Joe Biden’s American Rescue Plan and other economic policies have had predictable resultsWatch any sport nowadays, and you will be treated to instant replays that give you a detailed – often slow-motion – view of important moments. Watch the news, and you may find yourself feeling like you are similarly watching the past on playback. But these replays – of high inflation, soaring public debt, a brutal ground war in Europe, a new cold war and the rise of potentially destructive technologies – are far from instant, and the stakes are much higher.Readers might recall that I predicted rising inflation and slower growth as early as spring 2021. The former US Treasury secretary Larry Summers did so even earlier. Yet the US inflation figures – the worst since the early 1980s – caught most people by surprise. Continue reading...

Live coverage of business, economics and financial news as eurozone economy grows by 0.1% in first quarter after Amazon earnings beat expectationsCompared with the same quarter of the previous year, GDP increased by 1.3% in both the eurozone and the EU in the first quarter of 2023, after +1.8% in the eurozone and +1.7% in the EU in the previous quarter.In the fourth quarter of 2022, GDP had remained stable/stagnated (depending on your worldview) in the eurozone and had decreased by 0.1% in the EU. Continue reading...

Warmer winter, lower energy prices and China’s reopening help bloc surprise economists and stave off severe downturn

Banking group says some customers have had to dip into savings because of rising pricesNatWest has reported bumper first-quarter profits on the back of a rise in UK interest rates but said persistently high prices were causing some customers to dip into their savings.The banking group said it was largely unaffected by the banking turmoil that resulted in the collapse of Silicon Valley Bank and Credit Suisse last month, and despite uncertainty, managed to report a 50% jump in profits to £1.9bn in the first three months of the year. That was better than the £1.6bn forecast by analysts. Continue reading...

Public sector workers and food bank users don’t need the Bank’s chief economist to tell them who is worse off and who not, says Janet Dubé. Plus letters from David Redshaw, Mike Alcock, Austen Lynch and Andy StelmanHuw Pill says “in the UK, someone needs to accept that they’re worse off” (Britons ‘need to accept’ they’re poorer, says Bank of England economist, 25 April). If he wants to tell “someone” his private opinion of our economic situation, being chief economist at the Bank of England surely puts him in a good position to find a candidate.It’s simply not true that “we’re all worse off”, as Mr Pill claims. Neither the prime minister nor King Charles appear to be in that category. Public sector workers and food bank clients don’t need a senior economist to tell them who is worse off and who isn’t. Continue reading...

Annual pace decelerates to just 1.1% as fears of recession this year grow despite strong consumer spendingUS economic growth slowed sharply in the first quarter of the year, despite strong consumer spending resilient to interest-rate rises designed to tame historic inflation.The latest GDP figures released by the US commerce department show that the world’s largest economy slowed sharply from January through March, to just a 1.1% annual pace as businesses reduced inventories amid a decline in housing investment. Continue reading...

Supermarket chain and consumer goods company insist they are protecting shoppers from inflation surgeSainsbury’s and the Marmite maker Unilever have both insisted they are protecting shoppers from inflation, amid accusations that some companies are profiteering from the cost of living crisis.“We are not profiteering in any form,” the chief executive of Unilever, Alan Jope, said as the consumer goods company insisted it was only passing on three-quarters of its increased costs to customers. Continue reading...

Venkatakrishnan says bank remains cautious about months ahead despite first-quarter profit of £2.6bnThe British economy is still not “out of the woods”, according to Barclays’ chief executive, who said the bank would remain cautious in the months ahead despite making its strongest quarterly profit since 2011.CS Venkatakrishnan said: “The macro-economic outlook around the world – not only the UK or in the US – is a little better today than it was six months ago. That doesn’t mean they’re out of the woods.” Continue reading...

Thinktank urges ministers to make reducing long-term sickness health equivalent of drive for net zeroBritain’s poor record on health is costing the economy £43bn a year and cutting the annual incomes of individuals affected by long-term sickness by up to £2,200 a year on average, a report says.With official figures showing more days lost to sickness than at any time since 2004, the Institute for Public Policy Research said improving the country’s health was vital both for the economy and to boost the incomes of disadvantaged groups. Continue reading...

‘We’re all worse off,’ says the Bank of England. At a time of soaring pay to company bosses, this is ugly politicsStruggling households, sinking businesses: the Bank of England wants you to swallow some bitter news for your own good. You “need to accept” that you are poorer. Stop asking for wage rises. Do not sneak up prices. Surrender your “reluctance to accept that, yes, we’re all worse off”. Such thoughts only produce higher inflation – and that simply won’t do, according to the Bank’s chief economist, Huw Pill. In an interview this week, he accused families and business of indulging in a game of “pass the parcel” – pushing higher costs between themselves when what they really need to do is admit that “we all have to take our share”.If Mr Pill himself displays such Zen-like acceptance, it may owe something to the fact that he received £88,000 for his first five-and-a-bit months at Threadneedle Street, equivalent to an annual salary of £180,000. Another advocate of serenity is the Bank’s governor, Andrew Bailey, who last year told workers not to make big pay demands, while raking in half a million pounds. Ordinary Britons may detect a touch of Versailles here, of being advised to chow down on brioche because no bread is to be found. Such statements do not enhance one’s authority, as Marie Antoinette could attest. Continue reading...

Why should we all just ‘accept we’re worse off’, when corporate greed and global shortages are really to blame?The Bank of England’s chief economist, Huw Pill, provoked derision this week when he claimed that inflation means those in Britain need to accept that “we’re all worse off, and we all have to take our share”. Echoing comments made last year by the Bank’s governor, Andrew Bailey, on the need for pay “restraint”, Pill claimed the “pass-the-parcel game” of wage and price rises was “generating inflation”.I disagree: they are both almost entirely wrong, and the clumsy messaging reflects the failure of conventional thinking and policy in tackling the cost of living crisis.James Meadway is director of the Progressive Economy ForumDo 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...

UK foreign secretary warns a war across Taiwan strait and likely destruction of semiconductor industry would have global effectsA Chinese invasion of Taiwan would destroy world trade, and distance would offer no protection to the inevitable catastrophic blow to the global economy, the UK’s foreign secretary, James Cleverly, warned in a set piece speech on Britain’s relations with Beijing.In remarks that differ from French president Emmanuel Macron’s attempts to distance Europe from any potential US involvement in a future conflict over Taiwan, and which firmly support continued if guarded engagement with Beijing, Cleverly said “no country could shield itself from the repercussions of a war in Taiwan”. Continue reading...

Retailer will extend online click & collect service to London and expand into Texas after strong resultsPrimark is to extend its online click & collect service to London and expand in the southern US after reporting strong first-half sales.The cut-price retailer said it had benefited from a return of tourists and office workers across UK cities, who had bought more items than a year before despite a 7% rise in prices. Continue reading...

Better than expected figures could give Jeremy Hunt wriggle room to cut taxes or increase spending

Huw Pill says someone in UK needs to accept that they’re worse off and stop trying to maintain their real spending power through higher wages or prices

The chancellor has to weigh tax giveaways against unprecedented government borrowing ahead of looming elections

Chief economist Huw Pill says workers and firms should stop trying to pass on rising costs by hiking prices or demanding better wagesBritish households and businesses “need to accept” they are poorer and stop seeking pay increases and pushing prices higher, the Bank of England’s chief economist, Huw Pill, has said.Pill said a game of “pass the parcel” is taking place in the economy – as households and companies try to pass on their higher costs. Continue reading...

Since 1989 my family has gone from farm labourers to high achievers. Something similar has happened to my countryWhen the iron curtain was swept away on that miraculous night of 9 November 1989, it exposed some of the deepest differences between geographical neighbours the world has ever recorded. The 13:1 GDP per capita gap between Poland and soon-to-be united Germany was twice that between the US and Mexico.That same night, my pregnant mother and her brothers were workers in the shadow economy on an eco-farm near Frankfurt, helping to meet the needs of a newly minted class of environmentally aware Germans. My family admired that country where “you never got lost on a highway”. People in Germany drove immaculately clean cars and manual labourers could play Stille Nacht on several instruments – which they did at the farm for Christmas 1989 – leading my mother to marvel at an education system that could so universally equip people not just with marketable skills but also with an ingrained sense of beauty.Anna Gromada is a social scientist and co-founder of the Warsaw-based Kalecki Foundation Continue reading...

Automation too often erodes conditions and job quality creating anxiety and overwork. To build ‘good work’, we must invest in people as well as techThe UK economy is at a pivotal moment. Two years on from Covid, and it remains the only country in the developed world where people have continued to drop out of the labour market in greater numbers beyond the pandemic.Rates of economic inactivity have risen and vacancies in the hospitality, health and technology sectors are proving hard to fill. At the same time, automation and the acceleration of artificial intelligence (AI) technology risk spreading fear and anxiety among workers. The UK is experiencing new forms of polarisation between good and poor-quality work. Continue reading...

Cost of living squeeze continues, led by price rises for eggs, milk and cheese, say analysts KantarShoppers increasingly turned to supermarkets’ cheapest own-label products as grocery inflation remained above 17% over the past month, keeping the pressure on already strained household finances.Sales of the very cheapest value own-label lines jumped 46% in the four weeks to 16 April, compared with a year earlier, dropping in to nearly one in five baskets as consumers sought to make savings. Continue reading...

Hindu nationalism in India is writing an epitaph for the country’s experiment with multi-ethnic secular democracyBecoming the world’s most populous nation allows India to burnish its credentials as a global economic and political heavyweight. With a population that is much younger than those of China, the US and the EU, there will be renewed interest in India’s potential to be a beacon of liberal values. The west is eager to draw a democratic giant into its orbit. China and India will together account for about half of all global growth this year. But India risks emulating its bigger northern neighbour’s economic ascent under tight political control by a dominant authoritarian party.Hindu nationalism in India is writing an epitaph for the country’s experiment with multi-ethnic secular democracy. Narendra Modi’s Bharatiya Janata party (BJP) has weakened institutions meant to keep the state both transparent and accountable. Information is censored, civil society hounded and protests suppressed. It is absurd that opposition leaders have been targeted to the extent that Mr Modi’s main rival – Rahul Gandhi – is currently disqualified from parliament. Such is the polarisation in politics that India’s last parliamentary session was the least productive since 1952. Continue reading...

Rishi Sunak hears concerns over tax-free shopping rules, AI and CBI allegations at first summit with UK corporate leaders

‘Pretty much nailed on’ that the rate will halve in next six months, according to Andy HaldaneThe former chief economist of the Bank of England has predicted that inflation will fall rapidly in the coming months, and advised interest rate setters to consider pausing further increases in borrowing costs.Andy Haldane, who left the Bank in 2021 to lead the Royal Society of Arts thinktank, said it was “pretty much nailed on” that inflation would halve in the next six months, hitting a target set in January by the prime minister, Rishi Sunak – because of an inevitable slowdown in energy price increases. Continue reading...

Ministers should aim to support households and bolster Britain’s often overlooked supply chainNot a single item in the average British grocery shop is falling in price. From basic essentials such as bread, milk and cheese to sugar and tea, the cost of a weekly food shop is rising at the fastest annual rate since 1977.More than a year into the worst period for living standards in modern records, Britain’s cost of living crisis is taking a horrifying turn. First came rocketing energy prices. Now the baton is being passed from our gas and electricity bills to the supermarket till receipt. Continue reading...

There are serious inequalities in how Britons save for retirement and in the health of those who have retired. Why?The pensions system has fallen under the gaze of the Institute for Fiscal Studies, and not before time.Retirement is a vexed subject and little discussed in the UK, where there has always been a feeling among policymakers that a higher birthrate than most developed countries and buoyant levels of immigration – almost exclusively of working-age people – meant Britain was immune to a global problem with ageing. Continue reading...

John Lewis, BMW, NatWest, Unilever, Aviva, Virgin Media 02 and GSK also distance from lobby group after Guardian reports into alleged misconduct

Report shows fastest rebound in private sector output in a year, with interest rate rise likely next monthConsumers splashing out on holidays has helped put Britain’s economy on track to avoid predictions of a contraction in the first three months of the year, paving the way for the Bank of England to raise interest rates next month.The latest monthly snapshot from S&P Global and the Chartered Institute of Procurement and Supply (Cips) showed the fastest rebound in private sector output in a year, fuelled by rising spending on travel, leisure and entertainment. Continue reading...

In today’s newsletter: The cost of eating continues to surge, and everywhere from Nigeria to China is in search of an answer

The Bank of England has so far failed to return the annual rate to its 2% target – so what are the options?Inflation has remained stubbornly high in the UK, with the latest data released this week showing it dropped only slightly in March, staying above 10% for the eighth time in the past nine months.The government has so far mostly relied on the Bank of England to try to return the annual rate of price rises to its 2% target, something it has clearly failed to do. Continue reading...

Economists predict inflation will prompt Bank of England to lift rates again in May, for last time in current cycle

Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predictsThe Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted.Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs. Continue reading...

UK inflation failed to drop into single-digit levels last month as food prices kept soaring, meaning central bank expected to raise borrowing costs again

Annual rate as measured by consumer prices index dropped to 10.1% in March, says ONS

Annual rate still above 10% as grocery prices soar, leaving MPC on course for another increase

Sugar, sauces, milk and cheese – we look at what is behind the March food inflation figure and if there is hope on the horizon

From sugar to bread, electricity to pet products, how costs have soared

This online tool will help you discover what is contributing to your household’s cost of living increasesInflation is soaring in the UK as people are hit by higher prices for everyday essentials.Now in double digits, the latest inflation rate for the 12 months to March 2023 means that goods and services cost over 10.1% more than they did a year ago – in most cases, surpassing any pay rises workers can expect to receive. Continue reading...

More firms are at risk of tipping from ‘danger’ to ‘distress’, experts warn, as businesses are hit by soaring costs and weak economy

Inflation may drop below 10% on Wednesday, but many items have risen even higher than the headline rateThe UK inflation rate could drop out of double digits for the first time since last summer when the Office for National Statistics releases figures for March on Wednesday, with the headline rate expected to fall back to 9.8% from 10.4% in February.Despite the predicted fall, the headline rate of inflation has been stuck at 40-year highs for months and is well above the Bank of England’s official 2% target. Continue reading...

Annual inflation may drop when official figures are released on Wednesday but UK rate still higher than eurozoneBritain’s annual inflation rate is poised to fall below 10% for the first time since last August when the latest official figures for the cost of living are released on Wednesday.A sharp fall in energy prices is thought likely to have dragged down the government’s preferred measure of inflation from 10.4% in February to 9.8% in March, according to a poll of economists conducted by Reuters. Continue reading...

Softer conditions in jobs market means unemployment rate unexpectedly edges higher to 3.8%

Insolvency Service says 2,457 businesses went bust in March as firms struggle with rising bills and high inflation

Deal would build closer economic ties as most western states push to isolate Moscow over UkraineIndia and Russia have entered “advanced negotiations” over a free trade agreement that aims to build closer economic ties as most western governments push to isolate Moscow over the war in Ukraine.In a development likely to add to tensions in Washington, London and EU capitals, Russia and India’s trade ministers said on Monday the two countries were in talks to strike a free trade deal. Continue reading...

Rishi Sunak wants growth, but ONS figures show rising levels of inactivity because of ill-health

The omnipresence of consultancies is harming public services, while creating lucrative opportunities for private profitShortly after Margaret Thatcher took power, her environment secretary, Michael Heseltine, wrote: “The management ethos must run right through our national life – private and public companies, civil service, nationalised industries, local government, the National Health Service.” Since 1980, ministers have stayed true to his word. Britain is the outsourcing capital of Europe. No other country on the continent relies so heavily on the consulting industry to do the work of the state. Earlier this year, ministers quietly dropped restrictions on spending controls, allowing Whitehall departments to potentially spend even more on external consultants.Those controls were the product of David Cameron’s 2008 pledge to end what he called the reign of “policy by PowerPoint”. Mr Cameron correctly argued that the use of consultancies had exploded under New Labour, whose faith in the credo of New Public Management, an agenda that sought to make the public sector function more like a business, produced lucrative opportunities for consultancies. Yet the story was hardly different under the Conservatives. While spending on consultants initially decreased under Mr Cameron’s government, economists Mariana Mazzucato and Rosie Collington note that consultancy firms bid for contracts at cut-price rates in an attempt to gain a foothold in government. When the time came for the state to spend big, the consultants would be ready. Continue reading...

Rolling coverage of the latest economic and financial news, as UK’s blue-chip index heads for seventh day of gains in a rowEuropean stock markets are also moving higher this morning, with Germany’s DAX up 0.16% and Italy’s FTSE MIB gaining 0.25%.Pierre Veyret, technical analyst at ActivTrades, explains:European shares openened on a positive note, following the lead of Asian benchmarks, as risk appetite remains strong at the beginning of this new week.The bullish sentiment continues and investors may be willing to push stock indexes to new highs, despite lingering concerns over higher borrowing rates and economic recession. This sustained appetite for riskier assets may come from the fact some investors see the current monetary tightening cycle to be closer to the end than the beginning, while expecting a shallower recession than initially anticipated.“Certainly that’s good news for the Bank of England, and it does make the May decision a really close call.” Continue reading...

PM urges Britain to prize numeracy, but critics say such talk counts for nothing without a funded planThe UK possesses an inherent “anti-maths mindset” that is hampering efforts to improve numeracy, Rishi Sunak is to say as he relaunches his plan to make maths education until 18 compulsory.In a speech to students, teachers and others in north London planned for Monday, the prime minister is expected to argue that a failure to consider numeracy as basic a skill as reading is costing the UK economy huge sums. Continue reading...

Foreign secretary says ‘free and open Indo-Pacific’ is ‘critical to UK’ and releases manga-style cartoons to mark his visitJames Cleverly has arrived in Japan for a G7 foreign ministers’ summit to promote a “free and open” Indo-Pacific, as the UK government steps up its focus on the region after Brexit.The foreign secretary and his counterparts from countries including the US and France will hold high-level talks on closer security and defence ties in the face of China’s growing assertiveness in the Pacific. Continue reading...

Bridgetown Initiative could be way for rich nations’ development finance words to become actionKristalina Georgieva is one of life’s optimists, so it was no surprise that the managing director of the International Monetary Fund found things to be cheerful about at last week’s gathering of finance ministers and central bank governors in Washington.The two Bretton Woods institutions – the IMF and the World Bank – meet every six months, and since October, fears of a deep recession have receded. As Georgieva noted, the global economy has shown unexpected resilience. Energy prices have come down and that makes the outlook for inflation better. What’s more, the IMF chief said there was a can-do approach at the meeting. Continue reading...

Attacks on Rishi Sunak are pointless if Labour is going to let the crowning disaster of Tory government pass without commentFirst we hear from the International Monetary Fund that the UK economy is bottom of the G7 class. Then come the absolutely disastrous export figures for October-December from the Office for National Statistics: the volume of exports was more than 9% below the pre-pandemic average. This compares with a double-digit increase in Italy’s exports – er, yes, a country which is still a member of the European single market.There was a time when devaluation of the pound revived exports. No longer. Brexit and the damage wreaked by a succession of Conservative governments have seen to that. The pound has been spectacularly devalued against the dollar and the euro since the Brexit referendum. This has done precious little to boost exports but has had an all too obvious effect on import prices. Hence inflation in the UK is worse than in other industrial countries – thanks to, guess what, Brexit. Continue reading...