‘A perfect storm’: supply chain crisis could blow world economy off course

From Liverpool to LA, shortages of energy, labour and transport are threatening recovery from Covid

It was all going so well. Successful vaccination programmes were driving the post-pandemic recovery of the global economy, stock markets were back at record highs, and prices were rising just enough to make deflation fears a thing of the past.

But a supply crunch that initially put a question mark over the availability of luxury cars or whether there would be enough PlayStations under our Christmas trees is instead morphing into a full-blown crisis featuring a shortage of energy, labour and transport from Liverpool to Los Angeles, and from Qingdao to Queensland.

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China’s factory activity in shock slowdown as energy crisis hits home

Output, orders and employment all fell in September, according to official data, as Beijing turns to Russia to ease its electricity shortages


China’s factory activity has shrunk unexpectedly amid curbs on electricity use and rising prices for commodities and parts, raising more concerns about the state of the world’s second biggest economy.

A closely watched survey released on Thursday showed that China’s factory activity contracted in September for the first time since the pandemic took a grip in February 2020.

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Fears for 1 million furloughed staff with Sunak set to finally end scheme

After the success of the chancellors’s £70bn programme, there is uncertainty about the future direction of the economy

The biggest state intervention in the UK’s labour market in peacetime comes to an end this week when the government finally winds up its furlough support.

Barring an unlikely last-minute change of heart, a wage subsidy that has been in place for 18 months and has cost £70bn will no longer be open to struggling firms.

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The Guardian view on Europe’s centre-left: new grounds for optimism | Editorial

There are signs that previously struggling social democratic parties are drawing the right lessons from the pandemic

In the wake of the financial crash in 2008, hopes were high on the left that a bona fide crisis of capitalism would significantly shift the political dial in its favour. Isolated victories and movements aside, it didn’t really happen. Instead, in the early 2010s, the bailout of the bankers was followed by the imposition of austerity across Europe and in America as governments sought to balance the books.

Premature predictions on the nature of post-Covid politics in the west are therefore to be avoided. But certain themes do seem to be emerging. Sketching out broadly communitarian territory, they chime with many people’s experience of how the pandemic played out and what it exposed; and there is some evidence that, in northern Europe, they might inform a revival and renewal of centre-left parties and movements.

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China sends jets and bombers near Taiwan as Beijing opposes island’s trade deal bid

Nuclear-capable bombers entered air defence zone, says Taipei, amid simmering row over competing bids to join regional trade agreement

China has voiced opposition to Taiwan joining a major trans-Pacific trade deal as it flew 24 planes – including two nuclear-capable bombers – into the self-ruled island’s air defence zone, the biggest incursion in weeks, Taiwanese officials said.

Last week Beijing submitted its own application to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

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China growth forecast cut by ratings agency amid Evergrande uncertainty

Downgrade by Fitch reflects jitters in markets as boss of Asia-focused bank HSBC says problems ‘concerning’

Ratings agency Fitch has downgraded its forecast for China’s economic growth because of concerns about a slowdown in the country’s colossal housing market and fears about struggling property giant Evergrande.

China enjoyed a swift economic rebound from the Covid-19 pandemic, but strict new rules on the country’s developers have caused a deleveraging rush and helped push housing giant Evergrande to crisis point.

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Eat the rich! Why millennials and generation Z have turned their backs on capitalism

Nearly eight out of 10 of young Britons blame capitalism for the housing crisis and two-thirds want to live under a socialist economic system. How did that happen?

The young are hungry and the rich are on the menu. This delicacy first appeared in the 18th century, when the philosopher Jean-Jacques Rousseau supposedly declared: “When the people shall have no more to eat, they will eat the rich!” But today this phrase is all over Twitter and other social media. On TikTok, viral videos feature fresh-faced youngsters menacingly raising their forks at anyone with cars that have start buttons or fridges that have water and ice dispensers.

So should the world’s billionaires – and fridge-owners – start sleeping with one eye open? Hardly. It’s clear that millennials (those born between the early 80s and the mid-90s) and zoomers (the following generation) are not really advocating violence. But it is also clear that this is more than just another viral meme.

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Stock market correction of 5%-10% ‘likely before year end’; US inflation expectations rise – as it happened

Rolling coverage of the latest economic and financial news

Earlier:

Time to wrap up....

Here’s today’s main stories:

Related: Alibaba shares plunge as Beijing ‘seeks to break up Ant’s Alipay’

Related: Stock market pullback likely by year end, Deutsche Bank survey finds

Related: Evergrande investors face 75% hit as company edges closer to restructure

Related: UK cancels Covid vaccine deal with French firm Valneva

Related: Higher taxes could leave low-paid frontline workers £1,000 worse off

Related: EU Brexit controls are pointless bureaucracy, says M&S chairman

Related: Brexit trade barriers added £600m in costs to UK importers this year

Related: Primark hit by ‘pingdemic’ but it says supply crisis won’t lead to shortages

Related: West End theatres bank on staging a revival with big-budget productions

Related: All Sainsbury’s stores to stay shut on Boxing Day as a ‘thank you’ to staff

Related: UK to offer £265m in subsidies for renewable energy developers

European stock markets have shrugged off growth fears and talk of a stock market pullback, to end the day higher.

In London, the FTSE 100 gained 39 points or 0.55% to end at 7068 points. Royal Mail (+3%), Lloyds Banking Group (+2.8%), and hedge fund management group Pershing Square (+2.6%) led the risers.

Spain's Ibex up 1.3%. German Dax up 0.6%
The major European indices are ending the day with gains across the board:

German DAX, +0.56%
France's CAC, +0.2%
UK's FTSE 100, +0.55%
Spain's Ibex, +1.3%
Italy's FTSE MIB, +0.9%
In other markets as European/London traders look to exit:

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The Taliban are not the only threat to Afghanistan. Aid cuts could undo 20 years of progress

The most vulnerable people will bear the cost of sanctions, as services and the economy collapse

Watching Afghanistan’s unfolding trauma, I’ve thought a lot about Mumtaz Ahmed, a young teacher I met a few years ago. Her family fled Kabul during Taliban rule in the late 1990s.

Raised as a refugee in Pakistan, Ahmed had defied the odds and made it to university. Now, she was back in Afghanistan teaching maths in a rural girls’ school. “I came back because I believe in education and I love my country,” she told me. “These girls have a right to learn – without education, Afghanistan has no future.”

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Climate impact of a transatlantic flight could cost global economy $3,000

Economic cost of climate crisis has cut 37% from global GDP this century, say researchers

A return flight from the UK to New York could cost the global economy more than $3,000 (£2,170) in the long run, owing to the effects of the climate crisis, according to a report.

Researchers examined the economic cost of the climate crisis and found it would cut about 37% from global GDP this century, more than twice the drop experienced in the Great Depression.

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Brexit: food and drink exports to EU suffer ‘disastrous’ decline

First-half sales fall £2bn, says industry body, as barriers are compounded by staff shortages

Exports of food and drink to the EU have suffered a “disastrous” decline in the first half of the year because of Brexit trade barriers, with sales of beef and cheese hit hardest.

Food and Drink Federation (FDF) producers lost £2bn in sales, a dent in revenue that could not be compensated for by the increased sales in the same period to non-EU countries including China and Australia.

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Covid and the crisis of neoliberalism | Adam Tooze

The year 2020 exposed the risks and weaknesses of the market-driven global system like never before. It’s hard to avoid the sense that a turning point has been reached

If one word could sum up the experience of 2020, it would be disbelief. Between Xi Jinping’s public acknowledgment of the coronavirus outbreak on 20 January 2020, and Joe Biden’s inauguration as the 46th president of the United States precisely a year later, the world was shaken by a disease that in the space of 12 months killed more than 2.2 million people and rendered tens of millions severely ill. Today the official death tolls stands at 4.51 million. The likely figure for excess deaths is more than twice that number. The virus disrupted the daily routine of virtually everyone on the planet, stopped much of public life, closed schools, separated families, interrupted travel and upended the world economy.

To contain the fallout, government support for households, businesses and markets took on dimensions not seen outside wartime. It was not just by far the sharpest economic recession experienced since the second world war, it was qualitatively unique. Never before had there been a collective decision, however haphazard and uneven, to shut large parts of the world’s economy down. It was, as the International Monetary Fund (IMF) put it, “a crisis like no other”.

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Recovery in global trade hit by Covid outbreaks in east Asia

Decline in exports from Taiwan combines with port closures in China and Japan to hinder growth

A recovery in global trade during the summer is beginning to wane, according to some early warning signs pointing to the negative effects of widespread Covid-19 outbreaks in the manufacturing centres of east Asia.

A dramatic decline in exports from Taiwan, which makes many of the computer chips used in cars and mobile phones, has combined with temporary port closures and lockdowns in Australia, China and Japan to cut the level of global trade.

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Food, beer, toys, medical kit. Why is Britain running out of everything?

Poor pay and conditions for HGV drivers and the loss of many thousands of EU workers are plunging the UKs supply chain into crisis

Gaps on supermarket shelves. Fast food outlets pulling milkshakes and bottled drinks from their menus. Restaurants running out of chicken and closing. Empty vending machines. Online grocery orders full of substitutions. Fruit and vegetables rotting in the fields.

These are just some of the most visible signs of Britain’s deepening supply chain crisis, which has seen stocks in shops and warehouses slump to their lowest levels since the Confederation of British Industry began surveying in 1983.

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The revolt against liberalism: what’s driving Poland and Hungary’s nativist turn? – podcast

For the hardline conservatives ruling Poland and Hungary, the transition from communism to liberal democracy was a mirage. They fervently believe a more decisive break with the past is needed to achieve national liberation. By Nicholas Mulder

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Japan’s economy bounces back as Covid restrictions ease

Economic output defies expectations to expand in Q2 – but analysts warn of contraction risk

Japan’s economy recovered strongly in the second quarter to join the turnaround seen across G7 countries as the easing of lockdown restrictions sent consumers rushing to the shops.

Beating the expectations of City analysts, the world’s third largest economy also capitalised on global trade’s return to health with a surge in exports.

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Economic recovery from Covid ‘running out of steam’ – OECD

Data collected from 38 member countries says UK among the major economies now in the slow lane

The world’s major economies have seen their rapid recovery after easing Covid restrictions begin to run out of steam in the past month as a resurgence in the virus depressed consumer spending, according to the Organisation for Economic Cooperation and Development.

There are signs that the recovery in the US and Japan is losing momentum, the OECD said, while parts of Europe and China have slowed as consumers remain reluctant to eat out, visit attractions and shop as they did before the pandemic.

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Failure to help poor countries fight Covid ‘could cost global economy $4.5tn’, says IMF

Fund calls on rich nations to help halt spread of infectious variants through countries with low vaccination rates

The world economy risks losing $4.5tn (£3.3tn) from highly infectious variants of Covid-19 spreading through poor countries where vaccination rates are lower, the International Monetary Fund has warned.

Calling on rich countries to take urgent action to share at least 1bn doses with developing nations, or risk severe economic consequences, the Washington-based fund said the gap between rich and poor economies had widened during the pandemic and risked worsening further next year.

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Guns, gangs and ‘bad aid’: Haiti’s crisis reaches full throttle

Incessant foreign meddling and corrupt elites have ensured life for Haitians remains mired in violence and poverty. President Moïse’s assassination marks an escalating catastrophe

The Haitian political activist Marie Antoinette Duclair appears to have been unaware that two men on a motorbike were following her car through the badly lit streets of Port-au-Prince.

Her passenger on the night of 29 June was a journalist, Diego Charles. They had been attending a meeting, and she was now, at 11 o’clock at night, dropping him at his home in the Christ-Roi area of Haiti’s capital.

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UK food worker shortages push prices up and risk Christmas turkey supplies

Dearth of delivery drivers, abattoir staff and fruit pickers caused by Covid and Brexit are fuelling wage rises with 5% hike in prices forecast

Food prices could rise by about 5% by the autumn – and turkeys and pigs in blankets could be in short supply this Christmas – as shortages of delivery drivers, abattoir staff and other workers drive up pay and other costs.

Industry insiders say that pay for lorry drivers and other supply chain workers, including abbatoir workers, plus vegetable and fruit pickers and packers have all risen because of difficulties in finding sufficient staff.

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