(Bloomberg) — Britain’s economic growth will fall further behind the euro area next year, and inflation will remain stubbornly high, according to new forecasts that paint a bleak backdrop for the next general election.
Economy
UK Economy Is Likely to Fall Further Behind Euro Area Next Year
Confidence has dropped sharply among the chief financial officers of some of the UK’s biggest listed companies. A net balance of 10% of CFOs surveyed by Deloitte were less optimistic about their businesses’ financial prospects than three months ago, down from a balance of 25% who were more optimistic in the first quarter.
The Confederation of British Industry waded into the debate in a report on Monday suggesting that green growth — projects to move the UK away from fossil fuels and toward clean energy — could deliver a £57 billion ($74.7 billion) boost to GDP by 2030, equivalent to between 1.6% and 2.4% of GDP.
“All parties should be on red alert for green growth and put it at the very heart of their manifestos,” said CBI Director-General Rain Newton-Smith. “Not only does it offer hope for lifting the current economic gloom, but it can deliver a path to sustained growth for years to come.”
Inflation expectations for the UK were also revised up more than for any other major European economy. Economists expect Sunak will hit his target of halving inflation by the end of the year, but they are now predicting that rate for the fourth quarter will be 4.8%, up from 4.6% previously.
Inflation will remain above the Bank of England’s 2% target for the entirety of next year, they said, only falling back to that level in 2025.
Forecasts in the survey are more optimistic than analysis by Bloomberg Economics, which along with a handful of other economists says the risk of a recession is rising with a jump in interest rates.
The combination of high inflation, sputtering growth and tensions left over from the UK’s decision to leave the European Union has held back business investment. Higher inflation is also raising the cost of borrowing, with the Bank of England expected to lift its benchmark lending rate through the summer from the current 5%. Economists expect a rates to peak at 5.75%, while investors are betting the figure is over 6%.
Fears are growing that Sunak’s plan to prop up the UK economy are too thin on detail, with US economist Tyler Cowen warning an audience in Westminster last week of a “blown opportunity” if the government did not intensify its focus on growth.
“After escaping a recession in the first half of 2023, the UK’s luck may be running out of steam,” said Sanjay Raja, senior economist at Deutsche Bank. “Higher rate expectations amidst still stubborn inflation will continue to hit households and businesses.”
Separate research published today revealed that rocketing interest rates have triggered the biggest plunge in UK household wealth since World War II. The Resolution Foundation said household wealth tumbled by £2.1 trillion ($2.8 trillion) after a slump in bond prices reduced the value of pension assets.
—With assistance from Harumi Ichikura and Andrew Atkinson.
Economy
Federal money and sales taxes help pump up New Brunswick budget surplus
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
Economy
Liberals announce expansion to mortgage eligibility, draft rights for renters, buyers
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
Economy
Statistics Canada says manufacturing sales up 1.4% in July at $71B
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
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