France’s economy stalls and Italy’s shrinks but Germany rebounds from contraction

Poorer countries – hampered by Covid debt and aid cuts – are facing hunger and unrest as conflict pushes up the cost of staplesPrices were rising before Russia’s invasion of Ukraine, which has further disrupted energy markets and food exports, forcing developing countries to pay more to import staples at a time when they are already struggling with increased debts taken on to pay for pandemic responses.While panic over inflation has led news agendas all over the world, the IMF’s World Economic Outlook released this week estimated it would reach 8.7% in developing economies compared with 5.7% in rich countries. Experts fear millions more will be driven into poverty and that transport and food networks will be affected. Continue reading...

Germany, Hungary and others are devising ways they can use roubles to pay Gazprom and not be in breach of sanctions

Rolling coverage of the latest economic and financial news

Nancy Pelosi says oil companies ‘hoarding the windfall while keeping prices high at the pump’ amid concerns over US inflationThe Biden administration is to propose legislation that would allow US federal and state agencies to “go after” oil companies on wholesale and retail sales practices, lambasting the industry over price gouging and profiteering.As American voters express increasing concerns about the high prices of a wide range of consumer goods, including energy and food, Senate majority leader Chuck Schumer said passing legislation to bring down retail gasoline prices “is at the very top of our list”. Continue reading...

US economy contracted by -0.4% in first quarter, its weakest quarter since the early days of the pandemicThe US economy shrank in the first three months of the year, contracting by -0.4% in the first quarter, or -1.4% on an annualized basis, its weakest quarter since the early days of the pandemic.Economic growth slowed markedly at the start of the year. In the last three months of 2021 US gross domestic product (GDP) – a broad measure of the economy – grew by 1.7% or 6.9% on an annualized basis. Continue reading...

Supermarket also points to rising business costs and supply difficulties as it warns of lower profits.Sainsbury’s has said its customers are starting to watch “every penny” as the cost of living crisis mounts, which combined with significant cost increases and difficulties with supplies will lower profits at the supermarket chain in the year ahead. Continue reading...

Bank puts aside extra cash to cover potential loan defaults amid fears over effects from Ukraine warBarclays has become the latest UK bank to warn over the impact of the cost of living crisis, saying that its customers were already facing “harder conditions” as a result of surging inflation.It came as the bank put aside an extra £141m to cover potential defaults on its loans in the first quarter, nearly three times the amount put aside during the same period in 2021, but lower than the £299m that analysts had forecast. Continue reading...

Rise in energy and ingredient costs suggests consumers will have to pay more for well-known brandsThe consumer goods firm Unilever has said “unprecedented cost inflation” lies ahead as Russia’s war on Ukraine has added to a surge in energy and ingredient costs, and said that shoppers will pay even more for well-known brands in the coming months.The company, which makes goods ranging from Dove soap to Magnum ice-cream and Marmite, said on Thursday it expected its costs to rise by €2.7bn (£2.3bn) in the second half of 2022, after an already steep increase on the €2.1bn expected for the first half. Continue reading...

Threat of synchronised global downturn may recede by late 2022 but collapse in one region will affect othersIs the global economy flying into a perfect storm, with Europe, China, and the US all entering downturns at the same time later this year? The risks of a global recession trifecta are rising by the day.A recession in Europe is almost inevitable if the war in Ukraine escalates, and Germany, which has been fiercely resisting calls to pull the plug on Russian oil and gas, finally relents. China is finding it increasingly difficult to sustain positive growth in the face of draconian Covid-19 lockdowns, which have already brought Shanghai to a screeching halt and now threaten Beijing. In fact, the Chinese economy may already be in recession. And with US consumer prices currently increasing at their fastest rate in 40 years, prospects for a soft landing for prices without a big hit to growth look increasingly remote. Continue reading...

NFU president responds to reports ministers are considering lowering import taxes to stem inflationLowering food tariffs will not solve the cost of living crisis and it would be “misleading” to suggest as much to consumers, the president of the farmers’ union said after reports ministers were considering slashing import taxes.Minette Batters, the president of the National Farmers’ Union (NFU), which represents the interests of 55,000 food producers in England and Wales, said lowering the tariff wall for imported foods “does not even begin to deal with the problem” of soaring grocery prices. Continue reading...

British Business Bank to ‘call out’ lenders that failed to carry out due diligence when awarding pandemic support loansThe British Business Bank has pledged to “call out” banks that took taxpayer cash to cover losses on fraudulent Covid loans, but failed to apply the minimal checks.Patrick Magee, the state-owned business bank’s chief commercial officer, told MPs on the Treasury Committee on Wednesday that nearly £63m had been paid out on potentially fraudulent coronavirus business loans to UK banks so far. Continue reading...

A Guardian analysis uncovers how companies enriched themselves and their investors while boasting about jacking up pricesAs inflation shot to a new peak in March, cost increases exacted a deep toll on the economy, eating into most Americans’ wages and further imperiling the financially vulnerable. But for many of the US’s largest companies and their shareholders it has been a very different story.One widely accepted narrative holds that companies and consumers are sharing in inflationary pain, but a Guardian analysis of top corporations’ financials and earnings calls reveals most are enjoying profit increases even as they pass on costs to customers, many of whom are struggling to afford gas, food, clothing, housing and other basics. Continue reading...

Illness, mental health problems and NHS disruption have led to 400,000 workers vanishing, says thinktankBritain’s economy will suffer an £8bn hit this year from a reduction in the size of the workforce caused by a pandemic-induced rise in ill-health, research from a thinktank has shown.A report from the Institute for Public Policy Research said a combination of long Covid, NHS disruption and an increase in mental illness meant 400,000 workers had gone “missing” since the global health crisis began. Continue reading...

Rolling coverage of the latest economic and financial news, including the latest on Elon Musk’s takeover of Twitter

World Bank says biggest commodity shock since 1970s raises spectre of stagflation

Associated British Foods says its brands, including Twinings and Ryvita, also feel the inflationary heatThe owner of Primark has saidthe clothing chain will have to raise prices on its autumn and winter ranges as it is no longer able to offset cost increases with savings.Associated British Foods (ABF) said its food businesses, which include Twinings, Kingsmill and Ryvita, face increasing inflationary pressure in many areas including raw materials, commodities, energy and supply chain costs made worse by the war in Ukraine. Continue reading...

Total deficit in 12 months to March was more than £20bn higher than forecast, says ONSBritain’s gradual emergence from the Covid-19 pandemic meant government borrowing more than halved in the latest financial year but remained the third highest on record, the latest official figures show.The Office for National Statistics said the gap between the state’s revenues and its spending stood at £151.8bn in the 12 months to March, down from £317.6bn in the previous year. Continue reading...

Expert says every country will suffer as world’s biggest palm oil producer bans exports of commodity used in food, cosmetics and cleaning productsThe price of edible oils such as soyoil, sunflower oil and rapeseed oil is expected to rise after Indonesia announced a surprise export palm oil ban, experts have warned.Major edible oils are already in short supply due to adverse weather and Russia’s invasion of Ukraine. The move by Indonesia to pause exports will place extra strain on cost-sensitive consumers in Asia and Africa hit by higher fuel and food prices. Continue reading...

FTSE 100 drops by 141 points to 7380.5, its lowest close in more than five weeks

Fears over China’s economy are rising as Beijing district launches mass-testing, factory confidence drops and more British households are hit by rising costs

CBI’s April survey shows firms planning to pass on increase to consumersOptimism among UK manufacturers has fallen at its sharpest pace since the first coronavirus pandemic lockdown two years ago as firms struggle to cope with the fastest increase in their costs since 1975, according to the latest industry health check.With the war in Ukraine giving a fresh upward twist to the pressures on companies, the April industrial trends survey from the employers’ organisation the CBI found firms cutting back on investment and planning to pass on higher costs to consumers. Continue reading...

Covid and Russia-Ukraine war add to long-term problems causing higher inflation and slowing growthThe new reality with which many advanced economies and emerging markets must reckon is higher inflation and slowing economic growth. And a big reason for the current bout of stagflation is a series of negative aggregate supply shocks that have curtailed production and increased costs.This should come as no surprise. The Covid-19 pandemic forced many sectors to lock down, disrupted global supply chains, and produced an apparently persistent reduction in labour supply, especially in the US. Then came Russia’s invasion of Ukraine, which has driven up the price of energy, industrial metals, food, and fertilisers. And now, China has ordered draconian Covid-19 lockdowns in big economic hubs such as Shanghai, causing additional supply-chain disruptions and transport bottlenecks. Continue reading...

Unions from both sides of the Atlantic accuse Boris Johnson’s government of failing to grasp importance of labour rightsBritain’s hopes of a favourable post-Brexit trade deal with the US risk being undermined by the government’s lack of engagement on workers’ rights, trade unions have warned.As a second round of US-UK talks begins this week, union leaders from both countries said Washington would push for a “worker-centred approach to trade” to help unlock a deal. Continue reading...

If Russia’s invasion of Ukraine is hurting developed countries, it’s proving a hammer blow for the poor

They might think twice before using such language in front of the general publicTruly, we live in parlous economic times. For proof, consider the warning from the International Monetary Fund last week: “The sovereign bank nexus could lead to a self-reinforcing adverse feedback loop that could force the government into default”, calling the process a “doom loop”. Bewildering or what?I know economists are a rarefied breed, but they’re not doing themselves any favours when they dish up warnings like this. Mind you, “doom loop” is sensible shorthand. After all, consider its full meaning: “The doom loop is the circle of vulnerability where a country’s banking system can be severely hurt by volatility in the price of the sovereign bonds they hold for reserves resulting in a contraction in lending provided by the banks.” Continue reading...

Exclusive The Ukrainian president’s adviser, Oleg Ustenko, tells of his fury at how Europe’s refusal to act is piling more misery on Ukraine• Russia-Ukraine war: latest developmentsBefore Russia’s tanks, daubed with their infamous Z, rolled into Ukraine, Oleg Ustenko’s advice to president Volodymyr Zelenskiy had focused on pension reform, privatisation and coaxing economic migrants to return.Nearly 60 days later, the pair are instead striving to hold together an economy that, even if Vladimir Putin’s brutal bombardment were to end tomorrow, would be left in tatters. Continue reading...

The environment ranks low in polls of the public’s fears, while sickness ranks top. Yet we will all get more ill as the planet heatsArnold Schwarzenegger has the answer to tackling the climate emergency. Don’t hype the economic damage, he says, just say we need to “terminate pollution”.It may seem odd to pick the former bodybuilder and actor turned Republican politician as someone with the answer to the most important issue of the 21st century. But Schwarzenegger’s focus on pollution as California’s governor, and that of his successor, the Democrat Jerry Brown, means that since 2008, by wide agreement, the Golden State has enjoyed the longest economic expansion in its history, while also cutting emissions. Continue reading...

Consumer spending, still partially buoyed by lockdown savings, is about to take a hit. But will it mean recession?Business has been better than expected this year for Paul Askew’s fine-dining restaurant in central Liverpool. He feared for its future amid the worst cost-of-living crisis in a generation, but so far the punters have kept coming.“January is usually the quietest month,” says the chef patron of the Art School restaurant, where menus start at £39 a head. “But people were feeling liberated and came out in large numbers. The start of the year was better than we could have hoped, and that has continued.” Continue reading...

Organisation suggests there is a broader crisis as it revises down its forecasts for economic growthThe International Monetary Fund’s revised World Economic Outlook is sobering. It is rare for the organisation to revise down sharply its projections for economic growth only one quarter into the calendar year. Yet in this case, it has done so for 86% of its 190 member countries, resulting in a decline of almost one percentage point in global growth for 2022 – from 4.4% to 3.6%. Moreover, this forecast is accompanied by a significant increase in projected inflation, and all this bad news is packaged in a wrapping of deeper uncertainty. There is a downward bias in the balance of risks, and inequality is expected to worsen within and across countries.The WEO revision is attracting a great deal of media attention. The focus, understandably, is on the relatively large size of the revisions for the current year, most of which are associated with the detrimental economic effects of Russia’s invasion of Ukraine. The war has disrupted the supply of corn, gas, metals, oil and wheat, as well as pushing up the price of critical inputs such as fertiliser (which is made from natural gas). These developments have prompted warnings of a looming global food crisis and a severe increase in world hunger. Given the scale of the disruptions, it would not surprise me if the IMF issued a further downward revision to its growth projections – particularly for Europe – later this year. Continue reading...

Store becomes latest supermarket to limit customers as conflict chokes off flow of sunflower oil to UKTesco has become the latest supermarket to ration cooking oil as the Russia-Ukraine war chokes off the flow of sunflower oil to the UK food industry, further raising the cost of popular items such as crisps and chips.Most of the UK’s sunflower oil comes from Ukraine and the war has had a devastating impact on availability as exports ground to a halt. With firms left scrabbling to source other vegetable oils, the price of cooking oil in the shops is about a 20% higher than a year ago. Continue reading...

Immediate embargo would cost €165bn but economy may not shrink as much as first year of Covid

Worried consumers rein in March spending as private sector growth slows

From dog food to coffee, readers are reporting some basic goods’ prices are rising by far more than inflationInflation is rampant, and supermarket prices are no exception. Shoppers are returning to stores to find old favourites have leapt in price from one week to the next. The cost of consumer goods is spiralling at such a rate that retail analysts have coined a new term, shelf shock.Nestlé, the owner of KitKat, Häagen-Dazs and Felix cat food, became the latest consumer goods group to warn of more pain to come on Thursday, saying it had raised prices by 5.2% in the first three months of this year and that rising production costs would force another increase soon. Continue reading...

Slowdown in retail sector feared as public gripped by pessimism about the economy as well as personal financesFears that Britain is heading for a marked slowdown in consumer spending have intensified as it emerged that the public is gloomier about the economy than when banks were on the brink of collapse during the financial crisis of 2008.A combination of rocketing energy prices, higher taxes and a surge in the annual inflation rate to its highest level in three decades meant confidence was in freefall, according to the latest monthly snapshot of sentiment. Continue reading...

Catherine Mann argues that soaring energy and food prices will persist even if consumer demand weakensA senior Bank of England policymaker has said Britain’s central bank could raise rates again next month to combat the risk of high inflation persisting into 2023.Catherine Mann, a former Citigroup economist who joined the BoE’s nine-strong monetary policy committee (MPC) last year, said on Thursday that soaring prices of energy and food will persist next year, even if consumer demand weakens. Continue reading...

KitKat and Nescafé owner blames surge in cost of ingredients, energy, labour and transportNestlé, the owner of KitKat, Häagen-Dazs and Felix cat food, raised its prices by 5.2% in the first three months of this year and has said rising costs will force another increase soon.Mark Schneider, its chief executive, said: “Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.” Continue reading...

From the supply-chain crisis to Covid vaccines, the past couple of years have brought home the benefits of self-sufficiencyRishi Sunak is in Washington DC this week to discuss the state of the global economy with his fellow finance ministers. But he is clearly keener on listening to some of them than others. Had the chancellor not been on a plane on his way across the Atlantic, he would have joined a walkout by the UK delegation – led by the Bank of England governor, Andrew Bailey – when Russia’s representative started speaking at a gathering of the G20. The protest by the Brits – along with the Americans and the Canadians – at a forum that includes the world’s leading developed and developing economies won’t make the slightest difference to the Kremlin. For all that, it is a symbolic gesture that matters. The International Monetary Fund issued a warning this week about the risk of the war accelerating the fragmentation of the world into rival economic blocs, and here is an example of it. China made it clear it didn’t think Russia should be excluded from G20 meetings, as did the country currently in the chair: Indonesia.The IMF is worried about the risk of a return to the 1930s. It fears the current trend towards deglobalisation will result in trade barriers going up, countries adopting their own technological standards – and rival reserve currencies emerging to challenge the supremacy of the US dollar. Bad all round, in other words.Larry Elliott is the Guardian’s economics editor Continue reading...

Bill Ackman’s Pershing Square fund dumps 7% stake for $400m loss after streaming service’s value plungesThe billionaire hedge fund manager Bill Ackman has sold his shares in Netflix at a loss of about $400m (£305m), reversing his bullish position in the streaming giant after it reported an outflow of more than 200,000 subscribers.The New York-based investor bought more than $1bn of Netflix shares in January, despite grim forecasts about the company’s subscription levels. Ackman said at the time that the subsequent drop in the share price had presented an “attractive” opportunity for his Pershing Square fund. Continue reading...

Elvira Nabiullina says lawsuits aim to release gold and foreign currency frozen amid Ukraine invasion sanctions

Live rolling coverage of business, economics and financial markets as global growth forecasts downgraded amid Ukraine invasion and inflation

Economic gains made after recovery from Covid pandemic could be erased, says expert

Analysis: Fund’s world economic outlook highlights need to protect people such as refugeesGloom at the International Monetary Fund is nothing new. Since last summer the body responsible for stabilising and supporting the world economy has been growing ever more pessimistic.First it was rising inflationary pressures caused by supply-side bottlenecks. Then it was the arrival of the new Omicron variant towards the end of 2021. Now it is the war in Ukraine, something not anticipated when the Washington-based organisation last published its assessment in January but which dominates the IMF’s world economic outlook. Continue reading...

President ‘deeply concerned about developing countries’ amid Russia’s war in Ukraine, Covid and inflationThe World Bank is preparing a $170bn package of financial help in response to the overlapping global crises of war, pandemic and inflation that are hitting the poorest countries particularly hard, its president has said.David Malpass warned that Russia’s invasion of Ukraine had added to pressures caused by the Covid-19 crisis and soaring cost of living, and there was a need to provide assistance quickly. Continue reading...

Inflation will limit UK consumers’ spending power, with energy costs a particular problemBritain’s economy is at growing risk of falling into a summer recession amid the biggest squeeze on household incomes since the mid 1950s, as soaring inflation curtails consumer spending power, forecasters have said.Economists said the double blow from slowing post-lockdown growth and rising living costs after Russia’s invasion of Ukraine could result in a fall in gross domestic product (GDP) for two consecutive quarters, which is the definition of a recession. Continue reading...

But situation needs looking at in global context because it is not a story of British exceptionalismEaster traditionally marks the start of the annual housebuying season, but this year there has been no need for potential sellers to mow the lawn and give the living room a lick of paint because the market’s already running hot.Demand for property has been strong ever since the UK first came out of lockdown in the summer of 2020. Mortgage approvals are up on pre-pandemic levels and prices have climbed ever higher. Continue reading...

Study of 78 countries reveals impact of economic exclusion, including on changing fortunes in UKCountries that allow economic inequality to increase as they grow richer make their citizens less happy, a new study shows.Until now, researchers have believed that inequality was largely irrelevant to levels of life satisfaction, according to Dr David Bartram at the University of Leicester. Continue reading...

The PM’s damaging slogan about leaving the EU is as nothing when compared with his attitude to following his own rulesThe prime minister has fallen out with his chancellor? Happy Easter and please tell me something new. Indeed, tension between Nos 10 and 11 Downing Street is almost par for the course. Margaret Thatcher did not get on with Geoffrey Howe – her chancellor from 1979 to 1983 – and after he was moved on to other departments they eventually fell out completely over Europe, about which Thatcher thought Howe far too enthusiastic.The tension between Tony Blair and his chancellor, Gordon Brown, between 1997 and 2007 was principally about Brown’s desire to take over the reins, but also about – here we go again – Europe. In that case, the argument was about whether or not to join the euro. Continue reading...

Private firms are turning to creative hiring methods, but public sector workers are missing outAverage wage growth in Britain is not keeping pace with inflation, leaving workers facing the biggest annual fall in living standards since records began in the 1950s.Some employers, however, are ramping up bonuses in an attempt to lure new recruits and retain existing staff, as record job vacancies intensify the battle for talent and companies work to support staff hit by dwindling spending power. Continue reading...

Erdoğan’s quixotic policies are putting pressure on prices, but now fallout from Ukraine is pushing the country towards crisisFrom behind the counter in a bakery in Kasımpaşa, a working-class Istanbul neighbourhood, Mustafa Kafadar can see the orange, white and blue banners of Recep Tayyip Erdoğan’s Justice and Development party (AKP) as they blow in the spring breeze.Kafadar has been wrenched out of retirement by Turkey’s economic crisis – his pension is no longer enough to cover his basic expenses. Now he works shifts in the bakery, where he describes living from payday to payday while he sweeps crumbs off a tray. Continue reading...