France, Spain, Germany and Italy helped by lower inflation and prospect of interest rate cuts
The eurozone has bounced back from its shallow technical recession after a stronger than expected performance by its “big four” economies in the first three months of 2024.
After two successive quarters of 0.1% contraction in the second half of 2023, the 20 nations that use the single currency posted growth of 0.3% between January and March.
Continue reading...Exclusive: Concerns over effect on UK’s finances lead officials to believe utility should be renationalised before general election
Senior Whitehall officials fear Thames Water’s financial collapse could trigger a rise in government borrowing costs not seen since the chaos of the Liz Truss mini-budget, the Guardian can reveal.
Such is their concern about the impact on wider borrowing costs for the UK, even beyond utilities and infrastructure, that they believe Thames should be renationalised before the general election.
Continue reading...Increase in cost of crude could drive inflation up and force central banks to keep interest rates high
• Business live – latest updates
A serious escalation of tensions in the Middle East would push the price of oil above $100 (£80) a barrel and reverse the recent downward trend in global inflation, the World Bank has said.
The Washington-based institution said the recent fall in commodity prices had been levelling off even before the recent missile strikes by Iran and Israel – making interest rate decisions for central banks tougher.
Continue reading...Government borrowed £120.7bn in the last financial year, with just under £12bn in March
Jeremy Hunt’s scope for a substantial pre-election tax giveaway has been hit after the latest set of official figures showed the UK’s public finances in worse shape than thought at last month’s budget.
Figures from the Office for National Statistics (ONS) showed the government borrowed £120.7bn in the 2023-24 financial year – £6.6bn more than the Office for Budget Responsibility (OBR) had expected.
Continue reading...IMF has revised up growth forecasts but medium-term prospects remain poor as globalisation goes into reverse
The 2020s are almost halfway over and are on course to be the most difficult decade for the global economy since the 1930s. Every finance minister and central bank governor at the spring meeting of the International Monetary Fund in Washington last week knows that, even if they were not prepared to admit it publicly.
The IMF likes to look on the bright side. It revised up slightly its forecast for global growth and now thinks scarring from the coronavirus pandemic and the cost of living crisis will be less severe than it originally feared. Interest rates have risen without triggering the recessions that were predicted. A soft landing has been finessed. The performance of some countries – the US and India to take two examples – has been strong.
Continue reading...Trade bodies say ongoing confusion about when checks will come in is ‘incredibly challenging’
Businesses have described Britain’s Brexit border plans as being in “complete disarray” after it emerged the introduction of some checks on EU imports will be delayed.
Post-Brexit border rules, due to come into force on 30 April, will require many meat, dairy and plant products from the EU to be physically checked at government border control posts (BCPs).
Continue reading...Hi-tech ‘golden triangle’ of Oxford, Cambridge and London risks deeper regional inequalities, says thinktank
Investments in new technologies such as artificial intelligence (AI) are “profoundly skewed” towards the “golden triangle” of Oxford, Cambridge and London, and risk deepening existing regional inequalities in England, according to research.
Ministers have promised to level up the country, narrowing the gap between the best- and worst-performing areas, but the rapid rollout of generative AI and automation could cut against that aspiration, according to the Institute for the Future of Work (IFOW).
Continue reading...In the UK, anxiety over the crisis after Iran’s missile strike on Israel drives down UK shares
An escalating Middle East conflict risks leading to higher oil prices, a reversal of the recent fall in inflation and a puncturing of the optimistic mood in financial markets, the International Monetary Fund has warned.
The Washington-based IMF said it was closely monitoring events in the region after Iran’s missile strike on Israel at the weekend and stressed the possibility that a war between the two countries could lead to higher interest rates.
Continue reading...Poverty reduction drive all but halted across many nations as Bank calls for more money to tackle a ‘great reversal’
The devastating impact of the pandemic on the world’s poorest countries has brought poverty reduction to a halt and led to a widening income gap with nations in the rich west, the World Bank has warned.
In a report released to coincide with its half-yearly meeting, the Washington-based organisation said half of the world’s 75 poorest nations had seen income per head rise more slowly than in developed countries over the past five years.
Continue reading...Megan Greene dampens hopes of August cut while underlying causes of inflation remain ‘persistent’
Cuts in UK interest rates should be “a way off”, according to a Bank of England policymaker, who has said that inflationary pressures will keep the cost of borrowing higher than financial markets expect.
Megan Greene, a member of the Bank’s nine-member monetary policy committee (MPC), which sets interest rates, said financial markets were betting “in the wrong direction” when they judged how quickly the central bank would make its first rate cut.
Continue reading...In annual letter to investors, Jamie Dimon warns ‘wars in Ukraine and Middle East could become far worse’
The boss of the US bank JP Morgan has warned that the world could be facing the most dangerous moment since the second world war, putting lives and economic growth at risk.
In his annual letter to investors, Jamie Dimon said the world had been “generally on a path to becoming stronger and safer” in recent years but had suffered a major reversal in February 2022 when Russia invaded Ukraine.
Continue reading...Rate declines for 15th consecutive month across 38 OECD countries from 6.3% in January to 5.3% in February
Food prices across the world’s richest nations rose in February at the slowest rate since before the Russian invasion of Ukraine, according to figures that show easing inflationary pressures on households.
The Organisation for Economic Co-operation and Development (OECD) said food inflation declined for the 15th consecutive month across its 38 member countries from 6.3% in January to 5.3% in February.
Continue reading...As the organisation’s anniversary nears, borders around the world are closing again
When trade ministers gathered in the Moroccan city of Marrakech 30 years ago this month to sign the agreement creating the World Trade Organization (WTO), the mood was celebratory. The Berlin Wall had come down only recently, communism had collapsed, and there was optimistic talk of how the body would prise open new markets and act as the arbiter when disputes broke out between countries.
The atmosphere today is much darker than it was in April 1994. Any enthusiasm for groundbreaking trade liberalisation deals disappeared decades ago and has been replaced by covert – and often overt – protectionism.
Continue reading...Fees of up to £145 on EU animal and plant products through Dover and Folkestone begin on 30 April
Trade groups have warned that consumers could see a rise in food prices after the UK government announced the introduction of post-Brexit charges on imports of EU food and plant products later this month.
The government has published details of fees – known as the common user charge – which will apply to small imports of animal products and plants, such as sausages, cheese and yoghurt, entering the UK from the EU through the port of Dover and through Eurotunnel at Folkestone.
Continue reading...Live, rolling coverage of business, economics and financial markets as UK postal service says it wants to cut 1,000 jobs and cut delivery days
The question on economists’ lips after the surprise easing of eurozone inflation is: will the European Central Bank (ECB) cut interest rates as early as this month?
The ECB’s rate-setting governing council, led by president Christine Lagarde, meets next week. Economists expect the council to cut rates in June, but surprising data and some doveish comments from some members of the council appear to have put an April cut into play.
While at first sight this looks like it opens up a possible rate cut in April, the ECB is unlikely to act this month. More data on wage growth will come in May, and the ECB needs to be certain of its path. In President Lagarde’s own words: “we will know a little more in April, but we will know a lot more in June”.
Christine Lagarde’s previous indication that the ECB may not commit outright to a path of rate cuts suggests a cautious approach, but the consensus among economists leans towards a potential cut as early as June, pending further data on wage growth trends.
The challenge here for the ECB is that reaching the last mile target inflation rate of 2% may prove more arduous than anticipated, with incremental decreases seen as most likely.
Will the labour market tighten further now that GDP growth looks to be rebounding? We doubt it and, in fact, suspect the unemployment rate will edge up over the coming months.
A still-low unemployment rate doesn’t necessarily mean wage growth will remain at today’s highs, so it need not worry the ECB nor prevent it from starting its easing cycle. We think wage growth will come down, in line with the fall in inflation in recent months as workers’ negotiating power diminishes. A recovery in productivity would support wage growth even as inflation eases. We think productivity growth is now improving, but slowly does it.
Continue reading...Output improves to 20-month high and job losses slow but global problems continue to restrict foreign orders
A jump in domestic orders helped pull UK factories out of almost two years of contraction last month, according to a leading business survey.
Output from the manufacturing sector improved to a 20-month high in March, marking the end of a period of shrinking activity that started in July 2022.
Continue reading...Latest estimate from ONS says GDP declined by 0.3% in final quarter of 2023
Official figures have confirmed that the UK economy went into recession at the end of last year, after the latest estimate found it contracted in the last two quarters of 2023.
In a blow to the government’s economic standing, the Office for National Statistics (ONS) said the economy, as measured by gross domestic product, shrank by 0.3% in the last three months of the year, unrevised from an earlier estimate.
Continue reading...The Israeli-American’s first book, Thinking, Fast and Slow, was a worldwide bestseller with revolutionary ideas about human error and bias
Daniel Kahneman, a psychologist who pioneered theories in behavioural economics that heavily influenced the discipline, and won him a Nobel prize, has died at age 90.
Kahneman, who wrote bestselling book Thinking, Fast and Slow, argued against the notion that people’s behaviour is rooted in a rational decision-making process – rather that it is often based on instinct.
Continue reading...Resolution Foundation points to legacy of Covid as it warns that near-record 2.7m people are too ill to work
Britain is going through the longest sustained rise in the number of working-age adults who are too sick to work since the 1990s, according to a report warning that a benefits crackdown is unlikely to solve the country’s jobless crisis.
The Resolution Foundation said economic inactivity due to long-term sickness – when people aged 16-64 are neither in work nor looking for a job because of a health condition – had increased in each year since July 2019, the longest sustained rise since 1994 to 1998.
Continue reading...Borrowing of £8.4bn last month could threaten OBR forecast for £114.1bn deficit for 2023-24 as a whole
Jeremy Hunt has been handed disappointing news from the public finances after government borrowing was higher than expected in February, leaving the national debt at the highest levels since the 1960s.
The Office for National Statistics said public sector net borrowing was £8.4bn in February, £3.4bn less than in the same month a year ago. However, it was higher than any economist expected in a Reuters poll that predicted a deficit of £6bn.
Continue reading...