Category Archives: Economics

UK basic wage growth hits record high; Russia’s central bank lifts rates to 12% – as it happened

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UK regular pay growth highest since 2001 while unemployment rate rises unexpectedly; rouble recovers afters Bank of Russia raises rates at extraordinary meeting

The statement doesn’t mention the rouble, which dropped to its lowest level in nearly 17 months yesterday. The Russian currency has been boosted by the central bank’s move.

It now takes 95 roubles to buy a dollar, whereas yesterday the exchange rate was at 102 roubles per dollar at one stage.

The decision is aimed at limiting price stability risks.

Inflationary pressure is building up. As of 7 August, the annual rate of inflation rose to 4.4% while current price growth rates continue to increase. Over the last three months current price growth amounted to 7.6% on average in annualised terms on a seasonally adjusted basis. The same core inflation measure went up to 7.1%.

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Russia’s central bank hikes interest rates by 3.5 percentage points as rouble falls

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Emergency decision is intended to halt slide after currency dropped to weakest point in almost 17 months

Russia’s central bank has hiked interest rates by 3.5 percentage points in an emergency move aimed at halting the rouble’s recent slide, after it fell to its weakest point in almost 17 months.

The decision to raise the key rate from 8.5% to 12% was announced after an extraordinary meeting of the bank’s board of directors, called after the rouble plunged past the psychologically key level of 100 to the dollar on Monday morning.

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Tax cuts would put ‘scary’ UK finances in greater danger, warns top economist

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Paul Johnson, of the Institute for Fiscal Studies, issues plea for honesty from Labour and the Conservatives about tax and spending choices ahead of election

Unveiling significant tax cuts before next year’s general election would put Britain’s “scary” public finances in further peril and risk the nightmare scenario of even higher interest rates, one of the country’s most influential economists has said.

Paul Johnson, director of the Institute for Fiscal Studies, also made a plea for honesty from both main parties over the profound tax and spending choices they would face should they win power.

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China’s economy is struggling but fears of sustained deflation are premature

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Trade with rest of world is shrinking and youth unemployment is at 20% but state interventions are expected

China’s economy is struggling. The recovery after the lifting of Covid-19 restrictions is faltering. Its trade with the rest of the world is shrinking. A decade-long boom in house prices has come to an end.

The most obvious manifestation of the troubles besetting the world’s second biggest economy is that China is now officially in deflation. In the US, the UK and the eurozone, prices are rising – albeit not quite as fast as they were a few months ago – but in China they are actually falling.

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Risk of UK recession at next general election is 60%, says thinktank

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Economic experts say it will take until third quarter of 2024 for output to return to pre-pandemic peak

Rishi Sunak will fight the next election against a backdrop of an economy suffering from five years of lost growth and a widening of the gap between the prosperous and less well off parts of Britain, a leading thinktank said on Wednesday.

The National Institute of Economic and Social Research (NIESR) said it would take until the third quarter of 2024 for UK output to return to its pre-pandemic peak and that there was a 60% risk of the government going to the polls during a recession.

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Italy approves 40% windfall tax on banks for 2023 as profits soar

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Proceeds from levy on interest rate income will be used to help mortgage holders and cut taxes

Italy has announced a one-off 40% windfall tax on local banks that have been accused of reaping billions in extra profit from rising interest rates.

The Italian government, which approved the surprise tax in a cabinet meeting on Monday night, said it planned to use the proceeds to support mortgage holders and cut taxes, at a time when rising rates have put extra pressure on households.

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Chinese economy slips into deflation as recovery falters and demand slows

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Consumer price inflation data shows prices fell by 0.3% year on year in July

China’s economy has fallen into deflation after consumer prices fell year on year last month for the first time in more than two years, official data shows, as slowing domestic spending weighs on the country’s post-Covid economic recovery.

The consumer price index, the main gauge of inflation, fell 0.3% in July, the National Bureau of Statistics of China (NBS) said, having flatlined in June. A survey of analysts had anticipated a 0.4% year-on-year decline.

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Is Germany’s great economy sinking into ‘slowcession’?

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Key data this week will offer a hint as to whether the eurozone’s powerhouse can shake off recent stagnation

Engine of the eurozone, industrial powerhouse, export world champion – just some of the ways Germany’s economy has been described over the years.

However, recent figures have indicated that the good times have come to an end, with Europe’s largest economy stuck in recession.

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More pain in store – tough-talking Bank raises UK interest rates and a few eyebrows

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Rise to 5.25% comes as no surprise but Bank of England’s language will frighten many

If it isn’t hurting it isn’t working. That was the message from John Major, then chancellor, in 1989 during a previous period when interest rates were being used to combat high inflation. And it was the message rammed home by the Bank of England on Thursday.

Any hard-pressed households or struggling business looking for comfort from Threadneedle Street would have been disappointed by news that the pain will continue and is likely to intensify. Interest rates may not yet have peaked.

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Bank of England warns interest rates will remain high for at least two years

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Policymakers vote for quarter-point rise to 5.25% – the 14th hike in a row – but BoE rules out prospect of recession

The Bank of England has warned businesses and households that the cost of borrowing will remain high for at least the next two years as it raised interest rates for the 14th consecutive time to 5.25%.

Ruling out the likelihood of a recession over the next two years, policymakers blamed strong wages growth in recent months for the need to increase interest rates by 0.25 percentage points to the highest level for 15 years.

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UK shop prices in first monthly fall for two years amid big discounts

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Clothing and footwear among items reduced most in July as retailers try to counter bad weather

The UK’s biggest retailers have reported the first monthly fall in shop prices for two years, as stores tried to tempt in customers with big discounts during July’s unseasonably wet weather.

The British Retail Consortium (BRC) said its annual shop price inflation rate, compiled with the help of NielsenIQ, had declined to its lowest level of the year, sliding to 7.6% last month from 8.4% in June.

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US economic growth speeds up in second quarter and weekly jobless claims fall

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Economy is being anchored by labor market and businesses are boosting investment, potentially holding off a recession

The US economy grew faster than expected in the second quarter as labor market resilience underpinned consumer spending, while businesses boosted investment in equipment, potentially keeping a much-feared recession at bay.

Gross domestic product (GDP) – a broad measure of economic growth – increased at a 2.4% annualized rate last quarter, the commerce department announced in its advance estimate of second-quarter GDP on Thursday. The economy grew at a 2.0% pace in the January-March quarter. Economists polled by Reuters had forecast GDP rising at a 1.8% rate.

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UK interest rates need to stay higher for longer to beat inflation, says IMF

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US Fed will also have to raise rates more aggressively than forecast, says Washington-based body

Interest rates in the UK will need to stay higher for longer than previously forecast in order to tackle stubbornly high inflation, the International Monetary Fund has warned.

The IMF’s regular update on the state of the global economy singled out the US Federal Reserve and the Bank of England as two central banks that will need to raise official borrowing costs more aggressively than it assumed only three months ago.

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Exceedingly good news? Mr Kipling owner says UK food inflation has peaked

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Premier Foods reports 21% rise in sales but pledges no more price rises this year

The maker of Mr Kipling cakes, Oxo cubes and Bisto gravy granules has said it believes recent food cost inflation has peaked, and it is not planning any more price rises for its food products for the rest of the year.

The news came as owner Premier Foods reported a 21% increase in sales in the first quarter of the financial year, compared with a year earlier.

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Asda’s profit margins at the pump have trebled, MPs told

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Competition regulator tells business committee of ‘significant change’ in retailer’s fuel pricing

Asda’s profit margins on fuel have tripled since before the pandemic, according to the competition regulator at a bad-tempered parliamentary hearing where the supermarket chain’s co-owner repeatedly refused to explain its pricing strategy.

Mohsin Issa declined to answer multiple questions on whether Asda had increased its profit margins on fuel since its takeover in 2021, prompting MPs on the business select committee to become increasingly furious as the retailer insisted it had not changed its strategy.

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China GDP growth falls short of expectations as sinking property prices hit economy

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Data shows the economy grew just 0.8% in the June quarter, down from 2.2% in the first three months of 2023

China’s economy expanded 6.3% in the second quarter from a year ago, falling short of market expectations as export demand remained tepid and sinking property prices sapped consumer confidence.

Compared with a year earlier, China’s GDP in the April-June period was 6.3% larger, the national bureau of statistics said on Monday, quickening from the 4.5% annual growth pace for the first three months of 2023. Economists had forecast growth to accelerate to 7.3%, according to a Reuters survey.

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How Britain became the G7’s inflation outlier – in one chart

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This week’s CPI figures look set to highlight a trend: that prices in the UK seem to rise faster than they do elsewhere

The UK has a longstanding problem with inflation. Since the 2008 banking crash, bouts of inflation felt across the world have sent prices higher in the UK than its G7 rivals.

In July 2009, during the recession that followed the banking crisis, UK inflation was 3.1 points above the G7 average. Two years later, when recovery sent oil prices soaring, it stood about 2% above the G7 average. In March this year, however, it stood a full 3.5 points above the G7 level.

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Keir Starmer: ‘We can’t win power by spending. We need to reform and create wealth’

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Exclusive: Labour leader urges left to ‘care more about growth’ and rules out spending ‘vast sums of money’

Labour will only succeed in winning power and rebuilding Britain if it prioritises economic growth, wealth creation and radical reform of public services over reckless spending promises, says Keir Starmer.

With four days to go before a crucial set of parliamentary byelections, the Labour leader delivers the most robust defence to date of his strategy for returning his party to power after 13 years, in an exclusive article for the Observer. Starmer takes on, directly, those who say his agenda is dull and uninspiring, insisting that the hard grind of rebuilding economic credibility must come first, as opposed to Labour retreating to its normal “comfort zone” of promising “vast sums of money”.

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Qantas and Virgin duopoly dwarfs the Australian banking and supermarket industries, airport peak body says

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Australian Airports Association tells parliamentary inquiry market dominance has allowed the two airlines to jack up profit margins

Qantas and Virgin now account for 95% of Australia’s domestic aviation market, a dominance that dwarfs industries such as banking and supermarkets and has allowed the airlines to jack up profit margins, the national airport body has warned.

The continued duopoly of Qantas Group – which includes budget carrier Jetstar – and Virgin Australia in the domestic aviation sector has also allowed air fares to rise above pre-pandemic levels even when adjusting for inflation, the Australian Airports Association (AAA) said in its submission to a parliamentary inquiry.

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Where to next for the Australian economy, the RBA – and Philip Lowe?

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The Reserve Bank governor will soon find out if his term has been extended – but economic hints from major banks tell a happier story than expected

Philip Lowe may yet go down as one of the unluckiest central bank governors in Australian history or perhaps elsewhere.

Within a few days, the treasurer, Jim Chalmers, will decide on whether to extend the Reserve Bank governor’s seven-year contract when it concludes in mid-September. Few expect Lowe will get the nod to stay on.

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