Governor optimistic over economic recovery but concedes Bank has ‘lessons to learn’ after forecast errors

New IMF report shows “a big upgrade to the UK’s growth forecast” says Jeremy Hunt, with UK expected to grow by 0.4% this year not shrink by 0.3%

All the methods of cost of living calculations come with benefits and limitationsOn its website the Bank of England has a tool allowing users to find out how prices have changed ever since King John was on the English throne back in 1209. By its calculations, goods and services costing £10 six years before Magna Carta was sealed would today cost £16,427.96.With the latest cost of living figures due out on Wednesday morning, Threadneedle Street’s ready reckoner puts the UK’s inflation record into historical perspective. It also highlights the many different ways – official and unofficial – in which changes to the cost of living are calculated. Continue reading...

Wages remain a problem, but rising numbers of skilled non-EU workers appear to be helping the NHS, social care, and indeed the overall UK economyThe UK public policy landscape is littered with disasters. From record NHS waiting lists to the de facto legalisation of petty crime and serious sexual assault, to the environmental damage created by the privatised water and sewerage companies.With immigration figures on Thursday likely to show that net migration in 2022 was the highest level on record, it’s tempting for politicians and commentators to add immigration to this list – although many have already done so on the basis of what, charitably, are wild, uninformed guesstimates. For Labour, immigration levels play into the narrative that 13 years of Tory rule have broken the country. For the ethno-nationalist right inside and outside government, well represented at the National Conservative conference last week, the idea that our culture and national identity are threatened by an influx of mostly dark-skinned foreigners is foundational.Jonathan Portes is professor of economics and public policy at King’s College London and a former senior civil servant Continue reading...

Jeremy Hunt should squeeze public spending and cut debt, says Washington-based bodyThe International Monetary Fund has upgraded its forecasts for UK growth, saying the country will no longer fall into recession this year, but warned the government against tax cuts it said would fuel inflation and result in a long period of high interest rates.In a message to the chancellor, Jeremy Hunt, that he should maintain his planned squeeze on public spending, the Washington-based body said tax policy should stay “aligned with monetary policy in the fight against inflation”. Continue reading...

Jeremy Hunt to meet food manufacturers over prices as Kantar says rate is still ‘incredibly high’UK food price inflation remains at its third-highest level since the financial crisis, with the annual rate at which the cost of groceries is increasing at the elevated level of 17.2%, retail industry data shows.Prices barely eased during the four weeks to 14 May to only marginally below April’s 17.3% figure, according to the latest release from the analytics firm Kantar, representing the third-highest rate of grocery inflation since 2008. Continue reading...

Micron products will be banned from key infrastructure projects in China due to ‘serious network security risks’

US efforts to stifle China’s chip industry are thought to be part of a wider plan to hinder Beijing’s preparations for warSigns of the burgeoning conflict between the US and China can be spotted in many different places, from balloons in the sky to videos on TikTok. But nowhere is it more apparent than on the microscopic wafers of silicon, otherwise known as semiconductors.Semiconductors, or microchips, are tiny pieces of technology that power everything from microwaves to military weapons. The industry is worth more than $580bn (£466bn), but even that figure belies their importance to the global economy. Their existence powers several trillion dollars’ worth of goods and processes; without them the global economy would shudder to a halt. Continue reading...

Energy bills and a tight labour market continue to cloud predictions of a steep decline by the end of the yearTo tackle inflation, the Bank of England is keeping a close eye on the UK’s tight jobs market, ultra-high energy prices and the crippling cost of food.These are the three main factors that have sent inflation rocketing over the last 18 months. The question is, has Britain reached a turning point and how quickly will inflation fall? Continue reading...

Average SVR at highest level for more than 15 years as number of home loan products available jumpThe average standard variable rate (SVR) for mortgages has climbed to its highest level for more than 15 years, so many people sitting on one of these could save several hundred pounds a month by switching to a fixed-rate deal.That was one of the key takeaways from data issued this week that also signalled that rates on new fixed-rate mortgage deals may start to rise again. Continue reading...

Leaders expected to form council that will discuss response if states such as Russia and China boycott trade for political reasonsThe UK and other G7 countries are planning collective action against Russia and China if they threaten trade boycotts for political reasons, announcing a new body to deal with “economic coercion”.Rishi Sunak will urge “bold and pragmatic collective action” against hostile states that stop trading with other countries when they disagree with their geopolitical decisions. Continue reading...

Bank of International Settlements also warns US bank failures and cryptocurrencies could reduce trustCentral banks risk losing public trust if they fail to bring down high rates of inflation found across the developed world, according to the boss of the body that advises them.Agustín Carstens, the director of the Bank of International Settlements, said central bankers needed to maintain a tough stance against inflation or else risk a new generation of consumers who had never experienced rapidly rising prices losing faith in their independent role. Continue reading...

John Allan to stand down after allegations of inappropriate behaviour, while latest Sunday Times rich list shows first fall in the number of billionaires since financial crisis

Ann Widdecombe may not sympathise in any case, but rising costs have not affected all butties equallyMore than half of us are worried about the rising cost of eating, as food prices rise at their fastest rate since 1977.But that did not stop Ann Widdecombe landing herself in a pickle on Tuesday by suggesting people who could not afford cheese sandwiches should simply forgo them. Continue reading...

Resolution Foundation says it is not clear that politicians are prepared for another year of food price risesThe rising cost of food will overtake the price of energy as the driving force behind inflation over the summer, hitting poorer households the hardest, a leading thinktank has forecast.Grocery bills that had rocketed by almost 20% during the past year would continue to increase, replacing energy prices that were expected to begin falling over the next few months, the Resolution Foundation said. Continue reading...

David Miles says working from home, stalling population growth and higher interest rates will shape marketThe era of “massive” house price rises in the UK may be about to end, according to a senior economist at the government’s spending watchdog.David Miles, a member of a key committee at the Office for Budget Responsibility, said one of the main factors that would make runaway house price growth less likely was the increase in working from home. Continue reading...

Study of ‘youth economy’ shows youngsters are able to prise cash out of parents despite cost of living crisisWhile millions of parents are battling for pay rises that keep up with the cost of living, Britain’s youngsters have received an 11% increase in their average annual “income”, outpacing inflation, according to new data.The figures on children’s pocket money and earnings – part of what was claimed to be the most in-depth study of the UK’s “youth economy” – also found that six-year-olds had enjoyed the biggest “pay rise”, in the form of a 34% annual increase. Continue reading...

The Tories have failed to pursue the obvious answers to this crisis, punishing ill people and NHS strikers insteadBritain has a sick economy. That’s not a metaphor for the flatlining of growth over the past year, but a statement of fact. Never before have so many people been out of the labour force due to long-term sickness or disability. Never before has there been such a loss of human potential.Better health is desirable in itself. Ill-health makes people miserable, so it shouldn’t really matter whether or not there were economic benefits from reducing the number of people who might want to work if they fell well enough to do so. Gross domestic product is not everything.Larry Elliott is the Guardian’s economics editorDo you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Australian wages are rising by closer to 4% than 3%. That’s how fast they should grow when inflation is less than 3%, not 7%

Jeremy Hunt says the government can open borders for care homes and construction workers that are facing worker shortagesOn Brexit, Jeremy Hunt is pressed by the moderator about the challenge that Brexit has posed for many businesses in the room for the BCC conference this morning.He’s sidestepped the question a bit, saying that “any change in your trading relations with your biggest trading partner presents challenges” but notes that the surge in energy prices linked to the war in Ukraine have also hampered businesses. Continue reading...

Rishi Sunak’s Farm to Fork meeting, the first of its kind, failed to address solutions to inflation, soaring costs and food security, say attendersRishi Sunak’s Downing Street food summit has been described as “empty" by food and farming industry representatives, who rounded on the prime minister for failing to discuss soaring inflation or set out measures to safeguard British food production.The Farm to Fork summit, the first meeting of its kind, brought together farmers, food producers and some of Britain’s largest supermarkets. Continue reading...

The White House and Republicans in Congress are currently in a standoff over how much the government can borrowThe US faces an “unprecedented economic and financial storm”, the treasury secretary, Janet Yellen, warned on Tuesday as Joe Biden met with his Republican counterparts for the latest in a series of tense talks over the US debt ceiling.Time is quickly running out to find a solution, said Yellen. Without raising the debt limit, the US government will default on its bills, a historic first, with likely catastrophic consequences. Federal workers would be furloughed, global stock markets would crash and the US economy would probably drop into a recession. Continue reading...

Turning a blind eye to anti-competitive deals wouldn’t improve UK’s reputation as good place to do business, suggests Competition and Markets Authority

We’re keen to hear what Britons in their 50s and 60s have been doing with their time since they’ve begun working fewer hours, or stopped working completelyWe’d like to hear from people in the UK in their 50s and 60s who have recently decided to work less or leave the workforce altogether why they have made this decision, and what they are doing instead.The economic inactivity rate for people aged 50 to 64 years has increased slightly, from 27.1% between October and December last year to 27.2% between January and March 2023, according to the Office for National Statistics (ONS). Continue reading...

Number of vacancies falls and more people rejoin workforce – but work is needed on skills and ill health

Evidence of cooling in demand for labour amid 136,000 drop in employees between March and April

Jeremy Hunt’s freeze on allowances and thresholds will put a quarter of teachers and one-eighth of nurses in 40% income tax bracketOne in four teachers and one in eight nurses will be higher-rate taxpayers by 2027 as a result of the government’s record freeze on income tax allowances and thresholds, according to a leading thinktank.The Institute for Fiscal Studies said better-paid public sector workers will be among the almost 8 million people – one in five of all taxpayers – who will pay income tax at 40% or above as result of the Treasury’s attempt to reduce the UK’s budget deficit. Continue reading...

Fuel margins have increased across the retail market, but in particular for supermarkets, over the past four years, says competition watchdog

Revised outlook for 2023 and 2024 puts average growth for 27-member bloc at 1%

Customers seek energy-saving tech, repair services and consumer finance deals to stretch budgets, says CEO

Prices in the UK are continuing to rise on everything from groceries to energy bills and mortgage costs. Meanwhile, some companies are reporting record profits. Richard Partington reportsMillions of households in the UK are feeling a prolonged pinch as inflation eats away at their standard of living. Rising bills for weekly shopping, energy use and housing costs have meant many people are cutting back on luxuries and essentials.As the Guardian’s economics correspondent, Richard Partington, tells Michael Safi, the story spun by the government has been a simple one: the blame lies with Vladimir Putin and a global pandemic. But not everyone is suffering from these higher costs. Look at the country’s top 350 companies and, according to a team of researchers at Unite, the UK’s largest private-sector trade union, average profit margins increased from 5.7% in the first half of 2019 to 10.7% in the first half of 2022. It’s a concept that is being called ‘greedflation’ – where companies are using the alibi of a global crisis to bolster their profit margin by putting up prices more than they could otherwise get away with. So is that what’s happening? And if so, what can we do about it? Continue reading...

Without one, the country risks missing out on the opportunities offered by the green transition and new technologiesIn 2011, George Osborne used his second budget speech to promise a “Britain carried aloft by the march of the makers”. The UK manufacturing sector, cut off at the knees during the accelerated deindustrialisation of the 1980s, was to rise up and make a triumphant comeback. Britain was going to make stuff again.It didn’t happen of course. By 2016, Mr Osborne’s ideological commitment to a smaller state and austerity had contributed to a steel crisis, falling orders in construction, and a crisis of confidence in the private sector. In the absence of a proactive government setting strategic goals, and using its spending power to direct investment towards them, the march of the makers shuddered to a halt amid a needlessly prolonged recession. Brexit, by decoupling Britain from the mass market on its doorstep, then introduced a whole new world of pain for manufacturers. Continue reading...

Britain says it has no need for Biden-style green subsidies as it has a thriving renewables sector. The complacency is staggeringCountries that are serious about manufacturing have industrial strategies. The US and China have one. So do Germany and France.Britain does not have an industrial strategy. Rishi Sunak talks about turning the UK into a “science and technology superpower” but that’s all it is: talk. It is a PR strategy masquerading as an industrial strategy.It is no surprise that AstraZeneca recently announced it was building its new factory in Ireland. Continue reading...

Fewer voters believe the rapidly fragmenting right can offer solutions to our pressing crisesIt’s in its infancy, but it’s hard to imagine how the emergent mood of seriousness about the interlinked threats to our economy, society and democracy cannot but grow stronger.Yes, there was relief at last week’s news that the economy was still growing in the first three months of this year, even if at a minuscule rate. But that was dispelled by the realisation that it is still smaller than before the pandemic three years ago, the worst performance in the G7. Another interest rate increase seems sure to follow after last week’s hike – yet more stress for those having to remortgage their homes, and a further economic dampener. Business and consumer optimism are in short supply. Continue reading...

The Conservatives have much to be ashamed of after 13 years. But the surge in Lib Dem support shows Europe still matters‘When one with honeyed words but evil mind persuades the mob, great woes befall the state.” Euripides was not of course referring to Brexit in his play Orestes, but to the chaos caused by Clytemnestra’s murder of Agamemnon and Orestes’s dispatch, in turn, of Clytemnestra.The disastrous outcome for the Conservatives in the local elections may not lead to any physical violence, but all the signs are, as the recriminations begin, that the Tories are in for a metaphorical bloodbath. Continue reading...

Costs are falling yet shopping bills rise. Something doesn’t add up and experts point to ‘greedflation’ on the part of big retailers‘It’s diabolical because if I put my prices up people are going to stop coming to my shop,” says Bally Singh, owner of Hooked Fish and Chips about the hard decisions as high energy and food costs threaten his business.Singh’s fish and chip shop in West Drayton, in the outer suburbs of London, is one of 10,500 in the UK battling to keep customers happy as the cost of a meal, once as cheap as chips, soars, in grim lockstep with wider UK food prices which are climbing at the fastest rate since 1977. Continue reading...

Impact of Bank of England’s decision to hike rates to 4.5% will be felt mostly by young families, thinktank saysSoaring interest rates will cost UK mortgage holders £12bn in extra payments, according to a leading thinktank which said the impact will be felt mostly by young families.In a report that emphasised the dramatic impact of higher borrowing costs, the Resolution Foundation said the Bank of England’s 12 consecutive rates rises since December 2021 had already cost homeowners £4.2bn, with about £8bn more in extra payments likely over the next couple of years. Continue reading...

UK’s recovery since pandemic has lagged other G7 nations, despite expanding by 0.1% in first quarter of 2023

But there was 0.1% growth in first quarter overall thanks to a stronger January, ONS says

There are some signs that headwinds are easing but economy still looks fragile

The Bank of England has raised interest rates by a quarter of a point to 4.5% as it forecast inflation would stay higher for longer than previously expected and the economy would perform more strongly. The Bank’s monetary policy committee voted by a majority for a 12th successive increase in borrowing costs, continuing its most aggressive rate-hiking cycle since the 1980s in an attempt to dampen UK inflation, which remains in double digits. UK rates are at the highest level since October 2008, when the global economy was in the grips of the financial crisis

Families who have remortgaged or are about to do so tell of a precarious position after rate raised to 4.5%

Latest 0.25 point hike marks 12th rise in a row as Bank battles stubbornly high inflation

Bank of England aware that impact of most rates rises has yet to be felt, meaning a pause is now probable

The quarter-point rise to 4.5% hits mortgage holders, credit card users and people seeking loans, but savers could benefit

Poll of City analysts shows unanimous expectation of Bank of England raising interest rates to 4.5%Almost 1.5 million homeowners with variable rate mortgages face higher borrowing costs with the Bank of England expected to push up interest rates on Thursday to 4.5%.City analysts polled by Refinitiv were unanimous in forecasting the central bank would increase its base rate by 0.25 percentage points when policymakers meet to tackle Britain’s stubbornly high inflation rate. Continue reading...

Headlines stoked fears of ‘stimulatory’ measures but you only need to look at the big banks and markets to see the reception was calm

Leading thinktank sounds alarm over cost of living crisis with poorest £4,000 worse off in 2023 than before Covid pandemicRishi Sunak is at risk of missing his flagship target to halve inflation this year, one of Britain’s leading economic forecasters has warned, as households are left thousands of pounds worse off amid the cost of living crisis.Sounding the alarm over the hit to living standards, the National Institute of Economic and Social Research said the soaring price of food and other basic essentials meant inflation was on track to remain persistently high for the rest of this year. Continue reading...

The obscene wealth of many CEOs is less a result of intelligence and more down to luck, background and personalityMoney may be able to buy you happiness, but it can’t buy you brains. A study published in January found that billionaires aren’t any smarter than the rest of us – indeed, those in the top 1% of earners scored lower on cognitive ability tests than those who earned slightly less.This is according to researchers who analysed data from 59,000 Swedish men, then tracked their lives for more than a decade. They found a strong connection between how smart someone was and how much they earned – until they reached a salary of 600,000 kronor (£46,700) a year. After that, factors such as luck, background and personality became more important. Continue reading...

Report details how local people and firms helped Alisher Usmanov’s conceal immense wealthCyprus has received an 800-page dossier from the US government detailing sanctions breaches by local individuals and entities that are alleged to have enabled the Russian billionaire, Alisher Usmanov, to conceal his immense wealth.As the island’s leader Nikos Christodoulides vowed to push ahead with the prosecution of law and audit firms that had aided the oligarch, Washington released documents that amounted to a toolkit to facilitate the process. At least two other dossiers are expected to follow. Continue reading...