Analysis: Households face triple whammy of higher taxes and energy bills, with wages failing to keep paceInflation was supposed to be yesterday’s problem. This time last year, the government’s preferred measure of the annual increase in the cost of living was running at less than 1%. Now it stands at 5.4% – the highest in almost 30 years – and it has not peaked yet.With the lagged impact of the supply-chain bottlenecks of last autumn feeding through into prices in the shops and a likely 50% jump in domestic energy bills to come, inflation will certainly exceed 6% in April and may be closer to 7%. Continue reading...

People who are feeling the pinch explain how their expenses are stacking upMost of primary school teacher Kate Locke’s salary goes on her rent – and in the last month, that’s gone up by 10%. Combined with the rising costs of food and energy, Locke, 39, is increasingly worried about money. “By end of month I’m in my overdraft, I haven’t been able to save anything – there’s no stability,” Locke, who lives in Reading, says. Continue reading...

Group of 102 wealthy people say tax would help tackle gulf between rich and poorMore than 100 members of the global super-rich called on Wednesday for governments around the world to “tax us now” to help pay for the pandemic response and tackle the gulf between rich and poor.The group of 102 millionaires and billionaires, including Disney heiress Abigail Disney, said the current tax system is rigged in their favour and needs to be rewritten to make taxation fairer for hard-working people and restore trust in politics.Pay for the Health and Social Care Levy twice over every year – eliminating the need to raise national insurance on working people.Cover the salaries of an additional 50,000 new nurses.Pay for the permanent increase of universal credit.Build 35,000 affordable houses and retrofit the UK’s draughtiest homes to reduce the cost of energy bills and help fight the climate crisis. Continue reading...

Rolling coverage of the latest economic and financial news

Unemployment falls to 4.1%, close to its level before the Covid pandemic

Analysis: Jobs market is booming, but Bank of England seems set to heap more pain on householdsA cursory glance at the latest jobs market figures suggests the economy was in good health as the end of 2021 came into sight.In the three months to November employment rose by 60,000 and the unemployment rate decreased by 0.4 percentage points on the quarter to 4.1%. Continue reading...

Global heating of 2C would cause billions in damage each year by 2050, according to risk assessmentThe climate crisis will wipe at least 1% a year off the UK’s economy by 2045 if global temperatures are allowed to rise by 2C, the government has said.More action would be needed on key areas such as flood defences, restoring natural protections such as peatlands and wetlands, and making the built environment more resilient to extreme weather, ministers said. Continue reading...

Rolling coverage of the latest economic and financial news

‘Dr King knew that economic injustice was bound up in the larger injustice he fought against,’ says treasury secretaryThe treasury secretary, Janet Yellen, marked Martin Luther King Day with a speech acknowledging that the US economy “has never worked fairly for Black Americans or, really, for any American of color”.Interpreting the late civil rights leader’s I Have a Dream speech, Yellen said: “Dr King knew that economic injustice was bound up in the larger injustice he fought against.” Continue reading...

Xi Jinping says major economies need to be wary of ‘negative spillovers’ hitting global recoveryChina has warned the US and Europe against a rapid rise in interest rates that would “slam on the brakes” of the global recovery from the pandemic.Central banks should maintain the monetary stimulus or risk “serious economic consequences” from the spillover effects with developing markets bearing the brunt. Continue reading...

Britain faces years of high energy prices and needs to have a conversation about what policies are neededThe good news is that energy prices will be coming down. The bad news is nobody knows when for sure. The UK’s biggest energy supplier, Centrica, says high gas and electricity prices could last for another two years. The International Energy Agency (IEA) reckons that’s too optimistic. Expensive bills are a problem for firms, consumers and the government. Households could face a doubling of annual energy bills to £2,400 a year from October - a cost-of-living catastrophe for millions. While Labour proposes a support package, Conservative ministers have said little – fuelling suspicions that they intend to reduce demand for energy by making people poorer.Carbon-based energy will fade, but it won’t disappear completely. To keep temperatures to 1.5C above pre-industrial levels, the IEA says the world in 2050 would have to use about half as much natural gas as today and about one-quarter as much oil. British policymakers must wake up to the security implications of greening the economy. Britain replaced coal-fired plants with wind power to reduce carbon emissions, becoming dependent on natural gas imports – especially in calm weather. Traditional suppliers like Russia might see opportunities in volatile fossil fuel prices that result from the transition to net zero. This is not reassuring. Fuel price protests sparked unrest in Kazakhstan this month, but they also brought Britain to a halt 22 years ago. Continue reading...

Urgent questions from the climate crisis to tax avoidance remain on the tableIt is January 2020. Donald Trump and Greta Thunberg are the star turns at the annual festival of globalisation organised by the World Economic Forum in Davos. The fossil fuel-loving president and the teenage environmentalist have a pop at each other. There are reports of a new virus emerging from China but Covid barely gets a mention.Much has happened since. For a second year running, Davos is not going ahead in person. US billionaires will not be parking their private jets at Zurich airport. The skies above the ski resort made famous by Thomas Mann in the Magic Mountain will not be thick with helicopters. Hotels will not be able to charge five times their normal rates for a captive audience of policymakers, business leaders, academics, campaigners, journalists and assorted hangers-on. Continue reading...

We bring you Not the World Economic Forum, where monetary hawks fly and bankers explain why China is all right, reallyThe purpose of this column is usually fairly clear: to look ahead at the biggest event in the coming week. But this time we are breaking with tradition to bring you the week’s biggest non-event: Davos.Every year the great and the good gather in the Swiss Alps at the grandly titled World Economic Forum to give their answers to the big questions. But Covid-19, running now into its fourth calendar year, has seen it called off again. Continue reading...

Vacancies are falling, pressure on pay seems to be reducing, tax rises are looming. This economy is unlikely to overheatNext month brings the likelihood of a 0.25% interest rate rise from the Bank of England, and possibly two more over the rest of the year, as Threadneedle Street seeks to dampen Britain’s overheating economy.At least that would be the reason if the economy were overheating and in need of higher interest rates. In fact, the central bank is simply revealing itself to be weaker than it was in 2011, when inflation jumped to 5% and investors, fearful of runaway prices encouraging workers to demand sky-high wages, demanded action. Interest rates then remained at historic lows. Continue reading...

Leaders in Warrington turned to commercial investing to make up for funding cuts, but now the plight of a small energy firm threatens to make that a gamble too farIn an ideal world, Cathy Mitchell wouldn’t have to spend her time worrying about a £1bn-plus investment portfolio. The former barrister and deputy leader of Warrington borough council would usually have her mind on schools, adult social care and bus services, with the investments looking after themselves. But things are far from normal for the Cheshire borough or its book of assets: one of its flagship stakes – a 50% share in stricken firm Together Energy – is reportedly on the verge of going up in smoke.Warrington has followed councils across the country in ploughing cash into commercial schemes in the hope of generating returns that can offset a decade of Conservative austerity. However, critics say the Labour-run council has taken the high-stakes strategy too far: putting public money into risky ventures in property, energy and finance – including some firms backed by super-rich Tory donors. Continue reading...

UK economy finally larger than pre-Covid, after burst of growth in November… before Omicron hit

GDP expanded by 0.9% before impact of Omicron as Christmas shopping began early

Analysis: after a V-shaped recession, variant’s impact will put the brakes on – with a double whammy due in April

UK pubs, bars and restaurants saw hefty drop in trading over Christmas and New Year, while more Americans filed new jobless claims last week

All that frittered wealth could be used to help with the economic recovery from the pandemic insteadYou may need a stiff drink to believe this. Last October, a new record was set: a cask of Macallan 1991 whisky sold for a cool $2.33m. At least this was an entire cask of premium liquor: earlier last year, a luxury case of 30-year-old Irish malt featuring a gold Fabergé egg was auctioned off for $2m, only slightly more than a single bottle of scotch at the end of 2019.Is whisky really worth 2m big ones? As any economist will tell you, the value of something is determined by how much someone is prepared to pay for it, and all that money sloshing around at the top has to go somewhere. The crises of our time have been kind to the uber-rich: while British workers have suffered a near unprecedented squeeze in their wages, the richest 1,000 people saw their fortunes double in the first seven years after the financial crash. Covid has proved little different: Britain produced a record number of new billionaires in the pandemic, while their US counterparts enjoyed almost a two-thirds jump in their wealth during the first 18 months of the crisis. At $4.8tn, the combined fortunes of US billionaires are almost equivalent to the size of the entire Japanese economy. Continue reading...

Cost of living soars on both sides of the Atlantic, as US inflation jumps, and UK consumers face higher gas bills and hotel costs

Analysis: the Fed and other central banks have to raise interest rates, but they’d be advised to do it slowlyUS inflation at 7% for first time since 1982: live updatesNot since Ronald Reagan was president and Paul Volcker was the hardline chairman of the Federal Reserve has US inflation been as high as 7%, so inevitably the latest jump in the country’s cost of living index will have consequences.The US central bank has historically tended to fear deep recession more than runaway inflation, scarred as it still is by the legacy of the Great Depression. The Fed, however, cannot ignore the risks of a wage-price spiral developing and will be forced to act. Continue reading...

US labor department says CPI rose 0.5% compared with November and 7% compared with December 2020The price of goods and services in the US continue to rise at rates unseen in decades, jumping to 7% in December compared to the same month last year – the seventh consecutive month in which inflation has topped 5%.The news represents a blow to the Biden administration and the Federal Reserve, which until recently have characterized soaring prices as a “transitory” phenomenon brought about by supply chain issues triggered by the pandemic. Continue reading...

Current plans not fit for purpose amid squeeze on families, says Institute for Fiscal StudiesBenefits must be increased by twice as much as planned this year if the poorest households in Britain are to be supported through the cost of living crisis, a leading economics thinktank has said.Warning the government that its current plans were not fit for purpose amid the worsening squeeze on families, the Institute for Fiscal Studies (IFS) said an additional £3bn needed pumping into the welfare system in response to soaring energy bills and mounting inflationary pressure. Continue reading...

Without those monthly checks 50,000 children in the state the centrist senator represents could sink into deep povertyLast fall, Krista Greene missed a week of work after her sons were exposed to Covid and could not return to school. Greene, who manages a tutoring center and yoga studio in Charleston, West Virginia, does not receive any paid time off. Normally, she would have been worried about this loss of income. But the Greene family’s budget had recently become a little more flexible, thanks to the monthly child tax credit payments that began in July 2021.“The first thing I said to my husband was, ‘The Biden bucks are coming next week, so I won’t miss any bills,’” Greene said. Continue reading...

Cashflow hit by rising expenses amid surging bills and impact of Omicron, finds quarterly studyUK households have suffered the sharpest fall in the amount of cash they have available to spend for almost eight years, amid a worsening cost of living crisis driven by high inflation and rising energy bills.According to a report by the insurer Scottish Widows, increasing living costs at the end of last year hit people’s pockets and led to the steepest decline in cash availability since the start of 2014. Continue reading...

Federal Reserve chair Jerome Powell is appearing for a confirmation hearing at the Senate, as prices across the OECD jump at the fastest pace since 1996

Bank forecasts slowdown in growth as world copes with Covid, inflation and higher interest ratesThe risk of a hard landing for large parts of the global economy is rising as countries struggle to cope with the triple threat of Covid-19, inflation and higher interest rates, the World Bank has said.In its half-yearly forecasts, the Washington DC-based Bank said it expected a “pronounced slowdown” in growth in the next two years, with the less well-off parts of the world especially hard hit. Continue reading...

Sharper divisions between rich and poor countries are making a united response more difficult, survey findsScars left by the Covid-19 pandemic have deepened the global divide between rich and poor countries and will make it harder to find common cause in the fight against global heating, according to the World Economic Forum.A WEF report puts climate or environment-related threats in the top five slots in its list of the 10 long-term risks but warned a “vaccine divide” was making collaboration to limit temperature increases more difficult. Continue reading...

Industry says consumer spending is likely to be held back after strong full-year figures for retail in 2021Britain’s retailers have said the soaring cost of living risks dragging down high street sales in 2022 after a bumper Christmas trading period and year of recovery in consumer spending.Sounding the alarm over the risks for the UK economy as whole, the British Retail Consortium said there were significant headwinds for the industry in 2022 from high inflation, rising energy bills and planned tax increases. Continue reading...

Tech stocks continue to slide as investors brace for US Federal Reserve to tighten monetary policy due to high inflation

Share prices fell back on both sides of the Atlantic with the FTSE 100 shedding 40 pointsGlobal financial markets tumbled on Monday amid growing investor concerns about the US Federal Reserve potentially putting up interest rates in response to surging inflationary pressures.Share prices fell back on both sides of the Atlantic with the FTSE 100 shedding 40 points, or 0.5%, in London, to finish the day at 7,445, while stocks fell by a more substantial margin on Wall Street as traders bet on the American central bank leaping into action from as early as March to tackle high inflation rates. Continue reading...

Emerging economies should prepare for tough action from Federal Reserve, says fundHigher US inflation could lead to a tougher than expected response from America’s central bank that would send tremors through financial markets and put vulnerable countries at risk, the International Monetary Fund has warned.Adding to growing concerns about the sharp increase in price pressures being registered across the globe, the IMF said emerging market nations should brace themselves for muscular action from the US central bank, the Federal Reserve. Continue reading...

Make UK says two-thirds of companies fear customs delays and red tape from new rules will further hamper supply chainsManufacturers have warned that Brexit will add to soaring costs facing British industry, amid concerns that customs delays and red tape will rank among the biggest challenges for firms this year.Make UK, the industry body representing 20,000 manufacturing firms of all sizes from across the country, said that while optimism among its members had grown, it was being undermined by the after-effects of the UK’s departure from the EU. Continue reading...

Reaching for the tax-cutting playbook won’t solve Britain’s problems – the current crisis was a decade in the making before CovidBritain’s unfolding cost of living crisis is dominating the headlines. The soaring cost of a weekly shop, a record increase looming for utility bills, and the price of petrol through the roof. Households have never had it so tough.Yet the squeeze has been in place for longer than the current crisis might suggest. Far from the year of the squeeze, the opening months of 2022 reflect the problems of the past decade, compounded by Covid-19. Continue reading...

Labour must make it clear that regions suffering under the long squeeze of austerity have still more to fear from the ToriesApart from his bad luck in being struck twice by the need to go into isolation from Covid, the leader of the opposition, Sir Keir Starmer has a huge, indeed historic, weight on his shoulders. To put it bluntly: this government is so appalling that if, as it hopes, it is re-elected either this year or next, many of us will be seriously tempted to emigrate.The sleaze that finally overturned one of the safest Tory seats in the land, namely North Shropshire, brought to mind a line in Imperium, a novel by my old friend Robert Harris: Cicero (for it is the fictional he) describes a dodgy politician as “giving corruption a bad name”. Continue reading...

The Fed wants to raise interest rates and coronavirus support programs are ending. Millions of families stand to sufferFriday’s jobs report from the Department of Labor was a warning sign about the US economy. It should cause widespread concern about the Fed’s plans to raise interest rates to control inflation. And it should cause policymakers to rethink ending government supports such as extended unemployment insurance and the child tax credit. These will soon be needed to keep millions of families afloat.Employers added only 199,000 jobs in December. That’s the fewest new jobs added in any month last year. In November, employers added 249,000. The average for 2021 was 537,000 jobs per month. Note also that the December survey was done in mid-December, before the latest surge in the Omicron variant of Covid caused millions of people to stay home. Continue reading...

Some believe high pay deals will set off a wage-price spiral. But do the UK’s de-unionised workers have the power to demand them?Jack Saunders might possess a PhD and have lectured undergraduates for 10 years, most recently at University College London, yet in all that time job security and an above-inflation pay rise have eluded him.“I have been on a fixed-term contract since I started in 2011,” he said. “And there hasn’t been a pay award above inflation since Gordon Brown was prime minister. It means you are always searching the job market and each job is a stopgap.” Continue reading...

Fewer jobs created in December than expected, although October and November’s payroll revised higher

Survey finds Omicron meant a weak end to 2021 despite building costs easing to buck the inflation trendGrowth in the UK construction industry slowed in December as the impact of Omicron offset gains for building firms from fading supply chain disruption.Figures from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed building companies ending 2021 on a weaker footing, with coronavirus infections and fresh pandemic restrictions hitting demand. Continue reading...

The prime minister has failed to convince his party, the cabinet or voters what the country should look likeIf the Tory party could be summed up in a word, it would be power. The Conservatives have dominated the 19th, 20th and – so far – 21st centuries. Their most successful leaders have anticipated the national mood and shaped their party to profit from it. Boris Johnson won the last election by betting the right way on Brexit. But there is a fundamental disagreement at the heart of the Tory party as to what the future UK economy outside the EU should look like. This question urgently needs an answer, not least as the country looks past the pandemic.In the next six months Britain will almost certainly face a cost-of-living crisis. High inflation may go even higher before it ebbs away. Mr Johnson is in denial about this problem while people face going cold and hungry in their homes. Prices are driven higher by global energy costs, set by cartels such as Opec or gas producers such as Russia. However, the price at which electricity and gas is supplied to the UK’s companies and households could be capped and a windfall tax on oil companies used to reimburse suppliers. State intervention could help ordinary households – but ministers say that this would be at the expense of “this country’s reputation as a hub of international capital and investment”. Continue reading...

Activity weakened across UK services sector last month, as hospitality firms suffer cancellations and staff shortages

Consumer body calls for safeguards such as affordability checks in advance of FCA regulationStronger safeguards are needed to protect the millions of UK shoppers who use “buy now, pay later” deals because many people do not realise they are taking on debt, a consumer body has warned.Buy now, pay later (BNPL) lets shoppers delay payment for an item with no interest or charges – unless you fail to pay it back on time, at which point some firms impose late fees. Continue reading...

Last quarter survey of 2021 shows firms worried about raised interest rates, and cash flow and debt issues, prior to plan B Covid rulesBritain’s economic recovery stalled before the arrival of the Omicron variant of Covid and the dampening effect of the government’s plan B restrictions on consumer spending in the Christmas shopping period, a wide-ranging company survey has found.Businesses blamed spiralling inflation and shortages of imported goods for a decline in sales in the fourth quarter, which meant that an expansion during the spring and summer ground to a halt. Continue reading...

Energy bill and tax rises will hammer households by an average £1,200 from April, and could turn voters against Boris JohnsonTurn on the radio or scroll down your phone and the big headlines belong to Covid. But when this latest version of the plague drops off the front pages, another story is set to take its place – and this one will hang around for most of the year, setting the terms of trade at Westminster and possibly deciding Boris Johnson’s future.The cost of living is about to shape our politics in a way that it hasn’t for decades.Aditya Chakrabortty is a Guardian columnist and senior economics commentator Continue reading...

Alastair Hatchett writes that pay growth for some is quite strong, while for others it is very weakThe forthcoming economic crisis analysed by the Resolution Foundation (UK households warned of ‘year of the squeeze’ as cost of living soars, 29 December) is partly based on a view that wage growth is stagnant. This is true for a wide range of employees but not necessarily for all. In fact, earnings growth in the year to October was 4.9%, matching consumer price index inflation, in part buoyed up by labour market shortages. If we follow the Office for National Statistics’ breakdown of sectors, average earnings in the private sector grew by 5.4% in the year to October, while in the public sector the growth rate was 2.7%. So 2022 is set to be yet another tough year for public sector employees.Further analysis of the different parts of the private sector shows average earnings growing by 7.7% in the finance and business services sector, contrasting with a low rate of 2.8% in manufacturing. Pay growth for some is quite strong, while for others it is very weak and certainly below the rate of inflation.

Rolling coverage of the latest economic and financial news

Borrowing on credit cards reached highest level in more than a year in November, says Bank of EnglandConsumer borrowing on credit cards jumped to its highest level in more than a year in November, pushing all forms of household unsecured credit to £1.2bn, according to the latest Bank of England data.The increase in reliance on loans and credit cards exceeded City forecasts of a £0.8bn rise and beat the £0.6bn average of the previous six months. Continue reading...

Supply chain disruption and staff shortages held back economy in DecemberBritain’s manufacturers have suffered a drop in export demand amid pressure from Covid and Brexit, according to fresh data that shows supply chain disruption and staff shortages held back the economy in December.The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed growth in UK factory output was limited last month by Covid restrictions and Brexit weighing on orders and pushing up costs. Continue reading...

Workers left their jobs at historic rates, with a record 4.5m quits at the end of November – but it happened against an economic picture that remains difficult to interpret2021 was the year of the “Great Resignation” – a year when workers quit their jobs at historic rates. According to some, the trend was driven by an economic and psychological shift as employers struggled – and often failed – to tempt anxious staff to return to industries that have too often treated workers as dispensable. The truth is more complicated.It is accurate to say that many people have quit their jobs in 2021 – “quits”, as the Bureau of Labor Statistics calls them, hit a high in September, with over 4.4 million people leaving their jobs, and was followed by a modest reduction of that trend in October. Continue reading...