Service sector and manufacturing output falls, with cost of living crisis also hitting businesses

The US Fed is planning tough reforms, but earlier intervention could have prevented collapses at Silicon Valley Bank and othersBank capital is back in the financial headlines. In late July, US banking regulators, led by the Federal Reserve, announced plans to finalise the Basel 3 reforms (which banks like to call Basel 4, owing to their significant impact). The aim, according to a joint agency proposal, is to improve the strength and resilience of the banking system" by modifying large capital requirements to better reflect underlying risks, and by applying more transparent and consistent requirements.The announced proposals are tougher than many expected. They will cover more banks - including some that had benefited from Trump-era concessions - and they will require banks to include unrealised losses from securities in their capital ratios (among other changes). Overall, US regulators expect the most complex banks to increase their capital by 16%. Continue reading...

Republicans believe they stand to gain from the dispute but there is a divide between sympathy and disdain for the workersA strike pitting a resurgent trade union against the US's three biggest carmakers has exposed key differences in labour relations among Republicans - even while animating their assault on Joe Biden's self-styled Bidenomics" policies.Led by Donald Trump, the former president and 2024 party frontrunner, Republican hopefuls have seized on the stoppage by 13,000 United Auto Workers (UAW) members at General Motors, Ford and Stellantis production facilities in Missouri, Michigan and Ohio to highlight rumbling economic discontent as a catalyst to recapturing the White House. The UAW is demanding a 40% pay raise, shorter hours and better pensions for its members - and is threatening to spread the strike to other plants if its terms are not met. Continue reading...

Relief for mortgage holders after 14 consecutive rises as UK economy comes under growing pressure

BoE policymakers were split 5-4 on interest rates this month, with a narrow majority voting to leave Bank rate at 5.25%

Decision to hold rate at 5.25% will be good news for mortgage holders and firms but reflects dramatic weakening of economic activity Business live - latest updates

Resolution Foundation says cuts earmarked for after election are even less tenable' now Treasury is 11.4bn better off than forecastHigh inflation boosted the government's finances in August, putting pressure on the chancellor, Jeremy Hunt, to increase support for state services, a thinktank has said.Government borrowing was 11.6bn in August and almost 70bn in the first five months of the current financial year. This left the chancellor 11.4bn better off in the 2023-24 year so far than official forecasts predicted in March. Continue reading...

Markets revise forecasts, raising chance interest rates may be kept on hold for first time in two yearsThe Bank of England is facing a knife-edge decision on interest rates after an unexpected fall in UK inflation last month, as financial markets bet the central bank could leave borrowing costs unchanged for the first time in almost two years.In a crunch week for the economy, the August figures from the Office for National Statistics (ONS) on Wednesday saw financial markets revise their forecasts, raising the chance of the central bank keeping interest rates on hold on Thursday from 20% to more than 50%. Continue reading...

Federal funds rate will remain at the the same level as the central bank announced in July, when it last raised ratesThe Federal Reserve announced it was leaving its benchmark interest rate unchanged at a 22-year high on Wednesday but signaled it could hike rates again in its fight to bring down inflation.After a two-day meeting the Fed announced its federal funds rate would remain in a range of 5.25 to 5.5% - the same level that the central bank announced in July, when it last raised rates. Continue reading...

Net zero rollback could be a disaster for business confidence, with cars policy looking particularly perverseOne can understand why Rishi Sunak sees political opportunity in watering down a few climate policies. Previous soundbites about the economic opportunity of the 21st century" may be correct in the round, but voters have also noticed that heat pumps are expensive and that the path to net zero by 2050 involves costs as well as opportunities. A strategy that claims, in effect, that net zero can be delivered more gently is not absurd for a party that is miles behind in the polls.The problem, though, is the one highlighted by the furious reaction from some carmakers, in particular, to Sunak's flip-flop. Any realistic route to net zero involves winning, and keeping, the broad confidence of businesses that will be overhauling the infrastructure. At one level, hitting the 2050 target requires an enormous public-private effort to rewire the entire economy. The whole point of setting interim targets is to make it more likely that you hit the main end goal. Presented with a legally binding commitment, the government risks looks incapable of delivering a plan that it can stick to. Continue reading...

Odds of an increase in UK interest rates on Thursday fall below 50%, after inflation rate dropped unexpectedly in August to an 18-month low

Business groups and economists fear further increases risk rise in corporate bankruptcies and unemployment

Cop28 offers an opportunity to rethink how we can develop investments that are profitable, liquid and easily accessibleAs we move from UN climate week to Cop28 in Dubai later this year, we must stop the greenwishing" and greenwashing" and start thinking about the instruments that will enable the private sector and private investors to channel more capital toward climate resilience and sustainable development. While the public sector has an important role to play in this respect, scalable solutions require significant commitments of private sector resources. With the climate crisis already wreaking havoc on poor and rich countries alike, unlocking this largely untapped pool of capital has become an urgent priority.Yet as matters stand, many investors associate climate-centric investments with social impact" and reduced profitability. While sophisticated investors have the means to deploy their capital profitably toward decarbonisation, the energy transition and other climate-related sectors, such investments tend to be illiquid. They remain tightly wound up in private equity funds, and thus inaccessible to the ordinary investors and savers who are most exposed to climate-driven food, water and energy insecurity. Continue reading...

Financial markets give more than 50% chance of cost of borrowing remaining unchanged for first time in almost two years

From vegetables to coffee and transport to recreation, how the cost of everyday items varies

Rolling coverage of the latest economic and financial news, as Brent crude hits 10-month high and CBI puts annual meeting on hold amid financial woes

Oil price is bad news for central banks trying to tame inflation and will add to pressure to further increase interest ratesThe price of crude oil has topped $95 a barrel, threatening to push up petrol prices at the pump and create a headache for central bankers tasked with taming the resulting inflation.Markets are already betting that the latest inflation figures from the Office for National Statistics, out on Wednesday, will show a rise in the annual rate of consumer price inflation to 7% in August, from 6.8% in July. Continue reading...

Higher interest rates and weaker trade, as well as sluggish growth in China, likely to hit big economies

While former PM takes some responsibility for markets crisis after mini-budget, she says main fault lay with Bank of EnglandLiz Truss has set out her intent to be the Conservatives' beacon for lower taxes and smaller government despite her disastrous 49 days inside No 10, arguing that the economic damage under her rule was largely the fault of groupthink" from officials and the media.In a pugnacious and lengthy Q&A after a speech in London, and taking notably more questions than she did as prime minister, Truss promised to push her message at the Conservative party conference in Manchester next month, which she will then expand on in a book. Continue reading...

Richard Holden responds to urgent question from Labour about HS2 but refuses to say if HS2 will still reach Manchester or Euston in London. This live blog is closedQ: Should the Bank of England remain independent?Truss says she thinks its mandate should be improved. It should focus more on the money supply. Continue reading...

Rolling coverage of the latest economic and financial news

The former prime minister Liz Truss has admitted her mini-budget policies were rushed. Speaking at the Institute for Government, during her first high-profile speech on the economy since leaving office, Truss said: 'Some people said we were in too much of a rush. It was certainly true that I didn't just try to fatten the pig on market day but tried to rear, fatten and slaughter it on market day.' She added the reason her government was in a hurry was because voters wanted change and she wanted to deliver on that

Bank of International Settlements said markets risk ignoring aftershocks from inflation such as insolvencies and property price falls

Firms preparing for difficult year as potent cocktail' of difficulties takes hold, says industry lobby groupUK manufacturers are cutting their recruitment plans after being hit by a slowdown in orders as a downturn looms, a new survey shows.Britain's manufacturers are battening down the hatches" amid a sharp drop in activity, according to the latest quarterly data from Make UK, which represents manufacturers, and the business advisory firm BDO. Continue reading...

Former prime minister to make remarks in speech on Monday almost a year since mini-budget that led to her downfallLiz Truss will blame the UK's economic problems on 25 years of economic consensus" as she doubles down on the policy proposals that helped trigger financial turmoil and caused her to be ousted from Downing Street after just 49 days.The former prime minister will give a speech at the Institute for Government on Monday, almost exactly a year since her government's mini-budget", which caused the pound to crash and ultimately led to her downfall. Continue reading...

After years spent dismissing progressive concerns, Tories want to highlight national decline, but to accept no responsibilityGirl Who Boys Can't Hear was a recurring character who featured on The Fast Show. She is a woman in the company of men who raises an intelligent solution to a problem, or makes an insightful observation, only to be ignored entirely. A few seconds after she has spoken, a man says something to the effect of Oh I've got it!", and repeats what she has said verbatim. The group of men immediately spring to agreement and admiration of his input. The woman then says: Sorry, can any of you actually hear me?"The sketch always raised a laugh even though you knew what was coming. What elevated it every time wasn't the punchline, but the elaborate performance of the men - earnestly scratching their heads at the problem, studiously pretending to come up with an answer after the truth-telling woman has already given it, and then cheerfully bonding in the pleasure of one of them finding the solution. The past few weeks in news and political analysis have reminded me often of this performance. Suddenly, there is a lot of hearing of things that were previously said, just not by the right people. Britain, it appears, is broken.Nesrine Malik is a Guardian columnist Continue reading...

Biden adviser Heather Boushey urges UK and Europe to increase climate friendly investment to reboot growthGovernments around the world must drastically increase public investment in green technologies to combat global heating and drive sustainable economic growth, a top adviser to President Joe Biden has said.Heather Boushey, a member of the White House council of economic advisers, said countries including the UK needed to ramp up green investment to reboot economic growth, boost energy security, and protect against future inflation shocks. Continue reading...

Rise of 30% since June follows increasing demand in China and production cuts by Russia and Saudi ArabiaOil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% since June, after Russian and Saudi Arabian production cuts and rising demand from China.Brent crude, the oil price benchmark, rose to a 10-month high last week of almost $94 a barrel, up from $72 a barrel at its lowest point in June - heading for its biggest quarterly increase since Russia's invasion of Ukraine. Continue reading...

Truss was right in saying Britain needed economic growth - where she was badly wrong was in her prescription

Despite his appalling legacy, the ex-chancellor appears to have a lot of unquestioning journalist palsEven for non-attendees, George Osborne's July wedding lingers in the memory. First, because of the bizarre, orange confetti protest. Second, because of the number of journalists who were guests.Nick Robinson from Today. Emily Maitlis and Jon Sopel, formerly of the BBC, now presenting the News Agents podcast. Sky's former political editor, Adam Boulton. Ed Balls, the former Labour minister, now a daytime TV presenter. Times Radio's Mariella Frostrup. Almost enough to show Osborne in a decent light. Do such guests hint at personal qualities that might, if they'd been visible, make up for his reputation as one of Britain's worst ever chancellors? Perhaps an endearing side to Osborne finally helps account for his chairmanship, as an arts-axer, of the British Museum, for his editorship, as a non-journalist, of a newspaper, and now, for the warm interest in his new podcasting career. Continue reading...

They are annoyingly good at politics but terrible at economics - GDP and living standards plummet in countries led by themGlobal politics might not feel quite as grim as it did a few years back, but there's still a lot of populism around: about a quarter of countries are led by populists. Silvio Berlusconi may be dead, but Giorgia Meloni is running the show in Italy. Donald Trump wants back into the White House (it's cosier than jail), and are we really confident that arch-centrist Emmanuel Macron in France won't be followed by Marine Le Pen? Even the pope is worried about a libertarian former sex-coach taking power in Argentina.I raise this because it should encourage anti-populists to focus on addressing the bad economic outcomes that help drive populism. If you need further encouragement, it should come from recognising the scale of bad economic outcomes that follow populists actually coming to power. Continue reading...

Younger people in Britain are out of love with the Conservatives. Here are five key areas where the party needs to improve Read more: senior Tories warn Sunak on young peopleWith the Tories suffering from a serious lack of support among the under-40s, MPs are urging action from Rishi Sunak. Here are the policy areas the prime minister could use to try to reach them: Continue reading...

Rising unemployment and sluggish economic growth are unlikely to derail Threadneedle Street's drive to curb inflationThe Bank of England is poised this week to raise interest rates for a 15th time in a row as Threadneedle Street's policymakers continue their prolonged battle to tame inflation.Despite rising unemployment and sluggish growth, the City believes concerns over pay pressures will persuade a majority of the Bank's nine-strong monetary policy committee (MPC) to push up the official cost of borrowing by another 0.25 percentage points to 5.5%. Continue reading...

As Biden's 2022 Chips Act sees $280bn poured into economy, new industry has come to some towns but floundered in othersWhen the plastics manufacturing plant Roger Binegar had worked in for 28 years closed in 2009, it felt like manufacturing in south-western Ohio had all but been consigned to history.Yet 14 years later, a huge new construction effort is under way a stone's throw from his home outside Jeffersonville. The Japanese carmaker Honda and the electronics company LG are building a battery manufacturing plant slated to employ 2,000 people once it's up and running in 2026. Continue reading...

Official figures point to an impressive recovery but many Americans don't feel that way. Is the economy heading for a fall?Strolling past the colorfully restored Victorian homes of the Fourth Ward, watching the barman hand-carve blocks of ice for old fashioneds at the jam-packed bar of The Crunkleton, it's easy to fall for Charlotte's ample southern charms. And yet, people are not happy - at least according to the polls.Consumer sentiment in North Carolina is now lower than it was at the height of the pandemic, according to High Point University's confidence tracker. People are just not feeling particularly good," said Martin Kifer, director of the university's survey research center. Continue reading...

Insolvency Service reports 19% rise from August 2022's figures as firms fight high interest rates and falling sales

Despite a strong economy, an exclusive Guardian poll shows mistrust in media and government means disbelief in both partiesAmericans do not trust the government's economic news - or the media's reporting of it - according to a Harris poll conducted exclusively for the Guardian that presents the White House with a major hurdle as it pushes Biden's economic record ahead of next year's election.The US has roared back from the Covid recession by official measures. But two-thirds of Americans are unhappy about the economy despite consistent reports that inflation is easing and unemployment is close to a 50-year low. And the poll suggests many are unaware of or don't believe the positive economic news the government has reported.Two-thirds of respondents (68%) reported it's difficult to be happy about positive economic news when they feel financially squeezed each month (Republicans: 69%, Democrats: 68%).Two-thirds of Americans (65%) believe that the economy is worse than the media makes it out to be rather than better (35%).In August the unemployment rate was 3.8%, close to a 50-year low. But the poll found that 51% wrongly believe that unemployment is nearing a 50-year high rather than those who believe it's actually low (49%). Continue reading...

Shares in UK chip designer are making a successful debut on the US stock market today, while UK blue-chip stocks post their best day since last November

Peter Riddle asks if Labour has the necessary vision and courage; plus letters from Nadine Grieve and Adrian CoskerAs crumbling schools and insecure prisons help to hammer the final nails into this government's coffin, the focus inevitably turns to what happens next. A vigorous debate is now being played out between those who argue that anything is better than the corruption and neglect of this Conservative government and those who believe that those who have prospered under 13 years of Tory rule should start to contribute a greater proportion of their wealth for the wider good.Larry Elliott is right (Councils going bust, schools crumbling, the NHS in crisis: the answer is more tax, 7 September). Just a change of personnel in government alone will not bring about the radical changes people are desperate for. The fundamental question remains of whether Labour, under Keir Starmer's leadership, has the vision and courage to introduce a fairer distribution of wealth to fund heavy investment in our public services and start to redress the years of Conservative slash and burn policies, or whether it maintains its current trajectory and achieves power but simply treads water.

Weak consumer spending as, people - especially in Germany, the EU's largest economy - put more into savings

Central bank's president hints this may be the peak for rates in drive to bring down stubborn inflationThe European Central Bank has raised interest rates to the highest level since the launch of the euro to tackle stubbornly high inflation, despite fears over a slowdown across the single currency bloc.It marks the 10th consecutive rate rise for the bank, as the ECB warned inflation remained too high even as the impact of previous increases and a weakening outlook for global trade weigh on the eurozone economy. Continue reading...

Partnership says smaller first-half loss is optimistic sign but recovery plan likely to take two years longer than scheduledThe owner of John Lewis and Waitrose has said its turnaround plan will take two years longer than scheduled, after reporting another loss for the first half of the year.The John Lewis Partnership (JLP) made a pre-tax loss of 59m for the 26 weeks to 29 July, as it continued to face pressures from higher costs and caution from shoppers during the cost of living crisis. Continue reading...

British tech firm valued at $54.5bn before highly anticipated flotation on Nasdaq by private owner SoftBankThe British chip designer Arm has secured a $54.5bn (43.6bn) valuation in its initial public offering (IPO), before its highly anticipated return to the stock market in New York on Thursday.The company, owned privately by the Japanese investor SoftBank since 2016, priced its shares at $51 each and sold 95.5m shares, raising $4.87bn for Softbank. Continue reading...

German-owned discount chain reports 18% sales rise and extra market share but inflation cost it 100m to keep prices lowDiscount supermarket chain Lidl has revealed its British arm swung to an annual loss after battling to keep a lid on prices as its costs rose across the board".The group reported pre-tax losses of 76m for the year to 28 February against profits of 41.1m the previous year as it also invested heavily in the business. Continue reading...

New Lib Dem leadership in Surrey Heath attacks previous Conservative regime for racking up debts of 165mMichael Gove's local council is warning that it faces effective bankruptcy within two years after racking up millions of pounds in debt for failed property investments overseen by its former Conservative administration.Surrey Heath borough council is in the parliamentary constituency of Gove, who as levelling up secretary is the cabinet minister in charge of local government. Continue reading...

Growth in prices still remains far below the decades-high inflation rates that were seen last summer, when rate peaked at 9.1% in JuneUS inflation in August rose for the first time since June 2022, rising to 3.7% as a sharp increase in energy prices pushed prices up toward the end of the summer.Growth in prices still remains far below the decades-high inflation rates that were seen last summer, when the rate peaked at 9.1% in June. Still, an increase in inflation means the US economy is further from the Federal Reserve's target rate of 2% and will probably make officials consider pushing interest rates up later this year. Continue reading...

China's economic crisis. Plus: ChatGPT and Proust

Manufacturing, services and construction sectors contract for first time since summer of 2022

The formula was temporarily stopped after the Covid lockdown but doing so again may upset pensioners at the ballot box