Economics | The Guardian

Investors nervous as US central bank says it will reduce balance sheet size and as president meets Xi Jinping

It is time to ditch the belief that economies obey rigid mechanical rules, which has widened inequality and polluted our planet. Economics is evolvingThings are not going well in the world’s richest economies. Most OECD countries are facing their highest levels of income inequality in 30 years, while generating ecological footprints of a size that would require four, five or six planet Earths if every country were to follow suit. These economies have, in essence, become divisive and degenerative by default. Mainstream economic theory long promised that the solution starts with growth – but why does that theory seem so ill-equipped to deal with the social and ecological fallout of its own prescriptions? The answer can be traced back to a severe case of physics envy.In the 1870s, a handful of aspiring economists hoped to make economics a science as reputable as physics. Awed by Newton’s insights on the physical laws of motion – laws that so elegantly describe the trajectory of falling apples and orbiting moons – they sought to create an economic theory that matched his legacy. And so pioneering economists such as William Stanley Jevons and Léon Walras drew their diagrams in clear imitation of Newton’s style and, inspired by the way that gravity pulls a falling object to rest, wrote enthusiastically of the role played by market forces and mechanisms in pulling an economy into equilibrium.People and money are not so obedient as gravity, as it turns out, so no such laws existRelated: Activism is mainstream again … how can protests create change? | Saira O’MallieLike a well-trained child, growth will apparently clean up after itselfRelated: The world is stuck in the past, Hans Rosling showed us the way forward | Paul Currion Continue reading...

Fall in the pound and sugar reduction efforts cited as reasons for latest round of shrinkflationDoritos, Peperami and Coco Pops are the latest products to fall victim to shrinkflation as rising costs hit food producers.The size of a large bag of Doritos has been reduced by 10% to 180g but remains on sale at the same average price of £1.99. A £1 “grab bag” is shrinking by nearly 12% to 90g. Continue reading...

The Prudential Regulatory Authority should use its power to stop credit card companies making it easy for people to get into debtNew figures on business confidence suggest that the one place where the service sector boom is on the ebb is in the consumer sector – hotels and restaurants, gyms and hairdressers. The twin pressures of rising inflation and slowing pay rises are squeezing household incomes. The ratio of personal debt to household income, which fell steadily in the years after the financial crisis, has now again begun to rise. Last week, new figures were published showing February brought the highest increase in credit card debt in 11 years.The British economy’s failure to wean itself off an addiction to growth fuelled by an expanding consumer debt bubble is bad for consumers, and bad for the economy as a whole. It is no substitute for business investment, which the OECD has forecast will fall sharply in future years in a post-Brexit climate of uncertainty. It makes recession more likely, and, when it comes, deeper and longer. The human costs of getting into problematic debt are no less profound: people are a third more likely to develop mental health issues if they find themselves struggling with debt. Continue reading...

Latest survey of Britain’s service sector beats forecasts, but consumer-focused companies may struggle this year

Rebound in March despite evidence that inflation is hitting spending in hotels, restaurants, gyms and hairdressersBritain’s services firms have bounced back from a new year lull to expand at the fastest rate since late 2016.The latest health check of a sector that accounts for more than 75% of the economy’s output showed the pace of activity picking up to a three-month high in March.Related: UK services sector growth hits three-month high, as car sales smash records - business live Continue reading...

Failure to recover to pre-financial crisis levels has seen 16% gap open up between UK and fellow membersBritain’s poor productivity performance before, during and after the financial crisis of a decade ago has left a gap of 16% with the other six members of the G7 group of industrial nations.International comparisons published by the Office for National Statistics show that output per hour worked continued to lag well behind the US, Germany and France in 2015 – the last year for which data is available.Related: Global productivity slowdown risks creating instability, warns IMF Continue reading...

Politicians such as Donald Trump, Marine Le Pen and Beppe Grillo are wildcards that could kill off gathering growthAfter nine dreary years of downgrading their GDP forecasts, macroeconomic policymakers around the world are shaking their heads in disbelief: despite a populist-propelled wave of political tumult, global growth is actually set to outperform expectations in 2017.It’s not just American exceptionalism. Although US growth is very strong, Europe has been outperforming expectations by more. There is even happy news for emerging markets, which are still bracing for US Federal Reserve interest-rate hikes but have gained a better backdrop against which to adjust.Related: Trump is wrong to criticise Germany over trade – he should look closer to home Continue reading...

Minutes show Bank is growing concerned at mounting risk to lenders as consumers tap looser borrowing conditionsThe Bank of England has flagged up new concerns about the rapid growth in consumer borrowing as Britons rack up debt on credit cards, car purchase schemes and personal loans.Reinforcing recent warnings from the Bank about signs of a borrowing binge, minutes from a policy meeting published on Tuesday suggested it was worried about looser lending conditions such as higher maximum loan limits.Related: UK's borrowing binge is worrying the Bank of EnglandRelated: Sub-prime cars: are car loans driving us towards the next financial crash? Continue reading...

Supermarket moves to ditch promotions coupled with weakened pound following Brexit vote add average £21.31 to quarterly food billsA sharp rise in food prices has added £21.31 to the average household shopping bill over the past three months as the number of promotions fell to an 11-year low, according to new grocery market data.The price of everyday goods at supermarkets rose 2.3% in the three months to 26 March from a year ago, said Kantar Worldpanel, a sharp pick-up from the 0.2% food price inflation recorded in the 12 weeks to 1 January – the first time prices rose in more than two years.Related: From energy bills to dental work, it's UK national price hike day Continue reading...

Ministers say 3m earning and learning schemes will plug the UK skills gap but critics say new levy is yet another financial burden for businessesWhen Mohammed Choudhury was studying for A-levels, one of his teachers mentioned apprenticeships as an alternative to university. Now the 19-year old is learning computer coding and fixing software bugs for the Gloucestershire precision manufacturing firm Renishaw. Many of his friends went to university, but Choudhury has no regrets about picking a software apprenticeship.

Christine Lagarde says governments must invest in education, cut red tape and encourage innovation to drive up growthThe head of the International Monetary Fund has issued a stark warning that living standards will fall around the world unless governments take urgent action to increase productivity by investing in education, cutting red tape and incentivising research and development.Christine Lagarde used a speech in Washington to tell policymakers they could not simply wait for innovation to drive up productivity growth and help living standards recover from the legacy of the global financial crisis.Related: Ignore the nanny-state claims – credit card firms need to help those in long-term debt | Nils Pratley Continue reading...

Forget the distraction of Brexit – cuts coming in this week say so much more about the UK’s national identityThe country may still be reeling from the triggering of article 50 but it’s this week that Britain will truly define itself – and in the most shameful of ways. In the coming days, Theresa May’s Conservative government will bring in a range of widespread benefit cuts – cuts that target disabled people, young people, and parents on low wages.Related: Cancer patient's family stands to lose £50k under benefit cuts Continue reading...

The west’s post-cold war failures across the former Soviet bloc should not weaken its resolve to create democratic statesToday, a quarter-century after the cold war’s end, the west and Russia are again at odds. This time, at least on one side, the dispute is more transparently about geopolitical power, not ideology.The west has supported in a variety of ways democratic movements in the post-Soviet region, hardly hiding its enthusiasm for the various “colour” revolutions that have replaced longstanding dictators with more responsive leaders – though not all have turned out to be the committed democrats they pretended to be.Related: Donald Trump, the master of unreality, must be resisted at every turn | Joseph Stiglitz Continue reading...

Survey of chief financial officers reveals drop in negative sentiment but leaving EU is still top concern

The naming and shaming of employers is welcome, but the fight for equal pay for women has just begun

It’s riding high as the UK City of Culture and beneficiary of huge investment from Siemens. But Hull voted overwhelmingly for Brexit, and uncertainty after the referendum led the German giant to put expansion plans on hold. Should residents be worried?At the start of this year, the civic columns and royal statue of Hull’s Queen Victoria Square were brutally intruded on by a 75-metre-long white turbine blade on a plinth. This was the 2017 UK City of Culture’s monument to wind power, its new hope for a sustainable future at sea.Hull has never recovered from the near-total ending of its long-distance fishing industry after the “cod wars” with Iceland in the 1970s. For all its efforts, it is Britain’s third most deprived local authority, with one large ward, Orchard Park and Greenwood, suffering some of the country’s deepest poverty. So the decision by the German manufacturer Siemens in November 2014 to establish Hull as the home of its factory to make blades for Britain’s vast new North Sea wind farms delivered the city’s most far-reaching economic boost for decades.Related: Siemens freezes new UK wind power investment following Brexit vote Continue reading...

With its manufacturing and engineering tradition, the West Midlands should be at the forefront of British hopes for exporting beyond Europe. Sadly, on most measures, it is in no position to do soBrexit, according to its cheerleaders, offers British businesses the chance to expand trade beyond Europe to the rest of the world. Trade minister Liam Fox infamously said the easy option of shipping goods across the Channel had deterred businesses large and small from looking further afield. They had become fat and lazy, and now they would be forced to be more entrepreneurial.Setting aside the reasons why countries all over the world mostly export to their neighbours (it’s cheaper, and there are shared histories and cultures) and try to do so within free-trade blocs (profits are higher when tariffs are low and regulations are harmonised). let’s consider the question of how fat and lazy business has become. Is it ready to accept Fox’s challenge? Continue reading...

The growth in credit and fall in savings have alarming echoes of the financial crisis. But at least regulators are no longer asleep at the wheelCould it be 2005 and 2006 all over again? Industry figures last week showed that UK credit-card debt has soared while the savings rate has plunged to an all-time low. Meanwhile, across the Atlantic, data shows that late last year car loans were being taken out at a faster rate than any time in US history.Almost everyone in America leases a car or buys it using cheap credit. Except that they don’t take the opportunity to lower their outgoings and cut their monthly loan bills. Instead, they take the cheap credit and buy a bigger car. A much bigger car. Continue reading...

The designer who became a global brand has been declared bankrupt after years of court action and financial bad luckKaren Millen is used to seeing her name in lights. With 400 outlets spread across 65 countries, there is even a store that bears the Kent-born designer’s name in Mongolia.But last week Karen Millen, the woman, became famous all over again for the wrong reasons, after suffering the humiliation of being declared bankrupt over an unpaid tax bill. Continue reading...

Latest data shows UK households feeling the pinch, as Britain posts a trade surplus with non-EU countries

ONS data raises hopes that sharp decline in pound since Brexit vote could make economy less reliant on domestic spendingBritain’s trading position with the rest of the world improved markedly in the final three months of 2016, boosting hopes that the pound’s sharp fall since the Brexit vote can help the economy become less reliant on domestic spending.

Innovations come when governments and businesses are forced out of their comfort zonesTribute bands are all the rage these days. So it should come as no surprise that the triggering of article 50 was marked by a homage to a band that toured the country in the summer of 2016: Project Fear.Project Fear 2017 has been playing its own versions of Beatles hits: I (Don’t) Feel Fine, We (Can’t) Work it Out and, of course, that all-time classic, While My Economy Gently Weeps. It has been quite a trip down memory lane to the days when the band’s lead vocalist, George Osborne, was predicting immediate recession in the event of a Brexit vote.Related: Brexit Britain is suddenly debating trade – but it's the wrong talking point | Larry ElliottTrade does not lead to innovation and investment; rather innovation and investment lead to tradeRelated: Why denying refugees the right to work is a catastrophic error | Paul Collier and Alexander Betts Continue reading...

Figures suggest people are increasingly dipping into their savings as disposable income also fallsBritish households ran down their savings to a record low at the end of 2016, raising fears that the UK is on course for a fresh consumer debt crisis in the wake of the Brexit vote.The saving ratio – which estimates the amount of money households have available to save as a percentage of their total disposable income – fell sharply in the fourth quarter last year to 3.3% from 5.3% in the third. Continue reading...

New report shows automation is already causing losses, depressing wages and likely to have lasting, devastating effectIn 2013, the Oxford Martin School released a report that looked at the automation of work, assessing the likelihood that robots and other technologies would replace humans. It concluded that of the 702 job categories examined, 47% were susceptible to automation within the next 20 years. The report completely upended our ideas about the future of work.Now, a new report by the National Bureau of Economic Research (NBER) in the United States is set to be an even bigger wake-up call. Written by economists Daron Acemoglu (MIT) and Pascual Restrepo (Boston University), it not only adds support to the Oxford Martin conclusions, it actually suggests the jobs are already lost and unlikely to come back.

Young Vic, London

All the day’s economic and financial news, as City firms prepare to move jobs out of London after Brexit

Bankers, pharmaceutical giants, Google, Facebook ... a new breed of rentiers are at the very top of the pyramid and they’re sucking the rest of us dryThis piece is about one of the biggest taboos of our times. About a truth that is seldom acknowledged, and yet – on reflection – cannot be denied. The truth that we are living in an inverse welfare state.Related: Capitalism simply isn't working and here are the reasons why | Will HuttonRelated: Wolfgang Streeck: ‘Look at London – it’s a second Rome. This is what an empire looks like’Related: Meet the rightwing power players lurking beneath Silicon Valley's liberal facade Continue reading...

Attempt to create European trading powerhouse has been formally derailed by Brussels, which said it would create a monopoly

We’ve road-tested the new 12-sided coin, and found that some ticket and vending machines don’t actually accept it

The president thinks Germany’s trade surplus is the result of manipulating the euro, but Wall Street fuelled the problemDonald Trump has criticised Germany’s enormous current account surplus, which he considers the result of German currency manipulation. But the president is wrong. While Germany’s external surplus, at 8% of GDP, is big – too big – it is not the result of currency manipulation by Germany. The real culprits are an inflationary credit bubble in southern Europe, the expansionary policies of the European Central Bank, and the financial products US banks sold to the world. So, instead of blaming Germany, Trump would do well to focus on institutions in his own country.Germany’s trade surplus is rooted in the fact that the country sells its goods too cheaply. Here, the Trump administration is basically right. The euro is too cheap relative to the US dollar, and Germany is selling too cheaply to its trading partners within the eurozone. This undervaluation boosts demand for German goods in other countries, while making Germany reluctant to import as much as it exports.Related: Trump’s trade advis​​er says Germany uses euro to 'exploit' US and EU Continue reading...

UK officials recognise that failure to agree post-Brexit trade deal with EU27 would cause havoc, according to EU sourcesEuropean diplomats based in the UK say the British government is stepping back from its threat to leave the EU without a trade deal if negotiations break down.Related: Sir Tim Barrow to hand-deliver article 50 letter to Donald TuskRelated: Brexit: everything you need to know about how the UK will leave the EU Continue reading...

Qatari investors are unperturbed by Britain’s departure from EU and looking to build on significant investmentsTheresa May’s ambitions to create a “global Britain” after Brexit have been boosted by Qatar’s announcement that it expects to invest £5bn in the UK over the next five years.On Monday, two days before the planned triggering of article 50, Qatari investors at a London conference suggested they were unperturbed by the prospect of Britain’s departure from the EU and were looking for further opportunities to build on already significant investments in the UK that include the Olympic Village in east London, the Shard building, Harrods department store and a stake in Sainsbury’s.

Rising household debt could spook the nation again so it is right to keep an eye on cheap creditAlarm bells are jangling at the Bank of England. Households have been on a borrowing binge. Consumer spending is being underpinned by debt, with an increased dependency on personal loans, payday loans, car finance and – in particular – credit cards.Threadneedle Street is worried about these trends – and rightly so. Household debt as a proportion of national income peaked at 160% at the time of the financial crisis and fell only modestly thereafter. Now – having bottomed out at 140% of GDP – the ratio is on the rise again. Continue reading...

Bank of England says City institutions need to reassure regulators that they are ready for a range of possible outcomesThe Bank of England has asked UK banks, insurers and other financial institutions to draw up comprehensive plans for how they will deal with Britain’s exit from the European Union, and will scrutinise them closely.Two days before Theresa May’s government plans to trigger article 50 and begin two years of negotiation over the UK’s departure, the Bank said City institutions would have to provide copies of contingency plans to reassure regulators that they were ready for “a range of possible outcomes”.Related: UK economy cooling after post-Brexit vote growth, surveys show Continue reading...

Aerospace industry delivered 100 aircraft in February, worth £2bn to UK, with orders up to 43, but uncertainty rises over BrexitThe global aerospace industry enjoyed a surge in aircraft orders in February, putting it on track for another record year of deliveries and boosting the UK economy.The number of commercial aircraft ordered by airlines jumped to 43 last month from just four in February 2016, according to ADS, the industry trade association.Related: Brexit and Trump mean 'dangerous new phase' for Airbus, says boss Continue reading...

Office for National Statistics to harvest data from traffic sensors, mobile phones and satellite images at new campus in WalesThe UK’s official statistics office is looking into using traffic sensors, mobile photo data and satellite images as new ways of measuring the shape of the economy.The Office for National Statistics (ONS) is opening a new data science campus at its headquarters in Newport, south Wales, on Monday as part of a £17m investment in the way the UK collects and presents data.Related: How statistics lost their power – and why we should fear what comes next | William Davies Continue reading...

Researchers say Wales and north-east are among areas most vulnerable to loss of funding, tariffs on exports and shortage of European workers

Thinktank’s analysis suggests new £3bn levy on larger employers will raise less money and have smaller impact on areas that need it mostThe government’s new £3bn apprenticeship levy threatens to deepen Britain’s north-south divide, according to a new analysis, with London and the south-east benefiting most from the government’s shakeup of staff training.The Institute for Public Policy Research (IPPR) has warned that the apprenticeship levy, which comes into force next month, will raise less money and have a smaller impact in the areas that need it most. These areas are those that have been hit by deindustrialisation and suffer from low levels of qualifications, low productivity and low pay.Related: Pattern-cutting to tattooing: amazing apprenticeships – in pictures Continue reading...

Political revolts are inevitable in a world where employees are wage slaves and bosses super richThe rise of populism has rattled the global political establishment. Brexit came as a shock, as did the victory of Donald Trump. Much head-scratching has resulted as leaders seek to work out why large chunks of their electorates are so cross.Related: What the 21st century can learn from the 1929 crash | Larry ElliottThose responsible for global financial crisis got away with it while those who were innocent bore the brunt of austerityRelated: Brexit has allowed the banks to get off Britain's naughty stepRelated: Wolfgang Streeck: ‘Look at London – it’s a second Rome. This is what an empire looks like’ Continue reading...

US president’s failure to win backing for his repeal of Obamacare has delivered a dose of reality to the marketsWall Street’s uncritical love affair with Donald Trump is over. For five months, traders have swallowed whole the idea that the president would swiftly get a package of tax cuts through a Republican-dominated Congress, giving a boost to growth and corporate profits in the process.Yet the first real test of Trump’s ability to get lawmakers to do his bidding – the repeal of Obamacare – has been a disaster. The resistance on Capitol Hill has left the financial markets wondering when – and indeed whether – Trump will be able to deliver on his fiscal boost. Continue reading...

The woman from the agency at the centre of the Sports Direct scandal is up before the select committee this weekWhile Sports Direct founder Mike Ashley was undoubtedly the stand-out performer at June’s business, innovation and skills select committee hearing into the retailer’s treatment of staff, the show put on by Transline’s Jennifer Hardy is often overlooked.She is the finance chief of the temporary employment agency whose performance prompted committee chairman Iain Wright to accuse her of deliberately misleading MPs, after Hardy claimed the firm lost its gangmaster licence following an “administrative error ... not a misdemeanour”. Continue reading...

Trump issued an ultimatum after the vote was postponed on his bill to replace Obamacare, raising fears about his ability to push through other growth-boosting reforms

You may think that a smuggler in the Tunisian desert has nothing to do with your trip to the supermarket. You’re wrongAs I talk to him, Ahmed pulls his chair into his store to escape the hot Tunisian sun. He is a retired teacher – the years of screaming children can be counted in the rings framing his eyes. Behind him is his merchandise. To make up for a small pension, Ahmed is selling kitchenware in a market near the Libyan border, over four hundred tiny concrete garages surround him, goods piled high: clothes, bags, microwaves. It looks like any other market, but note an invisible detail: everything sold here is illegal. Every good in this market has been smuggled into Tunisia. Ahmed, though he may not look the part, is a smuggler.Related: Supply chain audits fail to detect abuses, says reportRelated: Living and looking for lavatories – why researching relief is so relevantRelated: The world in 2065: what do social scientists think the future holds? Continue reading...

Two former members of the Bank of England’s interest rate-setting committee discuss the outlook for this yearProfessor of economics at Dartmouth College, New Hampshire, and member of the Bank’s MPC from June 2006 to May 2009 Continue reading...

The latest monthly Guardian analysis finds signs of a slowdown as prices rise and real pay shrinks• Help fund our journalism by becoming a Guardian supporterBritish households are being warned to prepare for a tightening squeeze on living standards, as a Guardian analysis shows the Brexit vote’s blow to the pound is stoking inflation while pay packets are shrinking in real terms.As Theresa May prepares to trigger article 50 next week, kicking off the formal process of the UK leaving the EU, the economy continues to defy the doomsayers who predicted a sudden downturn after the referendum. But signs of a slowdown are now emerging as higher prices put pressure on companies and consumers alike.Related: How has the Brexit vote affected the UK economy? March verdictRelated: 'The Brexit vote is starting to have major negative consequences' – experts debate the data Continue reading...

Maryvale’s Australian Paper, the only copy paper manufacturer in the country, urges government to hold firm on tariffs to keep out subsidised importsAustralia’s only copy paper manufacturer, one of the largest remaining employers in Gippsland’s Latrobe Valley, is concerned free trade negotiations with Indonesia could frustrate moves to impose anti-dumping tariffs.The Anti-Dumping Commission filed its report on paper imports to the federal government on Friday, after a 10-month investigation.Related: Emergency intervention urged to keep open Hazelwood power plantRelated: What will fill the hole left by coal? Continue reading...

Retail sales rose by a stronger-than-expected 1.4% in February as UK consumers took Brexit and rising inflation in their stride

Business pressure to weaken bribery laws and government’s inability to focus on non-Brexit issues are also concerns, says groupBrexit could damage the UK’s efforts to tackle corruption and give multinationals leverage over the British government in bribery cases, the Organisation for Economic Co-operation and Development has warned.Business pressure to weaken bribery laws and an inability by the government to focus on non-Brexit issues are both risks associated with leaving the European Union, according to a new report by the group.Related: Pro-Brexit ministers 'relaxed about leaving EU without trade deal' Continue reading...

Recovery after slump in December and January is not enough to reverse slide in three-month trend, says ONSBritain’s retailers received a respite from a two-month losing streak when spending in high street stores and online bounced back in February.The Office for National Statistics said retail sales volumes were up by 1.4% on January and 3.7% higher than in February 2016.Related: UK retail sales surge as consumers shrug off Brexit fears - business live Continue reading...