Investment

UK Risks ‘Decade in the Doldrums’ Without Investment, Think Tank Warns – BNN Bloomberg

Published

1 year ago

November 8, 2023

(Bloomberg) — Britain faces “a decade in the doldrums” with poor growth and worsening regional inequalities unless the government steps up the level of public investment, the National Institute of Social and Economic Research said.

The economic think tank on Wednesday warned against cutting taxes before the election, arguing that it’s far more important for the country’s long-term prospects to lift productivity by investing more.

The findings accompanied projections indicating sputtering economic growth will slow next year. Members of Prime Minister Rishi Sunak’s Conservative Party want tax cuts to lure back support ahead of an election widely expected next year but economists warn that Britain must fix longer-term problems.

“The lack of public investment is a large part of the UK’s slow growth story,” said Stephen Millard, deputy director for macroeconomic modeling. “That’s what they should be doing. We don’t want to see a pre-election tax giveaway.”

NIESR added that England’s regions would fall further behind without direct investment. “Regional inequality that has been entrenched since the 1970s is likely to persist with little trickle down from richer to poorer parts of the country,” said Jagjit Chadha, NIESR’s director.

A separate report from the Recruitment & Employment Confederation and KPMG showed demand for staff declining at the slowest pace in four months. It also showed lingering upward pressure on pay, a concern for the Bank of England, which is trying to head off a wage-price spiral.

In a sign that the UK’s tight labor market is easing, the increase in salaries was only in line with the long run average and the pace of growth the slowest in 31 months.

“The jobs market is facing a cyclical challenge,” said Claire Warnes, a partner at KPMG UK. “There are people out there who want to work, and there’s a decent availability of candidates, but they often do not have the right skills for the roles on offer. This means higher starting salaries are still being offered.”

NIESR’s latest quarterly forecasts come just weeks ahead of the autumn fiscal statement from Chancellor of the Exchequer Jeremy Hunt. The research group expects growth of just 0.6% and that to slide to 0.5% in 2025.

Slow growth, it said, is partly due to higher interest rates, which the Bank of England has raised from 0.1% to 5.25% since December 2021. NIESR expects inflation to drop to 5.1% in October, from 6.7%, then to 3.9% at the end of 2024 and hit the 2% target in 2025. Official inflation data for October is due next week.

“Monetary policy has done its job – we don’t expect any more increases in rates,” Millard said. NIESR predicts rates to drop to 3.5% by 2027, a much sharper drop than what financial markets have priced in.

NIESR said the government’s main challenge is to fix the UK’s investment shortfall by raising public investment from 2% to 3% of gross domestic product a year. It estimates that Hunt may have as much as £90 billion ($111 billion) of headroom at the autumn statement to invest.

The figure is far higher than the £13 billion estimated by the Resolution Foundation think tank and the record low £6.5 billion the chancellor had in March. NIESR said the difference reflected its higher estimate of nominal GDP, which is affected by inflation projections.

It expects house prices to fall 6.5% peak to trough by the middle of 2025, though that drop would be less severe than previously forecast. That will push another 50,000 households into negative equity, taking the total to 166,000 – about 1.5% of all mortgage borrowers.

Household incomes for workers on between £16,000 and £32,000 a year will not recover to pre-pandemic levels until 2026 but the increase in the national living wage to over £11 an hour will reduce destitution and improve the incentives for those on the lowest incomes to return to the labor force, NIESR said.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

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

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

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

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