Ratings agency highlights US president’s unpredictability and break from ‘norms’ of international relations as risksDonald Trump’s presidency poses a risk to the global economy, a leading credit ratings agency has warned, highlighting his unpredictability, his administration’s aggressive tone and his break with established “norms†in international relations.Less than a month into a presidency characterised by frequent Twitter tirades and an executive to order to ban citizens from some Muslim-majority countries from entering the US, Fitch said Trump posed a threat to global economic conditions.#Trump Administration Poses Risks to Global Sovereigns https://t.co/XObCY0Dz9p Continue reading...
Analysts fear the boom in personal contract plans are mirroring the sub-prime mortgage scandal and are fuelling a colossal build-up of debt in UK and USA huge increase in the amounts borrowed by already indebted households in Britain and the US to buy new vehicles is fuelling fears that “sub-prime cars†could ignite the next financial crash.British households borrowed a record £31.6bn in 2016 to buy cars, up 12% on the year before, said the Finance and Leasing Association on Friday. Nine out of 10 private car buyers are now using personal contract plans (known as PCPs), which have boomed since interest rates fell to historic lows. Continue reading...
ONS data shows increased output and narrowing of trade gap in December as economy defies Brexit uncertaintyBritain’s manufacturers and construction firms had a December bounce, adding to evidence that the UK economy ended 2016 on a strong note despite the Brexit vote.Backing up official estimates that show the UK economy was the fastest growing of the G7 leading industrial countries last year, figures published on Friday came in stronger than City economists expected.Related: UK industry is on a roll – but inflation could send it on the slide | Larry Elliott Continue reading...
As Donald Trump steers the US towards isolationism and protectionism, China’s leader is casting himself as a champion of internationalism and free trade. But are Xi’s values really compatible with those of the rest of the world?Some call it Xi Jinping’s Big White Book; a 515-page, 2.5kg tome in which China’s paramount leader lays out his thinking on everything from tree planting to macro-economics; from Karl Marx to the importance of being earnest.More than five million copies of Xi’s The Governance of China now adorn bookshelves and coffee tables around the globe, if Communist party propagandists are to be believed, in languages including Russian, Cambodian, Portuguese, Arabic and Nepali.Related: US-China war would be a disaster for the world, says Communist partyRelated: Trump agrees to support 'One China' policy in Xi Jinping call Continue reading...
Reduction was a core wish of leave voters, but overall figure will probably fall by less than 15%, thinktank predictsTheresa May’s attempt to reclaim control of UK borders after Brexit could reduce annual migration from the EU by just 50,000 – one-sixth of the current overall annual figure, according to new research.The projection of a “vanishingly small reduction†is one of the first attempts to estimate how likely labour market demand, and the government’s planned new controls, could reduce the number of migrants coming to the UK. Reduction in immigrant numbers has been repeatedly cited in polls as the chief reason voters backed leaving the European Union.Related: Brexit bill: MPs reject amendment to protect EU citizens in UK Continue reading...
Germany’s finance minister Wolfgang Schäuble tells Athens it can cut its £280bn debt only by leaving the single currencyThe Greek government has expressed hope of an imminent deal with its EU creditors, despite a warning from the German finance minister, Wolfgang Schäuble, that the country could cut its debts only by leaving the single currency.
by Phillip Inman Economics correspondent on (#2C3HN)
Chief operating officer will manage Bank’s strategy during Brexit negotiations and sit on monetary policy committeeThe Bank of England has appointed Charlotte Hogg as its second most powerful executive, in a role that hands the former financier the task of keeping a check on Britain’s financial sector.Hogg has been appointed deputy governor for markets and banking, while consolidating her position at Threadneedle Street by retaining her current role as the central bank’s chief operating officer. She replaces Minouche Shafik, who is becoming director of the London School of Economics. Continue reading...
Consumers and employees want to know where their companies stand on Trump’s policies. Here’s how businesses should be reactingOn 12 January, a week before the inauguration, LL Bean found itself smack bang in the middle of one of now-President Trump’s notorious tweets:Thank you to Linda Bean of L.L.Bean for your great support and courage. People will support you even more now. Buy L.L.Bean. @LBPerfectMaineMy daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!Related: Super Bowl ads trolling Trump: 'The world is more beautiful the more you accept' Continue reading...
But crazy spending plans that have led to huge rise in borrowing by junk-rated firms are likely to be blocked by CongressWall Street is making some big bets on Donald Trump. One of the biggest is that the US president can persuade Congress to unravel the Dodd-Frank Act that he believes ties the financial services industry in knots. Bank shares have carried the US stock market higher ever since Trump said it was a priority.Another big bet is on a Trump-inspired spending spree by Congress on all manner of infrastructure projects, including the Mexican wall and on the military. This bet gets a steroid boost when traders add in the impact of huge tax cuts, albeit for the richest, trade tariffs on imports (protecting smaller US firms from competition) and a supposedly benign form of blackmail targeting major corporations that consider opening factories abroad (forcing them to locate inside the US).Related: Why Donald Trump can't bully China on tradeTrump needs to win over eight Democrats in the Senate to push through his agenda; that looks increasingly unlikely. Continue reading...
Beijing holds trillions of dollars in US debt and any trade disruption could lead to huge price rises in the budget stores on which many Americans relyAs US President Donald Trump proceeds to destabilise the postwar global economic order, much of the world is collectively holding its breath. Commentators search for words to describe his assault on conventional norms of leadership and tolerance in a modern liberal democracy. The mainstream media, faced with a president who might sometimes be badly uninformed and yet really believes what he is saying, hesitate to label conspicuously false statements as lies.But some would argue that beneath the chaos and bluster, there is an economic rationale to the Trump administration’s disorderly retreat from globalisation. According to this view, the US has been duped into enabling China’s ascendency, and one day Americans will come to regret it. We economists tend to view abdication of US world leadership as a historic mistake.Related: Trump’s honeymoon with the stock market will soon be over | Nouriel Roubini Continue reading...
David Hodge has been a thorn in the government’s side over its pernicious cuts. Next month’s budget will reveal who really won this power struggleNo one likes to be duped. Did David Hodge, leader of Surrey council, pull a fast one when he said he would hold a referendum to raise council tax by an eye-catching 15%?Last month his office called me to offer an interview, knowing I would heartily approve of anything that would hold the government’s feet to the fire over the crisis in social care, with its knock-on effect on the NHS. It’s time to alert all voters – especially Tory voters – to the shocking mistreatment and neglect of many older people who are denied the care they need.The referendum was set to become a rallying point for councils everywhereRelated: PMQs verdict: Jeremy Corbyn's leaked texts give him the upper hand Continue reading...
A new volunteer-run law centre in Manchester is the exception. More commonly, advice services across the country are either closed or strugglingOut of a red-brick shop front in Manchester’s Moss Side, the Greater Manchester Law Centre is set to fight for a piece of the welfare state. John Nicholson – a local barrister and chair of the GMLC – puts it like this: “We’re not just a law centre. We’re a campaign for justice.â€To understand exactly how one small, volunteer-run law centre is launching a fightback against the government – and with it, what it represents for towns and cities up and down the country – we have to go back almost four years, to the spring of 2013. This was when the legal aid budget was gutted by £350m a year. Overnight, a cancer patient found “fit for work†or a cleaner sacked for falling pregnant was priced out of the legal system.When the South Manchester Law Centre closed in 2014, for many it was the final straw, and the impetus to do somethingRelated: Legal aid cuts creating two-tier justice system, says Amnesty Continue reading...
Unhappy at how economics is out of touch with reality and defined by an elite, Joe Earle, Cahal Moran and Zach Ward-Perkins sum up their explosive call for changeIn the autumn of 2011, as the world’s financial system lurched from crash to crisis, the authors of this book began, as undergraduates, to study economics. While their lectures took place at the University of Manchester the eurozone was in flames. The students’ first term would last longer than the Greek government. Banks across the west were still on life support. And David Cameron was imposing on Britons year on year of swingeing spending cuts.Related: The end of capitalism has begunThe high priests of economics still hold power, but they no longer have legitimacy Continue reading...
Your article on the government’s housing white paper (English housing market ‘broken’, Javid admits at launch of white paper, 8 February) highlights many of the issues and hurdles we must overcome if we are to fix the “broken†housing market. But the omission of analysis of the impact of our ageing population ignores a fundamental reason why the market needs to be fixed. And while the white paper referenced some of the changes necessary, a significant amount of further work needs to be done. We know that over the next 25 years, the proportion of households where the oldest person is 85 or over will grow faster than any other age group, and homes that meet the needs of older people will be in greater demand.Related: 'Stop dithering and start building' - experts on the housing white paperRelated: Housing crisis: the empty nester's guide to downsizingRelated: England's housing market is 'broken', government admits in white paper Continue reading...
Ted Malloch, proposed US ambassador to the EU, casts doubt on survival of eurozone and says Athens should return to drachmaDonald Trump’s administration has put itself on a fresh collision course with the European Union after the president’s candidate to be ambassador in Brussels said Greece should leave the euro and predicted the single currency would not survive more than 18 months in its present form.Days after being accused of “outrageous malevolence†towards the EU for publicly declaring that it “needs a little tamingâ€, Ted Malloch courted fresh controversy by saying Greece should have left the eurozone four years ago when it would have been “easier and simplerâ€.Related: European parliament leaders call on EU to reject Trump's likely ambassador pickGreece should get out of the euro & go back to their own currency--they are just wasting time.Related: EU leaders warily await Donald Trump's choice of ambassador | Patrick WintourRelated: Greece's debt costs rise sharply as worries grow over IMF role Continue reading...
by Phillip Inman Economics correspondent on (#2BXXP)
Bank forecasts that UK pay growth is likely to slow despite hopes being raised as economy shrugs off effects of Brexit voteHopes of bumper pay rises as the economy shrugs off the effects of the Brexit vote appear to be dashed by a Bank of England survey that predicts a decline in wages growth this year.A report by the central bank’s regional agents found that the increase in average pay settlements, far from strengthening in response to higher inflation, will decline from 2.7% to 2.2% this year.Related: Bank of England sharply raises UK growth forecast Continue reading...
by Phillip Inman Economics correspondent on (#2BSCE)
Slower growth after Brexit vote and ageing population will hit budget over next decade, says leading thinktankThe government is on course to impose steep cuts in public spending and increase taxes by the end of the decade to their highest level in 30 years to combat the UK’s persistent budget deficit.But slower economic growth after the Brexit vote and lower than expected tax receipts will still leave the UK with one of the largest shortfalls in public spending in the developed world, according to the Institute for Fiscal Studies.Related: IFS warns of biggest squeeze on pay for 70 years over Brexit Continue reading...
Investors worried by fund’s warnings country’s debt burden is unsustainable and reported split over joining latest bailoutFresh worries over Greece’s debts have pushed the country’s borrowing costs sharply higher amid renewed insistence from Athens it will not swallow further austerity demands from international lenders.The yields on two-year government bonds jumped to their highest level since last June and went above 10% to reflect growing anxiety on financial markets over Greece’s ability to keep up to date with debt repayments. Yields on 10-year government bonds were also higher at above 7.8%, the highest close since November.Related: Greek debt crisis: an existentialist drama with no good end in sight | Larry ElliottRelated: Grexit? Greece again on the brink as debt crisis threatens break with EU Continue reading...
Chronic underfunding means that even basic needs for the most vulnerable are not being met, says shadow social care minister Barbara KeeleyAsk Barbara Keeley what keeps her awake at night and Labour’s shadow cabinet member for mental health and social care will tell you it’s the stories of people in “heartrending†situations whose care is being cut.Related: For equitable and sustainable social care we need a dedicated tax | Paul BurstowIt isn’t fair to create an even bigger postcode lottery where the level of service you can get depends on where you live Continue reading...
PwC predicts UK will be hit in short term by Brexit, but will outperform US, Canada, France, Germany, Italy and Japan by 2050The UK could shake off the near-term impact of Brexit to become the fastest-growing economy in the G7 group of rich countries between now and 2050, according to a report that paints a bright outlook for the country’s prospects outside the EU.Consultants PwC say the UK economy will not escape entirely unscathed from the decision to leave the bloc and that it will dampen growth prospects in the short term. But the brunt of the impact would be felt by 2020 and in the years that follow the UK would outperform its peers thanks to its relatively large working age population and its flexible economy.Related: Voting for Brexit hasn’t saved us from secretive trade deals Continue reading...
The ECB’s Mario Draghi is right to warn against relaxing rules such as Dodd-Frank aimed at preventing another financial crisis“The last thing we want at this point in time is a relaxation of regulation,†said Mario Draghi, president of the European Central Bank on Monday. He is right to worry. Relaxation of financial regulation is exactly what Donald Trump has in mind and the effects could be felt around the world.The US president seems to have accepted the half-baked idea that US banks are somehow so tied down by international regulations that they are obliged to hoard capital that could be used for lending to the American economy. “I have so many people, friends of mine, who have nice businesses who can’t borrow money,†said Trump when he signed an executive order last week.Related: British firms suffer Brexit impact, as ECB's Draghi warns on US protectionism – as it happened Continue reading...
Sartre’s Huis Clos has three damned souls arguing in a room for eternity. Greece has Tsipras, Schäuble and Lagarde. Now there’s a fourth: enter stage right Donald TrumpPut three people in a room who can’t get on with each other. Condemn them to stay there for all eternity while they torture each other. Sit and watch as the gruesome story plays out. And what do you have?One answer is the 1944 existentialist play by Jean-Paul Sartre, Huis Clos. Another is the story of the neverending Greek debt crisis in which the three main characters are Alexis Tsipras, Wolfgang Schäuble and Christine Lagarde.
The current economy seems to defy the Bank of England’s predictions. Perhaps that is because pay growth has become so much harder to forecastOn the face of it, the Bank of England’s freshly minted forecast for this year looked rosy. A glance at the headline figure of 2% growth in the quarterly inflation report was much better than the Bank’s gloomy forecast last year of 0.8%.A 2% growth rate will again put the UK in the top rank of developed world nations and have City analysts scratching their heads over the apparent strength of the UK economy. How, they ask, with uncertainty clouding the horizon, can the great British consumer be so confident about prospects and merrily carry on spending? Continue reading...
Once the UK leaves the EU, Liam Fox will be presented with arrangements more secretive and toxic than anything the EU has ever demandedA turbocharged version of the Transatlantic Trade and Investment Partnership (TTIP) could be heading Britain’s way after Theresa May’s Brexit white paper. That’s the upsetting irony for those (and there were a few) who voted to leave the European Union to escape nasty trade deals that involve secret courts to resolve corporate disputes.These are the courts that some of the world’s biggest companies have used when they want to overturn local laws that jeopardise their profits. Tobacco company Philip Morris was a keen exponent. Its legal suits in Australia, Uruguay and others against plain cigarette packaging caused an outcry and cost the respective governments millions of pounds in legal fees, even though it failed. Continue reading...
The Resolution Foundation’s prediction that inequalities are going to grow (UK faces return to inequality of Thatcher years, 1 February) makes gloomy reading. Sadly it is underestimated because it takes no account of cuts in what Barbara Castle, when she was secretary of state at the Department of Health and Social Security 40 years ago, called “the social wageâ€. By this she meant “the publicly provided services which mean so much to family healthcare, education, housing and a good environmentâ€. She estimated that in 1975 the social wage added £20 a week to the average working household. At the time the average full-time weekly wage of a male manual worker was £52 and a female manual worker £31.Every week you have reported cuts not only to health, education and social care but also to parks, museums, libraries, children’s centres, buses and public lavatories. All these services are essential to a caring society and can only be provided collectively. They are part of our social fabric and the more threadbare this becomes the less autonomy children, people with disabilities and older, frail people enjoy. At the same time it becomes harder for their families to support them. Instead of insisting that families should do more (and they already do a great deal – there are five times as many family and friends caring for older people as there are paid carers), the government should reverse the massive cuts made to local authorities’ budgets and increase the “social wageâ€.
Political uncertainty drove investment demand up by 70% in 2016, while global demand was at highest level since 2013The Brexit vote and the election of Donald Trump drove global demand for gold to a four-year high in 2016, as pension funds and other institutional investors piled into the precious metal while higher prices put consumers off jewellery purchases.Global gold demand rose 2% last year to reach 4,309 tonnes, the highest level since 2013, according to a report from the World Gold Council, which represents gold miners.Related: Gold: key trends helping the metal keep its shine Continue reading...
Key sector’s first slowdown for four months in Markit/Cips PMI report could point to wider trendWarnings that Britain is heading for a sharp increase in inflation have intensified after a key business survey showed companies in the services sector are grappling with their biggest rise in costs for almost six years.The report into the UK economy’s biggest sector, which spans banks to hotels and hairdressers, showed firms suffered their first slowdown for four months in January. This suggests the economy lost momentum at the start of 2017.Related: Bank of England sharply raises UK growth forecastThe 3 UK #PMI surveys show companies' costs are rising at the joint-fastest rate since the global financial crisis pic.twitter.com/wOVzjoqiIv Continue reading...
The biggest rise in inequality since Thatcher is on its way, bringing economic instability, poverty, poor health, increased violence and fear among neighboursHomelessness and child poverty have risen, the NHS is in dire financial straits, understaffed prisons have record suicide rates, the elderly lack social care – yet the rich continue to get richer, and continue to avoid taxes. This is an expression of abject moral bankruptcy.But, if the Resolution Foundation’s forecast is right, this is just a prelude to the biggest rise in inequality since that seen under Margaret Thatcher in the 1980s. And with more inequality there will be a growing need for services of every kind – including more prisons and police. An increasing body of scientific evidence has shown that almost all of the problems related to lower social status get worse when inequality escalates. That goes for poor health and child wellbeing, for violence, school bullying and lower maths and literacy scores.Related: UK faces return to inequality of Thatcher years, says reportRelated: This is the most dangerous time for our planet | Stephen Hawking Continue reading...
His promises have rallied the Dow Jones – but his inconsistent, erratic and destructive policies will take a toll on growthWhen Donald Trump was elected president of the US, stock markets rallied impressively. Investors were initially giddy about Trump’s promises of fiscal stimulus, deregulation of energy, health care and financial services, and steep cuts in corporate, personal, estate, and capital-gains taxes. But will the reality of Trumponomics sustain a continued rise in equity prices?It is little wonder that corporations and investors have been happy. This traditional Republican embrace of trickle-down supply-side economics will mostly favour corporations and wealthy individuals, while doing almost nothing to create jobs or raise blue-collar workers’ incomes. According to the non-partisan Tax Policy Center, almost half of the benefits from Trump’s proposed tax cuts would go to the top 1% of income earners.Related: Strong dollar drags US growth to slowest pace since 2011 Continue reading...
Mark Carney and colleagues have been taken by surprise by the economy’s strong performance despite the Brexit voteThe Bank of England’s inflation report was supposed to be a dull affair. The City thought the quarterly health check of the UK economy would be a bit of a yawn.Big misjudgment, as it happens.Related: Bank of England sharply raises UK growth forecast Continue reading...
Central bank predicts economy will grow by 2% this year as consumers and businesses appear to shrug off Brexit bluesThe Bank of England has painted a brighter outlook for the UK economy this year, with faster growth, lower unemployment and a more modest rise in inflation.After further signs that consumers and businesses have shrugged off the Brexit vote, the Bank revised its earlier gloomy forecasts to predict the economy would grow 2% this year - matching its 2016 performance.Related: Bank of England faces fresh embarrassment as tears up its forecasts | Larry ElliottRelated: Bank of England raises growth forecast and leaves interest rates on hold - business live Continue reading...
Yellen’s position as head of the Federal Reserve makes her an ideal role model for women in a male-dominated field, but Trump threatens to cut her tenure shortWhen Janet Yellen was sworn in as the chair of the US Federal Reserve three years ago this month, she made history. A fact that did not escape President Obama: “I should add that she’ll be the first woman to lead the Fed in its 100-year history,†said the man whose own appointment was also a historical first.Now she may be history. As a candidate Donald Trump said he would get rid of Yellen, and he could nominate her successor by summer, rendering her a lame duck at a time when the Fed is coming under ever greater scrutiny as rates rise for the first time since the recession.Related: The US Federal Reserve has created a 'false economy', Trump says Continue reading...
by Josh Halliday North of England correspondent on (#2B5P0)
Report says north of England is missing out on growth and jobs due to poor transport connections to airports and portsTheresa May’s attempt to rebalance the UK economy risks being derailed without a transport revolution to modernise links to the north of England’s airports, business leaders have warned.An independent commission found that the north of England had capacity for an extra 60 million air passengers but was being held back by outdated road and rail links. Continue reading...
The latest figures suggest a rosy outlook for manufacturing, but rising costs indicate there may be troubles aheadIt’s looking good for Britain’s long-suffering manufacturers. Order books are strong, the global economy is picking up and the weakness of the pound is making exports more competitive. Industry is on a roll.Well, maybe. Nobody likes to be a party pooper but we’ve been here before. Many times before, in fact. Over the past four decades there have been periods – sometimes quite lengthy periods – when it has looked as if a new dawn is breaking for manufacturing. Yet the promised renaissance has never happened.Related: Jump in import costs dents strong January for UK manufacturing Continue reading...
by Phillip Inman Economics correspondent on (#2B2PQ)
Sector posts sixth month of expanding output despite record rise in costs, which are expected to increase further over 2017A record rise in the cost of imports in January has taken the shine off a strong performance by the manufacturing sector, which has rebounded since the Brexit vote to record its sixth consecutive months of expanding output.Manufacturers were forced to hike the cost of their goods by one of the widest margins in one month after the slump in the pound triggered a record rise in the cost of imports, according to the Markit/Cips purchasing managers survey.Related: Weak pound sends UK factory costs soaring at record rate – business live Continue reading...
The US president, who said countries ‘play the market while we sit like a bunch of dummies’, signals possible retreat from strong dollar policyJapan has rejected Donald Trump’s claims that Tokyo was deliberately weakening the yen to gain an unfair trade advantage over the US.
Leading economic thinktank the NIESR expects 1.7% growth this year but says Brexit will hit trade in the long termThe surprising resilience of consumer spending in the months since the Brexit vote has forced one of the UK’s leading economic thinktanks to revise up its growth forecasts for the second time since the referendum.In its quarterly health check of the economy, the National Institute for Economic and Social Research (NIESR) said it now expected growth of 1.7% this year – only slightly down on the 2% recorded in 2016.Related: UK GDP figures show solid end to 2016 despite Brexit vote Continue reading...
by Larry Elliott Economics editor and Katie Allen on (#2B0E5)
Resolution Foundation says inflation, welfare cuts and squeeze on pay will punish least well-off hardestPressure on the government to help struggling Britons has intensified after a leading thinktank warned that falling living standards for the poor threatened the biggest rise in inequality since Margaret Thatcher was prime minister.The Resolution Foundation said Theresa May would need to make good on her pledge to support “just about managing†households as it released a report showing that rising inflation and an end to recent strong jobs growth would hit the least well-off hardest. Continue reading...
Peter Navarro, head of new National Trade Council, claims currency is ‘grossly undervalued’, sending it to eight-week highDonald Trump’s top trade adviser has hit out at Germany and accused the country of gaining an unfair trade advantage from the “grossly undervalued†euro.In a sign that the Trump administration is targeting currencies in its approach to trade deals, Peter Navarro, the head of the US president’s new National Trade Council, told the Financial Times (£) that the euro was like an “implicit Deutsche Markâ€.Related: 'Brutal, amoral, ruthless, cheating': how Trump's new trade tsar sees China Continue reading...