We’re no longer likely to enjoy 2-3% growth, but cheap borrowing should provoke a surge in public investmentWhen the Chinese New Year falls next month, it will become the year of the monkey, though, to date, 2016 has without doubt been all about the bear. Stock markets are feverish, the Chinese slowing economy is thought to be weaker than official statistics suggest and there’s widespread jumpiness about the US Federal Reserve’s decision to raise interest rates. From a UK perspective, this downbeat mood doesn’t neatly tally with our domestic scene. Sure, some forecasts have been notched downwards, but growth is steady. Employment is at a record high. Wages are sluggish but rising.But look back over the past decade and things start to look different. There has been no surge in GDP as would normally be expected following a deep recession; the decline in pay has been extraordinary; productivity has been comatose. Indeed, 2016’s market volatility has so captured the economic zeitgeist in part because there is already an underlying angst about the medium term growthoutlook for advanced economies – including the UK.Demographic forces are powerful, but they aren’t destiny Continue reading...

A tumbling oil price and see-saw financial markets are clear symptoms of economic instability. But what’s the cause?The new year kicked off with a global stock market and commodities rout over worries about the global economic outlook and China’s economy in particular. Plunging prices recovered at the end of last week, partly on reassurances of more stimulus to come from the European Central Bank, but traders are bracing for more volatility. At one point, oil prices fell below $28 per barrel – a 25% drop since the start of the year – on the combined effects of a supply glut and waning demand. Investors have dumped riskier stocks in favour of safe-haven assets, such as gold and government bonds. The FTSE 100 index of London-listed shares bounced back but is still down more than 5% since the start of the year. Continue reading...

Plummeting oil prices and fears about China turned screens red in trading rooms around the world. Although things may have stabilised, some fear we are on the verge of another global recessionThey were studying the snow forecasts in Davos on Friday. But the 3,000 bankers and CEOs who had flown to the Swiss ski resort for the annual gathering of the global business elite were not interested in what conditions would be like on the slopes this weekend. Rather, they were focused on the monster blizzard stalking the US.At the end of a week in which the price of oil had fallen to a 12-year low, the price of the black stuff was finally moving north again, breaching the symbolic $30 mark. The reason? Traders were betting that demand for fuel would increase as the big freeze gripped large parts of the US. Continue reading...

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

But chancellor tells Davos he will stick to ‘plan A’ as March budget loomsGeorge Osborne’s hopes of riding out the global downturn suffered a twin blow after retail sales tumbled last month and his plan to slash government borrowing appeared to be off track, despite higher tax receipts in December.Speaking in Davos on Friday, the chancellor said he would stick to ‘plan A’ despite facing calls to relax his austerity measures and fund investment to boost growth. He said he would ignore clamours to loosen the government’s purse strings and pledged to maintain the path of deficit reduction set out in his autumn statement. Continue reading...

Shares recover from week’s heavy losses, with shares boosted by rising oil prices and ECB meetingGlobal stock markets bounced back at the end of a tumultuous week as policymakers sought to play down fears the world was on the brink of a fresh financial crisis.US, European and Asian markets all rallied after weeks of losses as oil prices rose and policy makers pledged more support for the economy. Continue reading...

The Big Short explains the role of top bankers in the 2008 crash, but nothing much has changedThe UK release this week of the Oscar-nominated The Big Short, based on Michael Lewis’s book of the same name, is a fitting bookend to a time when we still believed that the broken financial system might be fixed. But the banks have won. Not a single “top banker” has been jailed and few, if any, have had to return undeserved bonuses. Measures taken since 2008 are being watered down before our eyes and, most dangerous of all, the deeper causes of the crash remain essentially intact. The Occupy movement should call a reunion so we can have a ceremony to bury all remaining hope.Related: The Big Short review – Ryan Gosling and Christian Bale can't save this overvalued stockIn the new set-up of the 80s and 90s bonuses stayed but the risk of being ruined personally was quietly shelved Continue reading...

In the third in our series, we ask whether Saudi Arabia’s response to changing times will also lead to political transformationIn the Faisaliyah mall in central Riyadh, the call to midday prayers brings down the shutters on shops selling luxurious global brands and the basement mosque fills up. Customers are routinely searched at the entrance – a woman guard in a niqab, black abaya and white gloves sits by the metal detector. Cafes and restaurants have mixed “family sections” to ensure privacy. Harvey Nichols is having a holiday sale.Business seems slow, though visitors look in vain for any serious sign of Saudi Arabia’s gathering economic crisis, born of the lowest oil revenues in decades and subsidy cuts to reduce a $98bn budget deficit – 15% of the country’s GDP. The price of petrol has just gone up by 60%, though it is still dirt cheap, and VAT and other taxes are planned – significant novelties in a country where most people have not known such things in their lifetimes.Related: Saudi king's son drives reforms and war in a year of anxiety and changeRelated: Saudi Aramco – the $10tn mystery at the heart of the Gulf stateRelated: Saudi Arabia and Isis: Riyadh keen to show it is tackling terror threat Continue reading...

Mild weather and extended discounts blamed for worse than expected 1% decline in sales values from previous yearSpending in UK shops dropped last month, as mild weather and deep discounting dented takings for retailers over the key Christmas period. Official figures show that sales values fell at the fastest pace for more than six years, down 1% in December compared with the same time in 2014.Mixed reports from big retailers since Christmas had pointed to weakness in UK retail sales, but the decline was sharper than City economists had forecast, contributing to fears of a slowdown in the wider economy at the end of 2015.Related: Fears grow of repeat of 2008 financial crash as investors run for coverRelated: The Guardian view on Marks & Spencer: challenge of the demand for choice | Editorial Continue reading...

George Osborne’s hopes of meeting deficit target in April given slight boost, but analysts say finances are not yet on trackA smaller than expected shortfall in government finances in December has given a slight boost to George Osborne’s hopes of meeting his deficit target at the end of the financial year.Borrowing of £7.5bn last month was lower than the £10.1bn expected, but analysts warned that this level failed to put the government’s finances back on track to meet the April target.Related: UK unemployment falls but wage growth weakens Continue reading...

Davos audience hears ECB president play down fears of global downturn and says EU can boost growth if it copes together with the refugee influxMario Draghi, the president of the European Central Bank, has said coping with the refugee crisis will be a boost for growth and brushed aside fears that the turmoil in global markets heralds the start of a recession.Draghi said it was important that Europe worked together to turn the challenge of coping with refugees into an opportunity and said one knock-on impact would be higher public spending.Related: Davos 2016: Refugee crisis will change Europe, says Draghi - live Continue reading...

For millions of us, the idea of planning for the long term no longer makes sense. We’re living for the moment, and the implications are terrifyingOnce upon a time there was a Frenchwoman who made it her life’s mission to save two of everything. Not just a spare for every possible eventuality – filling every cupboard to bursting, littering her cellar – but a twin for every object she owned, right down to table lamps.This hoarding made no sense at all, until it emerged that her grandfather once saved his family’s lives during the war by producing a spare reel of thread for a German soldier who needed to repair his uniform. Without that favour, they could have died. And so even as an adult, she could only feel safe so long as she had one of everything in reserve. Continue reading...

Chancellor’s Davos speech to UK business leaders stresses importance of completing promised economic reform around worldGeorge Osborne has issued a call for international action to bolster growth in the face of a “hazardous mix” of risks to the global economy.In an speech to be delivered to UK business leaders attending the World Economic Forum in Davos, the chancellor said it was important to complete the economic reforms promised by political leaders around the world.Related: IMF demands EU debt relief for Greece before new bailout Continue reading...

The full effect of China’s economic decline on the world is unclear, but for the steel city of Tangshan the future already looks decidedly bleakA billboard on the motorway into China’s steel capital evokes the golden era of the country’s blistering economic rise. “Gathering great wealth!” it boasts. “Business wins the future!”But at the Fufeng steel plant on the outskirts of Tangshan, a once booming industrial hub about 200km south-east of Beijing, there is scant sign of those glory days.

In truth the west failed to learn from the 2008 crash. Any economic ‘recovery’ was built on asset bubblesThe US stock market has just had the worst start to a year in its history. At the same time, European and Japanese stock markets have lost around 10% and 15% of their values respectively; the Chinese stock market has resumed its headlong dash downward; and the oil price has fallen to the lowest level in 12 years, reflecting (and anticipating) worldwide economic slowdown.According to the dominant economic narrative of recent times, 2016 was the year when the world economy would recover fully from the 2008 crash. The US would lead this recovery by generating growth and jobs via fiscal conservatism and pro-business policies. Reflecting the economy’s robust growth, the US stock market reached new heights in 2015, although disrupted by the mess in the Chinese stock market over the summer. By last October, US unemployment had fallen from the post-crisis peak of 10% to 5%, bringing it back close to the pre-crisis low. In a show of confidence, last month the US Federal Reserve finally raised its interest rate for the first time in nine years.Related: ‘Living within our means’ makes no economic sense. Labour is right to oppose it | Ha-Joon Chang Continue reading...

In talks with Tsipras about struggling economy, Lagarde sets out fresh conditions for further financial aid

Isn’t it about time something serious was done about the global lottery that the various stock markets have become, where share trading is just an upmarket form of gambling (Panic selling grips markets as fears for global economy grow, 21 January)? Of course, under capitalism, the basics of what the stock market does (or used to do) are part of the system but now, with trading done every second of every day, the deals have almost nothing to do with the real world. And I haven’t mentioned micro-trading, which happens between computers and faster than any human can witness.How about, for a start, making all deals last for, say, 24 hours? You buy shares and must keep them for a day. Then we could get on to some serious reform, say holding shares for a week at a time, then quarterly? I won’t go quite as far as Jonathan Swift in Gulliver’s Travels, who suggested we should all have to carry all our possessions with us all of the time, but we surely need some sanity and not this perpetual doom and boom stuff we have had this last half century or more. Continue reading...

European Central Bank chief Mario Draghi announces plans to boost EU economies after day of turmoil in global tradingThe European Central Bank brought respite to volatile financial markets after indicating it is ready to inject fresh stimulus into the eurozone as soon as March.

Stocks are having their worst start to a year in history, partly because of a plunge in the price of oil, but few economists see a repeat of the 2008 crisis aheadWall Street is drowning in oil. Stocks are having their worst start to a year in history in part because of a rapid plunge in the price of oil. The price of crude is down 28% this year already, which in turn has dragged down energy company shares in the Standard & Poor’s 500 index by 13%, which has helped pull the overall index down 9%.This even though low oil prices and the cheap prices for gasoline and other fuels that result are wonderful for consumers and many companies.Related: No global economic crisis yet, but the ingredients are there Continue reading...

It’s not just the mania for Keep Calm and Carry On … Britain’s most provocative writer on architecture targets the fashionable revival of mid-20th century aestheticsThe writer and critic Owen Hatherley has become something of a sage of modernism in recent years. Casting his gaze over the built and pop-cultural landscapes, he sorts the echt from the phoney with all the moral certainty of a Ruskin or a Carlyle. His latest book – his sixth – is a short, stimulating polemic against a suite of aesthetic and political motifs united under the promising term, “austerity nostalgia”.For Hatherley, austerity nostalgia is exemplified by the fetishisation of mid-century Danish furniture; by the coveting of the ex-council flat over the suburban maisonette; by the design aesthetic of the home goods shop Labour and Wait. Austerity nostalgia announces itself in san serif fonts. It glories in the stripped-down design of the underground network and the homely experimentalism of the GPO film unit.Related: Keep Calm and Carry On – the sinister message behind the slogan that seduced the nation Continue reading...

The DWP placed sanctions on a schizophrenic man when he fell into difficulties. It was an aggressive and destructive way to treat someone so vulnerableLuke Alexander Loy was not one of George Osborne’s “hard-working people”. The 42-year-old had schizophrenia and was unable to work (or “do the right thing”, as David Cameron now ominously terms being employed . But Luke’s story – his life – is one worth talking about.Luke lived with his mother in their two-bed council house in Birmingham and had built a stable rhythm: carving wood sculptures as art therapy in their front room, going for walks five times a day, and shopping for his elderly neighbours.Under austerity, Britain’s welfare state appears to be sliding into survival of the fittestRelated: Death has become a part of Britain’s benefits system | Frances Ryan Continue reading...

Ban Ki-moon unveils global project after UK development secretary lobbied for greater opportunities for girls and womenThe UN has called for a “quantum leap” forward in the empowerment of women at the launch of a global campaign to fully mobilise the untapped economic potential of half the world’s population.Ban Ki-moon, the UN secretary general, announced in Davos on Thursday that he was creating his organisation’s first high-level panel on women’s economic empowerment, which will come up with a plan of action later this year. Continue reading...

As leaders gathered in Davos, FTSE 100 was gripped by panic selling and entered bear market with Dow Jones also plungingFears that the global economy could be heading for a repeat of the 2008 financial crash have sent shockwaves through financial markets – prompting a rush to safe havens by investors.Oil prices fell to a fresh 12-year low on Wednesday and metal prices tumbled in response to warnings that China’s slowdown could derail the global recovery at a time when central banks, which came to the rescue in the credit crunch, have only limited firepower.Related: If this market turmoil forces a US rate cut, the outlook will truly be grim Continue reading...

King’s Fund study ranks UK 13th out of 15 original EU members and casts doubt on ministers’ claims they are giving the NHS generous cash settlementsBritain’s spending on its health service is falling by international standards and, by 2020, will be £43bn less a year than the average spent by its European neighbours, according to research by the King’s Fund.The UK is devoting a diminishing proportion of GDP in health and is now a lowly 13th out of the original 15 EU members in terms of investment, an analysis for the Guardian by the thinktank’s chief economist shows.Related: What would you like to see from the NHS' mental health services?Related: NHS has the west's most stressed GPs, survey reveals Continue reading...

There’s a gloomy feeling in the air as world leaders and business chiefs gather at the World Economic Forum in Davos

Dow ends day down 248 points while slumping oil price and gloom at Davos sends FTSE 100 tumbling officially into bear market territory• Dow suffers steep falls as FTSE 100 enters bear market – live updatesGlobal shares tumbled again on Wednesday as fears of an economic slowdown escalated and the oil price hit lows not seen since 2003.European markets collapsed following more sell-offs in Asia. In New York the Dow Jones Industrial Average had lost over 550 points by 1pm ET but staged a late rally and ended the day down 248 points, 1.55%.Ugly, very, very ugly, describes current equity markets, with momentum swinging negative yet again and the bears firmly in control. The fledgling hope from yesterday that markets were on the turn has been quashed by sharp overnight falls in Japan and Asia, which has seen European markets fall aggressively. With every upturn being followed by deeper falls, investors are increasingly wary as it becomes more and more difficult to determine what might happen next.Oil prices remain under pressure, but the consumer benefits of lower energy prices and higher disposable income have yet to filter through to the wider equity market, which remains unremittingly negative in the face of further prospective asset sales by oil exporting countries’ sovereign wealth funds. Continue reading...

Chancellor says former French finance minister is an outstanding leader who has the vision ‘to help steer the global economy through the years ahead’George Osborne has backed Christine Lagarde’s attempt for a second term as managing director of the International Monetary Fund.The chancellor nominated the former French finance minister for another four years as head of the Washington-based organisation, saying she was an outstanding leader who had the vision “to help steer the global economy through the years ahead”. Continue reading...

Jobless rate of 5.1% is lowest since 2006 but slowdown in pay growth likely to further delay any interest rate rise amid signs the UK recovery is cooling fastWage growth slowed in November to its lowest rate since February 2015 in the latest signal that the pace of Britain’s recovery is rapidly cooling down.Wages grew at 2% in the three months to November, down from 2.4% in the previous month, after breaking through the 3% barrier in the summer.Related: Unemployment rate falls to lowest figure for a decade - Politics liveRelated: Young and older people 'experience age discrimination at work'Related: George Osborne has tied a knot of fear and optimism – but is it unravelling? | Polly Toynbee Continue reading...

As shares tumble across global markets, the reaction at the World Economic Forum has varied from pessimism to stoicismI think we’re witnessing a collision of events which has provoked an immediate sense of crisis. Whether it’s commodities, China, oil prices, terrorism, geopolitical turbulence – all have landed particularly in the month of January, and there is an immediate impact which is reflected in the stock market. At the moment what is being discounted are some of the positives that come out of low oil prices in economic terms. It is only being looked at in the lens of bad news. Continue reading...

The days when one country’s economic woes could be insulated from the wider world have long gone. China’s problems could have a fearsome domino effectAnother day, another financial spasm. In London, New York, Shanghai and Frankfurt the story was the same: shares dumped and the oil price crashing to its lowest level since 2003 on fears that the China is heading into a recession that will drag the rest of the world economy down with it.Despite the fresh sell-off in financial markets on Wednesday, this is far from a done deal. For the doomsday scenario to materialise, China would need to have a hard landing, rather than simply a bumpy one, the rest of the world would have to be ripe for its own crisis, and there would need to be a transmission mechanism for delivering a problem centred on east Asia to the rest of the global economy.Related: Beware the great 2016 financial crisis, warns leading City pessimistRelated: China economy grows at slowest pace in 25 years, latest GDP figures show Continue reading...

Commodity prices are falling, crude oil is tumbling, market confidence is crashing... yet the monetary policy committee seems determined not to raise interest ratesThe credibility of the Monetary Policy Committee of the Bank of England in general, and that of its governor, Mark Carney, in particular, is now seriously in question. The concern is that they may have already missed a significant downturn. Brent crude has just fallen below $28 a barrel. Commodity prices are tumbling and global markets are approaching bear territory – and there is no sign of a floor. The US and the UK are both slowing fast. But the MPC has been asleep at the wheel.Related: UK unemployment falls but wage growth weakensThe US and the UK are both slowing fast. But the Monetary Policy Committee has been asleep at the wheelRelated: Davos 2016: FTSE 100 in bear market as global economic fears grow - live Continue reading...

There are growing fears for the health of the global economy, as shown here in graphs charting the fall of commodity prices and stock market valueGlobal stock markets suffered further heavy losses and crude oil prices continued their unrelenting slide, as world leaders and business chiefs gathered at the World Economic Forum in Davos.Related: What is a bear market? Continue reading...

Labour market data shows that despite strong employment the growth in average earnings is half the rate of pre-crash eraCast your mind back 10 years. It is early 2006 and everything seems to be going well. Unemployment is around 5%, the Bank of England prides itself on keeping inflation at or close to its 2% target, earnings are going up by 4% a year.As we now know, this was the equivalent of the Edwardian summer – the calm before the storm. Since the financial and economic crisis of 2007-09, things have never been the same again.Related: UK unemployment falls but wage growth weakens Continue reading...

Migration into Europe could lift GDP via greater state spending and long-term boost to jobs market with negative effects short-lived, says reportThe recent influx of refugees into Europe is likely to raise economic growth slightly in the short term – mainly in Austria, Germany and Sweden – and could deliver a bigger long-term economic boost to the EU if refugees are well integrated into the job market, according to the International Monetary Fund.Related: Davos 2016: Global economic fears grow as stock markets dive - live Continue reading...

US crude oil fell under $28 a barrel, its lowest point since 2003, as investors took fright at increasingly negative sentiment about the global economyAsia Pacific stock markets have been pummelled as investors took fright at a continued slide in oil prices and mounting bearish sentiment about the global economy.Related: Why are we looking on helplessly as markets crash all over the world? | Will Hutton Continue reading...

International Labour Organization predicts joblessness will surpass 200 million by end of 2017 for the first time on recordMore than 3 million people will become unemployed worldwide in the next two years, making existing jobs vulnerable and fuelling potential social unrest as the global economy slows, a report warns.

Some of the emerging markets where the food-to-detergent firm is big are sliding, but through it all the Unilever ship has sailed onPrepare for volatility, says Unilever’s chief executive, Paul Polman. If you’re running a global consumer goods company, this seems a sensible basis on which to plan. The price of oil and other commodities is slippery. Some of the emerging markets where Unilever is big are sliding, as are their currencies. Last year’s backdrop of “intensifying geopolitical instability”, as Polman puts it, remains in place.Investors, on the other hand, will be struck by the lack of volatility in Unilever’s business, taken as a whole. Sales growth last year, measured at the underlying level, was 4.1%, which was within a percentage point of the average over the past decade. Price increases accounted for slightly less than half that increase, suggesting brands such as Dove and Magnum retain clout with consumers. Core earnings per share improved 11% at constant currencies, completing half a decade of steady improvements. Continue reading...

Chancellor George Osborne is very pleased with himself at Treasury Questions – everyone’s a winner in his fantasy Britain. Apart from the losers, of courseParallel worlds, parallel lives. Where most of the UK sees a decline in manufacturing, lay-offs in the steel industry and widespread insecurity about the global economy, George Osborne sees only sunlit uplands, smiling faces and Hovis adverts. Yesterday belongs to him and we are so lucky to have him.“The redundancies at Tata Steel are deeply regrettable,” the chancellor said at Treasury questions, in a voice that expressed more a sense of acceptable collateral damage than regret. “But … ” But George was in charge. A force for good and a force for change. While lesser mortals prepared to quake and quail at the World Economic Forum in Davos, the Übermensch knew no fear. Everything he touched turned to gold.Related: Who doesn't want to see Jeremy Corbyn elected? It would be a glorious six-day reign | Frankie Boyle Continue reading...

PwC survey finds that two-thirds of chief executives see more threats facing their businesses than three years agoThe falling price of oil, the slowing Chinese economy and the risks of terrorist attacks are conspiring to make the chief executives of major companies around the world more concerned about the prospects for economic growth.Related: The Guardian view on the global economy: China sends a shiver through Davos | EditorialRelated: Davos 2016: eight key themes for the World Economic ForumRelated: IMF cuts global growth forecasts Continue reading...

International Energy Agency predicts increase in supply after lifting of sanctions against Iran, pushing prices down furtherThe world could find itself drowning in oil this year and prices could fall further as new Iranian output cancels out production cuts elsewhere, according to the International Energy Agency.An increase in supply and weakening demand growth will ensure there is an overabundance of oil until late 2016 at the earliest, the IEA said in its January report. It said the result would be the third successive year when supply exceeded demand by 1m barrels a day, and the system would struggle to cope.Related: IMF cuts global growth forecasts Continue reading...