Latest news with #economicweakness
Telegraph
3 days ago
- Business
- Telegraph
Inflation risks are taking Britain towards the debt-crisis cliff edge
The UK's consumer price index was 3.6pc higher in June than the same month last year – significantly above the Bank of England's 2pc inflation target. The broader retail price index rose even more, by 4.4pc. Unemployment is also up, hitting 4.7pc during the three months to May, a four-year high. And last week's double dose of downbeat data came against a backdrop of broader economic weakness, with GDP having shrunk in both April and May. It's now screamingly obvious that Labour's crude Keynesianism – 'pump priming' the economy by upping state borrowing and spending – isn't working. Worse than that, this Government's actions are pushing Britain towards a budgetary crisis every bit as serious as that in 1976, when the UK was forced to go 'cap in hand' to the International Monetary Fund for a bail-out. Chancellor Rachel Reeves's higher tax rates have been hammering economic activity, causing tax revenues to fall. Yet Labour's leadership, driven by ideological fervour and fearing the party's increasingly strident far left, keeps pushing spending up regardless. The sharp rise in the rate of employer National Insurance contributions (NIC) has caused hiring to plunge since it was announced in last October's Budget, undermining NIC revenues overall. Labour's higher capital gains tax (CGT) rates mean investors aren't selling assets, causing CGT revenues to plunge. A far more punitive non-domicile tax regime and much higher inheritance tax on businesses has sparked an exodus of wealthy individuals, with countless UK entrepreneurs moving abroad. The top 1pc of earners generate 30pc of all income tax receipts, with the top 5pc paying almost half. But when you push the seriously rich overseas with a student-politics tax regime, they often stop investing and close their UK-based businesses. So the revenue loss goes way beyond income tax, spreading across the gamut of employment and corporate taxes too. As a former asset manager, I talk to many senior people at the global pension funds, insurance companies and other institutional investors that lend governments serious money. They ask me about UK politics and public policy and I ask them what they are doing and why. So when I say financiers are not only deeply unimpressed but seriously alarmed at this Government's actions, that's directly from the horse's mouth. Anyone remotely financially literate can see investors are demanding ever higher returns to bankroll this increasingly spendthrift Government. The interest rates our Government pays to borrow are now at their highest level since the late 1990s, but on a far greater volume of debt. The UK's benchmark 30-year gilt yield last week breached 5.5pc – and has been way above 5pc for the whole of this year. Borrowing costs, then, are consistently much higher than the 4.85pc peak they momentarily touched during Liz Truss's 'mini-budget' crisis in October 2022. Yet the broadcast media's reaction, hysterical back then, is now ridiculously complacent. Draw your own conclusions as to why. Last August, just after Labour took office, the 30-year yield was below 4.5pc. Since then, increasingly sceptical investors have pushed it a full percentage point higher. During this same period, the Bank of England has cut its benchmark borrowing cost from 5.25pc to 4.25pc, a percentage point in the opposite direction. 'Market rates' and 'policy rates' moving against each other are a clear sign of brewing systemic danger. The warning signals are flashing red, yet almost no one in a political and media class addicted to government spending wants to acknowledge what's going on. In April 2024, the Office for Budget Responsibility (OBR) forecast the Government would borrow £87bn over the subsequent 12 months. When that financial year ended in April 2025, the figure was £148bn, an astonishing 70pc more. Endless discussions about whether 'fiscal headroom' in 2029/30 is £5bn or £10bn is utter displacement activity. We can't even get within £60bn of our borrowing estimate within the current financial year. The reality in front of us is that Britain borrowed £148bn last year and £110bn or three quarters of that increase in our national debt went on interest payments on debt previously incurred. Our public finances resemble a Ponzi scheme. Reeves and Keir Starmer cite crowd-pleasing nonsense about 'school breakfast clubs' and 'world-class public services'. As if it's fine to drive the UK into bankruptcy, provoking a full-on bail-out and all the resulting financial and economic chaos because the money is being spent under virtue-signalling headings. 'Borrowing costs are going up around the world', bleat fresh-faced government spin doctors. Yes, but UK gilt yields and total debt service payments are now easily the highest in the G7. Plus, much of the private money invested in UK gilts is 'levered' – or also borrowed. And when the backers of the Government's backers get worried, as they now are, they will eventually 'margin call' creditors, igniting a sudden and self-reinforcing sell-off that sends yields and economy-wide borrowing costs into orbit. On top of all that, Britain is a stark outlier when it comes to the share of 'index-linked' state debt – with regular interest payments rising in line with RPI inflation. Around 30pc of UK gilts are 'linkers', compared to just 12pc in Italy (the G7's next highest) and 5pc in Germany and the US – reflecting long-standing market concerns about vast UK government off-balance-sheet liabilities, not least the trillion-pound-plus bill for still insanely generous pensions for state employees. Britain's sky-high share of index-linked state debt, a long-standing ruse to keep headline yields as low as possible, is coming home to roost. As inflation rises, debt service costs ratchet upward, resulting in ever more borrowing to pay those costs as our tax-strapped economy struggles. That's why, when last week's higher-than-expected inflation number emerged, yields rose sharply. The UK is close to the debt-crisis cliff-edge – and ministers can't say they weren't warned.
Yahoo
01-07-2025
- Business
- Yahoo
German unemployment rate steady at 6.2% in June
The German unemployment rate was steady at 6.2% in June, official figures showed on Tuesday. The Federal Employment Agency, based in the southern city of Nuremberg, said the number of unemployed people fell by 5,000 to 2.914 million. The unemployment rate remained unchanged compared to May. The figure was 188,000 more than in June 2024, when the rate was 6%. "The labour market continues to show signs of economic weakness," said the agency's head, Andrea Nahles. "Unemployment continues to develop unfavourably." "Companies' willingness to hire remains low," she added. Germany's sluggish economy has shown signs of recovery in recent months after two consecutive years of recession, but the developments have not yet been reflected in the job market. The agency registered 632,000 vacancies in June, around 69,000 fewer than one year ago. Job portal Indeed said the number of vacancies on its website fell to a four-year low, with a 2.2% drop from May. Some 968,000 people received unemployment benefits in June, the agency said, up 101,000 from last year. Labour experts expect the number of jobless people to exceed the symbolic 3 million mark in the summer. Unemployment usually falls significantly in June due to seasonal factors, before a rise during the summer break.
Reuters
01-07-2025
- Business
- Reuters
German unemployment rises less than expected in June
BERLIN, July 1 (Reuters) - The number of people out of work in Germany rose less than expected in June, labour office figures showed on Tuesday, as the labour market remains in the grip of an anaemic economy. The office said the number of unemployed increased by 11,000 in seasonally adjusted terms to 2.97 million. Analysts polled by Reuters had expected a rise of 15,000. The number of unemployed people in Germany is approaching the 3 million mark for the first time in a decade. Germany is set to gradually raise its hourly minimum wage to 14.60 euros ($17.10) by 2027, which can make it less attractive for companies to take on staff. Germany's job market has been squeezed by two years of economic contraction, even against a backdrop of long-term labour shortages, adding to pressure on conservative Chancellor Friedrich Merz, who has vowed to turn around the economy. The seasonally adjusted employment rate remained unchanged in June on the previous month at 6.3%. "The labour market continues to show signs of economic weakness. Unemployment continues to develop unfavourably. And companies remain reluctant to hire," said labour office head Andrea Nahles. There were 632,000 job openings in June, 69,000 fewer than a year ago, showing a slowdown in labour demand, the labour office said. ($1 = 0.8538 euros)
Bloomberg
27-06-2025
- Business
- Bloomberg
China's Industrial Profits Plummet as Trump's Tariffs Hit
By Updated on Save China's industrial firms saw their profits drop the most since October, illustrating weakness in an economy strained by higher US tariffs and lingering deflationary pressure. Industrial profits fell 9.1% last month from a year earlier, according to data released Friday by the National Bureau of Statistics. The May reading reversed a modest gain earlier this year and took decline in the first five months to 1.1%.
Yahoo
26-06-2025
- Business
- Yahoo
Jobless claims hit 2021 high & Q1 GDP revised lower
Jobless claims rose, and first quarter GDP was revised lower to a 0.5% decline, signaling possible economic weakness. Yahoo Finance Markets Reporter Josh Schafer joins Morning Brief to break down fresh economic data, market reaction, and the possibility of President Trump naming a new Fed chair early. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. Joining me now, we've got markets reporter Josh Shafer, senior reporter Ali Kanal live from the Nasdaq and senior healthcare reporter Angeli Camlani. Josh, let's start with you. You're taking a closer look at the economic data out this morning. What do we know there? What have we seen? Yeah, Brad, so you mentioned that first quarter GDP number again, that would be economic growth that ended back in March, right? So pretty backward looking at this point. That was revised lower from 0.2% decline to a 0.5% decline for that first quarter GDP. But I was also keeping a close eye on continuing claims this morning. So this is continuing people that file week after week for unemployment benefits. That ticked up to its highest level since November of 2021. So an interesting data point to keep watching there as more Americans continue to sort of struggle to find new jobs once they are out of a job. And so, just a second more on this, especially considering we're hearing more about the Fed and how they're evaluating a lot of the economic data that's come out with some of the questioning that we've heard from Fed chair Powell, really looking at the quality of the data, but also how that's interpreted and who interprets it might be changing, at least at the chair position. What are we hearing about what President Trump is thinking through of who the next Fed chair might be? Yeah, Brad. So it sounds like from that report from the Wall Street Journal that President Trump would be interested in perhaps eliminating, or sorry, nominating a new Fed chair earlier than chair Powell, than chair Powell's nomination or time at as the Fed chair being over. So that would be sort of an interesting move for markets, but I think your your move in futures right now is sort of telling you that maybe the market could look past that, right? We're showing the dollar, that has moved lower. But overall, stocks at this point not really impacted by that. And I would go back to the discussion from really two months ago now when there was discussion of perhaps Trump removing Powell. Strategists sort of argue that the key in that whole discussion is just investors want security in what is happening with the central bank, and knowing the central bank would be there to cut interest rates if something was going on in the economy, raise interest rates if they need to. They just want to know there's a stability factor there. And at least for this morning, these reports don't seem to really be testing that overall thesis for investors. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
