As part of a distinctly underwhelming set at Glastonbury U2 played “Until the end of the world” about half way through. Given their penchant for “innovative tax planning” i.e. not paying any in their home country, perhaps they are well placed to comment on the torrent of bad financial news issued before they went on stage.
The National Institute of Economic and Social Research, a very highly regarded think-tank said on Thursday, that the UK economy grew by just 0.1 per cent in the period from April to June.
British Gas has announced a rise in gas and electricity prices of 18% and 16% just eight months after it raised its prices by 7%. The increase will affect 9 million customers and become effective from 18 August. It will add £192 to the average annual dual fuel bill, which will increase from £1,096 to £1,288 as a result.
The pause in inflation rate looks likely to be only temporary as the annual rise in prices, as measured by the consumer prices index (CPI), should hit 5pc within months, a higher peak than previously anticipated by the Bank, which has recently had to revise its forecast upwards to reflect rises in energy prices.
Whilst the economy was booming and house prices rising, seemingly to many, in unstoppable fashion, equity withdrawal saw many consumers use their homes as cash machines, with a significant amount of this money then being used to boost consumer spending. Instead, since the beginning of 2008 home owners have invested a total of £63.7 billion into paying off debt, all of which has therefore not been spent on consumer spending. Between July 1998 and March 2008 home owners borrowed £328 billion against the rising value of their homes and this was a huge boost to overall economic activity over the period.
The U.S. economy barely added jobs for the second month in a row in June and the unemployment rate rose to the highest level this year, adding to concerns that the US labour market will take years to recover. With little scope left for policy to help, President Barack Obama is likely to confront the highest unemployment rate of any postwar incumbent when he seeks reelection in the fall of 2012.
Standard & Poor’s has warned that it will slash the US credit rating to D, the lowest level, in the event that the debt ceiling is not raised and the country misses a debt payment.
As the Chinese government struggles to rein in soaring food costs its politically sensitive inflation rate accelerated in June to the highest level in three years, Food prices in June were up 14.4 percent year-on-year whilst the price of pork, China’s preferred choice of meat was up 57.1 percent during the period.
Moody’s said that China’s local government debt may be 3.5 trillion Yuan (337 billion pounds) larger than auditors estimate potentially greeting significant losses for local banks
Oil prices have rebounded about 10 per cent after plunging to four-month lows following the International Energy Agency’s shock announcement on June 23
Moody’s cut Portugal’s credit standing to junk in the first such move by a ratings agency and warned the country may need a second round of rescue funds before it can return to capital markets .
The European Central Bank in a unanimous decision pressed ahead with its second interest rate increase this year, in spite of the escalating eurozone debt crisis .
The eurozone debt crisis intensified amid the first serious signs that contagion is spreading to Italy, the currency zones third biggest economy, as Italian bond yields leapt to nine-year highs . Italy’s GDP per capita is lower today than it was in 1999, which is remarkable considering that this dismal economic performance took place during the boom. (what has Silvio really been up to ???). Moody’s last month put Italy on negative ratings watch, citing rising interest rates and doubts over its ability to boost growth and lower its public debt. The reality now is that the bond vigilantes have locked onto Italy.
We may well have to wait for “The Cure” (who headline the Isle of Wight festival in September…….) watch this space for more early eighties music inspired economics.
P.S. If the world economy should turn round shortly after The Cure play the Isle of Wight, close your eyes and imagine Robert Smith as the replacement for Dominique Strauss-Kahn at the IMF.
Now isn’t the world a better place…..