UK Economy: Is There Worse to Come?

The British pound has tanked, markets are in crisis and economists worldwide are panicking. What’s happening to the British economy?

L’inflation alimentaire en France s’approche des 10 % dans les supermarchés

LE MONDE : Certains produits de première nécessité, comme les pâtes ou le riz, se sont envolés de 20, 30, voire 130 % sur un an. Et le rythme ne ralentit pas.

« L’invitée surprise. » C’est ainsi que Jean-Philippe André, président de l’Association nationale des industries agroalimentaires (ANIA) qualifie l’inflation. Il se remémore, qu’il y a un an à peine, le sujet n’était même pas abordé. Depuis, la valse des étiquettes s’est enclenchée dans les rayons des supermarchés. Et le rythme ne ralentit pas. Après avoir franchi la barre des 5 % en juin, l’inflation alimentaire s’approche désormais du seuil des 10 %.

C’est le constat dressé par le cabinet d’analyses IRI France, qui publiait, jeudi 29 septembre, les données collectées à la fin de ce mois. Cette société qui scrute les achats des consommateurs après leur passage en caisse avait enregistré un premier frémissement des prix à la hausse, en décembre 2021.

Neuf mois plus tard, elle constate que les prix des produits de grande consommation ont bondi, en un an, de 9,11 %. Sur les seuls produits alimentaires, la progression est de 9,75 %. IRI France pointe les rayons épicerie salée, crémerie, surgelés et glaces, où les hausses de tarifs dépassent les 10 %. Avec une mention spéciale pour les viandes surgelées dont l’inflation frôle les 30 %. Seuls les apéritifs anisés se distinguent avec une tarification en léger retrait. » | Par Laurence Girard | jeudi 29 septembre 2022

Article réservé aux abonnés

Just Economists Losing Their Minds over Trussonomics

Just some experts outlining just how badly the Tories have handled the economy.

Truss and Treasury Secretary Fail to Reassure Markets as Bond Yields Rise, Stocks Tumble and Pound Slides – Business Live

THE GUARDIAN: Prime minister and Chris Philp fail to restore investor confidence in series of interviews, as government bond yields rise and stock markets tumble

The prime minister, Liz Truss, and the Treasury’s no 2, Chris Philp, have both done a round of broadcast interviews this morning – but their comments appear to have done little to reassure markets.

Government bond yields are rising again, the stock market has tumbled and the pound is sliding. Sterling is now worth $1.0789, a 0.9% drop on the day.

The FTSE 100 and FTSE 250 indices have lost 1.8% and 2.3% respectively this morning. Germany’s Dax has dropped 1.9%, France’s CAC has slid 1.8% and Italy’s FTSE MiB fell 1.1%.

Despite a barrage of criticism, from the International Monetary Trust and the former Bank of England governor Mark Carney, the government is refusing to perform a U-turn on the package of £45bn of unfunded tax cuts aimed at the wealthy it announced on Friday. There is also no sign at the moment that the fiscal policy statement planned for 23 November could be brought forward.

Truss said this morning: “I have to do what I believe is right for the country and what is going to help move our country forward.” » | Julia Kollewe | Thursday, September 29, 2022

Market-turmoil and Slumping British Pound after UK Government Announced Economic Plans | DW News

The new UK government's plan for huge tax cuts financed by borrowing have drawn strong criticism from the IMF. The British pound has slumped - so has London lost control of the economy? The Day put that question to Phillip Inman, economics editor of the UK's Observer newspaper.

Thom Hartmann: Has PM Liz Truss Wrecked the UK Economy? Featuring Richard Wolff

Is British prime minister Liz Truss trashing the economy of her country? A tax cut for the rich and little for the poor. The pound sterling has crashed against the dollar and the euro.

The International Monetary Fund (IMF) has publicly rebuked the UK government, which is almost unheard of.

Is the country spinning out of control financially?


Bio: Professor Richard Wolff, Economist / Co-founder, Democracy At Work / Author of numerous books including The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself (also available as an eBook) / Host-Economic Update w/Prof. Richard Wolff on FSTV

Government Is Undercutting UK Institutions, Says Former Bank Governor

Read the article here.

What Tory MPs are saying about Kwasi Kwarteng's future »

Emergency Action by Bank of England amid UK Economic Turmoil

As the economic storm clouds over the UK darkened further still, the Bank of England today staged a dramatic intervention - saying it will start buying up government debt in an effort to stabilise markets and protect pension funds.

The surging cost of borrowing, sparked last week by the Chancellor's tax-cutting plans, had earlier drawn a stinging rebuke from the IMF - but the government says it's sticking to its guns, although departments will be asked to identify 'spending efficiencies'.

Labour says parliament should be recalled so the prime minister is held to account over the crisis.


Truss and Kwarteng are not fit for purpose. They need to go. Go before the UK economy is totally ruined. Both of them are greenhorns. No to tax cuts for the super-rich! No to Kwarteng’s voodoo economics! – © Mark Alexander

Kwarteng’s Tax Cuts Will Force ‘Significant’ Interest Rate Rises by Bank of England

THE GUARDIAN: Chief economist says mini-budget will increase inflationary pressure in remarks likely to further spook mortgage borrowers

The Bank of England’s chief economist, Huw Pill, says: ‘It is hard not to draw the conclusion that this [tax cuts] will require a significant monetary policy response.’ Photograph: Bloomberg/Getty Images
A senior Bank of England official has warned “significant” increases in interest rates will have to be imposed by the central bank in response to tax cuts put forward by Kwasi Kwarteng in his mini-budget.

The Bank’s chief economist, Huw Pill, said the chancellor’s planned tax cuts would act as a stimulus and increase inflationary pressures, with the result that interest rates would need to go higher than previously forecast.

“In my view, a combination of the fiscal announcements we have seen will act a stimulus to demand in the economy,” he said. “It is hard not to draw the conclusion that this will require a significant monetary policy response.”

Pill’s remarks are likely to further spook homebuyers and mortgage borrowers near the end of a fixed-rate mortgage about the cost of financing their loans. » | Phillip Inman | Tuesday, September 27, 2022,br />
UK’s cost of borrowing on international markets overtakes Greece and Italy: Five-year British government bonds fall dramatically as traders price in higher risk of default on debt »

UK Warned ‘Utterly Irresponsible’ Policy Could Drive Pound below Dollar and Euro Parity - Business Live

THE GUARDIAN: Former US Treasury secretary Larry Summers warns the first step in regaining credibility is not saying incredible things

…

Larry Summers, a former US Treasury secretary, has warned that the UK government’s ‘utterly irresponsible’ plans could drag the pound below parity against the euro, as well as the dollar.

Summers has heavily criticised chancellor Kwasi Kwarteng for undermining credibility by saying ‘incredible things’ about planning more tax cuts -- those weekend comments pushed the pound to a record low of $1.0327 on Monday.

Summers says he was “very pessimistic about the consequences of utterly irresponsible UK policy on Friday,” but didn’t expect the markets to get so bad so quickly.

Summers also suggests the Bank of England should have taken more decisive action, rather than its ‘timid’ statement yesterday. » | Graeme Wearden | Tuesday, September 27, 2022

Pound comes under new pressure after Bank of England fails to raise rates: Central bank stops short of emergency rate hike and instead says it will make full assessment in November »

Pound Crashes to All-time Low as UK Chancellor Hints at More Tax Cuts

Chancellor Kwasi Kwarteng was today forced to quell growing market unease over his low-tax, high borrowing strategy with a promise to set out more details in November, along with independent costings.

The Bank of England put out a statement too, saying they wouldn't hesitate to hike interest rates at their next meeting, but neither intervention seemed to reassure city markets.

The pound slid once again this evening, having hit a historic low against the dollar earlier in a rollercoaster day.
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And amidst the turmoil - the cost of government borrowing shot up too.

Pound Comes under New Pressure after Bank of England Fails to Raise Rates

THE GUARDIAN: Central bank stops short of emergency rate hike and instead says it will make full assessment in November

The Bank of England issued a statement in response the pound’s sharp fall on currency markets.Photograph: James Veysey/Rex/Shutterstock
The government was struggling to prevent a full-scale loss of financial market confidence in its economic strategy on Monday evening after the Bank of England’s decision to rule out an emergency rise in interest rates prompted fresh selling of the pound.

Attempts by Threadneedle Street and the Treasury failed to repair the damage caused by Kwasi Kwarteng’s mini-budget last Friday, with sterling falling to a record low against the US dollar.

Within minutes of the Bank saying that it intended to wait until November before responding to the recent turbulence, the pound had dropped two cents against the dollar and was within three cents of the record low of $1.03 hit in Far East trading overnight. » | Larry Elliott, Economics editor and Rowena Mason, Deputy political editor | Monday, September 26, 2022

Markets warn sterling slump could lead UK interest rates to triple by next year: Analysts expect Bank of England to convene meeting to raise rates with further increase in November »

Isn’t this Governor being rather lily-livered? – © Mark Alexander

The Dollar Is Strong. That Is Good for the U.S. but Bad for the World.

THE NEW YORK TIMES: The Federal Reserve may have no choice but to wage a relentless inflation fight, but countries rich and poor are feeling the pain of plunging currencies.

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.

On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.

In Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.

“For the rest of the world, it’s a no-win situation,” said Eswar Prasad, an economics professor at Cornell and author of several books on currencies. At the same time, he said, the Fed has no choice but to act aggressively to control inflation: “Any delay in action could make things potentially even worse.” » | Patricia Cohen, Reporting from London | Monday, September 26, 2022

British Pound Touches Record Low as Investors Dump U.K. Assets

THE NEW YORK TIMES: The market’s resounding rejection of the new British government’s plans for tax cuts and borrowing continued Monday as the pound briefly fell to its weakest level against the U.S. dollar on record.

After a historically bad day on Friday, the British currency plunged as low as $1.035 in the early hours of Monday morning, before recovering to about $1.08, down 0.5 percent for the day. It also weakened slightly against the euro.

On Monday, prices for British government bonds plummeted, and yields surged, sending borrowing costs to new highs. The 10-year yield, which influences mortgages, business loans and other types of debt, hit its highest level in more than a decade. It traded at around 4.15 percent on Monday, double where it was a month and a half ago.

As traders dumped British assets, analysts have said the government’s plan to quickly grow the economy through deregulation and tax cuts, which will require tens of billions of pounds in additional borrowing at a time of rising interest rates and high inflation, was a gamble. » | Eshe Nelson | Monday, September 26, 2022

Clearly, Kwarteng’s voodoo economics has failed to impress the markets! – © Mark Alexander

Daniel Lacalle: Inflation Is Always Monetary Mismanagement

Daniel Lacalle is a distinguished economist from Spain. This is a link to his website in English.

His website is also available in Spanish.

The Guardian View on the Tory Trickle Up Policies: Redistributing to the Rich

THE GUARDIAN – EDITORIAL: Kwasi Kwarteng thinks Britain needs to give millionaires huge handouts and concrete over the country. He’s wrong

Kwasi Kwarteng came to the Commons determined to bury the politics of redistribution. But the Conservative chancellor revived it with a “ mini-budget” that attached rocket boosters on to bankers’ pay, gave millionaires a £40,000 handout by abolishing the top rate of tax and cut levies for businesses and buy-to-let landlords. It is in a cost of living crisis that Mr Kwarteng has chosen to show his true colours. Ordinary families are choosing between heating and eating. The nation’s public services are falling apart. The chancellor’s medicine for such ailments is to shower money – and to loosen regulatory safeguards – on the City, energy companies and housebuilders. » | Editorial | Friday, September 23, 2022

Fed Makes Another Big Rate Increase

THE NEW YORK TIMES: The Federal Reserve raised rates by three-quarters of a point and projected a more aggressive path ahead, suggesting that borrowing costs would be increased to 4.4 percent by the end of the year.

Federal Reserve officials ramped up their battle against the fastest inflation in 40 years on Wednesday, ushering in a third straight supersize rate increase while projecting a more aggressive path ahead for monetary policy, one that would lift interest rates higher and keep them elevated longer.

Central bankers raised their policy interest rate by three-quarters of a percentage point, boosting it to a range of 3 to 3.25 percent. The federal funds rate was set at near zero as recently as March, and the Fed’s increases since then have made for its fastest policy adjustment since the 1980s.

Even more notably, policymakers predicted on Wednesday that they will raise borrowing costs to 4.4 percent by the end of the year — suggesting that they could make another supersize rate move, followed by a half-point adjustment. Officials estimated that rates will climb to 4.6 percent by the end of 2023, up from an estimate of 3.8 percent in June, when they last published estimates. » | Jeanna Smialek | Wednesday, September 21, 2022

Saudi Aramco Chief Says Europe’s Plans on Energy Crisis Are Not Helpful

THE GUARDIAN: Amin Nasser says plans to cap bills and tax energy companies are not long-term solutions

Saudi Aramco’s Amin Nasser said the root cause of the energy crisis had come from underinvestment in fossil fuels. Photograph: Ahmed Yosri/Reuters
The chief executive of Saudi Aramco has said European governments’ efforts to tackle the energy crisis are “not helpful”.

Amin Nasser, who leads the world’s largest oil exporter, said plans to cap consumer bills and tax energy companies were not long-term solutions to the global crisis.

Nasser told a forum in Switzerland: “Freezing or capping energy bills might help consumers in the short term, but it does not address the real causes and is not the long-term solution.

“And taxing companies when you want them to increase production is clearly not helpful.” » | Alex Lawson, Energy correspondent | Tuesday, September 20, 2022

Trussonomics Is a Fanatical, Fantastical Creed, and the Last Thing Britain Needs

THE GUARDIAN – OPINION: ust when we need visions of a better world, the prime minister is proclaiming the toxic gospel of neoliberalism

Soon, the focus will return, and the collapse of many people’s economic prospects will dominate once more. As winter approaches, it will become clear that our politics is spectacularly lacking in answers.

Why? Because the doctrine destroying our condition of life is the doctrine Liz Truss has promised to extend to new extremes. She is fanatically devoted to an ideology misleadingly called Thatcherism or Reaganism (as if they invented it), but more accurately described as neoliberalism.

This doctrine insists that politics submits to “the market”, which means, when translated, that democracy must submit to the power of money. Any impediment to the accumulation of wealth – such as public ownership, tax, regulation, trade unions and political protest – should be torn down, either quickly and noisily or slowly and stealthily. When consumer choice is unencumbered by political interference, the market is allowed to become a Great Winnower, sifting us into a natural hierarchy of winners and losers. » | George Monbiot | Saturday, September 17, 2022

Stocks Slide at the End of a Rough Week for Investors.

THE NEW YORK TIMES: Pessimism is deepening as bellwether companies like FedEx and General Electric warn of worsening economic and business conditions.

After one of the worst weeks for the stock market this year, investors are losing their nerve as the burst of optimism that accompanied a summer rally fades away.

The S&P 500 index was set to close out the week around 5 percent lower than where it started, down 1 percent in early trading on Friday as corporate executives from bellwethers like FedEx and General Electric warned of crimped supply chains and declining economic activity that would hurt corporate profits.

The stock market’s move on Friday added to sharp losses earlier in the week, after a widely watched gauge of inflation showed that consumer prices rose more than expected in August. The fresh data undermined the popular thesis that inflation had peaked, ushering in expectations that the Federal Reserve would have to do more to restrain the economy that previously expected, raising the risk of the United States slipping into a severe downturn.

The stock slide marked the latest bout of whiplash for investors after a string of surprises this summer that have consistently undermined a more optimistic consensus in financial markets. Now, some of the most powerful trading houses in the world, responsible for investing trillions of dollars on behalf of pension funds, governments and other investors, are warning that there is more pain to come. » | Joe Rennison | Friday, September 16, 2022

Companies Declared Insolvent in England and Wales Jump by 43%

THE GUARDIAN: Businesses may struggle as consumers cut back spending amid high inflation and rising fuel costs, economists warn

The number of companies in England and Wales declared insolvent jumped by 43% in August, according to government data, which adds to concerns for the health of the UK economy.

There were 1,933 insolvencies in August, compared with 1,348 in the same month last year, the Insolvency Service said. It was 42% above the level in August 2019, before the Covid-19 pandemic hit.

Economists are concerned that businesses will increasingly struggle as consumers cut back spending amid high inflation. The government has stepped in with an energy price freeze that will cushion the blow of increased cost of gas and electricity, but the unit price paid by households this winter will still be well over double the levels of recent years. » | Jasper Jolly | Friday, September 16, 2022

Clearly, this must be one of the benefits of Brexit! – © Mark Alexander

Pound Falls as Weak Retail Sales Raise Fears UK Economy Is in Recession

THE GUARDIAN: Sterling drops by more than 1% against dollar to $1.1351, its lowest since 1985

The pound sank to a fresh 37-year low against the dollar on Friday after weaker than expected retail sales raised fears that the British economy is already in recession.

Sterling fell by more than 1% against the currency to $1.1351, its lowest since 1985, partly reflecting broader dollar strength as well as specific concerns about the outlook for Britain. The pound also hit a 17-month low against the euro, with €1 worth 87.66p.

It came as the latest official data showed cash-strapped consumers cut back on spending by more than expected in August, when retail sales volumes in Great Britain fell by 1.6%. Economists had predicted a more modest fall of 0.5%. » | Phillip Inman | Friday, September 16, 2022

Croatia Joins the Euro!

On 1 January 2023, Croatia will become the 20th member of the euro family!

In Full: Former BoE Governor Warns of a "Very Unpleasant Period" Ahead

Former Bank of England Governor Mervyn King blames central banks for fuelling the cost-of-living crisis by printing too much money during the pandemic.

King headed Britain's central bank from 2003 to 2013, and oversaw the start of its QE programme in March 2009 during the global financial crisis.

But in more recent years he has criticised the scale of central bank asset purchases, which were funded by newly-created money.

Liz Truss Cost of Living Crisis Policies Would Make Inflation Worse | Economics | New Statesman

Aug 31, 2022 Liz truss has shown a "complete failure" to address the inflation driven UK cost of living crisis, says economist Duncan Weldon.

Economist and Journalist Duncan Weldon speaks to the New Statesman's Will Dunn to discuss his cover story in the latest issue of the New Statesman magazine, titled "The coming economic storm: As inflation reaches a 40-year high and with Britain facing a punishing recession, the Conservative leadership contenders have failed to grasp the scale of the crisis."

Economist and Journalist Duncan Weldon speaks to the New Statesman's Will Dunn to discuss his cover story in the latest issue of the New Statesman magazine, titled "The coming economic storm: As inflation reaches a 40-year high and with Britain facing a punishing recession, the Conservative leadership contenders have failed to grasp the scale of the crisis."

Grande distribution : Lindt, Danone et Kiri accusés de « shrinkflation » sur les produits alimentaires

LE MONDE : L’ONG Foodwatch met en cause six marques qui ont modifié la taille de leurs produits-phares ces dernières années pour ne pas trop augmenter les prix.

Nestlé, Lindt & Sprüngli ou encore Danone ont trouvé la solution pour ne pas trop augmenter les prix en rayons et risquer de faire fuir des clients inquiets pour leur portefeuille : ils réduisent discrètement la quantité, voire la qualité, de certains de leurs produits, dénonce l’association Foodwatch dans une étude reprise par l’émission « Complément d’enquête », diffusée jeudi 1er septembre sur France 2. » | Le Monde avec AFP | vendredi 2 septembre 2022

Steigende Inflation in der Schweiz: Die Nationalbank muss bald nachziehen

NEUE ZÜRCHER ZEITUNG: Die Konsumentenpreise in der Schweiz sind im August weiter gestiegen. Um zu verhindern, dass sich die Inflation verfestigt und auf immer mehr Güter überschwappt, sollte die SNB den Leitzins noch diesen Monat erhöhen – dies auch als Signal an die Arbeitnehmenden.

Die Schweizerische Nationalbank ist gefordert im Kampf gegen die Teuerung. | Peter Klaunzer / Keystone
KOMMENTAR
Die europäischen Nachbarstaaten mögen die Schweiz um ihre vergleichsweise niedrige Inflation beneiden. Doch nur weil es anderswo noch schlimmer ist, kann man sich hierzulande nicht zurücklehnen. So wird auch in der Schweiz das Leben immer teurer. Neue Daten zeigen, dass die Konsumentenpreise im August gegenüber dem Vorjahr um 3,5 Prozent gestiegen sind. Der Wert liegt am oberen Rand der Erwartungen und auf dem höchsten Niveau seit den frühen 1990er Jahren. Von einer Entspannung an der Preisfront kann weiterhin keine Rede sein. » | Thomas Fuster | Donnerstag, 1. September 2022

Pound Slides as Fears Mount for UK Economy

BBC: Worries over the prospects for the UK economy led the pound to slide 5% against the US dollar in August.

Sterling sank again on Thursday morning, dipping below $1.16 on the currency markets.

Analysts said the fall reflects the darkening outlook for the economy, with consumers and businesses facing rising prices and soaring energy bills.

The Bank of England has predicted the UK will fall into recession towards the end of this year.

The weak pound means Brits travelling overseas will find their spending money will not stretch as far.

"Our economic prospects are not looking particularly good compared to the rest of the world," said Laura Lambie, senior investment director at Investec.

Ms Lambie said that recession fears were weighing on markets, with the investment bank Goldman Sachs warning this week that the UK could remain in recession until 2024.

A recession is defined as the economy getting smaller for two consecutive three-month periods. » | Noor Nanji, Business reporter, BBC News | Thursday, September 1, 2022

Ovo Energy Boss Proposes Plan to Stave Off Household Bill Crisis

Read the article here.