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by Sean Farrell on (#1288M)
Country’s battle with deflation enters new phase with central bank hoping to avoid pitfalls of unconventional interest rate moveThe Bank of Japan (BoJ) has imposed negative interest rates on banks to encourage them to lend to businesses, instead of hoarding cash, to support the flagging economy and the country’s battle to break free of deflation.Related: Stock markets rebound after Japan's shock move to negative interest rates – liveRelated: Bank of Japan shocks markets by adopting negative interest rates Continue reading...
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| Updated | 2025-07-12 06:30 |
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by Phil Maynard on (#127VK)
A slowdown in China, plummeting stock prices, debt worries in emerging markets and low oil prices point to a bumpy patch in the global economy. Could we be on the verge of another major crisis, as some analysts warn? We look at the reasons to be fearful and cheerful about the economy in 2016 Continue reading...
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by Eoin Flaherty on (#127KG)
Two things are clear: radical new ways of getting rich have been invented, and things have probably never been this unequal since before the second world warOxfam’s latest report claims that income inequality has reached a new global extreme, exceeding even its predictions from the previous year. The figures behind this claim are striking – just 62 individuals now hold the same wealth as the bottom half of humanity, compared with 80 in 2014 and 388 in 2010. It appears that not only have the global elite weathered the financial crisis, but their fortunes have collectively improved.Related: We’ve been conned by the rich predators of Davos | Aditya ChakraborttyRelated: Inequality isn’t inevitable, it’s engineered. That’s how the 1% have taken over | Suzanne Moore Continue reading...
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by Justin McCurry in Tokyo on (#1270M)
The central bank has imposed a 0.1% fee on deposits in an attempt to force more borrowing as way out of the deflationary spiralJapan’s central bank has made a shock decision to adopt negative interest rates, in an attempt to protect the flagging economy from market volatility and fears over the global economy.In a 5-4 vote, the bank’s board imposed a 0.1% fee on deposits left with the Bank of Japan (BoJ) – in effect a negative interest rate. Continue reading...
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by Albert Edwards, Aditya Chakrabortty, Linda Yueh, R on (#1276X)
Economists can’t agree if gyrating financial markets mean we face a global meltdown. We asked leading analysts to debate the question … Continue reading...
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by David Hellier on (#1267J)
Lender believes claim made by instigator of £3.5bn deal with Abu Dhabi client to be ‘misconceived and without merit’The dealmaker who played a key role in finding backers for Barclays’ emergency fundraising during the 2008 financial crisis has filed a lawsuit against the lender and is reportedly seeking nearly £1bn.A spokesman for Amanda Staveley confirmed the existence of the claim but declined to put a figure on the total being sought by the financier and her firm, PCP Capital Partners. However, the Financial Times reported that Staveley is suing for almost £1bn. Continue reading...
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by Terry Macalister on (#1263J)
Price of oil temporarily leaps 8% as Russian energy minister says February discussions with Opec members will address topic of production cutsThe price of oil jumped 8% at one stage on Thursday after Russian officials said they would discuss production cuts with Saudi Arabia and other Organisation of Petroleum Exporting Countries (Opec) at a meeting next month.Brent blend almost hit $36 per barrel before sinking back to just over $34 as Saudi sources played down suggestions it had already considered reining in crude volumes. Continue reading...
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by Sean Farrell on (#1240F)
The City regulator is to re-examine events surrounding near-collapse of HBOS group and whether its bosses should face actionCity regulators are to investigate the role of HBOS’s senior management in the near-collapse of the bank during the financial crisis more than seven years ago.
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by Nils Pratley on (#124S5)
The chancellor may blame the markets for cancelled share sale, but a stock like Lloyds is a weathervane for health of UK economyGeorge Osborne has discovered that share prices can go down as well as up. The chancellor has postponed his plan to flog £2bn of Lloyds Banking Group shares to the public because stock markets are deemed too “turbulentâ€, by which he means that Lloyds shares sit at 64p, well below the state’s break-even price of 73.6p.Spring had been the deadline for the sale – now it’s not. The scheme can be resuscitated at a later date but there is a simple moral to this tale: don’t make promises on timing, because markets can make you look foolish.Related: George Osborne postpones sale of last publicly owned Lloyds Bank sharesRelated: Oil prices to stay near current level throughout 2016, World Bank saysRelated: FCA orders new inquiry into HBOS chiefs Continue reading...
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by Frances Perraudin and Rajeev Syal on (#125EZ)
George Osborne’s ‘northern powerhouse’ policy questioned as branch closure in Sheffield casts doubt on chancellor’s pledge to revitalise English citiesThe Department for Business, Innovation and Skills (BIS) is to close its largest office outside London, prompting accusations that the chancellor’s “northern powerhouse†project was empty rhetoric.Plans to close the BIS office in Sheffield by 2018 were announced on Thursday by the department’s permanent secretary, Martin Donnelly, who told the centre’s 240 staff that all those faced with job losses would be provided with “comprehensive supportâ€. Continue reading...
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by Katie Allen on (#1242W)
Manufacturing and construction sectors falter as Brexit fears, market turmoil, China slowdown and falling oil price prompt cloud economic outlookBritain’s economy picked up pace at the end of 2015 but GDP growth for the year as a whole was down markedly, as both the manufacturing and construction sectors struggled with an uncertain outlook.Official figures published on Thursday showed GDP expanded 0.5% in final three months of 2015, up from 0.4% growth in the previous quarter and in line with the consensus forecast in a Reuters poll of economists. On a year earlier, GDP was up 1.9%, after growing an annual 2.1% in the third quarter. This latest quarter marks the slowest annual expansion rate since early 2013.Related: HBOS probe launched; UK growth hits 0.5% - business live0.5% growth in #GDP in Q4, up from 0.4% in Q3 https://t.co/HtgUwDgHlyLatest stats show economy grew at 0.5%. Shows UK continues to grow steadily & despite turbulence in global economy we're pushing ahead Continue reading...
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by Phillip Inman Economics correspondent on (#124H9)
Rising house prices do not offset the fact that manufacturing and construction shrank in the last three months of 2015Last summer, a brief recovery in the manufacturing sector was already running out of steam. The construction sector followed the same path. Affected by a slowdown in global trade, the high value of the pound, and possibly the government’s determination to impose another five years of austerity, businesses became more circumspect about expanding output.Now, official figures for GDP growth in the final three months of 2015 show that these backbone of the economy activities, the stuff of making and building things, actually shrank.Related: UK economic growth slows in 2015: what the economists are saying Continue reading...
by Katie Allen on (#124E8)
Leading economists assess outlook for 2016 after figures show GDP growth rate falling from 2.9% in 2014 to 2.2% last yearThe UK economy expanded 0.5% in the final months of 2015 as expected, but for the year as a whole, growth was down markedly.Official figures show GDP grew 2.2% last year after rising 2.9% in 2014. That slowdown came against the backdrop of a waning global economy.Given the difficult international background, it is not surprising that the UK failed to sustain the more impressive economic growth seen in 2014. Services remains the main driver of the economy, while production and construction are down.The GDP figures demonstrate that the recovery remains fragile. While the services sector continues to grow, production is close to stagnation and the construction sector is now in recession. Every effort must be made to support both these sectors as we seek to rebalance the economy.Despite some global headwinds, the UK economy continued to deliver solid growth of 0.5% in the fourth quarter of 2015, close to its long-term trend rate. As in previous quarters, this reflected the strength of domestic demand and private services sectors, while manufacturing and construction output were broadly flat.Looking ahead, strong job creation, low energy prices and positive real income growth should keep consumer spending growth at a decent rate of about 2.5% in 2016. This should allow the UK economy as a whole to deliver continued steady growth of just over 2% this year, despite recent financial market volatility.Manufacturing ended the year on a flat note, rounding off a disappointing year for the sector. However, the picture remains very much a sectoral story, with those sectors exposed to oil and gas struggling, while those consumer facing, such as automotive, are faring much better on the back of a healthy labour market and strong wage growth.While we expect the sector to grow this year, the risks are mounting. Along with the oil price remaining low, slower growth in emerging markets, especially China, is likely to hamper export prospects.Our Deputy Chief Economist Zach Witton comments on today's #GDP and #manufacturing figures from @ONS #ukmfg pic.twitter.com/XflbvV73sDAfter volatility in the financial markets during the first few weeks of the year, these GDP figures should settle nerves about the health of the real economy. Growth of 0.5% a quarter is far from remarkable, but with services continuing to power the recovery, and housebuilding expected to undergo something of a revival as the year progresses, this expansion looks sustainable.Across the economy, high levels of debt remain a concern – especially at this point in the cycle. This debt bubble can still be deflated with effective monetary policy, and it would be wise to take action before it becomes unmanageable.The upturn masks an unbalanced economy and a slowing pace of expansion, with the annual rate of growth slipping to the weakest for almost three years. Survey data also point[s] to a further loss of momentum in December.Uncertainty over ‘Brexit’, weak overseas growth and financial market volatility are all creating an unsettling business environment and point to downside risks to the economy in 2016. The coming year could easily see the pace of economic growth slow further from last year’s 2.2% expansion, and the chances are growing that we will see yet another year in which interest rates are left at their record low of 0.5%.UK GDP +0.5% in Q4, but driven (once again) entirely by services according to ONS pic.twitter.com/dxJHKsitv5The figures mean that GDP in 2015 as a whole rose by 2.2% – respectable, but still a fairly significant slowdown from 2014’s 2.9% rate. And the economy faces a number of headwinds this year, potentially including the EU referendum and rising inflation and interest rates. So we doubt that we will see a strong pick-up in growth this year. Nonetheless, we don’t expect a further slowdown either. And we are still more optimistic than most about the prospects for growth next year.Sub-trend growth suggests one of Carney's conditions for rate rise - growth set to use up remaining slack - not met pic.twitter.com/ckqWdvfLiEIt’s a big concern how fragile the recovery still looks, and how unbalanced it is, with growth almost entirely dependent on services.We need a stronger recovery that’s built to last and that reaches all sectors of the economy. The weakness of manufacturing and construction is no surprise given the government’s lack of a proper industrial policy to boost the economy and protect crucial industries such as steel.This morning’s UK GDP figures provide a timely counterweight to some of the recent economic pessimism ... Although this was in line with median expectations, given the singular focus on the downside risks in recent weeks, many in the market were no doubt braced for a weaker outturn.Today’s data provides welcome confirmation that the economy continued to grow broadly in line with its trend. It remains to be seen whether this resilience can be maintained in the wake of the recent market turmoil. Given the strength of the labour market, exceptionally loose monetary conditions and the positive impact on consumer and business spending of the fall in oil prices, we believe it will.The outlook for the UK in 2016 remains fragile and we expect a slowdown in growth compared with last year. The public could easily vote to leave the European Union in a referendum later this year, if the latest opinion polls give an accurate picture of voting intention.While the longer term implications of ‘Brexit’ are debatable and depend on a wide range of factors, the short-term implications would undoubtedly be messy. If Brexit happens, Cebr envisions a sharp fall in the value of sterling, as well as further volatility in other financial markets. There would also be negative impacts on overseas demand for property and foreign direct investment – in the short term at least.Monetary policy will remain highly accommodative for most of the year and help sustain or even accelerate consumer credit growth – already at decade highs – and boost consumption.In addition, consumer confidence remains elevated and stable, with the negative effects of continuing economic and financial market turbulence being offset by record high employment levels and continued increases in house prices. Finally, further falls in the price of oil and strong competition in the supermarket sector are driving down the cost of basic necessities such as food and oil, freeing up household income to spend on other goods and services. Continue reading...
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by Stewart Wood on (#124CV)
Google, crony capitalism and zero-hour contracts are just some of the things fuelling public anger. We need to channel that rage into reformGeorge Osborne did something foolish last weekend. On Saturday morning at 8.15am, possibly as his guard was down while munching on some rösti over breakfast in Davos, he tweeted: “#Google tax bill is a victory for the action we’ve takenâ€.Related: Google £130m UK back-tax deal lambasted as ‘derisory’ by expertRelated: The Big Shortfall: how UK taxpayers are cheated by business lobbyists | Simon Jenkins Continue reading...
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by Graeme Wearden (now) and Nick Fletcher (2pm-7pm) on (#11ZQN)
Latest: US central bank leaves borrowing costs unchanged and reveals it is watching markets closely
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by Editorial on (#1220F)
The debate about prevention and cure needs to break out of the confines of the seminar room and into the political debateThe Federal Reserve on Wednesday shrewdly declined to draw firm conclusions about recent mercurial swings of the markets. But investors are at least wary about a new global downturn. Citizens are similarly apprehensive: on Wednesday, Ipsos Mori’s confidence index gave the gloomiest reading in three years. Meanwhile, the economics profession has still only done a fraction of the difficult thinking demanded by the last crash. Sure, there is more understanding than in 2008 about banks keeping rainy-day funds aside, and more realism, too, about complex financial products, which exist to conceal rather than to manage risks. But the deeper questions about a more sustainable prosperity, less prone to disruptive vicissitudes, remain unanswered. So, too, does the immediate question about how to resuscitate the economy when it next falls to the floor.The nasty end to the Nice decade – the years of non-inflationary, continuous expansion – came so abruptly in 2008 that practice had to move faster than theory. Interest-rate cuts broke all records and, before the austerity turn, there was a fiscal stimulus too. Quantitative easing, which nobody had heard of until it started happening, entered the language. The same excuse for lack of preparedness is not going to cut it again. And yet – as a sobering Resolution Foundation report lays bare on Thursday – we are in some respects even less well-placed to respond. Continue reading...
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by Guardian staff and agencies on (#121XJ)
US stock markets fell again Wednesday as the central bank left rates unchanged but pledged to monitor developments in the global economyUS stock markets fell again on Wednesday as the Federal Reserve announced it would keep key interest rates unchanged while pledging to closely monitor developments in the global economy and financial markets.In December the central bank made the decision to raise rates for the first time since the recession. Stock markets have been turbulent across the world since the move, and all the US markets entered negative territory again after the announcement.Related: Market panic’s over – but ingredients are there for more thrills on the rollercoaster Continue reading...
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by Alex von Tunzelmann on (#121N9)
Adam McKay’s subprime meltdown drama is fast, witty and furiously righteous. But when it comes to the real events behind the story, is it a good bet?Director: Adam McKay
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by Sarah Butler on (#120JR)
More than 200,000 Chinese holidaymakers visited in first nine months of 2015 and £2,700 spend per head is among highest, says VisitBritainThe number of Chinese tourists visiting the UK soared 37% in the first nine months of last year, taking the total to more than 200,000 in 2015.Chinese visitors collectively spent just 4% more than in 2014 – or £435m – according to the tourism body VisitBritain. However, that was a bounce back from a 1% fall in the same period a year before, after a 68% surge in 2013.Related: VisitBritain aims to attract Chinese tourists with new names for landmarks Continue reading...
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by Anne Perkins on (#120H2)
The Labour leadership is recruiting Mariana Mazzucato and Thomas Piketty to revolutionise thinking about the way the UK economy should workFord is trying a bold new strategy to persuade the car-buying classes that, without quite going for the Ratner strategy of rubbishing its own product, it is now building something of novel and world-beating excellence. #Unlearn is a smart way of selling the idea of a change of direction.My interest in cars expires with a recognition of the strategy, so I’ve no idea whether the product matches the claim. But I like the idea. Labour could use some of this. In fact, it is on it already.Related: The Guardian view on the UK economy: the foundations are looking shaky | EditorialRelated: How Labour will secure the high-wage, hi-tech economy of the future | John McDonnell Continue reading...
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by Alberto Nardelli on (#11ZSQ)
Measures in pound’s volatility reach levels that close in on last year’s pre-general election confusion, with buyers keen to seek protection from a slide in valueInvestors’ jitters over the Brexit referendum have reached levels not seen since the 2015 general election as financial institutions seek protection from a fall in sterling, according to market data.Measures of volatility in the value of sterling indicate mounting fears that Britons may vote to leave the EU and further weaken the British pound. Continue reading...
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by Angelique Chrisafis in Paris on (#11W63)
Twenty people arrested, with teachers, farmers and air traffic controllers also taking industrial action across country
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by Graeme Wearden (until 2.15) and Nick Fletcher on (#11VZM)
Bank of England governor says “certain developments†could mean UK assets are seen as riskier, as EU referendum approaches
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by Rose Hackman on (#11WTY)
Journalist and policy analyst Farai Chideya tackles how to survive in a time of broadening inequality and dwindling job market prospectsOn the frontlines of economic upheaval, author Farai Chideya tackles the conversation of a generation head on, and asks the big question: how can all of us establish a life of relative financial security at a time of broadening inequality and dwindling job market prospects?In her latest book, The Episodic Career, the journalist and political analyst offers a guide for American workers operating in an age of disruption and new career rules. Continue reading...
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by Chris Matthews in Accra on (#11VY0)
Soaring prices for electricity, water and fuel have triggered protests amid concern that politicians are mishandling Ghana’s economic downturnDressed in the red and black clothing traditionally worn at funerals, waving anti-austerity placards and accompanied by drums and bellowing horns, thousands of Ghanaians descended on the Kwame Nkrumah Circle in Accra in mid-January.These workers marching through the capital and other cities were showing their dismay at recent price hikes and taxes, which have increased the cost of electricity by 59%, water by 67% and fuel by 28%.Related: Ghana’s cocoa farmers turn to smuggling as profits dwindle | Mark Anderson and Billie Adwoa McTernanRelated: Ghana’s plea to IMF a sad recognition of the perils of prosperity | Monica MarkRelated: Ghana’s big business and informal traders alike hit by crumbling economy | Billie Adwoa McTernan Continue reading...
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by Katie Allen on (#11SVG)
Credit Suisse analysts predict leaving EU would cause snap recession, hit share and house prices and knock up to 2% off GDPA UK vote to leave the EU would trigger a snap recession, prompt a fall in share prices and house prices and knock as much as 2% off GDP, according to analysts at the investment bank Credit Suisse.Wading into the debate over the upcoming referendum, they predict the UK will probably vote to stay in the bloc. But were the public to opt for Brexit, the consequences would be “drastic and long lastingâ€, say the analysts.Related: We are perfectly positioned within Europe. Why change it?Related: Unilever says its 7,500 UK jobs will not suffer in case of Brexit Continue reading...
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by Katie Allen on (#11SBA)
Demand in January fell faster than in December although companies are keener to invest and recruitUK manufacturers have suffered a further drop in orders this month, according to a poll that suggests the slowing global economy is hurting demand for exports.The latest snapshot of industry from the CBI showed order books deteriorated again in January, at a faster pace than December and more sharply than City economists had been predicting.
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by Andrew White on (#11RT4)
With growing numbers of jobs threatened by automation, reviving old ideas of an unconditional income may be the best way to protect workersAt a time of global economic insecurity, an insightful commentator identified the existential threat that technology poses to work:Related: Dutch city plans to pay citizens a ‘basic income’, and Greens say it could work in the UKRather than lamenting what automation robs us of, why not use it to generate greater opportunities? Continue reading...
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by Reuters on (#11RHX)
Japan’s Nikkei and the Shanghai Composite Index nudge up nearly 1% helped by expectations central banks will ease monetary policyShares in Chinese and other Asian markets began the week on a firmer note, extending gains from Friday after a rally in battered oil prices prompted a rise in global equities.
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by Costas Lapavitsas on (#11RE1)
Alexis Tsipras has embraced wholesale the austerity he once decriedToday marks a year since a radical left government was elected in Greece; its dynamic young prime minster, Alexis Tsipras, promising a decisive blow against austerity. Yanis Varoufakis, his unconventional finance minister, arrived in London soon after and caused a media sensation. Here was a government that disregarded stuffy bourgeois conventions and was spoiling for a fight. Expectations were high.Related: The crucifixion of Greece is killing the European project | Seumas MilneRelated: Greek general strike: Petrol bombs and teargas during anti-austerity protest - as it happened Continue reading...
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by Katie Allen on (#11QQ9)
Centre for Cities urges the government to address the geographical divide by continuing to increase investment in regional economiesAlmost half of the UK’s biggest cities have low-wage, high-welfare economies, according to a healthcheck on urban Britain that underscores the challenges for the government’s benefit-cutting agenda.George Osborne used his first budget of the Conservative government last summer to advocate a “higher wage, lower tax, lower welfare countryâ€. But a report published on Monday warns that his vision will take several parliaments to create, given current shortfalls in education, a housing crisis and inefficient jobs programmes.
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by Saeed Kamali Dehghan on (#11Q3C)
Sanctions have been lifted but uncertainty over US authorities’ stance means banks are reluctant to handle paymentsA week after the lifting of sanctions against Iran, major European banks are still reluctant to handle Iranian payments as they remain wary of being the first to test the reaction of US authorities.
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by Tobias Jones on (#11PQY)
Ever since Thomas More wrote Utopia 500 years ago, visionaries from William Morris to Ursula K Le Guin have dreamed of ideal worlds. But beneath the fig-leaf of fiction, the results are often bland – or bloodyA quarter of a century ago, the whole idea of utopia seemed irredeemably sullied. At the start of the 1990s, the largest social experiment in human history – the USSR – imploded, and with it went the notion that imagining a radically different society was a serious activity. It seemed that the rewards of such experiments were always so enticing that genocide inevitably ensued.That was the lesson drawn from any totalitarian regime informed by the highest (or lowest) idealism: the Khmer Rouge, the Videla regime in Argentina, Nazi Germany, you name it. Back then, it was thought best not to fantasise too much about a better world, but to learn to live in this one. The academic and political atmosphere in the 1990s was decidedly pragmatic, rather than optimistic. It was an era in which the liberal democracies celebrated (prematurely, of course) “the end of historyâ€. The story of humanity was a march to freedom, we were told, and we had arrived. This was as good as it got, and the idealists and unrealists should stop fantasising, because it was a dangerous hobby.Related: Utopias, past and present: why Thomas More remains astonishingly radical Continue reading...
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by Katie Allen on (#11PHT)
Data expected to show modest growth in 2015’s last quarter but this could be constrained by fears over China’s economy and EU referendumThe resilience of the British economy in the face of stuttering global markets will be tested this week, with the publication of official UK growth figures due on Thursday.The first snapshot of GDP in the final months of 2015 is expected to show that growth held up at a modest pace, helping the UK outperform other advanced economies during last year as a whole.Related: Why is the global economy suffering so much turbulence?Related: UK unemployment falls but wage growth weakensRelated: Sluggish economies are the new western norm. But we can act to lift the gloom | Gavin Kelly Continue reading...
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by Guardian Staff on (#11NXK)
After a few wild days for share prices, investors should keep an eye on oil prices, China’s slowdown and the US Fed’s interest rate to gauge the world’s economyBlink and you missed last week’s turmoil on the financial markets. On Wednesday, billions were wiped off share prices; on Thursday and Friday they were wiped back on. The FTSE 100 index ended the week higher than it started. Just a bout of new year jitters? Can investors now settle back and enjoy a period of calm?Probably not. It is easy to laugh, or groan, at markets’ ability to swing from gloom to optimism, but volatility tends not to appear out of thin air. Take a step back from this week’s excitement and remember that London’s blue-chip index has lost about 1200 points since its closing peak of 7104 in April last year. The factors driving that 17% decline are unlikely to disappear quickly. Last week’s brief panic suggests investors fear it wouldn’t take much to intensify the pressure. Continue reading...
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by Sean Farrell on (#11NXN)
Despite the plunging oil price, no one wants to rock the boat with the powerful Anglo-Dutch firmIt’s nine months since Shell announced it was buying BG Group in an agreed £47bn deal and almost everything has changed. Back in April, the oil price appeared to be recovering from its fall below $50 a barrel but the price has since plunged below $30. The International Energy Agency warned last week it could fall further in a world “awash†with oil.Shell and BG shareholders vote on the takeover this week but, despite the industry’s dire state, they will approve the deal, now worth £35bn to reflect Shell’s depressed share price. This is partly due to faith in the ability of Shell’s chief executive, Ben van Beurden, to make it work. It’s also because most big shareholders don’t want to rock the boat in public with a company as powerful as Shell. Only Standard Life has broken ranks by declaring it would vote against. Continue reading...
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by William Keegan on (#11NQ8)
Being in the EU but outside the euro and Schengen is highly advantageous - and far better than anything that could be achieved by leaving and renegotiating‘We should miss Britain a lot. But Britain would miss the European Union even more.†The speaker was a senior member of the Italian government, in response to a question about the attitude of Italians to the thorny issue of Brexit. The occasion was the annual Venice Seminar, where members of the Italian government speak frankly, but not for direct attribution, on the political and economic scene.For many years the views expressed at those seminars about the Italian economy have been a triumph of hope over experience. For example, the Italian economy managed, after the initial impact of the great recession of 2008-10, to contract further in 2011 and 2012 when even the British economy was beginning to recover. Continue reading...
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by Gavin Kelly on (#11N2V)
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...
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by Katie Allen on (#11N3D)
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...
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by Jamie Doward, Larry Elliott in Davos, Rod Ardehali on (#11N3F)
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...
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by Graeme Wearden in Davos on (#11K8Y)
Rolling coverage of the final day of the World Economic Forum in Davos
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by Phillip Inman and Katie Allen on (#11HR2)
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...
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by Julia Kollewe and Katie Allen on (#11FVW)
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...
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by Joris Luyendijk on (#11H9M)
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...
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by Ian Black in Riyadh on (#11GSG)
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...
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by Katie Allen on (#11G8F)
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...
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by Phillip Inman Economics correspondent on (#11G8H)
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...
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by Larry Elliott Economics editor on (#11FXQ)
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...
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by Gaby Hinsliff on (#11FFW)
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...
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by Larry Elliott, Jill Treanor and Graeme Wearden in on (#11ETZ)
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...
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