LONDON, Oct 5 (Reuters) – Britain’s economic bounce-back after coronavirus lockdowns is being hampered by problems in supply chains, a jump in inflation and the risk of a rise in unemployment, complicating the task for policymakers of steering the recovery.
Former Bank of England chief economist Andy Haldane says Britain is in a VILE era of volatile inflation, low expansion.
Financial markets now think the BoE is all but certain to raise interest rates by February but some economists, worried by signs of a flagging recovery, aren’t so sure.
Below are some of the gauges of Britain’s economy that are likely to be on the minds of economic policymakers.
INFLATION
Britain’s inflation rate hit 3.2% in August, its highest in almost a decade. Some one-off factors accounted for the record jump from July but the BoE thinks inflation is heading above 4%, more than double its 2% target.
The BoE is watching for any signs that consumers are losing confidence that inflation will be contained in the longer run.
Public expectations for inflation in the year ahead rose sharply in September, according to a Citi/YouGov survey which may have weighed on the minds of BoE rate-setters. They said last month that the case for raising rates was strengthening.
UK inflation on track to hit double BoE’s 2% target
UK public inflation expectations lurch higher: Citi/YouGov
GROWTH FADING?
While Britain’s economy grew rapidly earlier this year as it reopened from a third COVID-19 lockdown, the latest readings show this momentum has largely dissipated. Economic growth slowed to a crawl in July, according to official data, and surveys of businesses and consumers suggest sluggish growth persisted into the second half of the year – even before the most severe supply chain problems seen in recent weeks.
UK economy loses steam as shortages bite
SUPPLY CHAIN PROBLEMS
There has been no let-up in the supply chain and staffing problems for British manufacturers dealing with hefty delays from suppliers, according to the latest IHS Markit/CIPS survey of businesses.
That was even before panic-buying at petrol stations, caused by a shortage of tanker drivers, led in late September to the biggest week-on-week drop in car traffic since early June – another unpromising sign for the economy.
The shortage of workers, something seen in other economies around the world, has worsened since Britain decided to leave the European Union and end free movement of workers from the bloc. But Prime Minister Boris Johnson denied on Tuesday Britain was in crisis and said its “natural ability to sort out its logistics and supply chains is very strong.” read more
Going off-road: panic buying keeps some motorists at home
CONSUMER SPENDING
The supply chain disruption and rising inflation prompted a hefty hit last month to the GfK gauge of consumer confidence – historically a good indicator of household spending.
Households are also facing cuts to state benefits and tax increases for working people.
BoE data published last week suggested consumers are once again leaning more towards saving than spending.
Consumer spending recovers – but tougher times ahead?
JOBS AND WAGES
Britain’s unemployment rate has fallen in six of the last seven monthly reports, helped by the economic recovery and the government’s jobs-protecting furlough programme.
That scheme ended at the end of September and the BoE is keeping an eye on whether unemployment is about to rise again.
Wages have been rising fast although the official measure of earnings growth has been boosted by statistical distortions caused by the pandemic. Still, inflation has started to bite into earnings: the official real-terms measure of total wage growth has declined for three months running.
UK unemployment rate falls, for now – while pay rises
Reporting by Andy Bruce, Editing by Timothy Heritage
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
