 3.7% as interest rates bite

Andrew Bailey says inflation is in line with BoE forecasts but view of markets is that data will delay interest rate cuts

IMF says reduction in national insurance may have made cutting UK national debt more difficultThe International Monetary Fund has issued a strong warning to Britain and other countries facing elections this year to avoid voter giveaways that might pose risks to their public finances.In its half-yearly fiscal monitor, the IMF said the reduction in national insurance contributions (NICs) announced by Jeremy Hunt in his budget last month may have already made cutting the UK's national debt more difficult. Continue reading...

Treasurer and finance minister hail remarkable achievement' as monitor finds balance to be behind only Canada among G20 countries

City investors trim their forecasts for rate cuts this year, after inflation falls by less than expected to 3.2%

Shift in rate reduction predictions to autumn hits prime minister's strategy of winning back mortgage payers

Pressure piles on World Bank and IMF to steer countries to low-carbon transition at spring summitGovernments of wealthy countries must pledge hundreds of billions more in overseas aid payments channelled through the World Bank to avert the worst effects of the climate crisis, civil society experts and economists have said.The International Development Association fund, the arm of the World Bank that disburses loans and grants to poor countries, is worth about $93bn (b75n) but that figure must be roughly tripled by 2030, according to economic experts. Continue reading...

Hi-tech golden triangle' of Oxford, Cambridge and London risks deeper regional inequalities, says thinktankInvestments in new technologies such as artificial intelligence (AI) are profoundly skewed" towards the golden triangle" of Oxford, Cambridge and London, and risk deepening existing regional inequalities in England, according to research.Ministers have promised to level up the country, narrowing the gap between the best- and worst-performing areas, but the rapid rollout of generative AI and automation could cut against that aspiration, according to the Institute for the Future of Work (IFOW). Continue reading...

US central banker says recent data have clearly not given us greater confidence' that inflation coming fully under controlThe Federal Reserve chair, Jerome Powell, cautioned on Tuesday that persistently elevated inflation will probably delay any Fed interest rate cuts until later this year, opening the door to a period of higher-for-longer rates.Recent data have clearly not given us greater confidence" that inflation is coming fully under control and instead indicate that it's likely to take longer than expected to achieve that confidence", Powell said during a panel discussion at the Wilson Center. Continue reading...

In the UK, anxiety over the crisis after Iran's missile strike on Israel drives down UK sharesAn escalating Middle East conflict risks leading to higher oil prices, a reversal of the recent fall in inflation and a puncturing of the optimistic mood in financial markets, the International Monetary Fund has warned.The Washington-based IMF said it was closely monitoring events in the region after Iran's missile strike on Israel at the weekend and stressed the possibility that a war between the two countries could lead to higher interest rates. Continue reading...

Growth per head will remain flat this year as the effects of high inflation take time to abateBritain's households will endure a second year without an improvement in their living standards in 2024 as the effects of high inflation take time to abate, the International Monetary Fund has revealed.In its flagship World Economic Outlook (WEO), the Washington-based IMF said it was forecasting modest 0.5% UK growth this year - but only as a result of a rising population. Continue reading...

Many low-income nations are having to spend more on interest payments than vital sustainability goals. That needs to changeBlighted by the effects of global heating, beset by food insecurity and rising poverty, and hobbled by dollar-denominated debt that leaves no fiscal room for manoeuvre, some of the world's poorest nations are enduring a perfect storm. In the wake of Covid and then the war in Ukraine, inflation and high interest rates have tipped many over the edge: between 2020 and 2023 there were 18 sovereign defaults in 10 developing countries - more than in the previous two decades. Others are either in debt distress or close to it.As the World Bank and the International Monetary Fund hold their annual spring meetings in Washington this week, this dismal state of affairs should be at the top of delegates' agendas. Prior to the pandemic, the 2020s had been earmarked as a transformative decade - one in which developing nations would make vital progress towards climate targets and eliminating extreme poverty and hunger. Instead, due to events beyond those countries' control, there has been what a World Bank report this week described as a great reversal". In countries classified as eligible for grants and loans from the bank's International Development Association (IDA), a quarter of the population is now surviving on less than $2.15 a day - the global definition of poverty. Continue reading...

Pay growth is stronger than expected, underlining dilemma over when to cut interest rates

Continuing levels of inactivity due to ill-health and caring responsibilities suggest all is not well

Figures show sales rose 3.5% in March, the first increase above inflation since early in the crisisHigh street retailers benefited from a jump in consumer spending over the Easter bank holiday weekend, according to industry figures showing an increase in footfall and sales despite the cost of living crisis.Data collected by doorway sensors at thousands of shops across the UK showed footfall increased by 7% compared with Easter 2023 over the four days from Good Friday to Easter Monday, while the value of sales measured by debit card transactions increased by a similar amount. Continue reading...

Brent crude dips to $90 per barrel as markets monitor Israel-Iran, while 14,000 jobs could be cut at Tesla

Poverty reduction drive all but halted across many nations as Bank calls for more money to tackle a great reversal'

Brazilian president Lula's proposals have the backing of the World Bank. Now we need actionAll things considered, the world's richest countries have emerged from the global pandemic in better shape than they could have imagined when Covid-19 first appeared just over four years ago.To be sure, the impact of lockdown and its aftermath has been painful, but the effects on poor countries have been far more severe. Continue reading...

When I met the Dutch politician Geert Wilders years ago, he was set on Nexit'. Now he too would rather stay in the EUExports are performing badly, pace the fantasy world of the Daily Express; supply lines for imports once regarded as routine are disrupted or discontinued altogether; staff shortages owing to new restrictions on travel and employment of our fellow Europeans are hurting the hospitality trade in what we used to boast about as our service economy". The UK's economy is 5% worse off than it would be in the EU" according to a recent well-researched report by Goldman Sachs. Welcome to Brexit Britain!In the early days of the Brexit disaster, I met Michel Barnier, the EU's impressive negotiator, at a high-powered conference on Lake Como organised by the Ambrosetti Institute. We agreed what a disaster was in store if the UK did not come to its senses. Continue reading...

Fragile recovery, low growth, global debt, AI, the climate ... The organisations founded in 1944 have lots to talk about this weekThere is likely to be a sense of relief when the International Monetary Fund and the World Bank hold their half-yearly meetings in Washington this week. Not because the world is crisis-free - it clearly isn't - but because since they met six months ago no fresh crisis has emerged.The past half-decade has been as tough as any period in the history of the two organisations. First there was the pandemic, then the surge in inflation as lockdown restrictions were lifted. The cost of living problems were amplified by the war in Ukraine. Then, last October, two days before the start of the IMF/World Bank meetings in Marrakech - and just as things appeared to be calming down - Hamas launched its attack on Israel. Continue reading...

The government might be celebrating falling inflation, but higher prices for goods and services are here to stayTwo years ago, a two-litre bottle of supermarket olive oil cost about 7. Step into your local branch today and that same bottle will set you back more than 16. Grab a packet of pasta, or some broccoli, and you will pay 95% and 50% more, respectively, than in 2022. If your car insurance renewal is due, that will be an extra 35%-50%.The Russian invasion of Ukraine almost 26 months ago set off a chain reaction that caused energy and food bills to jump, and ultimately sent inflation in the UK spiralling, reaching a peak of 11.1% in October 2022, the highest rate in 41 years. Continue reading...

Chancellor cheers 0.1% rise in GDP, but IoD fears economy still fragile

Former US Fed boss Ben Bernanke criticises failure to admit mistakes and change course

Report by former US Federal Reserve boss reveals faulty economic model and reluctance to admit mistakes

February growth of 0.1% comes despite construction and retail being hit by wet start to year

Kristalina Georgieva also cautions of danger of tepid twenties' - a decade of sluggish economic growth

European Central Bank says rate cuts would be appropriate if inflation keeps falling, as BoE policymaker Megan Greene argues UK rate cuts are a way offThere's takeover drama in the self-storage world this morning, as another UK company falls to a foreign buyer.Europe's Shurgard has agreed a deal to buy London-listed Lok'nStore, in a deal worth 378m. Continue reading...

Exclusive: Australian Energy Markets Commission set interim value for cutting emissions that should reach $420/t CO-e by 2050

Thanks to near-monopolies in many industries, corporations are seeing record profits as consumers struggle with high pricesWe learned this week that the Consumer Price Index climbed 3.5% in March from a year earlier, up from 3.2% in February, and faster than most economists anticipated.This poses a conundrum for central bankers who have made it clear they want to see further evidence that inflation is cooling before they cut interest rates.Robert Reich, a former US secretary of labor, is a professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His newest book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

Additional measures from 30 April for imported animal and plant products could hike costs by 10% in first year, says Allianz TradeNew post-Brexit UK border controls coming into force later this month will cost British businesses 2bn and fuel higher inflation, according to a report warning that UK-EU trade will be damaged as a result.With less than a month before the introduction of new checks on animal and plant products from 30 April, the insurer Allianz Trade said the controls agreed under Boris Johnson's Brexit deal could add 10% to import costs over the first year. Continue reading...

Rolling coverage of the latest economic and financial news

Call for caution amid fears government intervention could lead to costly mistakes and prompt subsidy battleAggressive use of industrial policy by the world's most powerful economies risks becoming an expensive mistake that could trigger a tit-for-tat subsidy war, the International Monetary Fund has said.In a warning shot to governments around the world, the IMF said attempts to increase innovation only worked under certain limited conditions and were not a magic cure" for slow growth. Continue reading...

The consumer-price index, driven by fuel and housing costs, rose 0.4% from February, higher than the 0.3% expectedGlobal financial markets have scaled back expectations for an imminent cut in interest rates on both sides of the Atlantic after figures showed US inflation rose by more than expected in March.Figures from the US Department of Labor show a jump in fuel and housing rental costs drove up the consumer price index (CPI) to 3.5% in March compared with a year earlier, higher than expected by Wall Street economists. Continue reading...

Simon Stiell calls for reform at development banks to enable governments to provide more climate finance to developing worldThe World Bank must take a quantum leap" to provide new finance to tackle the climate crisis or face climate-driven economic catastrophe" that would bring all the world's economies to a halt, the UN climate chief has said.Simon Stiell warned that there were just two years left to draw up an international plan for the climate that would cut greenhouse gas emissions in line with the goal of limiting temperature rises to 1.5C above preindustrial levels. Continue reading...

Small business owner Scott Richardson chose Trump to shake things up but a strong economy means he's sticking with BidenFor the past 35 years, Scott Richardson and his wife, Theresa, have run a small, cheerful restaurant and catering business outside Philadelphia. Occasionally Yours has long been a community meeting spot in the town of Swarthmore. More recently, it has taken on another, unexpected, role - on the stage of national politics.Richardson is an independent-minded small business owner in a key swing state - exactly the kind of person US presidential candidates are desperate to woo. In 2016, when Pennsylvania went Republican for the first time since 1988, he voted for Donald Trump. Then, in 2020, dismayed by Trump's Covid response, he switched to Joe Biden, in no uncertain terms. Richardson's vote tracked how the state went in both elections. Continue reading...

Five simple policy ideas could generate billions for a Labour chancellor and end the threat of continued austerity

Rolling coverage of the latest economic and financial news, as gold rises almost 1% today to $2,365 per ounce

In annual letter to investors, Jamie Dimon warns wars in Ukraine and Middle East could become far worse'The boss of the US bank JP Morgan has warned that the world could be facing the most dangerous moment since the second world war, putting lives and economic growth at risk.In his annual letter to investors, Jamie Dimon said the world had been generally on a path to becoming stronger and safer" in recent years but had suffered a major reversal in February 2022 when Russia invaded Ukraine. Continue reading...

Rolling coverage of the latest economic and financial news

Rate declines for 15th consecutive month across 38 OECD countries from 6.3% in January to 5.3% in February

Risk of declining consumption, house price falls and defaults as tighter policy finally has impact

Ras el-Hekma is part of a $60bn package to help the economy withstand the impact of conflict in Gaza, but critics fear the money will entrench a corrupt, oppressive regimeIt is one of the few undeveloped spots remaining on the Mediterranean coast. There are white sand beaches, a few olive groves and an ageing 1940s holiday home built by the deposed King Farouk. So far, there is nothing to suggest that, within 30 years, the tranquil Egyptian peninsula of Ras el-Hekma will host a major new city.On 23 February, the Abu Dhabi sovereign wealth fund ADQ announced plans to develop Ras el-Hekma as part of a deal worth $35bn (28bn) in investment and debt relief. According to the Egyptian government, the 170 sq km city will include a marina, an airport and capacity for 8 million tourists a year. It is the largest foreign direct investment deal in Egyptian history by some margin, with ADQ paying the government the equivalent of 7% of the UAE's total GDP upfront, a year before it plans to break ground. Continue reading...

In London, rates for Battersea power station's 8m flats are still set with reference to its low-value past, and their rich owners pay less than householders in HartlepoolBattersea power station offered no prospect of luxury living when Tony Belton became a local councillor in 1971. The coal-fired behemoth was nearing closure after 40 years of belching soot over London, and would spend almost as long in dereliction and blight as a result of false starts at redevelopment.By 1991, most people visiting the area were there for the dogs' home or council rubbish dump. Squatting pigeons were the power station's only residents, and steel bracing protected its 48-metre-high brick walls fromcollapse. Continue reading...

Economic upticks are welcome but they won't help the chancellor's chances of retaining his seatSome chancellors are sacked. Some are forced to resign. Some exchange the green benches of the House of Commons for the red benches of the Lords. But not in living memory has a chancellor lost his seat at a general election.If opinion polls are accurate, Jeremy Hunt will break that tradition, with the Liberal Democrats on course to take his newly created Godalming and Ash seat in Surrey. The last time the Conservatives were on the wrong end of a landslide, Kenneth Clarke, then chancellor, held his Nottinghamshire seat reasonably comfortably. Hunt has a real fight on his hands. Continue reading...

As the organisation's anniversary nears, borders around the world are closing againWhen trade ministers gathered in the Moroccan city of Marrakech 30 years ago this month to sign the agreement creating the World Trade Organization (WTO), the mood was celebratory. The Berlin Wall had come down only recently, communism had collapsed, and there was optimistic talk of how the body would prise open new markets and act as the arbiter when disputes broke out between countries.The atmosphere today is much darker than it was in April 1994. Any enthusiasm for groundbreaking trade liberalisation deals disappeared decades ago and has been replaced by covert - and often overt - protectionism. Continue reading...