Economy

Sunak Faces Economic Misery Similar to Before 1997 Tory Defeat

Published

6 months ago

March 17, 2024

(Bloomberg) — Rishi Sunak’s government is facing the same levels of economic misery that led to the Conservative Party’s defeat in 1997, helping explain why the prime minister plans to delay the next election until late this year.

The Misery Index, created in the 1970s to capture the combined impacts of unemployment and inflation, is likely to improve over the next 12 months in the UK as price pressures dissipate. For now, and during Liz Truss’s brief term as premier in 2022, it’s showing its worst levels since John Major was ejected from office.

The figures shed light on how voters feel about an economy that tipped into recession in 2023 and is still struggling with a cost-of-living crisis. Sunak must call an election by January 2025 and has said his assumption is he’ll call a poll in the autumn, giving time for the most painful impacts to recede.

“From an economic perspective, it makes sense for Sunak to wait as long as he can before calling an election,” said Ruth Gregory, an economist at Capital Economics Ltd. in London. “Later in the year the economy will probably be out of recession, a recovery will most likely be underway, inflation will be lower, households’ real wages will be rising and interest rates will probably be falling.”

The misery index, based on a Bloomberg analysis of unemployment and inflation data from the Office for National Statistics, averaged almost 12 since Sunak took office in October 2022. That’s down from 15 under Truss, the most painful period since the 1990s, but up from the levels under every administration from Tony Blair through Boris Johnson.

The index was created by the US economist Arthur Okun, an adviser to US President Lyndon B. Johnson, to capture how voters felt about the economy. Since then, it’s been used by politicians and academics all over the world to track sentiment over time.

For Sunak, the index underscores the challenge Sunak faces — voter perceptions of their own fortunes lag real-time data. So an improvement that most economists think is materializing now won’t register with most people for many months.

“While people blame the government for inflation going up, they don’t necessarily credit it with inflation going down,” said Luke Tryl, director at More in Common, a research group that conducts surveys in the UK, US and Germany. “Headline figures might be indicating more optimism, but people aren’t feeling that in their day-to-day lives. And how people feel has always been more important than what the stats say.”

Plotting the misery index against UK general election dates shows ruling parties tend to lose power after periods where the pain is most accute. At the moment, the Labour opposition leads the Sunak’s Conservatives in polls by some 20 points.

Inflation has been Sunak’s main challenge. Unemployment — the main headache for his predecessors — has remained subdued even through last year’s slump, which most analysts say is probably over. Soaring prices ate into the spending power of consumers and prompted the Bank of England to raise interest rates to a 16-year high, driving up mortgage costs.

The outlook is more sunny. The government’s official forecaster, the Office for Budget Responsibility, expects inflation, which averaged 7.4% in 2023, to fall below 2% in the next few months and interest rates to decline. It expects unemployment, which was 4% last year, to tick up to 4.4%.

Of course, unemployment and inflation aren’t the only issues on the political agenda. Voters are also feeling the impact of rising tax bills and deteriorating public services, especially for health. With inflation subsiding, most prices will merely rise more slowly — not fall back to levels people enjoyed before Covid-19 hit.

“Voters care about levels, not just year-on-year changes, and in level terms they’re a lot worse off compared to a few years ago,” said Andrew Goodwin, chief UK economist at Oxford Economics.

Also, a brighter economic outlook doesn’t necessarily translate into popularity for the ruling party. The Conservative position in opinion polls didn’t recover after 1992, despite the improvement in GfK Ltd.’s measure consumer confidence, according to Gregory.

At the moment, all generations are suffering from the surge in prices. Those under 40 have never felt a worse period, and older ones have to look back decades to remember an equivalent amount of pain.

Economic sentiment has been improving in recent months, thanks to lower price gains and expectations of interest rates cuts. Yet the Conservatives’ position in polls keeps worsening, with one recent survey showing the Tories with their worst-ever rating.

“This is a sort of end-of-term prime minister,” Tyl said, drawing parallels with Major’s defeat in 1997. “Major was approaching the end of a significant period when the Conservative had been in power 14 years. Rishi Sunak is at the same point. Major had Black Wednesday. Sunak has got the cost-of-living crisis.”

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Business

A timeline of events in the bread price-fixing scandal

Published

10 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

10 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

1 day ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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