Analysts say manufacturing recession has begun as new orders fall amid soaring inflation and economic uncertaintyUK factory production slumped in August at the fastest rate since the early Covid-19 pandemic lockdown month of May 2020 after manufacturers suffered a sharp reversal in new orders from domestic and overseas customers.Analysts said a manufacturing recession had begun after firms reported that clients had “postponed, rescheduled or cancelled agreements” in response to economic uncertainties, soaring inflation and component shortages. Continue reading...

Funding still needs to be approved but could offer breathing space amid country’s economic turmoilThe International Monetary Fund has tentatively offered Sri Lanka a $2.9bn (£2.5bn) loan to help the country recover from the worst economic crisis since it gained independence from Britain in 1948.The funding is meant to provide some breathing space for Sri Lanka, which is scrambling to restructure nearly $30bn in debt to creditors including China, India and a string of international banks. Continue reading...

Resolution Foundation says rising energy bills will push extra 3 million people into poverty

Of course financial markets are jittery: the government has gone awol and the economy is tankingThe man most likely to lose the fight to become Conservative leader is threatening dire consequences if he is disappointed. Pointing to volatile financial markets, Rishi Sunak warned this week that investors will dump British assets if Liz Truss becomes prime minister and then borrows tens of billions to give away. Pressing ahead with tax cuts and public spending while ignoring the risk of an investors’ revolt is, says the former chancellor, “complacent and irresponsible”.A degree of rhetorical licence is granted to electoral combatants, and Mr Sunak has enjoyed his full quota this summer. The once mild-mannered MP has spotted a dangerous “lefty woke culture” from which only he can protect “our history, our values, our women”. Indeed, the further behind he has fallen, the more extreme the vows for what he will do if he wins. But even the boy who cried wolf called it right once, and this latest claim will undoubtedly be taken more seriously. After all, its author once worked in the City for those money managers he sees as so jittery. Continue reading...

Even in normal times, the private sector relies heavily on public money, infrastructure and services, writes Prof Mary MellorTaking back control of malfunctioning markets must mean challenging neoliberal economics and the myth of market supremacy (Editorial, 29 August). The market is not the sole source of money and wealth. The public economy is equally important – and vital when markets fail or in times of crisis. Even in normal times, the private sector relies heavily on public money, infrastructure and services. The biggest myth of all is that public expenditure is funded from the (private) taxpayer’s pocket. There is a growing alternative economics which shows that it is the state’s capacity to create money that underpins the market, through the authorised banking system and government spending.The illusion that the latter is based solely on borrowing from the private sector or taxation is sustained by the ambivalent role of central banks. When national debt is held by the (national) central bank, the reality is that the government effectively owes the debt to itself. Public spending is not inflationary if it is balanced by taxation. Continue reading...

Heaping pressure on incoming prime minister, 10-year government bond yields shoot up to 2.78%Fears of a long recession and the likelihood of higher public spending to cope with the cost of living crisis have sent the interest rate on Britain’s debts soaring towards its biggest monthly rise in almost 40 years.Ten-year UK government bond yields, which are a proxy for the effective interest rate on public borrowing, hit 2.78% to register the biggest monthly rise since September 1986. Continue reading...

Five-sticker packs for football tournament in Qatar are 12.5% more than for Russia 2018Inflation has come for the football sticker album. Collecting and completing the official Panini Fifa World Cup Qatar 2022 album will cost fans an average of about £870.Panini, which first produced a World Cup sticker album for the 1970 tournament in Mexico, has priced five-sticker packs for the Qatar 2022 album at 90p each. That is a 12.5% increase on the 80p cost of a five-sticker pack for the Russia 2018 album. For Euro 2016 a pack cost 50p. Continue reading...

On the frontline of Britain’s energy bills crisis. Plus: Visions of outer space

We are overconsuming the Earth’s resources and are increasing our ecological debt every year, writes Barbara WilliamsThank you for sharing Emmanuel Macron’s warning about the “end of abundance” (Report, 24 August). It is heartening to see a glimmer of realism creep into a speech by a politician. Humanity has now been exceeding the biocapacity of Earth for well over 50 years, and it beggars belief that both politicians and voters still believe that pursuing GDP might solve the ecological collapse that has been caused by this measure of “wellbeing”.We are increasing our ecological debt every year, leaving less and less scope for our children to survive. What we really need is a global aspiration to unite us in all our diversity, to peacefully and equitably aspire to shrink back within the biocapacity of our planet. Continue reading...

Peter Danielian disputes a claim that the UK is the sixth-richest country in the worldAlthough I agree with the main points of Aditya Chakrabortty’s article (These are energy bills many Britons simply can’t afford. Some will pay with their lives, 26 August), it is not correct to say that the UK is the “sixth-richest country in the world”. We have the sixth-largest economy (GDP), but GDP should not be used to compare nations’ wealth, which depends on the size of the population. India has the fifth-largest GDP, but I doubt many would describe it as rich; Denmark has a small GDP but is much richer than the UK.How rich a citizen is depends on per-capita GDP and how equitably it is distributed. It is better to use purchasing power parity (PPP) to compare individual wealth – this takes account of the per-capita GDP and the cost of living in each country. By this measure, the UK is ranked 30th in the world. The list of countries above us does include the expected tax havens and oil-rich countries with small populations, but notably includes Ireland (fifth) and most of the western and northern EU countries.

Goldman Sachs warns inflation could inflation peak above 22%, adding more pressure to households and businessesInflation in the UK could top 22% next year, close to the post-war record set in 1975, if wholesale energy prices remain at current high levels, Goldman Sachs has warned.Highlighting the pressure on households and businesses, the US investment bank said inflation could peak at 22.4% next year if wholesale gas and electricity prices continue to spiral over the winter. Continue reading...

Investment bank warns inflation could exceed 20% if UK energy price cap rises 80% in January, while baseline forecast has inflation rising to almost 15%Russian energy giant Gazprom has intensified the squeeze on Europe’s energy market, by cutting supplies to France’s Engie.Engie says it has been told that Gazprom will reduce gas deliveries starting today, due to a disagreement over some contracts.“As previously announced, Engie had already secured the volumes necessary to meet its commitments towards its customers and its own requirements, and put in place several measures to significantly reduce any direct financial and physical impacts that could result from an interruption to gas supplies by Gazprom.”“Very clearly Russia is using gas as a weapon of war and we must prepare for the worst case scenario of a complete interruption of supplies. Continue reading...

As costs rose nationwide, La Segunda in Tampa, Florida, had to figure out how to keep 140 employees across three bakeries afloatFor 106 years, La Segunda has baked bread in Ybor City, a neighborhood in Tampa, Florida. It’s a Cuban bakery where the loaves are scored with palmetto fronds and reach 36in in custom ovens. Between the longstanding traditions and myths that shape the place, the owners that span four generations have never seen prices rise as they have in the past year.Across America, inflation affected the food industry acutely, and in the case of La Segunda, the cost of wheat doubling in just 12 months left a bruise. “That’s 30% to 40% of our manufacturing,” said Copeland More, a partner alongside his father in the business. Continue reading...

Corporations are pushing up prices at the expense of AmericansFriday at Jackson Hole, Wyoming, Federal Reserve chairperson Jerome Powell said the Fed must continue to raise interest rates, even though it will “bring some pain to households and businesses”.This – with all due respect – is nuts.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

Move could see synchronised strikes in autumn as new prime minister takes officeBritain is facing a wave of coordinated industrial action by striking unions this autumn in protest at the escalating cost of living crisis, the Observer can reveal.A series of motions tabled by the country’s biggest unions ahead of the TUC congress next month demand that they work closely together to maximise their impact and “win” the fight for inflation-related pay rises. Continue reading...

In the face of energy crises and recession fears, house prices and rents remain robust – because the market is rigged that wayAs rising gas and electricity prices take centre stage after Ofgem set the October energy price cap at £3,549, it is interesting to see how little other parts of the economy have reacted.A plentiful supply of cheap energy has underpinned every period of growth in national income over the past 70 years and the prospect of what was once ubiquitous and low cost becoming a major financial burden is one of the main reasons many economists predict that a recession will begin this autumn and run throughout next year. Continue reading...

US stock markets nosedive as Jerome Powell says at top bank summit the ‘overarching focus is to bring inflation back down’US stock markets nosedived on Friday after the Federal Reserve chair, Jerome Powell, warned of “pain” ahead as the central bank struggles to bring down inflation from a 40-year high.Powell’s highly anticipated speech was more hawkish than had been expected, with the Fed chair pledging to do all he could to end rising prices. The Dow Jones Industrial Average lost just over 1,000 points, 3%, the S&P fell 3.3% and the Nasdaq dropped almost 4%. Continue reading...

MPs say it is vital tax and spending measures proposed by potential new prime minister are examined by OBRLiz Truss has been challenged to open up her prospective emergency tax cuts and spending plans to scrutiny if she becomes prime minister and makes immediate moves to tackle the cost of living crisis.The Office for Budget Responsibility (OBR), which produces independent forecasts based on major fiscal announcements by the government, revealed preparatory work had been under way for about a month to publish fresh economic forecasts in September. Continue reading...

Rocketing gas and electricity prices may usher in some benefits – but none will have much impact this winter

Retail chain pledges to do more to help consumers hit by cost of living crisisBritish households were on average £160 worse off in July than a year earlier, according to research by the supermarket Asda, as it said it would do more to help shoppers being squeezed by soaring food and energy costs.Asda bosses said they would keep “grocery bills in check” and do all they could to support customers “during these tough times”, as they monitor how much money consumers have to spend through their income tracker. Continue reading...

About 16 million working-age Americans have long-term Covid, according to a Brookings Institution reportAbout 16 million working-age Americans have long-term Covid and 2-4 million are out of work because of its ill effects, according to a new report from the Brookings Institution.Employers have complained of labor shortages throughout the pandemic, and the analysis of data from the US Census Bureau’s Household Pulse Survey, which collects data from Americans through a survey on education, employment, health and housing, suggests one possible reason for the lack of workers. Continue reading...

Pubs and farms concerned about supplies as CF Fertilisers UK prepares to pause ammonia and carbon dioxide production due to high natural gas pricesBritain’s next prime minister must adopt radical ideas - such as discounted power tariffs, energy bill freezes or a “solidarity” tax hike for higher earners - to protect households from the energy price shock, the Resolution Foundation thinktank warns.In a new report this morning, Resolution lays out how tens of billions of pounds in new government support must be targeted at households least able to cope with surging energy costs. Continue reading...

Gaming console maker says inflation rates and supply shortages have led to ‘challenging economic conditions’Sony is increasing the price of the PlayStation 5 by as much as 20%, the company says, in every major market save the US.The UK price of the games console, which has been plagued by supply shortages since its release in November 2020, will increase by 6% (£30), from £449.99 to £479.99. A cheaper, disc-less version of the console will get the same price rise, from £359.99 to £389.99. Continue reading...

Ren Zhengfei writes in leaked memo that ‘chill will be felt by everyone’ and company must focus on survivalThe founder of Huawei has delivered a stark warning for the tech company’s future, sparking alarm with the frankness of his assessment and what it signals for smaller businesses amid China’s economic troubles and a global downturn.In a leaked internal memo, Ren Zhengfei told Huawei staff “the chill will be felt by everyone” and the company must focus on profit over cashflow and expansion if it is to survive the next three years, indicating further job cuts and divestments. Continue reading...

Millions of vulnerable people will be harmed without radical policies to ease cost of living crisis, say expertsPhysical and financial harm will be caused to millions of vulnerable families unless the government takes action to avert a winter catastrophe by cutting energy bills, leading economists have warned.In the run-up to the announcement of the new energy price cap tomorrow the Resolution Foundation thinktank said radical policies such as price freezes, solidarity taxes or lower social tariffs were needed to prevent the cost of living crisis worsening. Continue reading...

The $1.7tn debt has become a hot political issues as midterm elections approachAmerica’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has more than tripled over the last 16 years. Continue reading...

The $1.7tn debt has become a hot political issues as midterm elections approachAmerica’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has more than tripled over the last 16 years. Continue reading...

This live blog has now closed, you can find our latest UK political coverage here

Disruption at the UK’s largest container port could escalate until Christmas unless workers are given an improved pay offer, Unite boss says

The ex-vaccines minister appears to be the equivalent of a caretaker football manager, with Kwarteng waiting in the wingsGordon Brown used to joke that there were two sorts of chancellors: the ones who failed and the ones who got out in time. Nadhim Zahawi looks like being in the second category.Appointed by Boris Johnson on 5 July as he struggled in vain to remain prime minister, Zahawi is likely to be the shortest-serving chancellor since Iain Macleod died in office in 1970. Macleod was in charge of the Treasury for a month; Zahawi’s tenure will probably last only twice as long. Continue reading...

UK aimed to phase oil Russian oil imports by end of 2022; in June it achieved that target, ONS data shows

This live blog is now closed. You can read our latest story on the leadership contest here:

UK private sector growth hits 18-month low, while the US, Germany and France all suffer falls in activity this month, adding to recession fearsThe downturn in Germany’s private sector economy has deepened too.The Flash Germany PMI Composite Output Index has fallen to just 47.6 this month, from July’s 48.1.Continued weakness in manufacturing is being compounded by a slowdown in the service sector, with surveyed businesses reporting a growing strain on demand from high inflation and increased interest rates.“The slowdown in the economy is increasingly taking a toll on firms’ hiring activity, with employment growth easing to its weakest for almost a year-and-a-half in August. A first fall in backlogs of work for more than two years points to capacity pressures across Germany’s private sector economy starting to ease and represents a downside risk to job creation going forward.Flash Germany PMI Composite Output Index at 47.6 (July: 48.1). 26-month low.Flash Germany Services PMI Activity Index at 48.2 (July: 49.7). 18-month low.Flash Germany Manufacturing Output Index at 46.4 (July: 45.0). 2-month high.Flash Germany Manufacturing PMI at 49.8 (July: 49.3). 2-month high. Continue reading...

City traders bet central bank will more than double cost of borrowing to combat soaring inflationThe Bank of England could be forced to raise interest rates to 4% from as early as next year to combat soaring inflation, despite the growing risk of recession amid the cost of living crisis.City traders are betting the central bank will more than double the cost of borrowing from 1.75% in response to inflation at the highest levels for more than 40 years. Continue reading...

Mel Stride says OBR must provide fiscal forecasts as Liz Truss urged to ‘come clean’ on promised tax cutsThe chair of the Commons Treasury committee has urged the government’s economic watchdog to produce fiscal forecasts alongside any emergency budget this autumn, after Liz Truss signalled she would try to avoid early scrutiny of her fiscal plans.Mel Stride, the chair of the committee, said the chancellor must ensure that the Office for Budget Responsibility (OBR) provides its assessment at the same time as the new prime minister makes any big fiscal decisions. Continue reading...

Higher costs, weaker demand and bottlenecks sink manufacturing output to lowest level since start of pandemicBritain’s factories are bearing the brunt of the slowdown in the economy as higher costs, weaker demand and supply bottlenecks combine to send output plunging.Two separate snapshots of industrial activity showed a decline in manufacturing activity – part of a Europe-wide trend exacerbated by the economic fallout from the war in Ukraine. Continue reading...

The sector is dangerously overheated – but unlike the 2008 financial crisis, the global ripple effect is likely to be limitedThe property sector in the Chinese economy has always been something of a puzzle. At its peak, it accounted for a quarter of the nation’s economic output, broadly measured. And it sees people in Beijing and Shanghai paying house prices similar to those in San Francisco and New York, despite having just a quarter the income of American buyers.Now many believe that we are about to see a violent contraction of the property market in China. The government wants to intervene to curb speculation, and rein in what it calls the “three high” problem: high prices, high debt and high financialisation. The approach has been nothing short of dramatic. Financing for property developers has tanked. Earlier this year, property sales declined by as much as 20-30%, in-progress developments are not being completed and people have taken to the streets, banding together to stop mortgage payments on such projects in protest.Keyu Jin is a professor of economics at LSE Continue reading...

Forecasts updated after 25% and 7% rally in gas and electricity prices respectively last weekInflation in the UK will hit 18% early next year as consumers count the cost of the deepening energy crisis, one of the world’s biggest banks has predicted.The US financial services group Citi said it expected the consumer prices index to breach 18% in the first quarter of 2023, while the retail prices index inflation rate would soar to 21%. Continue reading...

Rising cost of living is “entering the stratosphere” says Citi, which forecasts energy price cap could rise to £5,816 per year in April.Barristers have voted to begin striking indefinitely from next month, in the latest industrial action to hit the UK.The Criminal Bar Association, which represents advocates in England and Wales, has announced that 80% of voting members had backed escalating their industrial action in their ongoing dispute over government funding. Continue reading...

Truss cannot deliver £50bn tax cuts and support packages without pushing debt to dangerous levels, says Tory leadership rivalLiz Truss will plunge the economy into an “inflation spiral” if she does not choose between her unfunded £50bn tax cuts and providing cost of living support, her Conservative party leadership opponent, Rishi Sunak, has claimed.Sunak’s leadership campaign said Truss would increase borrowing to “historic and dangerous levels” and place public finances into “serious jeopardy” if she attempted to do both. Continue reading...

Brexit opportunities minister says Tory leadership hopeful’s comments reflect Britain’s ‘poor productivity’Jacob Rees-Mogg, a key ally of Liz Truss, has defended the Tory leadership frontrunner’s suggestion that British workers need “more graft” as “sensible”.Rees-Mogg, the Brexit opportunities minister, told the Mail on Sunday that her comments reflected “poor productivity in the British economy”. Continue reading...

Our writers assess and cost the key ideas floated so far, from targeted help to the most vulnerable to a new windfall taxBoris Johnson has said he will not introduce any new measures to deal with the cost of living crisis. Big spending decisions are being delayed until his successor as prime minister is in post. However, the result of the Conservative leadership election will not be announced until 5 September.In the meantime, a major increase in the regulated energy price cap, which puts a ceiling on gas and electricity bills, is due to be announced this Friday. It is forecast to rise from just under £2,000, to £3,600 a year for the average household. Continue reading...

Consumers are in either denial about the economy or think they are managing … for nowThe UK economy is a puzzle. Inflation has burst above 10% for the first time since Argentina was gearing up to invade the Falklands in early 1982. Prices are rising far more quickly than wages. Consumer confidence has plumbed depths not seen during any of the many misfortunes of the past half century.And yet, the official data shows the British public is carrying on shopping regardless. Retail sales were higher in July than they were in June despite the progressively tighter squeeze on living standards. Airports are busy with holidaymakers, house prices keep on rising. Odd sort of crisis, you might think. Continue reading...

Analysis: the party’s coalition is built on the ‘red wall’ and younger southern professionals, whose patience for posturing is limitedThe Conservative leadership campaign has seen the party jettison large parts of the platform it was elected on in 2019 – not least Boris Johnson’s pledge to level up the country – tacking rightwards on the economy and issues such as the environment and education. Should Conservatives be concerned that the rightward lurch of their party threatens its appeal at the next election to both new and traditional supporters?Younger, more educated voters have been moving out of London in their droves to the capital’s commuter belt for some time, tilting the demographic makeup of numerous seats. Many marginal constituencies in the south-east – places such as Esher and Walton and Winchester – are home to large numbers of graduates and professionals, groups that once upon a time were reliable Conservative voters. The party can no longer take these voters for granted, especially those of working age. Not only are they more likely to be Remainers but they also tend to hold more socially liberal attitudes on issues such as immigration and the environment, and are less likely to be sympathetic to anti-woke, anti-green posturing. Continue reading...

Sunak and Truss have no grasp of how low personal taxation is now – or how much a battered Britain needs public spendingWhenever I told him things were going from bad to worse, my father used to nod sagely and say: “It was ever thus.” However, I wonder what he would have said now about the state of the country and the “governing” Conservative party.In a leadership race whose inanity almost beggars belief, the two very rightwing contenders seem obsessed with establishing their Thatcherite credentials without, as far as I can see, having a clue what Thatcherism was really about. Continue reading...

As the country prepares for recession and more, the government dithers over tax cuts• You can order your own copy of this cartoon Continue reading...

War, drought and Covid have blighted prospects not just in Britain but continent-wide. Which countries are most at risk?Almost six months after Vladimir Putin ordered Russian troops into Ukraine, the extent of the damage to the European economy is becoming clear. The red lights of recession are flashing.The eurozone’s big four economies – Germany, France, Italy and Spain – have all had their growth forecasts for 2023 downgraded by the International Monetary Fund, as a combination of the war and higher interest rates put a brake on activity. Continue reading...

Beijing is in a bind over harsh Covid lockdowns, a property crisis and tensions with western trading partnersOn his tour of the southern Chinese city of Shenzhen last week, Li Keqiang, the premier, tried to send some positive energy at a time many citizens have been complaining of economic hardship.“China’s opening will continue. The Yellow river and the Yangtze river will not flow backward,” Li said, striking an upbeat tone while visiting Yantian Port, a gateway to Europe and North America, two of China’s biggest markets. Continue reading...

Those in Europe’s inflation hotspot remain calm about rising prices, but a lack of government intervention could fuel further increases – and discontentLike his cappuccinos, Taniel Vaaderpass, 33, isn’t bitter. His usually profitable company, OA Coffee, one of Estonia’s biggest coffee bean roasting companies, may have posted a loss for the first time last year and is set to do so again this year, but Vaaderpass remains strikingly sanguine as he sits on the terrace of the cafe he also owns on a cobbled street in the old town of Tallinn.The central causes of Vaaderpass’s misfortune is a 240% increase in the price of unroasted green coffee and a 20% surge in the cost of the gas he uses to roast his imported beans. He also felt the need to give his staff a 10% pay rise in January despite the lack of company profits. Continue reading...

Jobs disappear and high streets decimated as growing number of traders are forced to shut due to higher costsThe energy crisis is tearing through Britain’s high streets, with warnings on Friday of a “lost generation” of small businesses, as the impact of soaring gas and electricity prices begins to hit cafes, restaurants, shops and salons.Across the UK, growing numbers of traders are closing their doors for good in the face of unaffordable costs driven by record inflation, with some reporting tenfold increases in utility bills. Continue reading...