Markit/Cips UK manufacturing PMI report shows export and domestic orders picking up, confounding economists’ expectationsBritish manufacturers enjoyed a recovery in output and new orders last month, according to a survey that will raise hopes the sector is finally shrugging off its recession.

A predicted global meltdown passed without event. But there are enough warning signs to suggest we are sleepwalking into another disasterThe 1st of October came and went without financial armageddon. Veteran forecaster Martin Armstrong, who accurately predicted the 1987 crash, used the same model to suggest that 1 October would be a major turning point for global markets. Some investors even put bets on it. But the passing of the predicted global crash is only good news to a point. Many indicators in global finance are pointing downwards – and some even think the crash has begun.Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world.Related: Britain is heading for another 2008 crash: here’s why | David Graeber Continue reading...

Official PMI came in at 49.8 for October, while new export orders were also down for the 13th month in succession

UK and US have outperformed eurozone for same reason they did better in 1930s: they have made fewer macro-economic blundersI told you so. Barack Obama is too schooled in the niceties of diplomacy to put it as bluntly. But he would be well within his rights to utter those four words when he sits around the table with Angela Merkel at the G20 summit next week.Back in 2010, when the half-yearly gatherings of developed and developing countries were in their infancy, the G20 met in Toronto. Up until this point, the summits had shown a welcome unity, with all nations committed to the goal of avoiding a second Great Depression. Continue reading...

George Osborne’s come-uppance in the Lords and Trudeau’s victory in Canada suggest austerity may be losing its grip on the popular imaginationThose of us who have opposed George Osborne’s austerity policies throughout can take some comfort from two successive events on either side of the Atlantic. The first was the resounding victory of Trudeau the younger’s Liberal party in Canada on an unashamedly Keynesian, anti-austerity electoral platform. The second has been the way that the chancellor (indeed chancer) of the exchequer received his come-uppance from the House of Lords over his dishonourable programme of drastic reductions in tax credits.First, some background. Hardly anybody can be found these days who will say that they ever thought the Labour party stood a chance of winning under Ed Miliband. Yet David Cameron was sufficiently concerned to call a referendum on our membership of the European Union in order to ward off a threat from Ukip that might well have let Miliband in. Continue reading...

European Central Bank audit identifies capital shortfall in worst-case scenarioGreece’s four main banks need to find another €14bn (£10bn) of reserves to ensure they could withstand an economic downturn, the European Central Bank said on Saturday.The four banks – Alpha Bank, Eurobank, NBG and Piraeus Bank – have until 6 November to say how they intend to make up that shortfall, the ECB said.Related: Greece prepares to receive first funds after Germans back bailout Continue reading...

Helen Pidd reports that at the local government select committee on Monday Kieran Quinn, the Labour leader of Tameside council, praised George Osborne for being “very clever in as much as he has been able to bully, cajole, persuade other ministerial colleagues to give up some of their powers” (Labour should seize the day on elected mayors, 28 October). Other Labour council leaders throughout the north are lining up for what they see as more powers coming their way from Osborne’s “northern powerhouse”.What is lacking is any democratic involvement in these devolution agreements. Pidd reports that Greater Manchester “gains control over the region’s £6bn health and social care budget”. So who will get the blame for cuts in health and social care? Labour council leaders. Continue reading...

Prices across the single currency region were flat in October, while the Bank of Japan cuts its forecasts again1.47pm GMTTime for a quick recap.

Study shows a fall in infrastructure projects across the northern powerhouse area but the region is leading the way in housebuildingGovernment pledges to spend more on infrastructure projects in the north of England have been coming thick and fast since the UK chancellor unveiled plans for his “northern powerhouse”. But George Osborne has a lot of lost ground to make up, according to a new analysis of construction data revealing a fall in infrastructure activity across the northern powerhouse region.Infrastructure activity fell in London and across the combined regions where Osborne wants to create a network of northern cities to “take on the world”, according to an analysis of the latest construction data by Scape Group, a public sector-owned building consultants.Related: George Osborne has plenty on his plate with the UK economy Continue reading...

If the US fails to ratify the TPP because of fears about immigration, it would be a damaging blow to international cooperationFollowing the conclusion of the Trans-Pacific Partnership by 12 Pacific rim countries, debates about the costs and benefits of trade liberalisation are intensifying. The early leaders in the US presidential campaign – both the Republican Donald Trump and the Democrat Hillary Clinton – have expressed opposition to the TPP, though as secretary of state, Clinton called it the “the gold standard of trade deals”.The right level of trade openness is not a new debate. Historically, trade systems have ranged from rather open to severely restricted by rules, tariffs, or non-tariff barriers, driven by shifts in the relative strength of liberalising or protectionist economic and political forces. But even in closed systems, however severe the penalties they impose on trade, parallel markets usually develop, owing to the “gains from trade” generated by natural economic forces.Related: TPP deal: US and 11 other countries reach landmark Pacific trade pactRelated: From cars to cough medicine: why the Trans-Pacific Partnership matters to you Continue reading...

The central bank keeps its monetary powder dry as it gambles that the government’s other policy initiatives will kickstart the struggling economyThe Bank of Japan has held off expanding its massive monetary stimulus programme, preferring to keep its powder dry in the hope that the economy can overcome the drag from China’s slowdown without extra support.Related: The golden age of central banks is at an end – is it time for tax and spend?Related: Why China's interest rate cut may be bad news for the world economy Continue reading...

Separate surveys find October sales undershot expectations, while shoppers are more uncertain on whether it is a good time for major purchasesWorries about a global downturn have knocked consumer confidence with retail sales losing momentum over recent weeks, according to the latest reports signalling a slowdown in the UK economy.October marked a five-month low on a barometer of consumer mood from the market research group GfK, while a separate survey of retailers by the business group CBI showed sales had undershot expectations following a strong September.Related: GDP growth in the UK slows more than expected to 0.5% Continue reading...

Standard & Poor’s warns country would be downgraded one notch on leaving, which could double if relations with Brussels sourBritain’s credit rating could be cut by as much as two notches if it leaves the European Union, according to Standard & Poor’s, the only big ratings agency to still give Britain the top ranking.A vote to quit the EU would be likely to result in a one-notch downgrade, which could be increased to two notches if relations between London and Brussels deteriorated significantly, the agency’s chief sovereign rating officer told Reuters in an interview.

Gross domestic product increases at 1.5% annual rate after expanding at 3.9% in second quarter, as businesses reduced restocking warehousesUS economic growth cooled in the third quarter despite a pick-up in consumer spending as a glut on inventory led to businesses cutting back on restocking warehouses.Gross domestic product (GDP) – the broadest measure of economic health – increased at a 1.5% annual rate, a significant drop from the 3.9% annual growth of the second quarter, the Commerce Department said on Thursday. The main drag came from businesses stockpiling inventory, however, and economists expect growth to improve in the fourth quarter.Related: Federal Reserve keeps interest rates unchanged but hints at December rise Continue reading...

American GDP growth weakened this summer despite solid consumer spending, as firms cut back on their inventories3.16pm GMTIf you’re just tuning in, here’s what you need to know about the slowing US economy:US economic growth braked sharply in the third quarter as businesses cut back on restocking warehouses to work off an inventory glut, but solid domestic demand could encourage the Federal Reserve to raise interest rates in December.Gross domestic product increased at a 1.5% annual rate after expanding at a 3.9% clip in the second quarter, the Commerce Department said on Thursday. The inventory drag, however, is likely to be temporary and economists expect growth to pick up in the fourth quarter given strong domestic fundamentals.Related: US economic growth slows in third quarter as businesses cut back3.08pm GMTThis GDP report doesn’t resolve the confusion over when US interest rates will rise.Although growth slowed, the economy doesn’t look weak enough to rule out a hike this year.Forward-looking surveys have been signalling a slowdown, the strong dollar is hitting corporate profits, business investment is growing at only just over 2%, and inflationary pressure eased in the third quarter.The US central bank would have known what the growth figures were before it met this week. It clearly wants to leave all options open, not least even though a move before the end of the year would probably require a big jump in non-farm payrolls – the key measure of the health of the labour market – in the next couple of months.Related: US interest rates: slowdown in growth is no indicator of pre-Christmas rise2.56pm GMTToday’s growth figures look better if you ignore the fact that US companies reduced their spending on inventory-building.Capital Economics explains:The slowdown in GDP growth to 1.5% annualised in the third quarter, from a very strong 3.9% in the second, was mainly due to a big drag from inventories, which subtracted 1.4% points after making a neutral contribution in the previous quarter.The growth rate of final sales to domestic purchasers, a better gauge of underlying demand that strips out inventories and net external demand, was still as high as 2.9% in the third quarter.2.45pm GMTAlasdair Cavalla, economist at the Centre for Economics and Business Research, believes the Federal Reserve won’t be deterred from hiking rates in December by today’s report.This is a disappointing result for the world’s largest economy, but not disastrous. The rate was expected to fall given evidence from reduced hiring activity compared to earlier in the year, while leading indicators corroborated the slowdown....Yesterday the Federal Reserve revised its guidance. It was interpreted to mean a rate rise in December, barring disastrous domestic performance before then, regardless of what happens in the global economy. (The last proviso had been in doubt.) Today’s slowdown was as expected – something the Fed would have no doubt known yesterday. We maintain our expectation of a December rate rise.2.43pm GMTA reminder that this recovery is historically rather weak:US Real GDP growth during the current expansion: 2.2%. Slowest growth recovery in history. pic.twitter.com/bgygrU1TbzUS Nominal GDP Growth (YoY) falls to 2.9%. In the past, nominal growth has never been this low outside of recession. pic.twitter.com/q5Rj3YvM9A1.57pm GMTIt’s quite possible that US growth will bounce back this autumn.Sky News reckons the slowdown between July and September is a temporary affair:The slowdown was blamed on businesses in the manufacturing, wholesale and retail sectors reducing unwanted stockpiles or deciding not to restock heavily, taking 1.4 percentage points from the third quarter’s growth.However, economists expect that to be a blip - with GDP growth picking up in the current fourth quarter given the looming holiday season, low inflation and stronger wage growth and hiring.US Econony Endures Sharp Summer Slowdown https://t.co/YXqGSybRpu pic.twitter.com/uw9ejSVQqb1.50pm GMTShares are dipping at the start of trading in New York, as investors ponder the health of the US economy.The Dow Jones industrial average has dropped 35 points, or 0.2%, to 17,743 after the opening bell - which was rung by a musical star:The amazing James Monroe Iglehart (Genie in Broadway's "Aladdin") rings the @NYSE bell today $DIS pic.twitter.com/KNgQZkExui1.35pm GMTJames Knightley of ING says the detail of today’s report isn’t all bad:Inventories was a huge drag, subtracting 1.44 percentage points from growth. Investment in non-residential structures was down 4%, but everything else grew and net exports didn’t really take anything away either.1.33pm GMTHere’s Chris Williamson of Markit on today’s growth figures:“In particular, third quarter GDP was dragged down by a far smaller accumulation of inventories than in the second quarter, which is estimated to have reduced growth by 1.4%. This could therefore reverse in the fourth quarter as stock levels are rebuilt.“The composition of growth was also noteworthy from a policy perspective. As expected, exports acted as drag on growth, reflecting sluggish demand in overseas markets and the dollar’s appreciation, as did the energy sector, which is slashing capacity due to falling prices. But, importantly, consumer spending remained robust, with growth of expenditure merely easing from 3.6% in the second quarter to 3.2% and hinting at only a modest slowing of demand in the domestic economy.1.20pm GMTHere’s a breakdown of the key points in the US GDP report:1.13pm GMTThe US economy has now grown for six quarters in a row, since suffering a shock contraction during the bad winter of early 2014.Economic Growth in US cools as companies rein in inventories. US Q3 misses: 1.5% vs 1.6% exp https://t.co/jM7BcZP1eB pic.twitter.com/HocRg7cyQ11.06pm GMTThe Financial Times have helpfully drawn a barchart showing US annualised growth over the last 14 quarters (from their news story, here)12.58pm GMTWe’ve also got data showing that consumer inflation in the US fell during the last quarter.The personal consumption expenditure (PCE) fell to 1.2%, down from 2.1% in the second quarter.#GDP: Meh, tending to yuck. Consumers consuming sorta respectably. PCE Price index falls more to 1.2%. In normal times #Fed w/be cutting now12.52pm GMTBloomberg’s Carl Riccadonna reckons this growth report suggests US interest rates should remain at their current record low:Overall, GDP growth slipped from 2.7% to 2.0%--this will not give the Fed confidence that time is right for liftoff.12.48pm GMTThis excellent spreadsheet shows which parts of the US economy grew in the last quarter (in green) and which shrank (in red):Contributions to Percent Change in Real GDP: pic.twitter.com/CvGztxe6CW12.45pm GMTThe US has grown by an average of 2% so far this year -- is that really enough to justify a rate hike in December?#US GDP at 1.5% in Q3 leaving average quarterly growth so far this year at a rather modest 2% - we are at or a even a little below trendIf you're counting, GDP growth has averaged 2 percent through first three quarters of 2015. Another solid year, not a breakout year.12.41pm GMTToday’s GDP report shows that US consumers drove growth in the last three months.Household spending grew 3.2% in the quarter, suggesting the domestic economy remains strong.12.37pm GMTThis US slowdown means that Britain is growing faster than America, at least over the last three months.UK GDP rose by 0.5% in the third quarter, which equates to an annualised rate of 2%.12.36pm GMTThis growth reading is broadly in line with forecasts:GDP forecasts were quite accurate, it turns out. No big surprises here.12.31pm GMTHere we go! The US economy has slowed sharply in the third quarter of this year.GDP rose by an annualised rate of just 1.5% during Q3, according to data JUST released by the Commerce department. That’s a serious slowdown on the 3.9% recorded in the second quarter.12.25pm GMTComing up at the bottom of the hour, the Q3 Advance US GDP report will be released. Traders expect a 1.6% annualized rate of growth.12.19pm GMTJust 10 minutes to go until we learn how the US economy fared in the last three months.Remember: Wall Street expect a sharp slowdown, from an annual rate of 3.9% in Q2 to around 1.6% in Q3.12.00pm GMTThe UK has made significant progress in creating gender diversity in the UK, but more needs to be done to get the City closer to parity.As flagged up early this morning, Lord Mervyn Davies has called for women to hold at least 33% of all board positions by the end of this decade.There is no evidence to warrant an about turn, but plenty of evidence to show the voluntary regime is working, as each and every month the percentage of women on FTSE boards increases.”Related: A third of boardroom positions should be held by women, UK firms toldImpressive progress with women on boards. Comments on @FT article show there is still some way to go @30percentclub pic.twitter.com/eFTrWleZmK11.26am GMTBack in the UK, the latest snapshot of retail sales has come in weaker than expected, raises further questions about the strength of the wider economy.“Growth in sales and orders for high street retailers remains resilient, but there has been a slight slowdown in the pace of that growth following a strong September.“Internet sales are starting to ramp up again as we head towards Christmas and we would expect them to continue this positive pattern until the end of the year.11.15am GMTCity veteran George Magnus makes a typically astute point:Too late. Countries w/o state interference in fertility had lower birth rates. It's called getting richer https://t.co/5ljCTEVnxhParty: we'll leave the one-child policy to the property market instead.11.14am GMTWe should remember that China’s one-child-per-family policy had already begun to be relaxed before today’s news.In 2013, Beijing said couples could have two children if one of them was an only child (fairly likely, given the old policy)You could have a second child if you or your partner were yourself an only child. That alongside the fact it was already possible to buy yourself an exception and it didn’t count if you were a rural family whose first child was a girl meant there were quite a few loopholes. And in 2007, via JPM, a family-planning official in China estimated the one-child policy applied to less than 40% of the population. .Better hope this attempt goes better than that 2013 attempt to shake things up. As Cap Econ said of that move, “Partial easing of the policy in late 2013 – the government allowed couples to have a second child if one of the parents is an only child – didn’t increase the birth rate by as much as the government had anticipated.My man @DavidKeo has the definitive piece on China's latest tweak to the rules on number of children allowed https://t.co/jzxsxRubch11.04am GMTThe New Zealand dollar is also getting a boost; its dairy industry could benefit from faster population growth in China.New Zealand Dollar flies as #China drops one-child policy. pic.twitter.com/ZpK5ktWSoe10.48am GMTShares in French consumer giant Danone have jumped by 2% after news broke that China is ending its one-child-per-family policy.Danone is a major producer of baby food and formula, so should benefit quite quickly from the change.10.44am GMTBig news breaking in China... Beijing is abolishing the one-child per family policy as part of its attempts to boost growth.That’s according to the official newswire, Xinhua, which is reporting that all couples will be allowed two children.Xinhua: China is targeting "medium-high" eco growth for 2016-2020. Clarida on @bsurveillance says if this a departure from figures, it's NB.Long-run GDP is basically population growth times productivity. Expect #China's new two-child policy to have an impact in 20 yearsImpact of the #China decision to allow 2-child families won't be felt yet, but will be massive for the next generation in Asia, circa 2035+10.31am GMTWe also have new consumer confidence figures for the eurozone, which show a small deterioration this month.CHART: Italy's consumer confidence higher than Germany's for the first time in 5 years. France remains an outlier. pic.twitter.com/6ve3HoHQM210.27am GMTThe latest survey of European economic confidence is out, and it shows that firms are a little more optimistic.The Commission’s Economic Sentiment index has risen to 105.9 in the eurozone, up from 105.6 in September, and closer to the wider EU measure.10.07am GMTTraders in Frankfurt aren’t too impressed by Deutsche Bank’s new turnaround plan.Shares in the company have slumped by 6% this morning, as investors digest the thousand of job cuts announced by John Cryan today. His decision to axe dividends in 2015 and 2016 has not helped the mood.“We still believe there are major risks here and therefore think a capital increase in 2016 is still highly probable,” Citi analysts said in a note.A trader said: “Investors are very disappointed. Two years of no dividends and CEO Cryan cautions 2016 and 2017 won’t be strong in terms of business either. That’s a long time and shareholders are wondering why they should stay invested.”9.53am GMTSomething for London property owners to ponder...UBS Real Estate Bubble Index shows majority of of world cities significantly overvalued. London is especially bubbly pic.twitter.com/4RcmbR9lfv9.41am GMTToday’s US growth report (due in under three hours) could be less grim than some economists predict, reckons Ilya Spivak, currency strategist at DailyFX.He believes that Wall Street forecasts may not capture the latest economic data, such as better-than-expected trade figures released yesterday. So the slowdown might not be quite as severe....The preliminary set of third-quarter US GDP figures is in focus. The annualized growth rate is expected to register at 1.6%, down from 3.9% recorded in the three months through June. US economic news-flow has improved relative to consensus forecasts recently, hinting analysts’ models are underestimating the economy’s vigor and opening the door for an upside surprise.Such a result may boost the likelihood of a 2015 Fed rate hike in the minds of investors, pushing the US Dollar higher. The impact on risk sentiment trends is unclear for now but whatever happens may help establish a dominant paradigm in the days and weeks ahead.9.23am GMTDeutsche Bank has also revealed that 4,000 of its 9,000 job cuts will fall in Germany.Staff who survive the cull could also be also hit in the pocket. John Cryan says it would be “unacceptable” to not share the consequences of recent poor behaviour.9.15am GMTIt’s a black morning for Deutsche Bank staff, as new chief executive Jon Cryan wields the axe at Germany’s biggest bank.“We must reduce Deutsche Bank’s complexity”8.50am GMTThose disappointing results from Barclays and Royal Dutch Shell have helped to wipe almost 1% off the FTSE 100 this morning.The blue chip index is down 53 points at 6383, with mining stocks among the big fallers.Miners in the bad books again. $FTSE pic.twitter.com/U51OpSBvwcHelping drag the commodity sector as a whole further into the red was Shell; announcing its third quarter results less than 48 hours after revealing its latest ($2 billion) write-down in relation to its failed Carmon Creek project, the oil giant slipped to a $6.1 billion loss after the cost of ending multiple long term projects added up to a whopping $8.2 billion.This pushed Shell nearly 2% lower after the bell, worsening the situation in an already loss-loving sector.8.34am GMTShares in Barclays have fallen by 3.5% in early trading, after the bank missed profit forecasts and posted a 10% drop in adjusted earnings.Barclays also revealed that ring-fencing its retail banking arm will cost £1bn, on top of £2.3bn bill on legal costs and compensation.As its new boss, Jes Staley, pledged to clean up the bank’s reputation, Barclays said it was facing £290m redress costs as a result of an internal review relating to rates for foreign exchange transactions between 2005 and 2012.The figures were released a day after Barclays named Staley, a US investment banker, as its new chief executive. He is on a £10m pay packet and will start on 1 December.Related: Barclays legal bill hits £2.3bn in nine months8.25am GMTThe UK government has taken another step towards untangling itself from the banking sector, by selling more shares in Lloyds Banking Group.8.12am GMTMorgan Stanley reckons the Federal Reserve will be feeling pleased with itself:MS: Fed was aiming for markets to adjust to better price-in a December hike. At close-to 50/50 now, the Fed got what it was looking for.8.10am GMTBritain’s economy may be slowing down, but house prices are still rising.“Over the past five months annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term.While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand.8.04am GMTThis explains why the markets are taking the Federal Reserve’s comment about considering a rate rise at its “next meeting” so seriously:JPM's Feroli: the statement's direct reference to the 'next' mtg was the first such mention of possible action at a subsequent mtg since '997.59am GMTToday’s US GDP report will probably show that growth has fallen back below the 2% trend rate.The Wall Street Journal explains:The economy has grown at little better than a 2% pace since the recovery began in mid-2009. That’s largely because a quarter or two of above-trend growth has been upended by a weak performance.If the third-quarter data turns out as economists project, growth for the year will have decelerated from last year’s 2.4% increase.7.53am GMTBefore last night’s Fed meeting, investors were only pricing in a 35% chance that US borrowing costs would rise in December. It’s now a 48% chance:Morning Note: 1. Premier Li floats 6.5% target. 2. DB plans to scrap dividend. 3. And there was a Fed meeting... pic.twitter.com/6IZW1ryiXy7.49am GMTIn a few hours we find out how badly the US economy has suffered from the problems in emerging markets, and China’s slowdown.7.32am GMTGood morning , and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Today we’ll be mopping up the reaction to last night’s Federal Reserve meeting, where US policymakers floated the serious possibility of raising interest rates in December.“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation.”A new sentence in the Fed monetary policy statement has put a December rate hike by the Fed back on the table.G10 currencies slid against a resurgent US dollar, while the worst was left for emerging market currencies. The Korean won, Indonesian rupiah and Malaysian ringgit saw the heaviest selling in Asia.#Dollar at 2-1/2-month high after Fed keeps Dec rate hike on agenda. Euro trades <$1.10. https://t.co/3tvmIjbBv3 pic.twitter.com/MEpU4ADLhJDeutsche Bank posts €6bn Q3 loss.LATEST: Barclays 3rd-quarter adjusted pretax profit is £1.4 billion ($2.1 billion), down 13% https://t.co/CodSGQmEeQ pic.twitter.com/xNmRCIrgwmOil Giant Shell Slumps To £4bn Quarterly Loss https://t.co/c7oH8bYvny pic.twitter.com/MmSaJXMYd0CITY AM: the 33% club #tomorrowspaperstoday pic.twitter.com/NZ6Svjjda8 Continue reading...

The rising tide of illiberalism and nationalism threatens to break up the EU. What is needed as an urgent priority are policies to boost demand, job creation and growthThe recent victory of the conservative Law and Justice (PiS) party in Poland confirms a recent trend in Europe: the rise of illiberal state capitalism, led by populist rightwing authoritarians. Call it Putinomics in Russia, Órbanomics in Hungary, Erdoğanomics in Turkey, or a decade of Berlusconomics from which Italy is still recovering. Soon we will no doubt be seeing Kaczyńskiomics in Poland.All are variations on the same discordant theme: a nationalist leader comes to power when economic malaise gives way to chronic and secular stagnation. This elected authoritarian then starts to reduce political freedoms through tight-fisted control of the media, especially television. Then, he (so far, it has always been a man, though France’s Marine Le Pen would fit the pattern should she ever come to power) pursues an agenda opposing the European Union (when the country is a member) or other institutions of supra-national governance. Continue reading...

The American economy is performing far better than the fall in annual growth from 3.9% to 1.5% suggestsNothing about the world’s biggest economy is clear at present. Will the Federal Reserve raise interest rates before Christmas? Nobody is really sure. Is the economy still recovering well or is it on the cusp of a fresh downturn? The jury’s out on that and the latest data doesn’t help much either.Related: US economic growth slows in third quarter as businesses cut back Continue reading...

Bank warns inflated prices are a bubble at risk of bursting with prices decoupled from incomes, and says new investors should expect no medium- or long-term gainHouse prices in London are the most over-valued of any major city in the world and are in “bubble-risk territory”, a report by economists at UBS has found.Foreign investment, the help-to-buy scheme, “alluring” yields for buy-to-let landlords, and ongoing population growth have all led property prices in the city to decouple from local incomes, and there could be a “substantial price correction” if the conditions for investment deteriorated, the report said.Related: Cost of average London home rises to £500,000Unaffordable housing points to high dependence on foreign demand. So the risk of a price correction, should that demand weaken, is elevated, and the long-run appreciation prospects lower,” it said. Continue reading...

CBI warns of challenges ahead caused by weakening global economy and retail price competition, but says outlook for sales growth remains ‘decent’Retail sales growth has slowed sharply in recent weeks following a strong September, according to a business survey.The latest snapshot of sales in the UK from the CBI undershot retailers’ expectations and follows a series of indicators pointing to the UK economy losing momentum. Official figures this week showed UK GDP growth eased in the third quarter. Continue reading...

Your report (Portugal faces political crisis as leftists vow to topple new government, 26 October) does not do justice to what is happening in that country. There has just been a general election. A leftwing coalition campaigning on anti-austerity policies has won 50.7% of votes cast. It also possesses a majority of seats in the assembleia. The president, however, has not simply expressed “grave reservations” about whether this grouping should take power; he has blocked it on the grounds that this is “the worst moment for a radical change” and is trying to install a pro-troika government led by the very centre-right forces that the electorate has rejected. This is a coup d’état! Come on, Guardian, we expect better from you.

Fed policymakers vote to leave rates near zero after two-day meeting but indicate rate hike is near by dropping warnings about economy’s fragilityThe Federal Reserve on Wednesday kept interest rates unchanged at their record low of near-zero, but raised the likelihood of a rate hike in December by dropping previous warnings about the fragility of the global economy.

It’s almost Halloween and pumpkins are out in full force – but they’re not just decorating front door stoops or used for pie filling. Since the Pumpkin Spice Latte was introduced by Starbucks 12 years ago, pumpkin has become a flavor in products from hummus to beer to dogfood Continue reading...

Fates of Redcar mill and Tata and Caparo plants in balance as business secretary calls emergency summit on steel industry and trade regulationsDavid Cameron has pledged to award backdated compensation for high energy costs to struggling British steel producers as soon as the government gets clearance from Brussels.The prime minister’s promise was delivered as steelworkers travelled to Westminster to make the case for political intervention in the industry.Related: Life after steel: can Redcar rise from the ashes?Related: Government promises support for British steel industry Continue reading...

The government wants us to believe our economic growth is sustainable, and that budgetary surplus will fix all our problems. But these are dangerous mythsBritish public life has always been riddled with taboos, and nowhere is this more true than in the realm of economics. You can say anything you like about sex nowadays, but the moment the topic turns to fiscal policy, there are endless things that everyone knows, that are even written up in textbooks and scholarly articles, but no one is supposed to talk about in public. It’s a real problem. Because of these taboos, it’s impossible to talk about the real reasons for the 2008 crash, and this makes it almost certain something like it will happen again.I’d like to talk today about the greatest taboo of all. Let’s call it the Peter-Paul principle: the less the government is in debt, the more everybody else is. I call it this because it’s based on very simple mathematics. Say there are 40 poker chips. Peter holds half, Paul the other. Obviously if Peter gets 10 more, Paul has 10 less. Now look at this: it’s a diagram of the balance between the public and private sectors in our economy:Related: ‘Living within our means’ makes no economic sense. Labour is right to oppose it | Ha-Joon Chang Continue reading...

According to figures from the Office for National Statistics, construction output fell by more than 2% while industry contracted for a third successive quarter Continue reading...

The UK has become an easier place to do business in past year, says World Bank, after reforms to red tape and corporate taxThe government’s drive to cut red tape and corporate tax has seen the UK move up the international league table for doing business in a year that has seen both rich and poor countries strive to ease regulations on setting up and running companies, the World Bank said.Britain rose from eighth to sixth place in the Washington-based organisation’s rankings and was the highest placed of the G7 group of leading industrial nations. Continue reading...

Sector outpaces wider economy in third quarter, up 5.9% on previous three months thanks to productions such as Star Wars: Rogue OneBritain’s film and music industries have confirmed their status as two of the fastest growing sectors in the country, according to the latest GDP data.The film, video, TV and music publishing industries outpaced the wider economy between July and September, up 5.9% on the previous quarter, thanks to productions such as Star Wars spin-off Rogue One, which was shot at Pinewood Studios over the summer.Related: GDP growth in the UK slows more than expected to 0.5% Continue reading...

Rolling coverage as Britain’s growth figures miss forecasts, with manufacturing and construction both shrinking, while US data also disappoints

Leading economists and experts give their take on the slowdown in British economic growth over the third quarterThe UK economic recovery has lost momentum, with growth slowing to 0.5% in the past three months, from 0.7% in the previous quarter. Here is what economists made of the official figures.The main reason for the slowdown was the sharp fall in construction, a sector which is traditionally volatile and erratic. However, our strong services sector continues to keep the recovery on track.Our economic growth remains unbalanced ... The trade deficit also widened in this quarter, and we are still heavily reliant on consumer spending.Today’s findings don’t give huge cause for celebration, but neither are they too gloomy. The economic recovery may be built on relatively fragile foundations, including the imbalance between different sectors, but growth is still ticking along for now. Certainly employment levels and household spending power are improving domestically.The key threat on the horizon comes from a cooling global economy alongside a less-supportive inflationary environment next year. Cebr still expects the UK economy to expand comfortably above the 2% mark this year, but this will be followed by a gradual slowdown over the next few years.”The preliminary estimate of GDP confirmed that the economic recovery cooled in the third quarter. We think that this will be only temporary. Nonetheless, the news clearly further reduces the chances of an interest rate rise in the near future.”We expect a better growth number in the fourth quarter. The economy is creating jobs again in significant numbers, wages are rising nearly 3% in real terms and consumer confidence is at high levels. This suggests that the domestic growth story looks good. Inflation is also set to start rising as the falls in commodity prices seen late last year drop out of the annual comparison and rising domestic costs (most obviously wage costs) are increasingly passed on to the end consumer. Consequently, we continue to look for a rate rise in the second quarter of 2016 – after the Federal Reserve, but well ahead of market expectations of late 2016/early 2017.”A slowdown in growth does not necessarily mean that rate hikes should be deferred. But either way, today’s GDP surprise is small so will not have first order implications for the upcoming inflation report forecast, due for publication next Thursday.The really key issue for the MPC to address next week is whether/how to push back against market rate expectations, which are not pricing in the first Bank rate hike until Q1 2017. Our call remains that the MPC will begin to tighten policy in Q1 2016!”It was not a weak report, but obviously undershooting the Bank of England’s 0.6% assumption.To put it in context a 0.5% q/q reading in the US (later in the week) would be an upward surprise, so the UK economy is still posting a respectable pace of growth.The cause for concern here is that the business surveys indicate that the slowdown is spreading from the struggling manufacturing sector to the far larger services economy, meaning growth looks set to slow further in the fourth quarter.There are signs that companies are becoming more risk averse as global growth worries intensify, pulling back on their hiring, investment and spending intentions, which could lead to the slowdown becoming deeper and more entrenched. The economy therefore looks to be on course to grow by 2.3% in 2015, down from 2.9% in 2014 and below its long term trend rate.” Continue reading...

The alarms bells are not ringing yet but the British economy is coming off the boil with even the services sector showing some early signs of coolingGeorge Osborne has plenty on his plate at present. The chancellor is in a fine old mess over tax credits; now the latest evidence is that the economy is coming off the boil as well.In the short term, it will be digging himself out of the hole over welfare reform that will be causing Osborne the most concern.Related: UK GDP growth slows more than expected to 0.5%Related: UK economic growth slows to 0.5% - live updates Continue reading...

ONS data likely to delay any rate rise but construction slump and manufacturing recession deals blow to George OsborneThe already remote prospects of an interest rate rise from the Bank of England this year have all but disappeared after a recession in manufacturing and the biggest slump in construction output in three years slowed the UK economy by more than expected in the third quarter of 2015.City analysts said news that the economy’s rate of expansion eased to 0.5%, from 0.7% in the previous quarter, had ruled out an increase in the cost of borrowing until the spring or summer of next year.Related: UK GDP growth figures released - live updatesGDP is 0.5%. UK continues to outperform other major economies. But global risks mean we go on with tough decisions to live within our means Continue reading...

The chancellor will still take £4.5bn from the low-paid in tax credit cuts, but the rebellion is a political setbackThe drama of the House of Lords vote was essentially an absurdist spectacle. The Tory press harrumphed against the outrageous impertinence of unelected peers, the government was browbeaten with dark threats. But since the Tories have no intention of reforming the 800-heavy upper house, Liberal Democrat and Labour peers who are committed to an elected chamber are absolutely free to sabotage its present idiotic conventions. And so they did. After strong criticisms of tax credit cuts from all sides of the house, they voted for a delay, demanding that George Osborne fully reveal the impact of the cuts.The constitutional sideshow highlights the full monstrosity of the government’s benefit cuts: worse is still to come. Ministers and minions have been sent out to spread shameless deceptions about the impact of cuts announced so far. Osborne refuses to produce an impact assessment with a distributional analysis of who is hit and how hard. Andrew Tyrie, the Treasury select committee chair, has lost patience with evasive and bamboozling figures designed to mislead and wants a full document by 31 October. Don’t hold your breath for straight answers.Related: Tax credits vote: PM accuses Lords of breaking constitutional conventionThere is no tweak to fix this – except to put the well-targeted tax credits back into the pockets of those who need them Continue reading...

Official figures on Tuesday offer a first take on the country’s performance in the third quarter, with most economists predicting a slowdownThe UK economy looks like it has been losing momentum, stymied by China’s downturn, a construction slump and ailing manufacturers.Related: UK GDP growth figures released - live updatesBritons have found a job, and then a shop. The UK recovery has relied on this surge in domestic demand in the last five years, which has proved resilient to a handful of risks such as the general election and, recently, the emerging market rout and China slowdown.”The manufacturing sector is the biggest cause for concern, where several surveys and official data point to a marked slowing in activity. Indeed, manufacturing is already in its third recession in less than a decade, and the level of activity in August 2015 was some 7% below its 2007 peak.”Construction output nosedived 4.3% month on month in August after a drop of 1.0% in July ... Barring any revisions to the July/August data, construction output will need to have grown 8.2% month-on-month in September to have just been flat quarter-on-quarter in the third quarter.” Continue reading...

Children from poorest families in north of England are falling behind peers in south before age five, IPPR North thinktank findsChildren born into the poorest families in the north of England are falling behind comparable children in the south before they even reach school, according to new research that highlights a host of educational and other inequalities the government must tackle to succeed in creating a ”northern powerhouse”.The thinktank IPPR North has welcomed the aspirations of the chancellor, George Osborne, to tackle the UK’s north-south divide, but warned that children in the prospective northern powerhouse area are already disadvantaged prior to turning five because families are affected by higher unemployment and low pay in a local economy suffering from weak productivity and underinvestment.Related: Huge disparity in job creation between north and south – ONS reportRelated: London 'to grow twice as fast as north despite Conservative policies' Continue reading...

Rolling economic and financial news, as German bosses are more optimistic about future prospects but UK factories suffer and US home sales disappoint5.46pm GMTThe euphoria following hints of more QE from the European Central Bank and news of a Chinese interest rate cut has worn off at the start of the new week. Ahead of some key events - UK GDP, the latest US Federal Reserve meeting, eurozone inflation and Apple results - investors turned cautious once more. There was some disappointing economic data, from UK manufacturing to US new home sales, although German confidence figures came in better than expected, enabling the Dax to outperform other stock markets. The final scores showed:5.29pm GMTFrance has reported one of the biggest falls in its jobless numbers since before the financial crisis began.The number of people out of work fell by 23,800 in September to 3,547,800. This was down 0.7% month on month, but up 3.1% on a year earlier. The number of jobless young people dropped for the fourth month in a row.5.18pm GMTIn the UK, TalkTalk shares have slumped more than 12% in the wake of last week’s cyber attack on the company.Since the news was announced that the attack could have led to the theft of personal data from its 4m customers, some £360m has now been wiped off the company’s value.5.00pm GMTDespite some differences and more work needing to be done, Greece and its creditors are making progress in talks to allow the country to receive its next batch of bailout funds, Associated Press reported:Greece and its bailout creditors remain divided over how to toughen foreclosure laws, a European Union official said Monday, though the overall talks on getting the country the next batch of loans are on track.Valdis Dombrovskis, a European Commission vice-president for the euro, said Greece has already done many reforms, quickly. But he warned “there is no time to lose. There is a need to work very actively to modernize the Greek state and economy.”There is no time to lose. Lot to do and much effort on-going. Successful 1st review will be a key step for #Greece to return to growth.Greece has committed to broad reforms, savings and tax hikes to secure its third bailout package from its European partners. Bailout creditors are currently reviewing the government’s compliance with the measures they had agreed upon before paying the country a €2bn loan installment.Greece is under pressure to lower the income and wealth criteria based on which non-compliant borrowers’ primary residences enjoy protection.About 40% of all Greek bank loans are now in serious arrears, as successive income cuts over more than five years have left borrowers struggling to repay. At the heart of the issue are housing loans.The left-led government says it wants protection for borrowers whose homes are worth up to €300,000, and who earn up to €35,000 a year, about 75% of those affected. It says the creditors’ counter-proposal protection for homes worth up to €120,000 would expose nearly 80% of borrowers to the threat of foreclosure.3.59pm GMTSpanish prime minister Mariano Rajoy has called a general election for 20 December, in the hope that a recovery in the economy would see his party returned to power. Associated Press reports:Rajoy said he had fulfilled a promise made on taking office in 2011 by reducing sky-high unemployment and spurring economic growth.He said the country had gone from being threatened with needing a bailout to one of full confidence among investors and from record unemployment to a situation of job creation.3.50pm GMTGlobal markets are edging lower, with the weak US home sales dampening sentiment. But the real market moving events come later in the week. Spreadex analyst Connor Campbell said:It is likely that today is a mere moment of respite between last week’s market-moving announcements from the European Central Bank and the People’s Bank of China and the wave of important figures and earnings releases still to come before October ends (including the mid-week peak of the latest Federal Open Market Committee statement).On Tuesday alone there is the preliminary third quarter GDP number for the UK, US consumer confidence and durable goods figures and arguably the most anticipated release of the entire earnings season in the form of Apple’s fourth quarter results.3.15pm GMTThe Bank of England will not raise rates until the second quarter of next year, according to a poll of economists by Reuters.This is later than previously thought: two weeks ago in a similar poll, economists believed a rate rise would come in the first quarter.2.34pm GMTMore mixed US data.The Dallas Fed manufacturing index of business activity for October has come in at -12.7, compared to -9.5 in September and forecasts of an improvement to -6.5.2.15pm GMTThe home sales figures have helped push Wall Street lower, with the Dow Jones Industrial Average now down 30 points.2.15pm GMTBiggest miss in New Home Sales relative to expectations since August 2013. $ITB $XHB2.08pm GMTThere are signs that the US housing market may be cooling off.New single-family home sales fell 11.5% to a near one year low in September after two months of gains, according to the US Commerce Department. The seasonally adjusted annual rate of 468,000 units was the lowest level since November 2014 and well below expectations of 550,000.Disruption in new home sales will definitely influence Fed decision on rates.2.02pm GMTWorries about the US government reaching its debt ceiling if Congress does not vote to raise it seem overdone, according to ratings agency Moody’s. In a new report it said:Failure to raise the US government’s statutory debt limit before the Treasury has exhausted the “extraordinary measures” that it is using to fund the government’s spending, does not mean that the US is about to default on its debt.US Treasury Secretary Jacob Lew told Congress earlier this month that the government will have exhausted the measures in place to fund the government by, or around, November 3. Without an agreement to raise the statutory debt limit by then, the Treasury will be forced to begin cutting expenditures to ensure that its spending matches its income.“Even if the debt limit is not raised, we believe the government will order its payment priorities to allow the Treasury to continue servicing its debt obligations,” says Moody’s Senior Vice President Steven Hess.However, the risk that Congress will fail to raise the debt limit in time to prevent this scenario is small, Moody’s says in a report entitled “Debt Limit Deadline Next Week Does Not Imply Debt Default.”1.48pm GMTUS markets have opened virtually unchanged, with investors remaining cautious ahead of the latest US Federal Reserve meeting this week. Almost no one expects any movement on interest rates this month - there is no scheduled press conference for a start. But economists will be looking for clues about the Fed’s current thinking as to whether it will move at the December meeting. That debate still seems finely balanced.Markets are also a little hesitant ahead of a big week for technology company results, including Apple.1.42pm GMTTime for a very quick recap:The Chinese five year plan, which is currently being formulated by China’s top leadership, may play down growth targets for 2016-2020, since despite the vigorous efforts of the government the Chinese economy has failed to pick up.“The uncertainty whether the proposed minority government will be tolerated by the parliament had a negative impact on the country’s bonds.”1.26pm GMTPortuguese government bonds are coming under some pressure today as investors react to the unfolding political crisis in Lisbon.While most eurozone bonds have strengthened today, Portugal has gone the other way, pushing up the yield (or interest rate) on its 10-year debt from 2.37% to 2.45%.

Findings reveal that new export orders fell at fastest pace in three years, while domestic demand is also easingBritish manufacturers are suffering from waning demand from home and abroad, according to the latest business survey highlighting the impact of sputtering global growth and a strong pound.The survey of factory bosses by the business group CBI suggests order books have deteriorated at the fastest pace for three years. Facing a gloomier outlook, manufacturers have scaled back hiring in recent months and are looking to cut spending on training and innovation. Continue reading...

Exit poll points to Beata Szydło becoming the country’s next prime minister as ruling party concedes defeat

Li Keqiang makes comments before Communist party central committee meeting to set five-year planChina’s premier has said the country’s target for economic growth is not set in stone as the leadership in Beijing prepare to meet and prioritise economic and social goals for the next five years.Li Keqiang said it was not necessary for the economy to grow by the 7% target for this year. Li set the goal in March after China narrowly missed its 7.5% target for last year.Related: The global economy warrants a big dose of caution Continue reading...

When central banks feel the need to inject more economic stimulus a full six years into a recovery it is a sign of further trouble aheadThe People’s Bank of China was preparing to spring a surprise while President Xi Jinping was taking a selfie with Manchester City star Sergio Aguero. On Friday, the central bank in the world’s second-biggest economy cut the cost of borrowing for the sixth time in a year.This move has implications, none of them especially cheery despite the knee-jerk increase in share prices that followed. Those investors who thought the announcement in Beijing was a big buy signal should ask themselves whether this was a sign of strength or a sign of weakness.Related: China interest rate cut fuels fears over ailing economy Continue reading...

Tax credit cuts, the latest extension of Osborne’s policy, have for the first time provoked outspoken criticism of the chancellor from the right as well as the leftDavid Cameron is “delighted” that MPs backed the Conservatives’ plans for swingeing tax credit cuts last week. George Osborne told MPs on the cross-party Treasury select committee he was “comfortable” about the “judgment call” he had made.For the families who will receive letters in the coming weeks revealing precisely how much they will lose in April – £1,000 a year for more than 3 million households, according to the Institute for Fiscal Studies – that language will seem uncaring, casual even.Tax credit cuts may be the policy that sees Osborne’s carefully constructed political edifice crumble Continue reading...

An extraordinary week of diplomacy for President Xi’s visit generated a series of far-reaching agreements on trade, technology and cultureBritain’s diplomatic elite has been rushed off its feet catering for the largest contingent of Chinese officials and business executives to arrive in London for 10 years.In 2005, the chief concern was how to contain the noise from protesters angry at Beijing’s occupation of Tibet. This time the Dalai Lama and talk of human rights were kept off the agenda during a four-day visit that David Cameron said was the opening act in a “golden era” for UK-China relations. Continue reading...

In many ways, India seems the UK’s most natural trading partner in the east – but for now, the brute truth is that China has piles of cash looking for a return abroad, and India doesn’tAccording to Steve Hilton, former chief strategist to David Cameron, Britain is humiliating itself unnecessarily by “sucking up” to China when instead it could be “rolling out the red carpet” for India. “We should prioritise our relationship with India because that’s where the opportunity is,” he said this week on BBC Newsnight, striking a resonant chord with the many British citizens, of Indian origin and otherwise, who see India as the more natural and sympathetic ally. Parliamentary democracy, a free media, the English language, tea with milk: however ruthless and greedy British imperialism may have been, its 250-year history in India left that country with several of the imperfect institutions, beliefs and habits that Britain finds familiar and admirable.Related: Xi Jinping in London – in picturesRelated: Crowd chants 'Modi, Modi' as Indian PM winds up whirlwind Silicon Valley tour Continue reading...

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Government struggles to corroborate PM’s disputed figure as some of the deals listed have eerie similarity to ones made in pastDowning Street has insisted that the week-long Chinese state visit secured “up to £40bn” of trade and investment deals, after scrambling for much of Friday to substantiate the figure, brandished by David Cameron at a trade mission in Mansion House.The business secretary, Sajid Javid, said earlier this week that President Xi Jinping’s visit would increase trade and investment between Britain and China by £25bn; but the figure had leapt to £40bn by the time the prime minister spoke on Wednesday.Related: Xi visit shows China is dominant partner in a purely commercial coupling Continue reading...