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☆ U.K. Economy Stagnates as High Interest Rates Take Toll
▼ + stars: | 2023-11-10 | by ( Eshe Nelson | More About Eshe Nelson | ) www.nytimes.com time to read: +4 min

The services sector contracted last quarter as the highest interest rates since 2008 have weighed on the housing industry. Britain’s weak economy mirrors the stagnation in Europe, where eurozone economies contracted 0.1 percent in the third quarter. Across the region, high interest rates intended to drive down inflation are weakening economic activity, with demand for loans dropping and consumer spending slowing. This contrasts with the United States, where the economy is growing strongly and defying expectations for a slowdown prompted by high interest rates. This weak outlook is driven by high interest rates, which are expected to have an increasingly heavy toll on the economy.

Persons: ”, Stephen Millard, Jeremy Hunt, Hunt Organizations: Bank of England, National Institute of Economic, Social Research Locations: Europe, United States, Germany

☆ The UK economy is bigger than we thought. It still has ‘a growth problem’
▼ + stars: | 2023-09-04 | by ( Hanna Ziady | ) edition.cnn.com time to read: +5 min

London CNN —The UK economy recovered from the Covid-19 pandemic much faster than previously thought, according to major revisions of official statistics that have erased Britain’s laggard status overnight. The ONS had said as recently as last month that UK GDP had still not reached its pre-pandemic size by the second quarter of this year. “UK growth has still been very sluggish, even if it’s not at the bottom,” said Prof. Huw Dixon, who leads research in economic measurement at the National Institute of Economic and Social Research. So while the size of the economy is bigger than we thought, Britain still has a growth problem.”Richer dataIn 2020, the UK economy suffered its biggest slump in more than three centuries, recovering sharply the following year off a low base. Annual GDP growth for 2021 was also revised up by 1.1 percentage points to 8.7%.

Persons: ” Ruth Gregory, “, ”, Huw Dixon, ” Dixon, ” John Springford, Richer, That’s, Frost, Darren Morgan, Henry Nicholls, Jeremy Hunt, Gregory, Nomura Organizations: London CNN, Office, National Statistics, ONS, Capital Economics, National Institute of Economic, Social Research, CNN, Centre, European Reform, Getty Images, Bank of England Locations: Germany, United States, Canada, Japan, Italy, France, Britain, Petticoat Lane, AFP, United Kingdom

☆ U.K. Economy Grows Weakly
▼ + stars: | 2023-08-11 | by ( Kevin Granville | ) www.nytimes.com time to read: +4 min

The data beat the Bank of England’s forecast last week for 0.1 percent growth, and some economists had predicted a quarter of no growth. For over a year, beginning with the second quarter of 2022, Britain’s economy expanded each quarter by 0.1 percent — except for the July-September period last year, when it contracted by the same amount. Comparisons: Growth in Europe and United StatesIn Europe, the 20 countries that use the euro currency haven’t faired much better in terms of economic growth. The eurozone expanded 0.3 percent in the second quarter, after stalling earlier in the year and shrinking 0.1 percent late last year. “Low economic growth and stagnant productivity is increasing the financial vulnerability of households in the bottom half of the income distribution and the incidence of destitution at the poorest end,” the report said.

Persons: King Charles, Andrew Bailey, “ Organizations: Office, National Statistics, Bank of England’s, Bank of England, Bank, National Institute of Economic, Social Research Locations: Britain, Europe, United States, London

☆ Is it time to worry about stagflation?
▼ + stars: | 2023-08-10 | by ( Elisabeth Buchwald | ) edition.cnn.com time to read: +8 min

CNN —For the past two years, economists have been worrying about the risks of high inflation rates. But far less attention has been given to inflation’s sibling: stagflation. Stagflation is the combination of high inflation and a slowing economy. The current state of stagflation: Last year, then-World Bank President David Malpass warned that stagflation risks were high because of supply chain disruptions stemming from lockdowns in China and bans on Russian oil. What’s happening now: The risk of stagflation varies significantly across different regions of the globe.

Persons: Stagflation, David Malpass, Janet Yellen, ”, Lan Ha, stagflation, Andrew Kenningham, “, That’s, ” Kenningham, ” Ha, Ha, Parija Kavilanz, don’t, Dallin Hatch, Biden, Joe Biden, Trump, Matt Egan, It’s Organizations: CNN Business, Bell, CNN, Federal, World Bank, Euromonitor, Capital Economics, Bank of England’s, National Institute of Economic, Social Research, Trump Locations: Israel, lockdowns, China, Europe, Germany, Ukraine, Saudi Arabia

☆ Britain faces a mortgage crisis with renters and homeowners in the crossfire. Here's how to protect your money
▼ + stars: | 2023-08-02 | by ( Sophie Kiderlin | In | ) www.cnbc.com time to read: +5 min

"Demand is being stoked by a strong jobs market, record immigration and rising mortgage rates," Donnell said. Mortgage crisisBritain's mortgage crisis has been brewing for months. Nicholas Mendes, a technical mortgage manager at mortgage broker and advisor John Charcol, told CNBC Make It that there are pros and cons to both. Prospective buyers may feel "trapped" in the rental market, which could deter them from trying to buy, they told CNBC Make It. Higher mortgage rates are prompting some of those who still have mortgages to pay off to pass on those additional costs to renters, he said.

Persons: Oliver Knight, Knight Frank, Oscar Wong, Ed Monk, Richard Donnell, Zoopla, Donnell, Monk, Nicholas Mendes, John Charcol, Mendes, Urvish Patel, Barry Naisbitt Organizations: Fidelity International, CNBC, Mortgage, Bank of, Bank of England, National Institute of Economic, Social Research Locations: Britain

☆ CNBC Daily Open: Tech confronts reality
▼ + stars: | 2023-06-27 | by ( Yeo Boon Ping | ) www.cnbc.com time to read: +2 min

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Tech sell-offMajor U.S. indexes fell Monday, dragged down by a sell-off in technology stocks. Leaders speakIn his first televised address since the Wagner Group marched on Moscow, Russian President Vladimir Putin said organizers of the armed mutiny will be "brought to justice" and that his military would have crushed the rebellion. Wilson, who predicted the fall in markets last year, thinks the S&P 500 will drop to 3,900 in the fourth quarter.

Persons: Vladimir Putin, Joe Biden, Wilson, Morgan Stanley's Organizations: CNBC, Tech, Stock, Wagner, England's, National Institute of Economic, Social Research, Apple Watch Locations: Moscow, Russian, U.S, That's

☆ Mortgage catastrophe brews in Britain as millions are pushed toward insolvency
▼ + stars: | 2023-06-26 | by ( Sam Meredith | ) www.cnbc.com time to read: +1 min

U.K. Prime Minister Rishi Sunak conceded shortly after the BOE's rate hike that the government's mission to halve inflation to 5% by the end of the year had recently become more difficult. There is intensifying pressure on Britain's government to do more to help struggling households, with the country's shadow finance minister warning of a "mortgage catastrophe" as millions are pushed to the brink of insolvency. The Bank of England last week hiked interest rates by 50 basis points to 5%, a bigger increase than many had expected. The BOE's 13th consecutive rate rise takes the base rate to the highest level since 2008. "The rise in interest rates to 5% will push millions of households with mortgages towards the brink of insolvency," said Max Mosley, an economist at NIESR.

Persons: Rishi Sunak, NIESR, Max Mosley Organizations: Bank of England, National Institute of Economic, Social Research Locations: Wales, England

With some 1.6 million of those due to re-fix mostly 2-5 year fixed rate deals over the next 18 months - half of those by the end of this year - this super-hike will burn. Two-year fixed mortgage rates have doubled to 6% in just 10 months and were less than 1% two years ago. Fixed-rate deals were only introduced at all in 1989 and the vast majority were floating rates until just eight years ago. As Leaviss points out, five-year inflation expectations in the bond market are still stubbornly one percentage point above the 2% goal. In the end, the BoE has few good choices - but the days of fine tuning the economy with nudges and tweaks may be over.

Persons: BoE, that's, Moyeen, Jim Leaviss, Vivek Paul, Paul, Leaviss, Mike Dolan, Naomi Rovnick, Conor Humphries Organizations: Bank of England, National Institute of Economic, Social Research, Reuters Graphics Reuters, Reuters, Barclays, Bank, Investment, BlackRock Investment Institute, OECD, Twitter, Thomson Locations: United States, Germany

☆ Britain is facing a mortgage crisis. There are no easy answers
▼ + stars: | 2023-06-23 | by ( Anna Cooban | ) edition.cnn.com time to read: +6 min

Mortgage painThe announcement comes a day after the Bank of England raised interest rates by half a percentage point to help bring down stubborn inflation. More than 2 million UK mortgage holders paying a fixed interest rate are facing an increase of hundreds of pounds in monthly repayments when they are forced to refinance this year and next. Many borrowers bought their homes when mortgage rates were closer to 1% or 2%. That sets the country apart from other major economies, including the United States, where on both measures inflation has started to ease. After the latest rise in interest rates Thursday, Hunt said the government would “stick to [its] guns” on keeping rates high to tame high prices.

Persons: Rishi Sunak, Jeremy Hunt, Sarah Coles, Hargreaves Lansdown, ”, Matt Hammerstein, David Duffy, Debbie Crosby, James Manning, ” Max Mosley, Jake Berry, Sunak, Liz Truss, Brexit, Mark Carney, Charlie Bean, Hunt, ” — Hanna Ziady Organizations: London CNN, UK Treasury, HSBC, Lloyds Banking Group, Barclays, BCS, CNN, Bank of England, National Institute of Economic, Social Research, Virgin Money, Conservative Party, Institute for Fiscal Studies, European Union, Bank of, Daily Telegraph, BBC Radio Locations: United Kingdom, United States, Britain

To be sure, the April inflation data hit the UK debt market like a thunderbolt. While the headline consumer price inflation rate dropped to 8.7% from 10.1% in March, as energy prices ebbed, that was still far higher than forecast and core inflation rates hit their highest in 31 years at just under 7%. And a chief concern for many households is ongoing annual food price inflation still near 20%. Sterling and real yield spreadsNew UK gilt shock? Using 5-year real yields from the index-linked bond market, that premium jumped almost 40bp this week to its highest since last October.

☆ Sweden's economic gloom goes from bad to worse as government predicts steeper GDP contraction
▼ + stars: | 2023-04-17 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +5 min

JONATHAN NACKSTRAND / Contributor / Getty ImagesThe Swedish government is now predicting a deeper than expected GDP contraction in 2023, according to data released Monday, worsening an already gloomy outlook for the country's economy. Sweden's Ministry of Finance estimated in December that GDP would shrink by 0.7%, but it now predicts a 1% downturn as it reassesses the "challenging economic environment." "We face major challenges, but we will get through them together," Sweden's Minister for Finance, Elisabeth Svantesson, said in a press release Monday. The latest CPI data shows inflation is finally starting to slow, but wages are limping behind and house prices are facing a serious downturn. Eroding real wagesMost European countries are experiencing sky-high inflation, leaving real wages lagging behind.

☆ 'We're not out of the woods': Sweden’s sliding house prices could be only halfway to the bottom
▼ + stars: | 2023-04-06 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +4 min

Sweden's house prices are expected to continue to plummet. Danske previously projected a 20% drop, peak to trough, in Swedish house prices. The data shows house prices rose by 1% compared with February. When adjusted for seasonality, the increase translates into a small decline of 0.3%, with house prices typically growing slightly at the start of each year. SEB is maintaining its forecast of a 20% drop in Swedish house prices, but with downside risk.

☆ UK growth demands better-directed fiscal fireworks
▼ + stars: | 2023-03-13 | by ( Francesco Guerrera | ) www.reuters.com time to read: +7 min

As a former health minister, Hunt is familiar with the Hippocratic Oath’s principle of “first, do no harm.” That credo didn’t resonate with former finance minister Kwasi Kwarteng. The Institute for Fiscal Studies estimates that borrowing in the current financial year is running 31 billion pounds below the November forecast by the Office for Budget Responsibility (OBR), the UK’s independent fiscal watchdog. A further 6 billion pounds will freeze fuel duties, avoiding a 23% rise from April. In November, the OBR forecast that Downing Street would meet that goal with just 9.2 billion pounds to spare. That would still cost 11 billion pounds a year but would boost investment by 5% in the long run.

☆ Britain's early retired resist calls to work, despite higher living costs
▼ + stars: | 2023-03-09 | by ( David Milliken | ) www.reuters.com time to read: +8 min

The exodus of older workers has no equivalent in other advanced economies. "The best part of 90% of people who say they are early retired ... say that they will probably or definitely never work again." Based on data from before the pandemic, Britain's Resolution Foundation found the richest fifth of 50-59 year olds were 10 times likelier to retire early than the bottom fifth. Other companies say they value older workers for their experience. "Older workers are the ones that have got the skills - we don't find young people with the skills that we need.

☆ Sweden is facing its ‘day of reckoning’ as house prices plummet
▼ + stars: | 2023-01-11 | by ( Hannah Ward-Glenton | ) www.cnbc.com time to read: +7 min

But now property prices are tumbling. Sweden's property prices are facing a serious drop as the country's former central bank governor warns of lofty household debt levels. Central bank rate hikesIn 2022, Sweden's central bank undertook an aggressive interest rate hiking cycle that ricocheted through the property market. So basically once the interest rate is stabilised, we don't expect prices to continue declining," Brodin said. Sweden isn't the only European country experiencing a plunging property market post-pandemic, with some economists forecasting a similar downturn of between 20% and 25% in Germany.

By contrast, the median forecast for a similar poll on the U.S. Federal Reserve is exactly where futures currently price the Fed's terminal rate next year - 5.0%. Any reversion of terminal rate pricing to consensus or below could see the pound wobble again. "That said, we have been stressing downside risks to our terminal rate projection, given the constant dovish messaging from the MPC. BoE poll question on Terminal Rate Risks? Central Bank Rate Hike CampaignSterling volatilityThe opinions expressed here are those of the author, a columnist for Reuters.

LONDON, Nov 16 (Reuters) - If financial markets bore the brunt of this year's interest rate shock, housing now stands in the firing line. With long-term U.S. fixed mortgage rates above 7% for the first time in 20 years, and more than double January rates, U.S. housing sales and starts are already feeling the heat. "We see a relatively greater risk of a meaningful rise in mortgage delinquency rates in the UK," Goldman said this month. While Australia and New Zealand have higher variable mortgage rates, British mortgage holders also have a higher vulnerability to rising joblessness. All of which bodes ill for UK house prices - although forecasts are still far from apocalyptic.

☆ In Burnley, Britain's cost of living crisis hits home
▼ + stars: | 2022-11-15 | by ( Natalie Thomas | ) www.reuters.com time to read: +6 min

[1/6] Keelie Topping shops in the parish of the Church of St Matthew the Apostle in Burnley, England, Britain November 10, 2022. While millions in Britain face a difficult winter, the Centre for Cities think tank says the nearly 95,000 residents of Burnley are most exposed to the shockwaves ripping through the economy. Consumers in Burnley saw prices rise 11.7% in the year to September, the think tank estimates, compared with 10.1% nationally, and 9.1% in London. Britain's exit from the European Union has so far failed to yield economic dividends for places like Burnley. Adrian Pabst, at the National Institute of Economic and Social Research think tank, said the cost of supporting the poorest households did not have to be big.

☆ UK think-tank urges Hunt to think again on budget squeeze
▼ + stars: | 2022-11-11 | by ( William Schomberg | ) www.reuters.com time to read: +2 min

LONDON, Nov 11 (Reuters) - British finance minister Jeremy Hunt should rethink his plans to raise taxes and cut spending in next week's budget, a think-tank said, warning that many households would need further government help even without a fresh squeeze on the public finances. "It's not at all clear that the Chancellor needs to raise taxes or cut spending in the Autumn Statement next week. NIESR's deputy director for public policy, Adrian Pabst, said the cost of supporting the poorest households did not have to be big. "It seems extraordinary to suggest that this country cannot afford 0.2% of GDP to help the most vulnerable," Pabst said. ($1 = 0.8516 pounds)Writing by William Schomberg; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

☆ Analysis: Bank of England's recession warning turns spotlight to UK budget plan
▼ + stars: | 2022-11-04 | by ( William Schomberg | ) www.reuters.com time to read: +4 min

That would be a longer and shallower economic contraction than the ones that followed the COVID-19 lockdowns and the global financial crisis of 2007-09. But the backdrop of high inflation this time is limiting the policy options available to the government. Hunt has warned of tough decisions on taxes and spending as he prepares to announce the new government's first budget programme on Nov. 17. "This is not a recession we should be offsetting with lower interest rates and expansionary fiscal policy," Chadha said. Additional reporting by David Milliken;Writing by William Schomberg; Editing by Jon BoyleOur Standards: The Thomson Reuters Trust Principles.

The net effect was to catapult next year's implied Fed terminal rate well above 5%. Fed vs BoE Terminal RatesNIESR chart on UK variable mortgagesBANK "IN A HOLE"Although the BoE insisted further hikes from 3% would likely be needed, two of the nine person policymaking council voted for a smaller rate rise this week. State Street's EMEA macro strategist Tim Graf also thinks a terminal rate closer to 4% is now "the more likely end state for policy rates." The BoE needs to be super careful about the pound because another withering lurch will simply aggravate import and energy price inflation. by Mike Dolan, Twitter: @reutersMikeD; Editing by Josie KaoOur Standards: The Thomson Reuters Trust Principles.

And futures now assume the inflation fight will fall solely on the BoE and expect it to triple policy rates to as high as 5.8-6% next year. On Tuesday, the independent Institute for Fiscal Studies said Kwarteng needed 62 billion pounds ($68.22 billion) of spending cuts to keep public debt sustainable over time, with borrowing this year on course for 194 billion pounds and still above 100 billion by 2026/27 - over 70 billion higher than OBR forecasts in March. QE involves the purchase of mostly gilts from commercial banks in return for interest-bearing reserves at the central bank. And, unlike other major central banks, the BoE policy rate itself is the rate paid on those bank reserves. NIESR last year urged a solution to the problem whereby Treasury and central bank reduced the maturity mismatch by swapping longer-dated gilts back to Treasury to cut duration of its portfolios.

☆ Swedish economy set to grind to a halt as inflation bites
▼ + stars: | 2022-09-28 | by ( ) www.reuters.com time to read: +2 min

The economy started the year strongly but the effects of the war in Ukraine and the surging prices for energy it has brought with it are increasingly being felt. Register now for FREE unlimited access to Reuters.com RegisterThe NIER saw headline inflation averaging 7.7% this year and 4.6% in 2023, both higher than expected in August. The central bank targets 2% inflation. read moreMore is set to come as the central bank frontloads its response to inflation at 30-year highs and tries to prevent prices from continuing to spiral upward. The gloomy outlook has already hit the housing market, where prices are expected to fall as much 20% from a peak in spring to the trough next summer.

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