Stagflation feared as global economy suffers fallout from Covid pandemic, Chinese lockdowns and war in UkraineThe global economy faces a protracted period of weak growth and high inflation reminiscent of the 1970s as the impact of a two-year pandemic is compounded by Russia’s invasion of Ukraine, the World Bank has warned.In its half-yearly economic health check, the Washington-based Bank said echoes of the stagflation of four decades ago had forced it to cut its growth forecast for this year from 4.1% to 2.9%. Continue reading...
Food Standards Agency says number of people who skip meals or use food bank has leapt in past yearThe cost of food is a big worry for the vast majority of Britons while the number of people who skip meals or use a food bank has jumped in the past year, according to the Food Standards Agency (FSA).Its research shows food prices are a significant future concern over the next three years for more than three-quarters of UK consumers (76%), and the number using a food bank has risen from around one in 10 in March 2021, to nearly one in six this March. Continue reading...
Number of people visiting shops during June bank holiday week was up 17% on May averageFour days of jubilee celebrations provided some much-needed respite for Britain’s retailers after a tough May in which cost of living pressures weighed heavily on spending.There was a sharp increase in consumer footfall on the high streets during the long bank holiday weekend to mark the Queen’s 70 years on the throne, according to the British Retail Consortium (BRC). Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6028B)
Total donated to parties by financial firms and individuals tied to the sector over two years, report saysConcerns have been raised over the City’s influence on Westminster, after a report found financial firms and individuals tied to the sector donated £15m to political parties and gave £2m to MPs during the pandemic.The campaign group Positive Money tallied the gifts, expenses and donations handed to MPs, peers and their parties, as well as the value of income from politicians’ second jobs, saying it contributed to finance’s “oversized influence” on policymaking. Continue reading...
Cryptocurrencies’ use in avoiding taxes, laws and capital controls makes restrictions seem inevitableWith cryptocurrency prices plummeting as central banks start to raise interest rates, many are wondering if this is the beginning of the end of the bubble. Perhaps not yet. But a higher opportunity cost of money disproportionately drives down the prices of assets whose main uses lie in the future. Ultra-low interest rates flattered crypto, and young investors are now getting a taste of what happens when interest rates go up.A more interesting question is what will happen when governments finally get serious about regulating bitcoin and its brethren. Of the big economies, only China has so far begun to do so. Most policymakers have instead tried to change the topic by talking about central bank-issued digital currencies (CBDCs). Continue reading...
With work changed for ever by the pandemic, businesses are testing whether pilot represents a recognition that ‘the new frontier for competition is quality of life’More than 3,300 workers at 70 UK companies, ranging from a local chippy to large financial firms, start working a four-day week from Monday with no loss of pay in the world’s biggest trial of the new working pattern.The pilot is running for six months and is being organised by 4 Day Week Global in partnership with the thinktank Autonomy, the 4 Day Week Campaign, and researchers at Cambridge University, Oxford University and Boston College. Continue reading...
During Queen’s reign, country has tended to move quickly from national gloom to premature belief that it has finally ‘cracked it’In her 70 years on the throne the Queen has been served by 14 prime ministers and 22 chancellors of the exchequer. She has seen the country become wealthier and healthier despite five significant recessions. In 1952, the economy was dominated by manufacturing and powered by coal. Seven decades later, the pits have all closed and Britain is primarily a service-sector economy.The past 15 years have been the toughest of the Queen’s reign. Two deep recessions have provided the bookends to a period of extremely weak growth and flatlining living standards. Inflation is the highest it has been in four decades and the immediate prospects for the economy are poor. Continue reading...
Workers in Las Vegas are still feeling the effects of employers’ pandemic cuts – all made worse by rising inflation and low wagesIn the rotating restaurant at the top of the Strat hotel and casino, guests can once again enjoy $20 cocktails or a $90 shellfish display for two while taking in the expansive views of downtown Las Vegas from its landmark tower. After the Covid shutdown, Vegas is back in business. But not everyone seems happy, or sure how long it will last.On a recent afternoon, just out of view of the hotel’s 1,000-plus feet (350-metre) spike, a couple of hundred hospitality service workers were gathered in a nearby car park. In baking 90F (32C) heat, speakers told the workers that they must fight to get improved contracts and controls for soaring rents. “Sí, se puede” – yes, we can – they shouted outside the headquarters of Nevada’s powerful Culinary Workers Union. Continue reading...
Firing up the property market with a tax break is usually the Conservatives’ go-to tactic in times of trouble. But the chancellor must have his reasons…Boris Johnson’s government, out of ideas and beyond its sell-by date, is stuck in a rut. With the economy heading south as inflation ravages household incomes, there is a sense among Tory MPs that the chancellor should have something more up his sleeve.Yet all the Treasury can offer them is a looped tape of Rishi Sunak’s 2021 budget speech, when he laid out spending plans that were immediately submerged by the cutbacks and tax rises his fiscal conservatism demanded. Continue reading...
Plummeting prices and lost life savings confirmed for many that the blockchain dream was too good to be true – and it may now struggle to hit past highsEven if you don’t live and breathe cryptocurrency, you’ve probably noticed some turmoil in the sector. Eye-catching headlines about missing apes and collapsing stablecoins are indicative of the chaos, but what’s really going on? Continue reading...
Price hikes driven by combination of factors, including inflation and the war in UkraineThe price of a pint in London has long been bemoaned as the sign of how expensive it is to live in the capital.However, as crowds flocked to central London to toast the Queen on the jubilee bank holiday weekend, some would have been staggered if they ordered a round of drinks in one pub, after it emerged the the average price of a pint has topped £8 for the first time. Continue reading...
Unemployment rate holds at 3.6% for third month but rate for Black Americans is nearly twice that of white peopleThe US extended a year-long streak of strong jobs growth in May, adding another 390,000 new jobs, the Department of Labor said on Friday.The unemployment rate remained at 3.6% for the third month in a row, near a half-century low. The number of unemployed people was also essentially unchanged at 6 million. Continue reading...
Central bank moves to stem double-digit inflation and protect currency, taking borrowing to highest level since 2015Ukraine more than doubled interest rates to 25% on Thursday in a move to try to stem double-digit inflation and protect its currency, which has collapsed since Russia’s invasion.In the first interest rates intervention since Vladimir Putin’s troops attacked on 24 February, the Ukrainian central bank’s governor, Kyrylo Shevchenko, increased the benchmark interest rate from 10% to 25%. Continue reading...
Business and political elite embraced new ethos at WEF without reflecting on past mistakesThe World Economic Forum’s first meeting in more than two years was markedly different from the many previous Davos conferences that I have attended since 1995. It was not just that the bright snow and clear skies of January were replaced by bare ski slopes and a gloomy May drizzle. Rather, it was that a forum traditionally committed to championing globalisation was primarily concerned with globalisation’s failures: broken supply chains, food and energy price inflation, and an intellectual property (IP) regime that left billions without Covid-19 vaccines just so that a few drug companies could earn billions in extra profits.Among the proposed responses to these problems are to “reshore” or “friend-shore” production and to enact “industrial policies to increase country capacities to produce”. Gone are the days when everyone seemed to be working for a world without borders; suddenly, everyone recognises that at least some national borders are key to economic development and security. Continue reading...
On 5 June 1947, secretary of state George Marshall put forward the idea of a European economic recovery plan to be financed by the US. See how the Guardian and Observer reported events6 June 1947It would be neither fitting nor efficacious for this government to undertake to draw up unilaterally a programme designed to place Europe on its feet economically. This is the business of the Europeans. The initiative, I think, must come from Europe. The role of this country should consist of friendly aid in drafting a European programme and of later support of such a programme so far as it may be practical to do so.It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world without which there can be no political stability and no assured peace. Our policy is directed not against any country or doctrine but against hunger, poverty, desperation and chaos.United States assistance should not be doled out as crises develop. Any assistance the government may render in future should provide a cure rather than a mere palliative. Any government that is willing to assist it in the task of recovery will find full cooperation on the part of the United States government. Any government which manoeuvres to block the recovery of other countries cannot expect help from us. Furthermore, governments, political parties or groups which seek to perpetuate human misery in order to profit therefrom politically or otherwise will encounter the opposition of the United States. Continue reading...
In normal times consumers spend for gratification – in this cost of living crisis they are spending out of desperationWhen credit card balances begin to rocket, analysts are usually convinced the trend indicates consumers are growing in confidence and the economy is bowling along in rude health. In more normal times, consumers feel less concerned about the possibility of paying a super-expensive rate of interest if it means they can buy what they want straight away.These are not normal times. Britain’s economic recovery has ground to a standstill and a cost of living crisis means most things we buy are becoming less affordable by the day. So it was not surprising that City economists agreed that April’s £1.4bn rise in credit card balances was most probably an act of desperation by middle- and low-income households. Continue reading...
Discount chain predicts decline in discretionary spending as UK inflation soars to 40-year highThe discount retailer B&M has warned that its profits could drop as customers struggling with the cost of living crisis opt for cheaper products.It highlighted an “uncertain macroeconomic outlook” that could prompt customers to switch to cheaper products, making it difficult to predict the impact of inflation on sales volumes. Continue reading...
Critics say proposals ‘an own goal’ for government in combating money laundering, tax evasion and fraudThe government has been accused of watering down efforts to combat economic crime after putting forward proposals that could reduce transparency around small company accounts.It said it was reviewing the kind of reporting burdens faced by the UK’s smallest businesses in the hope of reducing the cost and time required to produce public accounts to a level of detail that it claimed was “only needed for larger companies”. Continue reading...
by Richard Partington and Sarah Butler on (#5ZSQC)
New way of gathering figures by ONS highlights cost of living pressures on struggling householdsUK consumers are facing significantly bigger increases in the price of some budget food items including pasta, crisps and bread, new experimental data shows, as poorer families bear the brunt of the cost of living crisis.Highlighting the challenge for low-income households, figures from the Office for National Statistics (ONS) showed prices for some low-cost groceries increased at a much faster rate than general inflation in the year to April. Continue reading...
Ever since Thatcher’s monetarist medicine, profits have become all-but guaranteed for wealthy elites – and society has sufferedInflation in the UK has hit its highest level in 40 years, particularly thanks to the dramatic rise in energy and food prices. This fact has provoked panic among some commentators and policymakers that Britain is about to relive the inflationary turbulence of the 1970s, and has prompted Rishi Sunak to announce a last-minute £15bn “cost of living package” partly funded by a one-off tax on energy companies. Andrew Bailey, the governor of the Bank of England, has already been the subject of outrage for suggesting that workers should show “restraint” in their pay demands, to prevent an upward spiral in wages and prices as seen in the 1970s. Right now, with inflation at 9% and employers expecting to increase pay this year by just 3%, Bailey should be able to relax on that front.Inflation aside, the differences between Britain’s economy of 2022 and that of 40 years ago are stark. In 1982, unemployment hit a postwar record, at more than 3 million, as manufacturing employment plummeted. Today, Boris Johnson boasts of record low unemployment. Trade union coverage was still over 50% in 1982; today, it’s less than half that, and almost half of that again in the private sector. The inability of most workers to negotiate collectively for wage increases is one of the principal reasons why Bailey sounded so out of touch, and why comparisons with the 1970s miss the mark.William Davies is a sociologist and political economist. His latest book is This is Not Normal: The Collapse of Liberal Britain Continue reading...
by Richard Partington Economics correspondent on (#5ZSF2)
Exporters fear Northern Ireland protocol row will spur trade war with Brussels, making an already difficult job even harderMark Brearley is still frustrated by Brexit. More than a year from Britain’s formal withdrawal from the EU, on terms agreed by Boris Johnson’s government, exporting the goods his company produces hasn’t got any easier for the London-based manufacturer.Describing it as “the same nightmare week after week”, he says: “A lot more time is spent with things going wrong. The EU really feels like the hardest place in the world to ship things to sometimes.” Continue reading...
Half worry rocketing prices will cut spending, while three in four fear long-term damage to businessesThree-quarters of small and medium-sized companies are worried about the long-term impact the cost of living crisis, soaring energy bills and rising inflation will have on their business, a survey has found.Just over half (51%) of SMEs said they were concerned that rocketing prices would dent consumer spending, in response to Barclays’ SME Barometer, a quarterly survey of business sentiment conducted for the bank. Continue reading...
The Tory reputation for economic competence was shredded in 1992 but the present PM’s woes go deeper, politically and economicallyMemories came flooding back as George Soros lambasted Vladimir Putin and Xi Jinping in Davos last week, although 30 years ago it was sterling rather than authoritarian leaders that the arch speculator had in his sights.As 1992 wore on, pressure on the pound intensified until on 16 September it was blown out of Europe’s exchange rate mechanism (ERM). John Major’s government never recovered from what was quickly dubbed Black Wednesday, so complete was the humiliation and loss of public trust. Continue reading...
by Vincent Ni, China Affairs Correspondent on (#5ZRTG)
Schools and airports help the leaders of countries that receive cash from Beijing tighten their grip on power, a new book claimsChina’s financing of overseas projects has disproportionately benefited the core political supporters of incumbent presidents or prime ministers of those countries that receive the funds, according to a new book.During the 20th century, China was mostly known as a recipient of international development finance. Its overseas development programme was modest – roughly on a par with that of Denmark. But over the course of one generation, as Beijing emerged as the world’s second-largest economy, its footprint began to extend far beyond its borders – often in the form of infrastructure initiatives such as Belt and Road. Continue reading...
‘Rocket’ was once good enough as a metaphor, but now the ante has been firmly upped skywardsWhen exactly did we become a nation of hyperbolic pyrotechnicians? I only ask because I can’t help noticing the glut of headlines featuring the word “skyrocket”.“Taste of things to come as food prices skyrocket” was just one example last weekend. Then there was, “Referral bonuses skyrocket as staff shortages rise”, “Used Tesla Prices Skyrocket, Selling For Huge Premium Over New Models”, “Burton jewellery firm started in leaky garden shed sees sales skyrocket”, “Energy bills set to skyrocket to £2,800 in the autumn for millions, MPs told”. Continue reading...
Hard-pressed Britons will need this money, even though the cost-of-living crisis is seen as ‘coming to the PM’s rescue’Things have reached a pretty pass when, in order to divert attention from their own decadence, Boris Johnson and his lickspittle party have decided to make a big thing of the cost-of-living crisis – a crisis, mark you, aggravated by the cumulative impact on food and other prices that is the direct consequence of Brexit.The worst cost-of-living crisis in most people’s memory seen as coming to Johnson’s rescue? The chance to claim you are mitigating it with measures extracted reluctantly from a chancellor who has previously made a point of cutting the real value of social benefits? “Moving on”? Yes, that is the nadir of the British polity to which we have been brought by the charlatan who “got Brexit done”. Continue reading...
by Presented by Katharine Murphy with Greg Jericho an on (#5ZQKZ)
The Guardian Australia’s political editor, Katharine Murphy, discusses the election result and the country’s economic situation with economics columnist Greg Jericho and the senior economics correspondent for the Age and the Sydney Morning Herald, Shane Wright. Continue reading...
There is no such thing as a free market – they are always set up to serve particular interest groups, writes Dr Tony BrauerIn your editorial on inflation (18 May), you call for “a reckoning for a free market ideology that has come to dominate our political life”. I agree, except that there is no such thing as a free market. All markets are structured to serve the interests of particular interest groups, and rarely for the common wealth.Nor should ideologues such as Boris Johnson be allowed to blame these crises on global systems. The systems didn’t just pop into existence; they have been constructed from a particular vision of global capitalism. Johnson and his ilk created the conditions from which low productivity, increasing inequality, and inflation have emerged. Further, there are plausible arguments that the global capitalist system is a good breeding ground for international pandemics, xenophobic nationalism and economic and military imperialism. Continue reading...
PM warns that UK faces difficult period, but can avoid recession, as Resolution says wealthy pensioners are biggest winners from £15bn cost of living package
Soaring prices are familiar to older Britons. But their return could lead a fragile, divided country into uncharted territoryWhen a government pinches a key opposition policy it has spent months deriding, and which goes directly against its ideology, you know something pretty big is going on. The Tories’ screeching U-turn over a windfall tax on energy companies in order to fund payments to “ease” the cost of living crisis is in part a typically crude attempt to change the subject from Partygate. But it is also a more revealing signal: that the government has, belatedly, become very worried about the politics of inflation.It is right to be. For a lot of voters, many of them Tories, high inflation is very frightening. Savings shrivel. Pay rises are rarely enough. Investing safely seems impossible. State benefits are even less sufficient than usual. Luxuries, small treats and even essentials become unaffordable. The whole process of personal enrichment promised by capitalism goes into reverse. The solidity of money – the basis for so much of our lives – is revealed as an illusion. It becomes clear that money can decay, like everything else.Andy Beckett is a Guardian columnist Continue reading...
Analysis: permanent increase in benefits needed to deal with rising prices and inflation, thinktanks sayRishi Sunak’s response to the cost of living crisis has received a mixed reception, with charities and anti-poverty groups saying it provides temporary relief for millions of households but leaves those on the lowest incomes facing an uncertain future.The package of measures will boost the incomes of 8 million low-income households with one-off increases to welfare payments in this financial year The chancellor rebuffed calls for permanent increases in benefits to cope with rising prices. Continue reading...
Rishi Sunak has succumbed to pressure to do more to tackle the cost of living crisis and announced a £5bn windfall tax on energy companies, calling it a 'temporary, targeted energy levy'. His statement was met with uproar from Labour MPs, who have repeatedly called for a windfall tax on energy firms. The chancellor said the oil and gas sector was making 'extraordinary profits' due to surging global commodity prices driven in part by Russia’s war. As a result, he said he was 'sympathetic' to the idea of taxing these profits fairly, but had found a sensible middle ground: a 'temporary, targeted energy profits levy' of 25%, but with 90% tax relief for firms that invest
From a warning of third world war to global stagflation or depression, gathering is unsurprisingly sombreThe impact of Russia’s invasion of Ukraine dominated a delayed and slimmed-down World Economic Forum this year but it took George Soros to articulate what many of those making the trip to the Swiss Alps had been thinking.Davos would not be Davos without a broadside from the 91-year-old philanthropist and former speculator, but the conflict in eastern Europe prompted his most apocalyptic warning yet. Continue reading...
by Richard Partington Economics correspondent on (#5ZMGA)
IFS and Resolution Foundation warn of disproportionate impact of energy prices on low-income householdsBritain’s poorest households are expected to see their living costs increase by almost twice the rate as the richest in society do when energy bills rise this autumn, leading economists have warned.The Institute for Fiscal Studies (IFS) said the fresh surge in gas and electricity bills expected in October could lead to average annual inflation rates of as high as 14% for the poorest tenth of households. Continue reading...
Reserve Bank ‘resolute in its commitment’ to keep inflation in the 1-3% target range, signalling further rate rises may still be neededNew Zealanders could feel rising living costs bite down harder in the next few months, as the central bank lifts interest rates by half a percentage point to 2% – its highest level since 2016.The increase matches expectations and is the second rate hike in two months as the Reserve Bank (RBNZ) attempts to rein in inflation, now at a 30-year high. Continue reading...
by Heather Stewart, Aubrey Allegretti and Matthew Wea on (#5ZK93)
TUC says suggestion that higher pay for workers this year will push up inflation is ‘nonsense’Unions have warned of a “hammer blow to morale” across the public sector after Downing Street said ministers would have to take into account the risk of stoking inflation when deciding this year’s pay awards.A readout of Tuesday morning’s cabinet meeting revealed that ministers “held a discussion on public sector pay”, which would affect government officials, nurses, police, teachers and NHS workers struggling during the cost of living crisis. Continue reading...
by Graeme Wearden and Larry Elliott in Davos on (#5ZK6E)
Some doubt the OECD-brokered agreement, which would levy more tax on the world’s largest firms, will ever be implementedAn international deal that would force the world’s biggest multinational companies to pay a fair share of tax has been delayed until 2024 amid fresh wrangling over the painstakingly negotiated agreement.Mathias Cormann, the secretary-general of the Organisation for Economic Co-operation and Development (OECD), told the World Economic Forum in Davos, Switzerland, that there were “difficult discussions” taking place that meant the deal could not come into force in 2023, as previously hoped. Continue reading...