Category Archives: Economics

Covid pandemic made poorest countries even worse off, World Bank warns

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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.

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Interest rates need to stay higher for longer, says Bank of England policymaker

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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.

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Global economic risks ‘could eclipse anything since second world war’, says JP Morgan boss

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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.

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Food inflation in world’s rich nations falls to pre-Ukraine war levels

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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.

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Dysfunction and division darken the WTO’s 30-year dream of free trade

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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.

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Brexit import charges may mean rise in food prices, say trade groups

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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.

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MP calls Royal Mail delivery cuts a ‘slap in the face for families’ – as it happened

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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.

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Jump in domestic orders ends two-year UK manufacturing dip

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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.

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Blow for Sunak as revised figures confirm UK did go into recession last year

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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.

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Daniel Kahneman, renowned psychologist and Nobel prize winner, dies at 90

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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.

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Longest sustained rise in people too sick to work since 1990s, says thinktank

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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.

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UK government borrowing higher than expected in February

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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.

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Fed leaves interest rates unchanged but signals three cuts this year

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Rates to stay at 25-year high of 5.25% to 5.5% as central bank says ‘inflation has eased over the past year but remains elevated’

The Federal Reserve announced on Wednesday that it would leave US interest rates at a 25-year high as it continues to assess their impact on cooling inflation and the wider economy.

After a two-day meeting, the Fed announced rates would be unchanged at 5.25% to 5.5%, where they have been since July. But the Fed signaled it still expects to cut rates three times this year.

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Tory party fined £10,750 by Electoral Commission for not accurately reporting non-cash donations – UK politics live

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Donations were related to an employee seconded to the party by a donor

The Conservative party has been fined £10,750 by the Electoral Commission for failing to accurately report non-cash donations worth more than £200,000.

The donations related to an employee who had been seconded to the party by a donor. The commission said:

The party under-reported non-cash donations, in the form of an employee seconded to the party by a donor between April 2020 to December 2023. The non-cash donations were under reported by more than £200,000, when the seconded employee went from part-time to full-time work at the party.

The party also reported late a single non-cash donation relating to the same seconded employee, in December 2023.

Our investigation into the Conservative and Unionist Party found a number of donations inaccurately reported or reported late. The political finance laws we enforce are there to ensure transparency in how parties are funded and to increase public confidence in our system, so it’s important donations are fully and clearly reported.

Where we find offences, we carefully consider the circumstances before deciding whether to impose a sanction. We take into account a range of factors before making our final decision, including proportionality.

Penny Mordaunt is not going to become the leader of the Conservative party with a coronation. That idea is inconceivable.

In defence of Rishi Sunak, it is quite hard for a leader to be, at this stage in his leadership, significantly more popular than the party, because the two get quite closely identified and the Conservative party’s popularity fell before Rishi Sunak did, so I wouldn’t hold him personally responsible.

I think we’ve been in office for a long time, and I agree with you that the changes of leadership didn’t help. I was not in favour of removing Boris Johnson, as you may remember, but that has happened and parties need to deal with the current situation, not what might have been.

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World’s largest solar manufacturer to cut one-third of workforce

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China’s Longi looks to slash costs as renewable energy sector faces tough headwinds from inflation

The world’s largest solar manufacturer has slashed nearly a third of its workforce after a cost-cutting drive that included telling staff to only print in black and white fell short and as a chill ripples through the renewable energy sector.

China’s Longi is to cut as much as 30% of its workforce, in an acceleration of cost reductions that began late last year, Bloomberg reported.

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Second surplus on track for Australia but budget will report a fall in revenue, says treasurer

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Jim Chalmers says slide in iron ore prices and uptick in jobless rate mean budget will report a much smaller revenue upgrade than in recent years

The government remains on track for a second straight surplus but the recent slide in iron ore prices and an uptick in the jobless rate mean the budget will report a much smaller revenue upgrade than in recent years, the federal treasurer, Jim Chalmers, says.

The coming budget, to be released on 14 May, will aim to address slowing economic growth, “persistent cost of living pressures”, and increased global uncertainty, Chalmers will tell a Committee for Economic Development of Australia lunch in Sydney on Thursday.

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Vinyl records return to UK ‘inflation basket’ for first time since 1992

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Strong sales of Taylor Swift’s 1989 (Taylor’s Version) help format make an impact, as air fryers also join list

Not since Simply Red’s album Stars topped the albums chart in 1992 have vinyl records been included in the basket of goods used to calculate annual inflation, but a rise in sales over recent years has brought them back as a marker of UK shop prices.

The Office for National Statistics said the “resurgence of popularity” in vinyl records meant they should be included among the 744 items used to calculate inflation each month, in its latest annual shake-up of the basket.

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Bitcoin hits new record high above $70,000; US investor ends Currys chase – business live

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Live, rolling coverage of business, economics and financial markets as exchange-traded funds help biggest cryptocurrency rally

The European Commission’s use of Microsoft email and office software broke its own privacy rules, an EU privacy watchdog has ruled.

Microsoft’s software transferred personal data outside the EU, breaching privacy rules, according to the European Data Protection Supervisor.

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The US could be facing a 2008-style financial crisis. Why does Sunak want to copy it?

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The PM’s admiration for Washington’s economic model may backfire amid looming US banking and stock market disasters

One of the consistent themes of the Conservative economic narrative is an admiration for the US and its ability to grow quickly. The way it has bounced back from the pandemic and how it has ridden out the impact of Russia’s invasion of Ukraine should serve as a blueprint.

A neoliberal Conservative analysis puts the emphasis on tech, innovation and a myth-like entrepreneurial spirit that the UK would do well to emulate. What it ignores is the way the US economy zips ahead on fantastical stock market valuations and off-balance-sheet accounting reminiscent of the years before the 2008 financial crisis. And how both these habits could bite back in a big way, much as they did in 2008, and pretty soon.

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Kristalina Georgieva wins backing to run for second term as IMF chief

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Bulgaria’s ‘eternal optimist’ in favour with European finance ministers after first five-year stint encompassing Covid and Ukraine

The head of the International Monetary Fund, Kristalina Georgieva, will run for a second five-year term after being nominated by a string of European countries to lead the global lender.

The Bulgarian economist and champion of policies to tackle the climate crisis will be given the support of her home country, which said she had accepted the nomination for another term starting in September.

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