Tag Archives: Economy

World

British Economy, Post Brexit and Pummeled by Covid, Is Worst in G-7

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The U.K.’s economy shrank more last year than any of the G-7, in what the Bank of England says will be the country’s biggest economic slump in more than 300 years.

What went wrong? Shutdowns caused greater pain for the U.K. than other members of the Group of Seven advanced economies in part because it is especially dependent on consumer spending, which evaporated amid one of Europe’s deadliest Covid-19 outbreaks. The economy was already weak after the four years of negotiations over Britain’s exit from the European Union, during which business investment sagged and households held back on spending.

This is the starting point for Britain’s new relationship with the EU, which began Jan. 1 with a loose free-trade agreement. Earlier this month, Prime Minister Boris Johnson announced another nationwide lockdown to fight a new, more-contagious variant of the coronavirus. That puts the U.K. economy on course to shrink again in the first quarter of the year, when businesses must also get to grips with new European trading arrangements.

Growth in the U.K. was already weak going into the pandemic because of feeble business investment, poor productivity and scant growth in incomes. Once the coronavirus set in, the British economy shrank by more than its peers in the G-7 in the first nine months of the year. Figures for the final quarter, due Feb. 12, are expected to show the economy contracted again.

The U.K. took a bigger hit because around 13% of its annual gross domestic product comes from spending on recreation and culture and in restaurants and hotels, a higher share than any other G-7 country. Businesses that depend on direct contact with consumers—bars and restaurants, sports events, hotels and theaters, cinemas and museums—were hobbled when social distancing became the norm and when the spread of the virus forced them to close. The current lockdown, in place through mid-February, closes schools and nonessential shops, and people have been told to leave home only if necessary.

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World

Oxfam: The megarich have already recovered from the pandemic. It may take the poor a decade to so do.

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More than a decade is how long it could take the world’s poorest to recover, according to Oxfam International’s annual inequality report.
The report, released on Sunday ahead of the World Economic Forum’s virtual meeting of political and financial leaders, typically held in Davos, Switzerland, lays out the virus’ disparate impact around the globe. The pandemic could increase economic inequality in almost every country at once, the first time this has happened, Oxfam found.
“We stand to witness the greatest rise in inequality since records began. The deep divide between the rich and poor is proving as deadly as the virus,” said Gabriela Bucher, Oxfam’s executive director. “Rigged economies are funneling wealth to a rich elite who are riding out the pandemic in luxury, while those on the front line of the pandemic — shop assistants, health care workers, and market vendors — are struggling to pay the bills and put food on the table.”
The coronavirus, which has infected nearly 100 million people and killed more than 2.1 million globally, has thrust inequality into the spotlight. How people cope has differed by race, by gender and by income.
For instance, close to 22,000 Black and Hispanic Americans would still be alive, as of December, if these groups died of the virus at the same rate as White Americans, according to Oxfam.
And 112 million fewer women would be at risk of losing income or their jobs if men and women were equally represented in sectors hurt by the pandemic.
Meanwhile, the wealthy are generally weathering the Covid storm quite well. Though stock markets collapsed in the early months of the pandemic, they have roared back — thanks in part to the unprecedented economic assistance provided by governments.
Worldwide, the wealth of billionaires has grown by $3.9 trillion between mid-March and the end of December, Oxfam calculated.

But the number of people living in poverty globally could have increased by up to 500 million last year, according to a UN University World Institute for Development Economics Research paper that Oxfam cited.

Other reports have also found that the pandemic has greatly hurt the poor. A separate World Bank study in October that found the pandemic could push as many as 60 million people into extreme poverty.

To fight this growing inequality, governments should ensure that everyone has access to a Covid-19 vaccine and financial support if they lose their jobs, Bucher said. Also, this is the time for longer-term investments in public services and low-carbon sectors to create millions of jobs and ensure everyone has access to education, health care and social care, she said.

In the US, Oxfam urged Congress to pass an economic recovery plan that invests in green jobs and supports the child care industry, which will help women return to work, and provide more aid in the global fight against the pandemic.

“These measures must not be Band-Aid solutions for desperate times, but a ‘new normal’ in economies that work for the benefit of all people, not just the privileged few,” Bucher said.

President Joe Biden has proposed a $1.9 trillion coronavirus and economic relief package, which contains additional stimulus payments, unemployment benefits and nutrition and housing assistance. He has said he will unveil an economic recovery plan next month.

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Business

Eurozone Flash PMIs January 2020: Business activity shrinks again

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A man over 75 years receives a coronavirus (Covid-19) vaccine shot in Strasbourg, France.

Anadolu Agency | Anadolu Agency | Getty Images

LONDON — Business activity in the euro zone fell to a two-month low in January, preliminary data showed on Friday, on the back of stricter coronavirus-related lockdowns.

The region is grappling with growing Covid-19 infection rates and tighter restrictions as new strains of the virus spread, causing further economic pain.

Markit’s flash composite PMI for the euro zone, which looks at activity across both manufacturing and services, dropped to 47.5 January, versus 49.1 in December. A reading below 50 represents a contraction in activity.

Chris Williamson, chief business economist at IHS Markit, said a double-dip recession for the euro zone was looking “increasingly inevitable.”

“Tighter Covid-19 restrictions took a further toll on businesses in January,” he said in a statement.

“Output fell at an increased rate, led by worsening conditions in the service sector and a weakening of manufacturing growth to the lowest seen so far in the sector’s seven-month recovery.”

European Central Bank President Christine Lagarde acknowledged on Thursday that the pandemic still posed “serious risks” to the euro zone economy.

In addition to the new Covid variants, there are also concerns over a slow vaccination roll-out across the European Union.

“In this environment ample monetary stimulus remains essential,” Lagarde said. The ECB decided at a meeting on Thursday to keep interest rates and its wider stimulus programs unchanged for now, having boosted its support in December.

The ECB expects the euro zone’s GDP (gross domestic product) to expand by 3.9% in 2021, and 2.1% in 2022. This is after a contraction of 7.3% last year. However, these forecasts are dependent on the evolution of the pandemic.

France hires more

Earlier, France’s business activity data also came in at a two-month low, reflecting the imposition of stricter curfews across the country. The country’s composite PMI for January was 47, making a contraction.

However, French businesses hired more employees in January — the first increase in job figures in almost a year.

“The fact that firms have returned to recruitment activity points to some confidence in an economic recovery in the second half of this year,” Eliot Kerr, economist at IHS Markit said, in a statement.

In Germany, business activity managed to grow slightly in January, with the flash composite output index coming in at 50.8. However, the reading represented a seven-month low for Europe’s economic engine.

Phil Smith, associate director at IHS Markit, highlighted a slower momentum in manufacturing activity in the country, and a continued hit to the services sector during January.

“All in all, the German economy has made a slow start to the year, and the extension of the current containment measures until at least mid-February means this looks like being the picture for several more weeks to come,” he said.

The German government decided some days ago to extend the national lockdown until Feb. 14.

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