This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a week

Today’s top stories

  • European Central Bank president Christine Lagarde warned that falling eurozone inflation could yet rebound and that it would take more than “the next couple of quarters” for the ECB to start cutting interest rates.

  • Israel’s prime minister Benjamin Netanyahu admitted that the war against Hamas in the Gaza Strip was taking longer than expected as the country faced growing pressure over the soaring Palestinian death toll and its ultimate objectives from the military operation. Israel-Hamas war: Full coverage

  • Joe Biden will press Xi Jinping on the need to revive communications between the two powers’ militaries when the US and Chinese presidents hold a summit ahead of the Asia-Pacific Economic Cooperation forum next week.

For up-to-the-minute news updates, visit our live blog


Good evening.

New data showing the UK economy stagnating and productivity at “alarming levels” underline the challenge facing chancellor Jeremy Hunt as he seeks to restore growth in his upcoming Autumn Statement.

Gross domestic product was unchanged in the three months to September, down from an expansion of 0.2 per cent in the previous three months, slightly better than economists had expected and in line with Bank of England forecasts. The monthly rise of 0.2 per cent was also better than expected and eases some concerns that high interest rates were pushing the economy into recession.

The figures leave the UK towards the bottom of the league table of major economies relative to pre-pandemic levels.

Line chart of Real GDP, rebased Q4 2019=100 showing Since the pandemic, the UK economy has underperformed the US and the eurozone

Hunt said his statement on November 22 would “focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs.” He is being pressured by some Tory colleagues to announce tax cuts but others have warned him not to fund them by cutting benefits for the poorest.

The scale of the struggle facing Hunt was underlined yesterday by official data showing UK productivity, the key driver of rising living standards over the longer term, has basically been flat since the financial crisis.

Trade looks unlikely to come to the rescue, with serious economists united on the damage done by Brexit, even if, as Peter Foster details in his latest Britain after Brexit newsletter (for Premium subscribers only), government ministers attempt to deny its impact. Many SMEs have simply given up trading with the EU because it is too complicated, he writes.

The Bank of England is fairly gloomy about the outlook. Governor Andrew Bailey warned last week there was a long way to go before policymakers could relax about inflation and on Wednesday reiterated that it was too early to start talking about interest rate cuts. Last week it kept rates on hold at 5.25 per cent, the highest level since the financial crisis.

Higher borrowing costs have had a huge impact on activity in sectors such as construction, which survey data this week showed contracted in October after the 11th consecutive monthly fall in housebuilding.

Cost of living pressures are also still hurting consumers. Motorists, for example, have not benefited from falling wholesale fuel costs because of weak forecourt competition. And many of those who can afford to put money away are likely to face a tax charge for the first time this year as higher interest on savings accounts pushes their earnings beyond the tax-free threshold. On the positive side, sector data this week showed grocery inflation slowing to single digits for the first time in 16 months.

The big picture from today’s data however was “still one of a stagnating economy” according to Thomas Pugh of consulting group RSM UK. “We doubt growth will materially pick up until towards the end of next year, meaning that the spectre of recession will hang over the UK economy for a long time yet.”

Need to know: UK and Europe economy

The Bank of England asked 53 major financial institutions to model the impact of a sharp rise in sovereign and corporate bond yields around the world in a stress-testing exercise.

A “massive” new government package of tax subsidies for German industry worth up to €28bn by 2028 to help manufacturers cope with high energy costs is likely to draw criticism from Brussels.

Ukraine warned that political squabbling between EU capitals on €50bn of support for Kyiv was putting the country’s “macro-financial stability” at risk, adding to concerns about future funding from the US.

The European parliament yesterday voted against big cuts in petrol engine emissions in a new setback for Brussels’ green agenda. It did however agree to regulate for the first time the amount of microplastics shed from tyres and brakes.

The needs of Russia’s army and its weapons factories are leaving civilian sectors with painful labour shortages as well as destabilising the broader economy. Russia has added at least Rbs3.4tn ($37bn) to its budget for this year, further aggravating inflationary risks.

Need to know: Global economy

US Federal Reserve chief Jay Powell echoed his ECB counterpart by warning against being “misled” by good data on prices, saying the goal of returning inflation to its 2 per cent target had a “long way to go”.

Falling pork prices dragged China back into deflation as the consumer price index dipped at an annual rate of 0.2 per cent in October. CPI in China was unchanged in September.

Kim Jong Un is back. A new Big Read details how the North Korean dictator has built up alliances with Russia and China and continued to develop nuclear weapons. “He survived [Donald] Trump, he survived the sanctions and he survived the pandemic,” said one academic. “Who in his position would not feel triumphant?”

Need to know: business

ICBC, China’s largest bank, is trying to minimise losses after a ransomware attack disrupted the US Treasury market by forcing ICBC’s clients to reroute trades. Allen & Overy, the UK-based law firm, has also fallen victim to a ransomware hack. Columnist Gillian Tett says criminals are increasingly targeting US corporations but the White House wants them to stop paying.

Apple was dealt a blow in its €14.3bn tax dispute with Brussels after an adviser to the EU’s top court said an earlier ruling over its business in Ireland should be shelved. The iPhone maker is also in trouble over its alleged favouring of immigrant workers over US citizens and green card holders.

Switzerland’s Richemont, owner of the Cartier jewellery brand, became the latest luxury group to signal a slowdown in the market as it reported first-half profits of €1.51bn, short of a forecast €2.17bn.

The story of how Carlsberg lost Baltika, its Russian business, is a return to the 1990s in more ways than one: the Kremlin’s moves to reward loyalists with seized western assets could constitute the biggest shift of wealth since the birth of the oligarchy in the early days of Russian capitalism.

Science round-up

The Copernicus European Earth observation agency said the earth was on track for its hottest year ever after a record-breaking October. The world is now edging closer to the 2015 Paris agreement goal of limiting the rise in average temperatures to ideally 1.5C, or well below 2C, since the industrial era.

US beef prices hit a record high as droughts in the south and west turn green pastures into dust fields and fuel higher feed costs. Scientists say the US is facing its worst dry spell in 1,200 years.

An unprecedented drought in the Amazon rainforest region, caused by a combination of the El Niño weather event and an unusual patch of warm water in the Atlantic Ocean, has extreme implications for the planet’s climate. As extreme heat and water shortages kill trees and spark fires, the forest releases carbon dioxide, fuelling the process of global warming that was a key factor behind the drought in the first place.

Chart showing sea surface temperature anomalies (C), three-month running mean in the central-eastern equatorial Pacific

France, Germany and Italy agreed to pump an extra €340mn a year into the troubled Ariane 6 heavy-lift rocket programme in an attempt to ensure Europe’s future in space.

Wegovy, Novo Nordisk’s obesity drug, has for the first time a direct competitor: Eli Lilly’s injectable tirzepatide. It is already sold under the name Mounjaro in the UK as a diabetes treatment but in the US it will be sold for weight loss as Zepbound. AstraZeneca is also entering the market with an oral obesity drug.

A UK minister has demanded the dissolution of an advisory committee on equality, diversity and inclusion at the leading research funding agency because of some members’ views on the war in Gaza. Commentator Anjana Ahuja says cool heads must now prevail to stop science becoming a new front in a damaging culture war.

Some good news

Despite policy roadblocks and the seemingly inexorable rise in temperatures (see above), economics commentator Chris Giles offers some reasons to be cheerful. Progress towards decarbonisation is still moving rapidly, he argues, helped by a continued sharp reduction in the costs of mitigating global warming.

Recommended newsletters

Working it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up here

The Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up here

Thanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at disruptedtimes@ft.com. Thank you

Source link