Rolling coverage of the latest economic and financial news after UK growth figures were released for August
Digging further into the UK GDP data, the 2.1% rise in August marks the fourth consecutive monthly increase since GDP plunged by a record 19.5% in April.
UK GDP is now 21.7% higher than its April low.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
And importantly: happy UK GDP day. Though how happy you are about the pace of Britain’s recovery depends on how you look at the numbers.
While the latest data confirms a rebound in economic activity continued into August, the sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels.
The increase in activity in August largely reflects a temporary boost from the from the economy reopening and government stimulus, including the Eat Out to Help Out Scheme, rather than proof of a sustained ‘V’-shaped recovery.
GDP rose 2.1% but is lower than expected as Covid lockdown measures were relaxed
Britain’s recovery from the coronavirus pandemic continued at a slower pace in August as the government’s eat out to help out scheme fuelled a rise in consumer spending.
The Office for National Statistics (ONS) said gross domestic product rose by 2.1% in August compared with the previous month, missing expectations among City economists for a monthly growth rate of 4.4%.
With UK’s Liam Fox eliminated the contest is now between Yoo Myung-hee and Ngozi Okonjo-Iweala
The World Trade Organization is set to be run by a woman for the first time in its 25-year history after it was announced that the final choice to be its new director-general will be between South Korea’s Yoo Myung-hee and Nigeria’s Ngozi Okonjo-Iweala.
Britain’s former international trade secretary Liam Fox failed to make the final shortlist as the number of candidates was whittled down from five to two.
The eight candidates to be the next director-general of the World Trade Organization are:
Rollin coverage of the latest economic and financial news, as budget airline easyJet warns it lost up to £845m last year
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
#BREAKING EasyJet expects annual pre-tax loss of up to £845 mn pic.twitter.com/y9lofVtR1p
“Based on current travel restrictions we expect to fly c.25% of planned capacity for Q1 2021 but we retain the flexibility to ramp up capacity quickly when we see demand return and early booking levels for summer ‘21 are in line with previous years.
“Aviation continues to face the most severe threat in its history and the UK Government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes.
easyJet came into this crisis in a very strong position thanks to its strong balance sheet and consistent profitability. This year will be the first time in its history that easyJet has ever made a full year loss.
MPs also hear that national debt is now more sensitive to movements in interest rates
Britain’s economic recovery from the coronavirus pandemic has been put “on hold” as a result of the second wave of the virus and tougher government restrictions, a senior Treasury official has warned.
Charlie Bean, a former Bank of England deputy governor who sits on the government’s budget responsibility committee, said a rapid rebound from lockdown earlier this year had stalled at the start of autumn amid a jump in coronavirus cases.
Bernie Evans is clear where the chancellor’s rhetoric will take the country, and Dave Hunter believes Labour can offer a credible alternative, if only it puts in the work
Rishi Sunak is not the first Tory chancellor to claim he has a “sacred responsibility to balance the books for future generations”, while doing nothing to ease graduates’ debts, improve young people’s chances in the housing market, increase social mobility, close pay ratios, or increasing spending on all aspects of state education (Rishi Sunak: hard choices ahead to tackle debt from Covid crisis, 5 October).
Future generations would benefit far more if the need for food banks was eradicated and there were guarantees of jobs and decent pay.
source https://www.theguardian.com/politics/2020/oct/07/sunak-serves-up-more-politics-than-economics
Covid-19, climate crisis and war combine to reverse decades of progress on raising living standards
An additional 150 million people could be pushed into extreme poverty by the end of next year as a conflict, climate change and Covid-19 combine to end two decades of progress in raising the living standards of those on the lowest incomes,says the latest World Bank estimates.
The Washington-based organisation said the proportion of the world’s population living on less than $1.90 a day was expected to rise from 9.1% to 9.4% during 2020, with the increase concentrated in countries with already high poverty rates.
Economists warned on Wednesday that the US economy was facing a “watershed moment” as Donald Trump vacillated on agreeing to a new round of stimulus cash for people and businesses hit by the coronavirus pandemic.
Related: Covid outbreak grips White House as Pence and Harris set to debate – live
source https://www.theguardian.com/business/2020/oct/07/slugs-us-economy-covid-stimulus-trump
Donald Trump said talks on a stimulus package are off – and the problems will only get worse
Having long been buttressed by ample liquidity, financial markets are entering the final quarter of 2020 amid an increasingly tentative global economic recovery, unusual political uncertainties and lagging fiscal and structural policy responses. And these headwinds come on top of the Covid-19 crisis, which has left most countries struggling to strike a balance between protecting public health, achieving a return to a semi-normal level of economic activity and limiting infringements on individual liberties.
In this context, the hope is that today’s generous liquidity conditions, enabled and supported by central banks, will continue to provide a bridge to a better 2021, not only reversing the economic and social damage but also delivering further gains to investors. But will this bridging operation, already deployed for several years to compensate for other headwinds, be sufficient to overcome what is an increasingly complex pandemic cocktail?
Related: Why are stock market prices rising despite the Covid pandemic? | Kenneth Rogoff
The longer the delay, the greater the problems that any future package will have to address
source https://www.theguardian.com/business/2020/oct/07/central-bank-covid-donald-trump-stimulus-package
Rolling coverage of the latest economic and financial news
Deutsche Bank told clients this morning that Trump’s decision to halt stimulus package talks is a shock.
Particularly as America’s top central banker has been pushing for more fiscal support, fearing that the recovery could falter.
President Trump once again took control of the headlines yesterday when he tweeted late in the US session that he had instructed White House negotiators to stop further US stimulus discussions with Congressional Democrats until after the election. He argued that Speaker Pelosi was not arguing in “good faith” and that he wants Congress to focus on the Supreme Court nomination of Judge Barrett instead. This came as a surprise after relatively positive headlines from Pelosi and Treasury Secretary Mnuchin earlier in the week, and also represented a reversal in tone given comments late Monday from White House Chief of Staff Meadows, who said “There are a lot of people that continue to hurt, are waiting on stimulus, and the President’s committed to getting a deal done…He wants to make sure we move expeditiously, but also in a fiscally responsible manner.”
The tweet also came just a few hours after Fed Chair Powell’s speech at the NABE’s annual meeting. While not much new information was proffered, Powell made one of his plainest cases for fiscal stimulus yet, saying “the risks of policy intervention are still asymmetric”, and that “the risks of overdoing it seems, for now, to be smaller” compared with the risks of offering too little support. If the current polling at both the national and state level holds, and former Vice President Biden were to win the election in November, fiscal stimulus may indeed come but will have to wait until Q1 of next year when a new government is seated.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,”
The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!
If I am sent a Stand Alone Bill for Stimulus Checks ($1,200), they will go out to our great people IMMEDIATELY. I am ready to sign right now. Are you listening Nancy? @MarkMeadows @senatemajldr @kevinomccarthy @SpeakerPelosi @SenSchumer
Dow closes almost 400 points lower after Trump calls off stimulus, causing sudden drop in stocks. https://t.co/G7w8ENqW7o pic.twitter.com/uIetPZSIHf
“The White House is in complete disarray.”
Related: Democrats outraged as Trump halts Covid stimulus talks until after election
Clearly, the President is looking to turn the tables and take back control of the election narrative and put the ball back in the Democrats’ court with his standalone $1,200 stimulus check suggestion via Twitter.
Major fiscal stimulus is off the table until after the election. The most that markets can expect before then is income support for individuals that would be positive for risk sentiment at the margin. Income support should not however be conflated with expectations for the post-election stimulus that relies on a Democratic sweep of Congress.
European Opening Calls:#FTSE 5944 -0.10%#DAX 12891 -0.12%#CAC 4884 -0.24%#AEX 554 -0.27%#MIB 19339 -0.47%#IBEX 6908 -0.41%#OMX 1837 -0.12%#STOXX 3226 -0.21%#IGOpeningCall
Donald Trump on Tuesday called off negotiations with Democratic lawmakers on coronavirus relief legislation until after the election, even as cases of the virus are on the rise across much of the country before flu season.
Related: Fed chair warns of ‘tragic’ consequences without further Covid relief
source https://www.theguardian.com/business/2020/oct/06/trump-coronavirus-covid-stimulus-election
Jerome Powell says risk of providing too little support outweighs risk of providing too much
Failure to provide more support for households and businesses hit by the coronavirus pandemic could have “tragic” economic consequences, Federal Reserve chair Jerome Powell warned on Tuesday.
As Congress remains gridlocked over a new round of stimulus in the wake of the coronavirus recession, Powell warned: “The expansion is still far from complete.”
Related: Making billions v making ends meet: how the pandemic has split the US economy in two
Caroline Kay on the Bank’s governor from 1966 to 1973, who joined straight from school and worked his way to the top
Your article (Andy Haldane: the funnyman central banker who’s not great at maths, 1 October) states incorrectly that if Andy Haldane became governor of the Bank of England, he’d be the first non-Oxbridge governor. How about Leslie O’Brien, governor from 1966 to 1973, who joined the Bank straight from school in 1927 and worked his way to the top through the ranks?
I knew Lord O’Brien in his latter career as chair of the House of Lords committee for which I was clerk, in 1982. He was a delightful man to work for and his watchwords of integrity and prudence would serve many a banker, and indeed many an Oxbridge graduate in public life, very well.
Caroline Kay
Bradford-on-Avon, Wiltshire
It is small businesses, not big corporations, that are facing economic pain in the crisis
Why are stock-market valuations soaring when the real economy remains so fragile? One factor has become increasingly clear: The crisis has disproportionately affected small businesses and low-income service workers. They are essential for the real economy, but not so much for equity markets. True, there are other explanations for the lofty valuations, but each has its limitations.
For example, because stock markets are forward-looking, current stock prices may reflect optimism about the imminent arrival of effective Covid-19 vaccines and radically improved testing and treatment options, which would allow for a more limited and nuanced approach to lockdowns. This outlook may be justified, or it may be that markets are underestimating the likelihood of a severe second wave this winter, and overestimating the efficacy and impact of the first-generation vaccines.
source https://www.theguardian.com/business/2020/oct/06/stock-market-prices-covid-pandemic-business
Kristalina Georgieva warns against premature withdrawal of government measures
The head of the International Monetary Fund has said the recovery in the global economy since the spring is fragile and warned Rishi Sunak and his fellow policymakers against an over-hasty withdrawal of support.
In a speech intended as a curtain raiser for next week’s annual meeting of the Washington-based organisation, Kristalina Georgieva said the unprecedented action taken by central banks and finance ministries had been a key factor in softening the impact of the Covid-19 pandemic.
source https://www.theguardian.com/business/2020/oct/06/imf-world-economy-covid-kristalina-georgieva
Rolling coverage of the latest economic and financial news, as the chancellor of the exchequer warns that many more jobs will be lost before the Covid-19 crisis is over
From LBC to BBC TV…. where Rishi Sunak has warned that the UK can’t run huge deficits indefinitely.
The chancellor argue that the current borrowing levels are correct now, but not “sustainable” indefinitely.
“This year we’re obviously having to borrow an enormous amount of money to provide support to the economy at a time of crisis, that’s the right thing to do,”
“In terms of the medium term… obviously this can’t carry on forever. This level of borrowing, which will be record levels pretty much this year, is not sustainable in the long run.”
Rishi Sunak has also been playing down concerns that his Eat Out To Help Out scheme fuelled the surge in Covid-19 cases, by encouraging people back to restaurant and pubs.
He says the scheme was particularly popular in the South West of England, where cases remain relatively low:
Mr Sunak says it’s « a matter of social justice » the Government protects jobs in the hospitality sector.
Chancellor says accusation « doesn’t stack up » because in south-west the scheme was used more than anywhere else but transmission rates are among lowest in the country.
Rishi Sunak has also been speaking to LBC radio – where he’s reassured pensioners that the pensions triple lock is safe.
Asked about the pledge to raise pensions in line with earnings, prices, or 2.5% (whichever is higher), the chancellor indicates that it remains intact despite the pressure on the public finances.
“Yes, our manifesto commitments are there and that is very much the legislative position.
We care very much about pensioners and making sure they have security and that’s indeed our policy.”
On tax rises, the Chancellor tells @LBC: « Our focus right now has to be on jobs…. that’s what top of our mind at the moment. »
Rishi Sunak goes further when Ferrari gets in to the specifics.
On the pensions triple lock, Chancellor says « our manifesto commitments are there ».
*No change.
On fuel duty freeze: « You’re asking me to comment on tax rises outside of fiscal events. »
*It’s going.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s Covid-19 jobs crisis is building day by day, with cinema group Cineworld putting 5,500 staff out of work from Thursday as it shuts its screens.
What’s happening in our economy is significant and severe. Many people are losing their jobs.
So the focus of all my attention in the short term is doing what we can to support as much employment as possible.
Tuesday’s EXPRESS: Payback time! Covid tax rises on the way #TomorrowsPapersToday pic.twitter.com/JQT8UkynMM
Over time, yes, we need sustainable public finances. In the short term, the best way to have long term sustainable public finances is to protect as many jobs as possible.
Asked about looming tax rises, Rishi Sunak also says his focus now is on jobs & his priority « in the short term » is employment. Adds that over time finances will need to be put on a sustainable footing but won’t be drawn on how he’ll do that.
Hundreds of thousands of people are losing their jobs as we speak. Many more will.
That’s happening on my watch and I need to try and do what I can to provide fresh opportunity for people and protect as many jobs as possible.
Related: Cineworld’s zero-hours staff face no pay as it confirms UK shutdown
Such devastating news. On the day the Chancellor boasts about the job he has done, further evidence the Government’s job support scheme just doesn’t work and will leave viable businesses – and their workers – out in the cold. https://t.co/5ZYZiko88z
European Opening Calls:#FTSE 5953 +0.18%#DAX 12855 +0.21%#CAC 4882 +0.20%#AEX 560 +0.29%#MIB 19315 +0.26%#IBEX 6854 +0.23%#OMX 1843 +0.17%#STOXX 3228 +0.24%#IGOpeningCall
Related: ‘Don’t be afraid’: Trump downplays Covid dangers after removing mask at White House – live
Author Chris Goodall says tackling the climate crisis is neither difficult nor expensive and can help boost the economy
Net zero. It’s a simple enough concept – the notion that we reduce carbon emissions to a level where we are no longer adding to the stock in the atmosphere. More and more companies and countries are taking the pledge, promising to hit net zero by 2050, 2030 or even sooner.
Related: Global heating: the vital statistics from a warming world
Opting for corporate hibernation doesn’t remove cinema chain’s urgent need for fresh funds
Choose your villain in the depressing no-action cinema thriller. The top nomination goes to the distributors of the James Bond franchise who have killed the Christmas season for the cinema industry by shunting the release of No Time To Die into next spring.
Then there’s Andrew Cuomo, the mayor of New York, who has helped to frighten Hollywood studios by closing the city’s screens. Cineworld itself, now planning to shut all its US and UK cinemas for an indefinite period, is hardly blameless. It is carrying $8.2bn (£6.3bn) of net debt, including lease commitments and its over-leveraged position existed before Covid-19 hit takings.
