Surprise increase is blow to Bank of England's fight against rising prices - but could be followed by falls

Shadow chancellor will say party has put private sector investment at heart of growth strategy, at JP Morgan breakfast meetingLabour intends to restore Britain's reputation as a place to do business after 14 years of Conservative economic failure, the shadow chancellor will tell members of the global elite in Davos on Wednesday.Stepping up Labour's pre-election boardroom charm offensive, Reeves will tell a breakfast meeting hosted by the US investment bank JP Morgan that boosting private sector investment is key to the party's growth strategy. Continue reading...

Rolling coverage of the opening day of the World Economic Forum in Davos

Outlook for employment looks weak enough to convince even hawkish policymakers to lower rates

Former UK prime minister and Princess Eugenie highlight problem at session at WEF in Davos

Vacancies tumbled at fastest rate on record in December, according to ONS figures

Ukraine, Middle East and Taiwan overshadow annual meeting at Davos, with artificial intelligence also high on agendaGrowing concern that heightened geopolitical tension could damage an already shaky global economy has dominated the start of the annual gathering of the world's business and political elite in Davos, Switzerland.Three potential flash points - Ukraine, the Middle East and Taiwan - threatened to overshadow the meeting of the World Economic Forum (WEF) aimed at rebuilding trust after the series of setbacks suffered in the past four years, including war, the Covid-19 pandemic and the cost of living crisis. Continue reading...

Multiple crises' contributed to 0.3% fall in GDP, says national statistics office

Crucial' that countries build social safety nets to mitigate impact on workers, says Kristalina Georgieva

Panic is confined to media headlines for now but Britain is as addicted as ever to Asian importsEscalating tensions in the Middle East, rising oil prices and lengthy delays to international shipping have been hogging the headlines in the past few days. Before this, the prospects for the world economy had been looking a little brighter. But with military intervention in the Red Sea and disruption to global trade, all bets are off.As world leaders gather this week for the annual Davos meeting in Switzerland, the concern will be that last year's downward march for inflation will be halted by rising geopolitical tensions. Since the last mountaintop bash, conflict has spread from eastern Europe to the Middle East, while the risk of a new cold war is mounting - not least highlighted by China's frosty response to the election of Taiwan's new pro-sovereignty president last week. Continue reading...

The shadow chancellor had plans to invest in infrastructure and more, but the weight of expert economic disapproval is wearing her down as the election nearsOne by one, they stamp all over your dreams. In this election year, the dashed hopes will belong to Rachel Reeves. In 2010 the victim was Alistair Darling.Reeves wants to increase spending on the UK's crumbling infrastructure should Labour win at the polls. Her commitments have become less ambitious as pressure mounts from mainstream economists and those in high finance worried about current debt levels escalating.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...

The World Economic Forum has already wrestled with pandemic and recession, but the troubles keep comingThe limos have been booked. Hotels have loaded up with champagne. Shops have been converted into pop-up offices for the tech giants. The annual Davos talkfest is about to begin.The collective mood of the 2,800 participants is anything but cheery as they make their way to the small Alpine town immortalised by Thomas Mann in his novel The Magic Mountain for the annual meeting of the World Economic Forum (WEF). Continue reading...

UK growth rebounded in November, but economists warn that a second quarterly contraction is still a risk

Experts warn of economic impact of sustained shipping attacks and Middle East tensions

Modest GDP growth in November gives chancellor little to celebrate when three-month figure shows contraction

GDP rises by 0.3% in November after October decline, with car leasing and video games fuelling bounceback

Maersk boss says it could take months before trade route is safe to traverse

Consumer price index exceeds economists' expectations as Fed weighs when to start cutting borrowing costsInflation ticked higher in the United States last month as the Federal Reserve weighs the latest stage of its battle against price growth.The headline consumer price index increased at an annual pace of 3.4% in December, according to the Bureau of Labor Statistics, up from 3.1% in the previous month, and exceeding economists' expectations of about 3.2%. Continue reading...

Forecasters at three leading institutions suggest inflation rate will halve to 2% by AprilThe Bank of England may be forced to bring forward the date of its first interest rate cut after three leading forecasters issued a surprise update suggesting the inflation rate will halve to 2% by April.The Oxford Economics consultancy and analysts at Investec and Deutsche Bank have reassessed their outlook for inflation in 2024 and concluded that the consumer prices index (CPI), which dropped to 3.9% in November last year, will fall below 2% within four months. Continue reading...

Rolling coverage of the latest economic and financial news, as MPs quiz BoE officials about the impact of high interest rates

James Meadway, once a Labour adviser and now a podcast host, says the separation between climate and economy has to endJames Meadway is an economist who is not at all impressed with economics. Formerly an adviser to John McDonnell when he was Labour shadow chancellor, Meadway has plenty to say about what mainstream economics gets wrong. But one of his central gripes is the way it treats the environment. We cannot simply pretend that ... the entire ecological crisis is a separate and distinct thing from what's happening in the economy," says Meadway, who now works on climate finance. And yet that is precisely what happens.This critique informs the podcast, Macrodose, which Meadway presents and which has recently turned one year old. Its tagline is Your weekly fix of climate economics". Every Wednesday, in 15 minutes or so, Meadway analyses the key economic stories of the week. Part of the aim is to make economics more accessible because, he says, it is often thought of as something so difficult that you have to be really clever to do it". Continue reading...

World Economic Forum highlights risk of election interference in year UK and US go to polls

Reduced cost pressures and popular festive bakes and chocolate orange muffins boost bakery chain

November figures will give RBA some comfort that its interest rate hikes are working

Eurozone jobless rate has slipped back to record low of 6.4%, while BlackRock fears promises of looser fiscal policy could hit UK bond prices

Global economy set to slow for third year in 2024, with poor countries especially hard hit, body saysThe global economy is set to slow for a third successive year in 2024 and is now on course for its weakest half-decade of growth since the early 1990s, the World Bank has warned.The Washington-based organisation said poor countries were being especially hard hit by a series of setbacks since the arrival of the Covid pandemic and there was a risk that the 2020s would be a wasted" decade. Continue reading...

Rolling coverage of the latest economic and financial news, as Boeing shares fall after 171 of its 737 Max 9 aircraft are grounded by US regulators

The 28bn pledged for green projects would boost growth - Keir Starmer shouldn't just stick to it, he should go furtherBritish wages are expected to remain below their 2008 level until 2028 in real terms, and the cost of living crisis is raging on. The UK is one of the most gas-dependent economies in Europe, while gas prices are still more than double their historic average. Addressing these problems requires more public investment to upgrade our energy system, accelerate the switch to renewables and help make homes and industry more efficient. This would help to create new jobs and make Britain less vulnerable to the whims of global energy markets, and until recently, both Labour and the Conservatives recognised that more government spending was necessary. But while Labour has cautiously restated its commitment to achieving climate targets, the Conservatives have reversed course, while attacking the opposition for its spending pledges.We urgently need a more enlightened debate on this issue. The chancellor, Jeremy Hunt, has repeatedly argued that more investment will contribute to higher inflation and force the Bank of England to raise interest rates. Tory MPs have cited dubious unpublished studies in support of these arguments. At the same time, we hardly ever hear about the benefits that public investment could deliver. In 2022, the government froze public investment in cash terms, meaning it will fall to 1.8% of GDP in five years' time. This is below pre-pandemic levels, which many economists already regarded as too low. Though Labour has promised to spend 28bn a year on green projects by the second half of the next parliament - subject to its fiscal rules - even this would still fall well below the average in other advanced economies.Carsten Jung is a senior economist at the Institute for Public Policy Research Continue reading...

After the EU and US failed to agree aid packages, we must send a clear message to regimes waging warsAs Russia's war against Ukraine continues to wreak havoc regionally and globally, the Ukrainian people and their allies demonstrate remarkable determination and courage. But almost two years after Russia launched its full-scale invasion, it is increasingly clear that the international community can and must do much more to help.While the G7 countries and other governments around the world have been extraordinarily generous in supporting the Ukrainian war effort, there are signs of growing fatigue in some circles - a development Russia appears to have anticipated. With the US and the EU failing to commit more than $100bn (80bn) in aid to Ukraine in December, the idea of seizing Russian assets frozen by western countries has re-emerged as a potential solution. Continue reading...

Making goods cheaper isn't going to fix the fact that income has shifted to the top 10%The policy debate about the cost of living is among the most confused and confusing in recent memory. All sorts of measures to reduce the cost of living are proposed, then criticised as being potentially inflationary. The argument implies, absurdly, that reducing the cost of living will increase the cost of living.The issue here is that the cost of living" is an essentially meaningless concept, rather like the sound of one hand clapping. The problem isn't the cost of buying goods, but whether our income is sufficient to pay for those goods. For most of us, that means the real (inflation-adjusted) value of our wages, after paying tax and (for homebuyers) mortgage interest. Continue reading...

Findings show British bosses growing in confidence over sector's prospects despite headwinds of sustained economic challenges'Britain's largest manufacturers believe the UK is increasing its competitiveness as a global hub for manufacturing, despite high energy costs, worker shortages and political instability holding back progress.In a crunch period for the economy before the general election, the manufacturing trade body Make UK and the accountancy firm PricewaterhouseCoopers said industry bosses were growing more confident about the sector's prospects, but headwinds of sustained economic challenges" still remained. Continue reading...

Conservative economic promises such as tax cuts fail to match fiscal reality - the key to progress is investment, not austerity

Wine in imperial measures, we are told, is what leaving was all about', while the UK struggles outside the single marketOne day in January 1985 I was staying in my usual Paris hotel, writing an article about the French economy and due to interview the finance minister that morning. He stood me up, but with good reason. The telephone rang and his assistant said Monsieur Delors had just resigned from the treasury and was off to Brussels to become president of the European Commission.I hesitate to use a dreadful cliche, but I shall: the rest is history. Delors formed an alliance with Margaret Thatcher which led to the creation of the single market, with Thatcher's nominee Arthur (later Lord) Cockfield playing a leading role in its formation. Continue reading...

Chancellor says reduction to 10% will bring significant relief' but return to pre-pandemic levels of tax can't be achieved in one goJeremy Hunt has said he does not know if he can afford to cut taxes for British households, on the day a national insurance reduction came into force.The main rate of national insurance contributions (NICs) paid by employees is now 10%, down from 12% as announced by the chancellor in his autumn statement in November. Continue reading...

Leader of Britain's police chiefs Gavin Stephens says policing is still being damaged by austerityPolice forces are still being damaged by government cuts, with 6,000 officers having to work away from frontline crime fighting to fill gaps caused by a funding crisis, police chiefs have said.Gavin Stephens, the chair of the National Police Chiefs' Council, said police were cutting crime but faced severe funding pressures and a 3.2bn cash shortfall. Continue reading...

While growth has slowed, the labor force defied fears of a downturn amid highest inflation levels in a generation

December data comes amid speculation over when European Central Bank will cut interest rates

Labour says plan is subject to party's fiscal rules of keeping debt falling as a percentage of GDP

Growth rates driven by shortage of properties on market, says mortgage lender, with typical home worth 287,105

From a potential roaring 20s in the markets to recession fears in the UK, here's our look ahead to the year in financeIf the past few years have taught us anything, it's to expect the unexpected. Nevertheless it seems reasonable to predict that certain familiar themes will dominate the international financial picture in 2024.Here we unpack what the next 12 months are likely to hold in store for major economies, interest rates and markets. Continue reading...

Alarmed by the rising tide of waste we are all creating, my family and I decided to try to make do with much less. But while individual behaviour is important, real change will require action on a far bigger scale Continue reading...

As railway staff, lorry drivers, farmers and others threaten to strike, we examine the challenges the country facesRailway staff, lorry drivers and farmers are among those threatening strike action across Germany from Monday in nationwide protests over grievances ranging from pay and conditions to cuts in agricultural subsidies and higher road tolls.Long Europe's powerhouse, Germany is struggling with a potent mix of short-term and deeper structural problems that - along with a divided and seemingly ineffectual government - have prompted economists to talk of the sick man of Europe". Continue reading...

Up to 1.5m households expected to face sharp increase this year, with inflation and tax rises also denting spending power

Labour leader says Conservatives will go low' in election this year and Labour are prepared to match them if they do. This live blog is closed

Secretary general urges countries to increase investment to avoid falling behind on climate action and sustainable developmentThe world faces a protracted period of weak economic growth that will undermine progress on sustainable development, the UN has warned, as it urged countries to raise investment to tackle the climate emergency.Its annual assessment of the state of the global economy presents a sombre outlook for growth as countries grapple with the impact of higher borrowing costs, geopolitical tensions and heightened risk of climate disasters. Continue reading...

The historic Bretton Woods summit shaped a golden era of growth. This year's G20 could be our equivalent

High interest rates, a slowdown in China and a possible Trump victory could make for a rocky yearThe global economy was full of surprises in 2023. Despite the sharp rise in interest rates, the US successfully avoided a recession, and major emerging markets did not spiral into a debt crisis. Even Japan's geriatric economy exhibited stunning vitality. By contrast, the EU fell behind, as its German growth engine sputtered after China's four-decade era of hypergrowth abruptly ended.Looking ahead to 2024, several questions loom large. What will happen to long-term inflation-adjusted interest rates? Can China avoid a more dramatic slowdown, given the turmoil in its real estate sector and high levels of local government debt? Having maintained near-zero interest rates for two decades, can the Bank of Japan (BOJ) normalise rates without triggering systemic financial and debt crises? Will the delayed effects of the Federal Reserve's interest rate rises eventually push the US into a recession? Can emerging markets maintain stability for another year? Last, what will be the next major source of geopolitical instability? Will it be a Chinese blockade of Taiwan, Donald Trump winning November's US presidential election, or an unforeseen event? Continue reading...

In today's newsletter: Guardian experts assess the government's progress on the prime minister's key promisesSign up here for our daily newsletter, First EditionGood morning. After Hanukkah, Christmas, Kwanzaa and New Year, the last great festival of the season: Rishi Sunak's five pledges anniversary day. The prime minister is marking the occasion with a trip to the east Midlands, while Keir Starmer is making a speech in which he will promise to lift the mood of a downtrodden country". Personally, I'll be saying a prayer to the god of setting your own homework, and another to the god of unfulfilled ambition.When Sunak came up with this device exactly a year ago, it was generally viewed as a smart rhetorical move: in several cases, he appeared to have dressed the central expectations of most experts in language that could make it look as if he was responsible for their achievement. He said there were no tricks", and that we're either delivering for you or we're not." But there were, in fact, tricks: the criteria were slippery, and the timelines were ambiguous. Everything seemed set up for the prime minister to set the terms of the debate and declare victory in time for the next election campaign.Iran | Two explosions have killed almost 100 people and injured scores more at a memorial ceremony in Iran marking the fourth anniversary of the US killing of Qassem Suleimani, the head of Iran's Quds Force. Iran did not immediately attribute blame and no side claimed responsibility for the deadliest single terrorist incident since the Iranian Revolution in 1979. Read Julian Borger's analysis.NHS | Junior doctors' leaders have said they are prepared to stage yet more strikes after the longest stoppage in NHS history. On Wednesday night, it emerged that as many as 20 hospitals had asked junior doctors to return to work but had the requests rejected amid claims they had not shown steps they had taken to mitigate the problems first.Jeffrey Epstein | Court documents identifying associates of notorious sex offender Jeffrey Epstein were made public on Wednesday. Some of the high-profile names in the unsealed court documents include Prince Andrew, the former US president Bill Clinton, Michael Jackson and David Copperfield. Read an explainer.Politics | Conservative MPs are pleading with Reform UK not to stand against them in the general election, the leader of the rightwing populist party has claimed. Richard Tice also insisted that Nigel Farage would play a formal role in Reform's election campaign.UK news | A 15-year-old boy has been arrested on suspicion of murder after a teenager was killed while waiting to watch New Year's Eve fireworks. Harry Pitman, 16, died after what police described as an altercation" as crowds gathered in Primrose Hill, Camden, north London, to watch the display. Continue reading...

Calls for drastic overhaul of funding as conflicts and climate crisis drive surge in humanitarian needs and appeals fall shortThe queue for water at Metche, a camp of 40,000 refugees on the Sudan-Chad border, starts at dawn and lasts until sunset. The aid agencies helping the people there, who fled fighting in Sudan earlier this year, do not have enough money to drill boreholes, so there is a chronic water shortage.Latrines have also yet to be dug and the desert around the camp serves as an open-air toilet. There are no blankets or mosquito nets, even though nights are cold and the area is plagued by malaria. There are similar shortages at all the hastily built camps for the 500,000 refugees who have crossed into Chad since Sudan's war erupted in April. Continue reading...

Higher borrowing costs and slump in demand contribute to 17th consecutive month of contractionBritain's factories started the year on a weaker footing after 17 consecutive months of contraction, as higher borrowing costs and a slump in demand took their toll.Factory output fell by more than expected in December after a drop in orders from domestic and export clients, according to the latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply. Continue reading...