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U.K. Economy Grows Less Than Expected as Services Disappoint – Financial Post

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By Andrew Atkinson and David Goodman

(Bloomberg) —

The U.K. economy grew less than expected in August as consumers reined in spending, raising doubt about whether output will return to pre-pandemic levels this year. Gross domestic product rose 0.4% in August, the Office for National Statistics said Wednesday. A series of revisions showed an unexpected drop in July, leaving the economy 0.8% smaller than it was when Covid-19 struck in February 2020.

The figures add to evidence Britain’s recovery is being squeezed by supply shortages and a jump in the cost of goods. That may give the Bank of England reason to delay an increase in interest rates that financial markets anticipate will come this year.

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“The prospect of rising costs, further disruptions, and a potential winter wave of Covid cases could threaten a fragile economic recovery,” said Yael Selfin, chief economist at KPMG UK.

Growth of more than 2% will be needed in September if the third quarter overall is to expand by 2.1%, as the BOE recently predicted. That’s unlikely, meaning the economy may remain short of pre-Covid levels on a quarterly basis until next year.

What Bloomberg Economics Says …

“The final quarter of the year will be challenging amid a continued supply crisis, soaring energy prices and a squeeze on household incomes. We don’t expect quarterly GDP to reach its pre-pandemic level until early next year.”

–Dan Hanson, Bloomberg Economics. Click for the REACT. 

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Households are also facing a cost of living squeeze that threatens to weigh on spending, with energy bills and taxes set to increase sharply in the spring. 

The ONS said services grew 0.3% in August, half the pace expected because of drops in retail sales and health care output. Construction shrank during the month, but both manufacturing and industrial production were stronger than expected. 

“The recovery is certainly facing more headwinds,” said Martin Beck, senior economic adviser to the EY ITEM Club. “While growth will likely slow over the rest of this year and into 2022, the expansion should prove to be down, but not out.” The report comes a day after data showing the labor market remained in robust health last month, reflecting a boom in hiring after the end of lockdowns. Policy makers are hoping that means employers will absorb many of the 1 million people who were still recieving furlough benefits when the program ended on Sept. 30.

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Total imports of goods, excluding precious metals, fell 3.1% in August, while total exports also dropped 4.6%, with the gap between imports to European Union countries and non-EU members closing to its narrowest since the end of the Brexit transition period. The ONS said it was unclear whether this reflected short-term pandemic disruption or longer-term supply chain recalibration. 

“With the ongoing pandemic and recession, it is difficult to assess the extent to which this reflects short-term trade disruption or longer-term supply chain adjustments,” said Ana Boata, head of economic research at trade credit insurer Euler Hermes. Gains in growth since lockdown are a fillup for Chancellor of the Exchequer Rishi Sunak as he prepares to deliver his annual Budget on Oct. 27. The budget deficit in the current fiscal year is forecast to come in well below official forecasts made in March, though progress in repairing the public finances is expected to slow.

 “Our economic recovery is continuing with more employees on payrolls than ever before and the UK forecast to have the fastest growth in the G7 this year,” Sunak said in a statement.

©2021 Bloomberg L.P.

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Saudi Arabia’s PIF launches offshore platform tourism project

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Saudi Arabia‘s sovereign wealth fund, the Public Investment Fund, announced on Saturday the launch of “THE RIG”, which it said would be the world’s first tourism destination on offshore platforms.

The fund, the engine of Crown Prince Mohammed Bin Salman‘s economic transformation plans for Saudi Arabia, manages a portfolio worth $400 billion.

It added in a statement that the project was located in the gulf and spanned an area of more than 150,000 square metres.

It said the project would feature a number of attractions, including three hotels, restaurants, helipads, and a range of adventurous activities including extreme sports.

The funds did not disclose the value of the project.

 

(Reported by Saeed Azhar; Writing by Moataz Abdelrahiem; Editing by Alex Richardson)

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The World Needs 16 Billion Covid Shots: New Economy Saturday – Bloomberg

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Wanted: 16.5 billion vaccine doses.

That’s the number urgently needed to inoculate the world against Covid-19—on top of the roughly 6.5 billion doses already administered. This according to Chad P. Bown, a trade specialist at the Peterson Institute of International Economics, and Thomas J. Bollyky, the Director of the Global Health Program at the Council on Foreign Relations.

Vaccinating the planet’s entire population is a moral imperative. The fact that only 3% of adults in low-income countries have been immunized is catastrophic. Putting more needles into arms is also a broader public health priority: the longer it takes to immunize everyone, the greater the risk deadlier variants will emerge.

As a result, full vaccination is clearly an economic necessity, too. But 19 months into a horrific pandemic that’s killed millions, impediments remain.

#lazy-img-380057754:beforepadding-top:66.64999999999999%;DRC-GOMA-COVID-19-VACCINATION
A medical worker administers a Covid-19 vaccine in Goma, Democratic Republic of the Congo, on Oct. 8. Developing nations lag far behind wealthy countries when it comes to vaccination—posing ​​​​a moral and economic emergency for the world.
Photographer: Xinhua News Agency 

This Week in the New Economy

 

The International Chamber of Commerce estimates the global economy stands to lose as much as $9.2 trillion as a result of unequal vaccine access.

But vaccines are also a trade issue. Like cars, laptops and smartphones, their production relies on intricate networks of cross-border supply chains. This system of dispersed manufacturing has worked remarkably well for places where global vaccine production is concentrated: India, the U.S., the European Union, the U.K. and China.

But these countries have prioritized their own people over the global good.

So-called “vaccine nationalism” was perhaps understandable when the first shots arrived. Producer countries naturally scrambled to protect their own hospital workers and the elderly.

The practice became less defensible when these countries started vaccinating low-risk populations. And that inequity is arguably intolerable now that those same rich nations are offering boosters while millions of healthcare workers in poorer countries haven’t received their first shot.

Tedros Adhanom Ghebreyesus, director-general of the World Health Organization, denounces this state of affairs as “vaccine apartheid.”

#lazy-img-380057974:beforepadding-top:66.68181818181817%;TOPSHOT-SWITZERLAND-HEALTH-VIRUS-WHO
Tedros Adhanom Ghebreyesus
Photographer: Fabrice Coffrini/AFP

If producer countries won’t share their existing output, then they must ramp up production, argue Bollyky and Bown (a member of the Bloomberg New Economy Trade Council).

“The mathematics are simple but stunning,” they write. Apart from Johnson & Johnson, available vaccines require a two-dose regimen. That adds up to 14 billion doses for a global population of seven billion. Taking into consideration third doses, stockpiling and inevitable waste, and the world needs a total of 23 billion doses for full vaccination. Given that 6.5 billion have already been delivered, that means an extra 16.5 billion are required.

To achieve the additional output, Bown and Bollyky are calling for a “Covid-19 Vaccine Investment and Trade Agreement” among countries in the vaccine supply chain.

Members would set a framework to subsidize the full supply chain and work with COVAX, the nonprofit that distributes vaccines to mostly poor countries. Countries that restricted exports would be penalized through limits on their vaccine inputs. Transparency would keep the system honest.

“Trade ministers should do their part to ensure that everyone everywhere has access to Covid-19 vaccines,” Bown and Bollyky warned. “The threat that new and more devastating virus variants could emerge—against which existing Covid-19 vaccines would be ineffective—means that no one is safe until the pandemic is under control.”

__________________________________________________________

The fourth annual Bloomberg New Economy Forum will convene the world’s most influential leaders in Singapore on Nov. 16-19 to mobilize behind the effort to build a sustainable and inclusive global economy. Learn more here.

Download the Bloomberg app: It’s available for iOS and Android.

Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. Learn more.

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    The global economy's 2020 hangover is far from over – CNN

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    New York (CNN Business)It’s almost 2022, but 2020 isn’t done with us yet.

    Despite good news about Covid-19 vaccinations, a solid economic rebound and seemingly boundless optimism on Wall Street, we’re nowhere near out of the woods.
    The global supply chain is a wreck. Europe and Asia are facing a potentially crippling energy shortage. And the US government’s partisan gridlock over the debt ceiling is far from resolved. All of that has the global economy in a vise grip that we won’t be free of anytime soon.
    “There’s just as much uncertainty now, today, as there was in March 2020 as the pandemic was unfolding,” said Mike O’Rourke, chief market strategist at Jones Trading. The only difference, he says, is that investors now are swimming in easy money that’s allowed them to shrug off the grim headlines.

    Supply chain chaos

    The Biden administration is doing what it can. On Wednesday, the White House announced a “90-day sprint” to unclog port congestion, shifting the Port of Los Angeles to a 24/7 schedule and leaning on the private sector to expand their overnight operations.
    The White House announced a "90-day sprint" to unclog port congestion. But it can only do so much.

    The White House announced a "90-day sprint" to unclog port congestion. But it can only do so much.

    But the government can do only so much. The move to a 24/7 schedule is “low-hanging fruit,” said Geoff Freeman, CEO of the Consumer Brands Association. Ports overseas have been operating that way for months.
    The problem goes much deeper than traffic jams. Truck drivers, for example, are in high demand just about everywhere. But so are trucks, which rely on computer chips, which are — you guessed it — backordered till the end of time.
    The majority of financial executives expect the supply problems to last well into 2022, if not later, according to a survey released Thursday by Duke University.

    Prices surging

    All of this is driving up prices. You don’t need a Ph.D in economics to see that, and yet central bankers and economists are still calling price hikes “transitory.” The Federal Reserve has used the term so much, and for so long, it’s pretty much lost all meaning.
    On Wednesday, the official word from the Fed was this: “The staff continued to expect that this year’s rise in inflation would prove to be transitory.” On the same day, the government published data showing the consumer price index soared 5.4% in September from a year earlier.
    The Fed’s “transitory” line looks like very wishful thinking from the people whose job it is to keep inflation around 2%.
    As if all of that weren’t hard enough on consumers: Winter is coming, and the world is facing an acute shortage of energy.
    American households can expect to spend 54% more for propane, 43% more for home heating oil, 30% more for natural gas and 6% more for electric heating, the US Energy Information Administration said Wednesday.
    The price spikes are even more dramatic in Europe, where wholesale electricity prices have increased by 200% compared to the 2019 average, according to the European Commission. Coal prices in China are at record highs and rolling blackouts to conserve energy have already begun.
    The EU is facing a sharp spike in energy prices, driven by increased global demand.

    The EU is facing a sharp spike in energy prices, driven by increased global demand.

    And just to keep things interesting, US lawmakers are flirting with financial disaster.
    President Biden on Friday signed a short-term debt ceiling suspension, averting an imminent default on US debt. But the Treasury says that deal will only get the country through December 3, setting up yet another showdown for Republicans and Democrats — just in time for the holidays!
    It’s hard to overstate how devastating a default would be. Millions of job losses would undo all the gains the labor market has made since the pandemic hit; credit markets would seize up; paychecks to federal workers, Medicare benefits, military salaries and other payments would be halted.
    “No one would be spared,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told CNN last month. “It would be such a self-imposed disaster that we wouldn’t recover from, all at a time when our role in the world is already being questioned.”

    Wall Street’s blinders

    In the face of so much risk, you might wonder why on Earth Wall Street seems so unbothered. Despite recent volatility, the S&P 500, the broadest measure of Wall Street, is up more than 18% so far this year.
    Investors hate uncertainty, but they love easy money more.
    “It’s $10 trillion of fiscal and monetary stimulus pumped into a $22 trillion economy,” said O’Rourke, the Jones Trading analyst. All of that cash has neutralized the signals investors might otherwise receive that trouble is afoot.
    “There’s much liquidity, and everyone feels good about it that they’re ignoring those headlines, those risks, for the time being,” O’Rourke said. “But it’s unlikely they’ll ignore them forever.”
    That’s because the Fed plans to start pumping the brakes on its easy-money policies, most likely next month.
    Fear of missing out is another powerful sentiment keeping stock markets humming. Investors are well aware the party can’t last forever, so they’re going wild while they can.
    We’re in a “massive equity bubble,” according to O’Rourke. And it’s difficult, if not impossible, to predict what the breaking point will be.
    -— CNN Business’ Matt Egan and Paul R. La Monica contributed reporting.

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