As energy bills soar, survey shows almost half of homes are worried about paying rent or mortgageMore than one in eight UK households fear they have no further way to make cuts to afford a sharp increase in annual energy bills this autumn.More than a quarter of households earning less than £20,000 worry they will be unable to cope with higher bills, with families in Yorkshire, the south-west and Northern Ireland the least confident about covering their costs, according to the latest rebuilding Britain index of 20,000 people by Legal & General. Continue reading...
Sharpest contraction is in energy-intensive industries, such as petrol, coking coal and ferrous metalsChina’s factory activity unexpectedly shrank in July as sporadic Covid outbreaks disrupted the sector and the slowing global economy weighed on demand.The official manufacturing purchasing managers’ index (PMI) fell to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said on Sunday. That was weaker than forecast, below the 50-point mark separating expansion from contraction. Continue reading...
Policies are tightening when major economies are either falling into recession or heading that wayIt’s over. An era of ever-rising house prices stimulated by cheap money is coming to an end. Central banks created a colossal real estate boom and soon they will have to cope with the consequences of the bubble being pricked.In China it is already happening. Banks in the world’s second biggest economy are under orders to bail out property developers so they can complete unfinished projects. Mortgage boycotts are on the rise because people are, unsurprisingly, unhappy about paying home loans for properties they are unable to occupy. Continue reading...
A few short years after the financial crash, oil, food and flights were affordable again. But this downturn looks much darkerWatching the Conservative party candidates spray money around as they vie to win the keys to No 10, it seems churlish to ask where the cash will come from. Running a 21st-century economy is not cheap and, unfortunately for those in power, gets more expensive every year.More immediately, to prevent a cost of living crisis translating into a calamity this winter for low- and middle-income households, a bigger bailout is on the cards. Continue reading...
This week’s decision on interest rates will be fraught, but many think Britain is heading the same way as the USWhen Bank of England officials meet this week to consider how much to raise the central bank’s base rate by, they could be forgiven for having spent the previous day scratching their heads.There are figures that show the UK economy is – like an 18th-century depiction of John Bull after a feast of pies – straining at full capacity. In normal times, low unemployment and a record number of vacancies would indicate a boom in full swing. Continue reading...
Analysis: In spite of high employment and robust hiring, many Americans are pessimistic about the economyThe Republican chair of the Federal Reserve doesn’t think it’s happening. Neither does the Democratic president, Joe Biden, nor do a good number of economists.And yet, many Americans appear to believe the world’s largest economy is in a recession, creating yet another liability for Biden in the run-up to November’s midterm elections, where voters are already inclined to hand Republicans control of at least one chamber of Congress. Continue reading...
The opposition should be clearer about its own solutions to disputes that the government is shamefully trying to prolongIt is perverse, but seemingly true, that Britain’s current industrial disputes over pay and jobs are causing more problems for the Labour opposition than they are for the Conservative government. There was a telling example on Wednesday, when Keir Starmer sacked an obscure junior shadow minister, Sam Tarry, for making media appearances on a rail workers’ picket line. The action generated more heat and headlines than anything triggered by Liz Truss’s belligerent pledge this week to impose new legal restrictions on public sector strike action, or Grant Shapps’ instant plan of 16 different measures that would emasculate unions’ rights to strike at all.There are several lessons here, but the main one is that the Conservatives are not being held to proper account for the spiralling effects of the squeeze on living standards over which they are presiding. They, not Labour, are the government. They, not Labour, set public sector pay policy. They have the formal power to change public finance rules. They also have the informal authority to bring pressure on the two sides to negotiate a settlement. As guardians of the public interest, if nothing else, the government should also avoid unnecessarily provoking the dispute or becoming a protagonist. Continue reading...
US oil companies post huge earnings, as sky-high fuel costs hit consumers and drive up inflationCities in Germany are switching off spotlights on public monuments, turning off fountains, and imposing cold showers on municipal swimming pools and sports halls, as the country races to reduce its energy consumption in the face of a looming Russian gas crisis.Hanover in north-west Germany on Wednesday became the first large city to announce energy-saving measures, including turning off hot water in the showers and bathrooms of city-run buildings and leisure centres. Continue reading...
Cost of living crisis comes as 19-member currency bloc beats growth forecasts in second quarterInflation in the eurozone reached a record high of 8.9% this month, closing the gap with the UK’s 9.4% rate.Dearer energy was blamed for the lion’s share of the increase from 8.6% in June, as the fallout from the Russian invasion of Ukraine continues to hammer European economies. Continue reading...
People borrowed an extra £1.8bn in June, up from £900m in May, Bank of England figures showUK consumer credit growth in June accelerated at the fastest rate in three years, as households struggle to cope with the rising cost of living.People borrowed an additional £1.8bn in consumer credit last month, up from a £900m increase in May, according to the latest Bank of England data. Continue reading...
Republicans are quick to call a recession as the administration points to brighter employment numbersPrices are rising in the US at the fastest rate in four decades. The Fed raised interest rates again. And new data showed the American economy shrank for a second consecutive quarter, intensifying fears of a recession and handing Republicans a potent line of attack just months before the midterm elections.For embattled Joe Biden, Thursday’s gross domestic product figures were the latest in a string of worrying economic developments clouding his presidency this week. The news came as Democrats celebrated a breakthrough on the president’s long-stalled economic agenda after Senator Joe Manchin announced his support for a version of the plan in a shock reversal for the West Virginia holdout. Continue reading...
Dhaka is understood to be seeking $4.5bn rescue package after being hit by high import costs and falling exportsBangladesh is to hold talks with the International Monetary Fund after applying for a bailout to prevent the country running out of cash.The government in Dhaka – the third in south Asia to seek a financial rescue package from the IMF after Pakistan and Sri Lanka – is understood to want $4.5bn (£3.7bn) after it was hit hard by high import prices, especially for gas, and a fall in exports as the global economy slowed down. Continue reading...
Blow to businesses as 300,000 workers took time off due to Covid last month, with BA.4 and BA.5 the majority of new infectionsStaff shortages were already a fact of life for restaurant-owner Des Gunewardena when the recent wave of Covid-19 hit.“I visited the Butler’s Wharf Chop House earlier this week and when I asked about our general manager he was off with Covid,” said the D&D boss, who oversees 2,000 staff in outlets across the UK, France and US. Continue reading...
Question weighs on consumers, politicians and investors around the world as the Federal Reserve raises interest ratesIs the US in a recession? It’s a question weighing on consumers, politicians and investors around the world. Today we got one step closer to answering it. And the answer is: maybe? Continue reading...
The bad news will be a major blow for the Biden administration as it prepares for a tough midterm election seasonThe US economy shrank again in the last three months, unofficially signaling the start of a recession.The commerce department announced Thursday that gross domestic product (GDP) – a broad measure of the price of goods and services – decreased at an annualized rate of 0.9% in the second quarter after falling at an annualized rate of 1.6% in the first three months. Continue reading...
Swiss food and beverage group says sales rose 9.2% driven by price increases, beating expectationsThe maker of KitKat, Nespresso, Häagen-Dazs ice-cream and Maggi stock cubes has blamed “significant and unprecedented cost inflation” for a 6.5% rise in prices in the first half of this year.Nestlé’s sales rose ahead of expectations driven by the price increases, analysts said, increasing 9.2% to 45.6bn Swiss francs (£39bn) in the half year, although net profit decreased by 11.7% to 5.2bn francs. Continue reading...
Neither has the first idea of what they’re doing. Truss’s proposal does little for those who need it, and Sunak’s is a desperate U-turnRishi Sunak is losing the battle to be Britain’s next prime minister and he knows it. The former chancellor’s announcement that he would scrap VAT on energy bills for a year is exactly what it looks like: a U-turn born of desperation.Having set himself up as the candidate of sober rectitude, Sunak has bowed to the inevitable as opinion polls show Liz Truss’s plan for immediate tax cuts are proving more attractive to Conservative party members than his wait-and-see approach.Larry Elliott is the Guardian’s economics editor Continue reading...
Tweaks suggested by Sunak and Truss will create longer-term problems. The need for a third support package is inescapableIn the contest to mouth the words “tax cuts” as often as possible to attract the gaze of Tory party members, Rishi Sunak now says he would remove VAT on energy bills for a year. However much his camp protests otherwise, this is a U-turn of the screeching sort. As chancellor, Sunak had two goes at constructing an energy support package for households and he kept the 5% VAT rate in place both times.More importantly, it’s a U-turn that does not come close to recognising the size of the hit coming to the pockets of poorer households. The sums here are not difficult. At £3,400 – a reasonable estimate for October’s price cap for an average household – axing VAT would produce an annual saving for consumers of £170. At £3,850 – the more speculative estimate of where the cap could be set in January if Russia continues to reduce gas flows through Nord Stream 1 to a trickle – we’re talking £192.50. Continue reading...
End of the 99p cheeseburger as fast food chain warns ‘we’re living through incredibly challenging times’Fast food chain McDonald’s is hiking its prices, including the first rise in the cost of a cheeseburger in 14 years.The company told customers this morning that its popular cheeseburger will now rise from 99p to £1.19, as the company passes on rising costs.We know things are tough right now. We’re living through incredibly challenging times and we’re all seeing the cost of everyday items, such as food and energy, increase in a way many of us have never experienced.This summer, our restaurants will be adding between 10p and 20p to a number of the menu items impacted most by inflation. From today, we’ll be increasing the price of our cheeseburger for the first time in over 14 years, taking it from 99p to £1.19.Some prices remain unaffected, and some will continue to vary across our restaurants. We understand that any price increases are not good news, but we have delayed and minimised these changes for as long as we could. Continue reading...
Fresh food inflation at 8% after increases in fertiliser, animal feed and transportShop prices soared by the greatest amount since at least 2005 in July as the cost of fresh food was driven up by rising charges for fertiliser, animal feed and transport.Prices rose by 4.4% compared to July last year, a step up from a year-on-year rise of 3.1% in June, according to the British Retail Consortium’s latest shop price index collated with market research firm Nielsen IQ. Continue reading...
International Monetary Fund cuts global growth forecasts as outlook darkens and inflation climbs, with UK seen as slowest-growing G7 member in 2023Power supply problems are causing disruption to rail services on the UK’s east coast main line this morning - a day before a national strike is expected to cause widespread problems.Damage to the overhead electric wires between Peterborough and Stevenage means trains on the route may be cancelled, delayed by up to 60 minutes or revised. Continue reading...
The UK is witnessing extreme temperatures, prompting public outcry. Yet new proposals to counter this are coming up shortLast week, temperatures crested at 40C (104F) in England, bringing the climate crisis to the fore and spurring a fresh wave of dismay. How is it, despite a steady drumbeat of extreme weather events, a rising tide of public outcry, and growing consensus across the political spectrum, that the world remains so profoundly far from the outer limits of the climate targets considered “safe”?The answer is increasingly located not in climate denial, but in a proliferation of non-solutions advocated by policymakers and business interests with varying degrees of earnestness and good intention, under the umbrella of “green capitalism”. These are proposals sold as urgent, pragmatic tools for cutting emissions or reversing ecosystem loss, but which in fact deliver neither. Continue reading...
Fund cuts forecasts as US, China and eurozone stall and inflation beats expectationsThe International Monetary Fund has said the global economy could soon be teetering on the brink of recession amid evidence that the world’s three biggest economies are all stalling and inflation is higher than previously forecast.In a downbeat update to its April world economic outlook (WEO), the IMF cut its growth forecasts in 2022 and 2023 – and raised the prospect of a more pronounced slowdown.A sudden stop of European gas flows from Russia as a result of the war in Ukraine.Stubbornly high inflation.A debt crisis triggered by tighter global financial conditions.Further Covid-19 outbreaks and lockdowns in China.Social unrest triggered by rising food and energy prices.Trade wars and geopolitical fragmentation. Continue reading...
Foreign capital flees poorer countries at the first sign of instability. The pandemic and Ukraine war ensure there is plenty of that aroundThis January, even before Sanjana Mudalige’s salary as a sales worker in a shopping mall in Colombo, Sri Lanka, was slashed in half, she had pawned her gold jewellery to try to make ends meet. Ultimately, she quit her job, because the travel costs alone exceeded the pay. Since then, she has shifted from using gas for cooking to chopping firewood, and eats just a quarter of what she did before. Her story, reported in the Washington Post, is one of many in Sri Lanka, where people are watching their children go hungry and their elderly relations suffer for lack of medicines.The human costs of the crisis only really captured international attention when the massive popular upsurge earlier this month, known as Aragalaya (Sinhalese for “struggle”), led to the peaceful overthrow of President Gotabaya Rajapaksa. His family had ruled Sri Lanka with an iron fist, albeit with electoral legitimacy, for more than 15 years, and is now being blamed by both national and international media for the desperate economic mess the country is in.Jayati Ghosh is professor of economics at University of Massachusetts Amherst Continue reading...
Analysis: claims by ex-chancellor about Foreign Office weakness towards Beijing look like an attempt to head off a similar attack on himRishi Sunak’s pre-emptive strike attacking Liz Truss over alleged Foreign Office pusillanimity towards China looks to have been a daring attempt to fend off an imminent assault from his Tory leadership rival.But it locks the contestants into a potentially uncontrollable dogfight as they seek to prove their credentials as the truer enemy of authoritarianism. Continue reading...
Select band of economists back Liz Truss’s tax plan, but Rishi Sunak’s team say it could cost homeowners £6,600 a yearLiz Truss is short of heavyweight support for her plan to cut taxes immediately if she succeeds Boris Johnson as prime minister. Last week, when questioned on the Radio 4 Today programme, she came up with only one name: Professor Patrick Minford.So it came as little surprise to find a letter appearing in the Daily Telegraph signed by a group of economists endorsing Truss’s proposal. Continue reading...
Fears of gas shortages drive German business confidence to two-year low, as Gazprom prepares to cut gas supplies to Europe via Nord Stream 1A European Central Bank policymaker has signalled that further large interest rate rises may be coming, after it surprised markets with a larger-than-expected hike last week.Martins Kazaks has told Bloomberg that a further ‘quite significant’ increase to rates may be needed in September, on top of the 50-basis point rise agreed at July’s meeting.“I would not say that this was the only front-loading,I would say that the rate increase in September also needs to be quite significant.” Continue reading...
Supply bottlenecks, cost pressures and softer demand hit British industryGrowth in UK factories’ order books and output has slowed to its weakest in 18 months as cost pressures, supply bottlenecks and softer demand hit British industry.The latest update on manufacturing from the CBI found business optimism fell for a third quarter running amid signs that the strong expansion of the past year has come to an end. Continue reading...
Former leadership contender wants manifesto to include state ownership and a living standards contract for citizensThe former Labour leadership contender Rebecca Long-Bailey has called for Labour to drop its cautious approach to the economy and fight the next election on a radical manifesto including state ownership and a living standards contract between government and public.In her first significant economic policy intervention since the 2020 leadership contest won by Sir Keir Starmer, Long-Bailey said Labour would need transformative policies if it was to win the next election. Continue reading...
Inflation and a cost of living crisis mean the new PM will have little time to produce a feelgood factorBritain has a chequered economic past so it is not exactly unusual for new prime ministers to take over at times of crisis. It is hard, though, to think of a premiership in recent times that has begun with the skies as dark as they are today.Liz or Rishi? Tax cuts now or later? In a sense, it doesn’t really matter because whoever takes over from Boris Johnson will be handed one heap of problems. Continue reading...
Liz Truss and Rishi Sunak feel bound to talk lower spending to party members, but the former chancellor at least must see the folly of losing billions off our GDP‘They are trying to hide the failure of Brexit behind policy stunts.” This observation about the fiasco of the Conservative party’s leadership contest came from an economist friend and neatly sums it up.Liz Truss, who voted Remain but is now an ardent Brexiter, cannot admit to herself that she was right first time, and that the trade deals she goes on about that are supposed to have made up for our crass departure from the European Union do not amount to a hill of beans. Continue reading...
Britain’s top hotels are suffering from bartender shortages, with many leaving the industry or moving to new projectsFor those in the business, the role of head bartender at the Savoy’s American bar in London is much more than a job – it’s the chance to join a prestigious club of just a handful of people and to earn a place in history.In its more than 130-year existence, only 13 people have held the role, inventing cocktails such as the Moonwalk and the Hanky Panky, and serving clientele including Marilyn Monroe, Charlie Chaplin, Ernest Hemingway and Winston Churchill. Continue reading...
The European Central Bank is effectively deciding how much a eurozone government can spend. That can’t last for longEver since May 2010, when the European Central Bank began bailing out Greece, the continent’s leaders have sought to reassure markets that such help was a one-off measure. But there is nothing as permanent as a temporary solution. The aftershocks of the financial crash meant that Italy, Spain and Portugal would have become insolvent without the large-scale bond buying of the ECB. In return, recipient states had to swallow the bitter pill of austerity.That the ECB effectively funds governments’ spending, in violation of European constitutional treaties, by buying their debt has been brushed under the carpet. No one could stomach the alternative policy of kicking out countries from the eurozone. Monetary financing became normalised during the pandemic when Europe, like the rest of the world, had to spend whatever it took to keep economies ticking over. This was the right thing to do. Continue reading...
Rolling live coverage of business, economics and financial markets as retail sales and factory surveys suggest UK economy losing momentumAway from public markets, there were notable comments on the future of the Port Talbot steelworks last night from the boss of Tata, the Indian conglomerate that owns it. He wants as much as £1.5bn from the government to upgrade the plant.
The group blamed rising inflation for job losses as it vows to protect shoppers from higher pricesThe Co-op Group is cutting 400 jobs at its head office in Manchester and consulting on about 50 more job losses at its Nisa business, as the retailer said it faced tough trading conditions amid rising inflation.The job cuts come after the Co-op, which employs more than 63,000 people including 4,000 at its head offices, warned in April of continuing problems with food supplies and inflation after its annual profits more than halved amid supply chain disruption and higher staff wages. Continue reading...
by Lisa O'Carroll Brexit correspondent on (#61NPX)
New Treasury estimate comes as European Central Bank increases interest rates for first time in 11 yearsIncreasing interest rates in Europe could push up the UK’s Brexit divorce bill by £5bn, the government’s Treasury office has said.The new estimate comes as the European Central Bank increased its interest rates for the first time in 11 years by 0.5 percentage points, ahead of the 0.25 percentage points expected by economists. Continue reading...
Current plans predicated on stable growth seem foolish when we know that shocks such as global heating aren’t going awayTemperatures in Britain hit 40C. Runways melt at major airports. The London fire brigade reports its busiest single day since the second world war as fires rage around the city. The Met Office warns of temperatures so high they “could lead to serious illness or loss of life”.Meanwhile, inflation grinds inexorably upwards. Russia’s invasion of Ukraine is part of it, but other pressures were already apparent. Staples such as coffee saw price rises as a result of extreme weather disrupting harvests. Even silicon chips have been affected, with droughts in Taiwan putting the hugely water-intensive production of semiconductors at risk.James Meadway is director of the Progressive Economy Forum
Latest snapshot of private sector activity reveals manufacturing and services struggling with rising costsInterest rate increases expected later this year will weaken a UK economy that is already expanding at its slowest pace since it began emerging from the 2021 lockdown, the latest private sector activity snapshot suggests.Although performing slightly stronger than the eurozone or the US, the latest monthly survey from the S&P Global/Chartered Institute of Procurement and Supply (Cips) showed both the UK services and manufacturing sectors struggled to cope with rising cost of living pressures. Continue reading...
Increase in food and drink sales not enough to offset overall impact of cost of living crisis, ONS data showsA boost to food and drink sales over the Queen’s jubilee weekend was not enough to prevent the cost of living crisis from pushing down retail sales last month.The Office for National Statistics (ONS) said sales volumes dipped 0.1% in June, after a 1.2% rise in food and drink sales failed to offset a slide in clothing, as well as consumers’ reluctance to purchase furniture and other big ticket items. Continue reading...
Analysis: experts are lining up to warn that her policies will increase inflation and leave the UK with higher debtLiz Truss claims her economic agenda of tax cuts and public spending will revitalise the UK economy, but it is not just her rival prime ministerial candidate Rishi Sunak arguing that the measures will be self-defeating.Economists have lined up to warn that her £30bn package – including the reversal of this year’s national insurance rise, the suspension of green levies on power bills, and the cancellation of a sharp rise in corporation tax in 2023 – will increase inflation and leave the government with higher debt bills. Continue reading...
Child poverty campaigners criticise government plans for free theatre tickets and supermarket discountsChild poverty campaigners have accused the government of “abandoning” struggling families after it announced a cost-of-living package that included free theatre tickets and supermarket discounts.They spoke out as Boris Johnson prepared to meet with some of the UK’s biggest retailers on Thursday to discuss the Help for Households scheme which is meant to help families facing soaring food and fuel bills after inflation hit a 40-year high of 9.4%. Continue reading...