The United Kingdom’s inflation has remained stubbornly high at 8.7 percent in May – the same rate as the previous month – pressuring the Bank of England (BoE) to take action.
The BoE is expected to raise interest rates – a monetary measure used to control inflation – on Thursday for the 13th consecutive time.
The central bank is an independent body.
Meanwhile, the inflation rate in May stood at 4 percent in the United States. Japan saw inflation at 3.4 percent, while Germany registered inflation at 6.3 percent and France’s inflation stood at 6 percent.
Why is inflation so high?
Previous BoE forecasts had predicted that the UK’s inflation rates would ease by dropping to just above 5 percent in the final quarter of 2023 and falling below its 2 percent target in early 2025.
But big price rises across the economy, energy subsidies and Britain’s struggling post-pandemic jobs market have led to soaring inflation rates.
British inflation also accelerated sharply after Russia’s full-scale invasion of Ukraine in February 2022, which sent natural gas prices soaring across Europe.
The Office for National Statistics said core inflation – a measure that excludes volatile food, energy, alcohol and tobacco prices, and which the BoE views as a good guide to underlying price pressures – unexpectedly rose to 7.1 percent from 6.8 percent, its highest since March 1992.
Another measure of underlying pressures – services inflation, which is heavily influenced by fast-rising wages and Britain’s tight post-pandemic job market – also reached its highest since 1992 at 7.4 percent.
“The cost of airfares rose by more than a year ago and is at a higher level than usual for May,” Office for National Statistics chief economist Grant Fitzner said.
“Rising prices for second-hand cars, live music events and computer games also contributed to inflation remaining high.”
But food and drink price inflation dropped slightly to 18.3 percent from April’s 19 percent.
Meanwhile, producer price inflation also slowed much more sharply than economists had expected, with prices charged by manufacturers rising by 2.9 percent in the 12 months to May, down from an increase of 5.2 percent in April.
What is the British government doing about it?
Tackling inflation has been British Prime Minister Rishi Sunak’s priority before the general election next year.
“I’m working day in and day out to give families the support they need, while working to halve inflation, reduce debt and grow the economy,” he said on Twitter, a day before May’s inflation figures were released.
I’m working day in and day out to give families the support they need, while working to halve inflation, reduce debt and grow the economy ???? pic.twitter.com/cqg4EmnEcN
Mortgage costs are likely to increase for millions of homeowners, with Chancellor of the Exchequer Jeremy Hunt ruling out financial support for mortgage holders.
“Today’s figures strengthen the case for the government to stick to its guns,” Hunt told reporters in the UK.
“If you look at what’s happening in other countries, you can see that rises in interest rates do bring down inflation over time, that will happen here,” he added.
Markets see a 40 percent chance that the BoE will raise interest rates by half a percentage point to 5 percent, rather than the quarter-point move previously expected, in an effort to control inflation.
Paul Dales, chief UK economist at Capital Economics, told the Reuters news agency that he now forecasts the BoE raising interest rates by half a percentage point on Thursday after the latest numbers.
“The problem is that the recent surge in core inflation and the re-acceleration in wage growth shows that domestic inflationary pressures are still strengthening,” Dales said.
“This suggests the Bank may have more work to do than the Fed or ECB [European Central Bank].”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
