by Richard Partington Economics correspondent on (#6Q5PY)
French service sector drives growth but experts warn strong figures mask disappointing performance elsewhereThe Paris Olympics have provided a boost to the eurozone economy after a sharp rise in spending as athletes and spectators descended on the French capital for the summer sporting event.Figures from a closely watched survey of businesses showed monthly French private sector output rose to its highest level in 17 months in August. Continue reading...
by Jennifer Rankin in Brussels and Lisa O'Carroll on (#6Q4SP)
Inquiry into eight EU countries is latest chapter in hostility between Beijing and EU over tradeChinese authorities have launched an anti-subsidy investigation into European dairy imports, in the latest sign of escalating trade tensions between Brussels and Beijing.The announcement from China's commerce ministry on Wednesday came a day after the European Commission revealed revised duties on Chinese electric vehicles as part of its examination into what it viewed as artificially cheap cars that posed a threat to jobs in Europe's motor industry. Continue reading...
The US created 818,000 fewer jobs than first calculated as the Federal Reserve hints at a rate cutThe US job market appears weaker than first thought, according to official figures released on Wednesday.The US created 818,000 fewer jobs than first calculated in the 12 months to the end of March, a 0.5% decrease, according to the Bureau of Labor Statistics' quarterly census of employment and wages. Continue reading...
Chancellor insists she still has large black hole to fill despite stronger-than-expected growth in first half of 2024Rachel Reeves is planning to raise taxes, cut spending and get tough on benefits in October's budget amid Treasury alarm that the pickup in the economy has failed to improve the poor state of the public finances.The chancellor is insisting she will still have a substantial black hole to fill despite stronger than expected growth in the first half of 2024.Raising more money from inheritance tax and capital gains tax.Sticking to plans for a 1% increase in public spending even though it would involve cuts for some Whitehall departments.Rejecting pressure to scrap the two-child benefit cap.Changing the way debt is measured to exclude the Bank of England. Continue reading...
by Richard Partington Economics correspondent on (#6Q30X)
Bank officials signal readiness to start interest rate-cutting cycle to ease pressure on households and businessesKamala Harris's hopes of victory in the looming US presidential election have been given a boost by mounting expectations that the US Federal Reserve will cut interest rates from as early as September.As Democrats gather for the party's national convention in Chicago starting on Monday, economists on Wall Street said the world's most powerful central bank was poised to begin a cycle of interest rate cuts before the end of the year. Continue reading...
Rolling coverage of the latest economic and financial newsGold has rallied by over 20% so far this year, as investors have piled into bullion.Back at the start of January, it traded at around $2,060 per ounce, before climbing to its alltime high over $2,500.The situation in the Israel-Iran-Hamas conflict remains fluid with Iran still expected to make a show of force in response to the recent assassination of Hamas' political leader. Negotiations for a ceasefire have come to a standstill once again as the US Secretary of State Antony Blinken is visiting the region.In the meantime, Ukraine's attempt to reverse the fate of the Russian-Ukraine conflict by mounting an offensive in Russian territories is gathering momentum. However, the possible direct involvement of Belarus and the increased chances of an asymmetric response from the Russian side could potentially scare investors going forward. Continue reading...
by Richard Partington Economics correspondent on (#6Q2N5)
Economy held back by ailing transport network, with poor roads adding to logistics costs, say manufacturersRachel Reeves has been warned by Britain's biggest manufacturers that her autumn budget must address a decade of decline in national infrastructure that is damaging economic growth.More than half of manufacturers surveyed by the industry group Make UK said that the country's national road infrastructure had deteriorated in the last 10 years, making it slower and more expensive to build and export British products. Continue reading...
by Richard Partington Economics correspondent on (#6Q2HH)
Figures from Rightmove show inquiries to estate agents since 1 August up 19% compared with a year agoThe first Bank of England rate cut in four years has triggered an immediate upturn in the UK property market, as cheaper mortgages prompt interest among buyers and drive up house prices.Figures from the property website Rightmove show the number of potential buyers contacting estate agents about homes for sale since 1 August jumped by 19% compared with the same time a year ago. Contacts in July were up 11% on the previous year. Continue reading...
Rachel Reeves must show how the Tories failed to tackle longstanding productivity, investment and trade deficits and stress how Labour canBritain had the fastest-growing economy in the G7 in the first half of this year. The unemployment rate is coming down and so is wage inflation. As Jim Callaghan never quite said as he arrived back in the country during the winter of discontent: crisis? What crisis?Last week's release of key economic indicators were not exactly supportive of the government's argument that it was handed a country in worse shape than at any time since 1945. That's quite a claim when quarterly growth is running at 0.6%, the annual inflation rate is 2.2% and unemployment is 4.2%.Overall, we are sceptical of talk that the UK is now experiencing Goldilocks' conditions. But it's clear that there has been a shift in the narrative away from weak growth and high inflation, towards stronger growth and weaker inflation." Continue reading...
Presidential candidates, bankers and economists will all be keen to hear what the Fed chair foresees for interest ratesThe eyes of the world's financial markets will be firmly trained on the Rocky Mountains resort of Jackson Hole on Friday. This is when Jerome Powell will deliver a much-anticipated speech at what, over more than four decades, has become the Davos for central bankers.In an address loaded with economic and political significance, the chair of the Federal Reserve - the US's central bank - is expected to lay out a road map for US interest rates. Continue reading...
By linking, analysing and communicating statistics, state departments can unlock their power for the public good Share government data to boost economy', says UK statistics watchdog chiefThe incoming government faces many challenges in seeking to boost economic growth, improve public services and enhance families' wellbeing. But it has opportunities too - some of them sitting right beneath its nose.One of the most important is the unrealised potential of the data that public bodies collect on individuals and businesses for their own purposes. By sharing, linking, analysing and communicating this data more effectively, the government could improve policy design and delivery - both directly and by helping outside researchers and analysts scrutinise policy choices and generate new ideas. Continue reading...
The UK Statistics Authority's chair says linking data sets from departments could aid growth and improve services We need to make data sharing across government the ruleMinisters could find ways to boost the economy and improve public services by combining data from separate government departments, according to the head of the UK's statistics watchdog.Sir Robert Chote, the chair of the UK Statistics Authority, said that too often government data was siloed" because departments and other bodies were worried that people may uncover weaknesses in the data or even reach inconvenient conclusions. Continue reading...
Lord Jim O'Neill says small businesses could lose out from merger of local government schemes to create large fundGovernment plans to create one of the largest pension schemes in the world from a merger of 87 local authority retirement funds could undermine investment in groundbreaking businesses across the north of England, according to former Treasury adviser Lord Jim O'Neill.Innovative startup businesses, many of them spun out of universities in Manchester, Leeds and Sheffield, could lose out if the Treasury creates a big fund interested only in backing large companies, he said. Continue reading...
The chancellor should be flushed with victory. Instead, she is adhering to an opposition dogma that undermines her own objectivesThe lady doth protest too much, methinks." This quotation from Hamlet keeps coming back to me every time Chancellor Rachel Reeves blames the last government for the economic inheritance and austerity measures she claims have been thrust upon her. The truth is that she often made it plain before the election that she expected a terrible inheritance; if there were some secrets she did not know about - well, that should not have surprised a politician.They have certainly been thrust upon the rest of us, not least the many pensioners who, while not qualifying for the revised, means-tested winter fuel payment, will struggle with heating bills that are much higher than when Gordon Brown, as chancellor, introduced the allowance all those years ago. Continue reading...
A study of ancient coins has shifted the focus of Europe's economic history from the Greeks and Romans to the ArabsDetectorists is great TV. Toby Jones and Mackenzie Crook wander Suffolk's fields, making the case for all of us to take up metal detecting as they enjoy the (implausibly) sun-soaked hills and discover the occasional Roman coin.It's a hobby that helps us understand the past, not just enjoy the present. Historians put ancient coins to good use, but economists are always interested in money. Creative ones can bring methods developed for modern data to bear on these ancient hoards. Continue reading...
The economist behind the Covid furlough scheme has called for unfair' council tax and stamp duty to be axed in EnglandCouncil tax and stamp duty are unfair and unpopular" English taxes that should be abolished, says the economist who devised the Covid furlough scheme.Tim Leunig, who has advised a series of cabinet ministers, including Rishi Sunak during his prime ministership, said it was time for a new and radical approach that would axe the two taxes and replace them with proportional levies. Continue reading...
Democratic nominee's Friday speech gave most specific economic proposals of her campaign so farJoe Biden is out of the race for the White House and Bidenomics" - the agenda he used to guide the world's largest economy - looks like its time is over too. For his replacement, Kamala Harris, it's all about the opportunity economy".At a rally in North Carolina, Harris adopted the new slogan to capture her core ideals. Continue reading...
Rolling coverage of the latest economic and financial news, as PwC becomes the first audit firm to be fined by the FCAThe cost of living crisis remains one of the top issues facing Britain, the latest poll from the Office for National Statistics shows.When asked about the important issues facing the UK today, the most commonly reported issues were the NHS (89%), the cost of living (88%), the economy (68%), housing (60%), crime (59%) and climate change and the environment (58%).Just over half (54%) of adults reported their cost of living had stayed the same in the past month with less than half (45%) reporting that their cost of living had increased.Around a quarter (25%) of adults believed they would be unable to pay an unexpected but necessary expense of 850. Continue reading...
by Richard Partington Economics correspondent on (#6Q1G6)
Alan Taylor takes three-year term on Bank's monetary policy committee and replaces Jonathan HaskelA British American academic who has previously researched the damage to the UK economy from austerity has been appointed to the Bank of England's interest rate-setting committee.Alan Taylor, a professor at New York's Columbia University, will join the Bank's monetary policy committee (MPC) on 2 September for a three-year term after his appointment by the chancellor, Rachel Reeves. He replaces Jonathan Haskel, who is stepping down after six years on the panel. Continue reading...
by Richard Partington Economics correspondent on (#6Q1G7)
Turning to a theory championed by the US Treasury secretary, Reeves aims to upskill the workforce while boosting productivityLong before Rachel Reeves entered the Treasury the challenge facing her as chancellor was clear. Britain's economy had been underperforming for years, not only as the result of successive global crises, but also self-inflicted shocks including austerity and Brexit.The latest figures show some progress to get back on track was being made before Labour's general election landslide: Britain recorded the strongest growth in the G7 in the first half of 2024 - a detail seized on by Jeremy Hunt to argue that the Conservative legacy was not all that bad. Continue reading...
Without a clearer sense of a national destination, the prime minister risks being cast as an agent of continuity instead of changeThere is always a stark contrast between the simplicityof a slogan that wins an election and the complexity of the task that greets an incoming government. For Labour, the challenge is especially acute becausethe headline promise of SirKeirStarmer's campaign was a single word: change". Aside from newfaces in ministerial offices, the reality for most people was always going to feel likemore of the same for some time.Wednesday's release of official economic data, showing inflation up by 2.2% last month, illustrates the point. The increase is on the lower end of analysts' expectations, but high prices, especially for essential groceries, will still shape the public mood. The cost of living crisis that was a major factor in bringing down the Tories is now Labour's problem. Continue reading...
Chancellor hopes to cut state aid for Speke vaccine plant to 40m. But pro-growth Treasury must not let project slip overseas Blow to AstraZeneca vaccine project as Reeves plans funding cutThe international going-rate for state aid to part-fund a large pharmaceutical facility costing a few hundred billion pounds, euros, dollars, or whatever, is hard to pin down. Governments don't publicise sweeteners and a company's thinking will be guided by many factors, including the wider tax regime. But a rough rule of thumb, say industry insiders, is a 15%-25% subsidy for capital costs. Singapore has a reputation for being more generous.Thus, if it is correct, as the FT reports, that Jeremy Hunt verbally offered AstraZeneca 65m towards a proposed 450m vaccine-manufacturing plant in Speke in Merseyside, one could say the last chancellor did OK with 14%. Continue reading...
Prices rose at an annual rate of 2.9% in July, as inflation dipped below 3% for the first time since 2021US annual inflation rate dipped below 3% in July for the first time since 2021, a relief to investors who are expecting the Federal Reserve to cut interest rates next month as a sense of unease has settled over Wall Street after signs of a cooling labor market.Prices rose at an annual rate of 2.9% in July while core inflation, which does not account for the volatile food and energy industries, climbed 3.2% over the previous 12 months and 0.2% since June. Continue reading...
Pharmaceuticals giant has hit a 200bn stock market valuation, a decade after fighting off Pfizer's takeover approachThe slowdown in pay growth in April to June is a big win" for the Bank of England, says Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK.Pugh says the Bank's monetary policy committee (MPC) will welcome the slowdown in wage growth in the private sector [workers may not agree, of course!].Regular private sector pay growth has dropped from 5.6% to 5.2% in June, that's only a fraction above the MPC forecast of 5.1%. Wage growth should continue to trend down over the rest of this year as 2% inflation is factored into pay settlements.If wage growth does continue to fall over the rest of this year, it would give the MPC ample cover to cut rates again towards the end of the year, probably in November, and then be more aggressive in its rate cutting cycle in 2025, so we currently have four cuts pencilled in for next year.Having reached its lowest rate in almost three years in July, August saw inflation nudge up again slightly. While this is noticeable following 17 straight months of falling rates, it actually marks a return to the average levels seen in the five years before the start of the cost of living crisis.With this kind of pricing spread, shoppers will find that the type of product they're putting in their baskets will really dictate how much they pay." Continue reading...
Price rises were bigger for budget foods than expensive varieties during peak years of inflation, research showsThe bill for a weekly shop in Britain's poorest households rose by far more than it did in wealthy homes during the height of the cost of living crisis as the sharpest price increases affected cheaper brands, research reveals.The study by the Institute for Fiscal Studies (IFS) found the least well-off had been hardest hit by cheapflation" in the 2021-23 period - paying 29.1% more for their food, compared with 23.5% for better-off households. Continue reading...
Brent crude hits $80 as tensions betwen Israel and Iran rise, while rouble slides after Ukraine's incursion into RussiaBuilding products supplier Marshalls continues to be hit by the weak UK house-building markets.Marshalls has reported that revenues fell by 13% year-on-year in the first half of this year.Falls in expected pay rises were anticipated now inflation is within a tolerable range for employees.However, many workers will still feel worse off than they did a couple of years ago, so other benefits like providing flexible working, offering benefits that help boost take home pay, and taking steps to improve job quality, are in employers' interest to help both support and retain staff." Continue reading...
Politicians must acknowledge that companies' systematic profiteering is pushing household finances over the edgeWe should care more about being overcharged for the things we buy. After three years when UK shop prices have rocketed by about 20%, it is reasonable to examine whether the extra cost is justified and whether the government should have done more to protect us.From the evidence it is clear that in too many cases the extra cost cannot be justified and governments have failed to intervene, doing much to undermine the foundations of social democracy. At the heart of the problem is the trend towards monopoly that characterises many of our most important industries - those where large companies have acquired huge marketing power and have found ways to cajole, entice and even bamboozle their customers to enhance their profits. Continue reading...
Black to the Future report recommends policy shifts in housing and healthcare as roadmap for systemic' inequityBlack Americans strongly support initiatives that would increase the minimum wage to $17, make affordable housing more accessible and create an equitable tax system, according to Black to the Future Action Fund, a political advocacy thinktank. On Thursday, the group released a 55-page economic agenda based on its 2023 survey of 211,219 Black people across all 50 states. The organization hopes that the report will serve as a roadmap for elected officials to address policy holes, and for advocates to generate campaigns that hold politicians accountable.We have to start imagining what it is that we want and not be so afraid to break out of what is," said Alicia Garza, founder and former principal of Black to the Future Action Fund, at a Thursday symposium in Atlanta. Continue reading...
Sterling records fourth weekly fall in a row despite stock markets largely recovering from Monday's routThe pound has recorded its longest run of falls in almost a year, as financial markets clawed back losses from Monday's sharp sell-off.After a turbulent week on the markets, sterling posted its fourth weekly drop in a row on Friday, the longest run of losses since September 2023. Continue reading...
Historically, crises have often erupted in late summer, which is why this week's mini crash set alarms ringingFears of a recession in the US. The biggest one-day fall on the Japanese stock market since 1987. Policymakers away on their summer breaks, leaving their deputies in charge. All familiar enough territory for August - one of the most dangerous months in the economic and financial calendar.In theory, August should be a month when not much happens and often that is the case. Stock market trading volumes tend to be light and if August starts calm it will tend to stay calm. But bad things can happen and when they do they can have profound consequences. Continue reading...