### Summary
The UK's public debt has risen by over 40% to nearly £2.6 trillion ($3.3 trillion) since the pandemic began, leaving the country owing more than its annual economic output. The heavy reliance on index-linked bonds and high inflation means that the UK will pay more to service its liabilities than any other advanced economy, raising concerns about the country's credit rating and long-term economic stability.
### Facts
- The UK's public debt has soared by more than 40% to almost £2.6 trillion ($3.3 trillion) since the pandemic began.
- The UK now owes more than its entire annual economic output for the first time since 1961.
- The country's reliance on index-linked bonds at a time of high inflation means that it will pay more to service its liabilities than any other advanced economy.
- The Office for Budget Responsibility has warned that without action, the country's debt could reach more than three times its gross domestic product in the next half century.
- Concerns have been reignited about the UK's credit rating, especially after Fitch stripped the US government of its AAA status.
- The Bank of England's rate hikes to quell inflation have led to a selloff in bonds, making the UK bond market one of the worst performers this year.
- Both the Conservative-led government and the Labour leader have few options to address the country's debt burden and stagnant economy.
- The three main credit-rating firms are scheduled to update their assessments of the UK over the next four months.
- The UK has already lost its top credit rating from Moody's and Fitch, and a further downgrade could have a severe impact on UK assets.
- The UK's debt-interest bill is the largest share in the developed world, accounting for 10.4% of revenue this year.
- Linked gilts, a type of bond, now account for a quarter of outstanding UK bonds and pose a burden on public finances.
- The UK's public finances have been under pressure due to a string of shocks over the past 15 years, including the financial crisis, the pandemic, and Russia's invasion of Ukraine.
- The Bank of England's efforts to control inflation are exacerbating the UK's public finances, as higher rates compound losses on reduced bond holdings.
- The Conservative government may be tempted to loosen the purse strings before the election, but this could impact the country's credit rating.
- Labour has acknowledged that it will have to delay a plan to invest £140 billion in green industries over five years.
- The long-term outlook for UK debt is bleak, with warnings that it could reach over 300% of GDP by the 2070s.
### Summary
The removal of Covid-19 restrictions in New Zealand has had significant effects on the economy, including high house prices, increased debt, and inflation, although unemployment has decreased.
### Facts
- 🏠 House prices, despite a decrease from their 2021 peak, are still nearly $200,000 higher than in 2019 due to low interest rates during the pandemic period.
- 👥 Unemployment has decreased, but government debt has significantly increased.
- 📈 Inflation, measured in both the consumer price index and the food price index, has soared.
- 🪂 Tourism has recovered to about 75% of pre-Covid levels, and migrants have returned in large numbers.
- 💼 The economy has held up better than expected in 2020, with a sharp contraction during lockdowns followed by a quick bounce back.
- 🔬 Covid has accelerated the use of technology, condensing five years of progress into a short time period.
- 💰 Despite positive macroeconomic data, people's household finances have been impacted, with increased spending on essentials and adjusted wage increases that do not keep up with inflation.
- 💸 Government spending has increased and is projected to remain high, despite most Covid-related spending being finished.
- 📉 Government revenue as a proportion of GDP is forecasted to be higher than expected in 2019, leading to a larger pot of money for looser expenditure.
Please note that some information in the text may be subjective or based on the opinions of economists.
### Summary
Average wages in Britain rose at a rate of 7.8% annually between April and June, outpacing inflation of 6.8% in July. However, the long-term picture shows that workers are still no better off than they were four years ago, indicating the need for sustained pay rises to improve living standards.
### Facts
- 💰 Average wages in Britain rose at a rate of 7.8% annually between April and June.
- 📉 Inflation in July was 6.8%, lower than the previous month's figure of 7.9%.
- ⚠️ The long-term data shows that workers are no better off than they were four years ago.
- 🔒 The Bank of England is concerned about wage rises leading to inflation becoming entrenched in the economy.
- 📉 The UK's productivity levels have fallen behind its peers since the financial crisis.
### Additional Information
- The Bank of England and Chancellor discourage asking for higher wages, fearing a wage-price spiral.
- The current UK real average weekly earnings figure is the same as it was in May 2019 and December 2010, and no better than in March 2006.
- Sustained pay rises are needed for workers to improve their living standards.
Britain's public debt load has risen by more than 40% to nearly £2.6 trillion ($3.3 trillion) since the pandemic began, causing concerns about the country's ability to service its liabilities and reigniting questions about its credit rating. The heavy reliance on index-linked bonds and the threat of inflation could further worsen the situation, potentially leading to a negative economic spiral that could last for years. The UK's debt burden is already higher than its entire annual economic output, and without action, it could balloon to three times the GDP over the next half century.
The UK and eurozone economies are at risk of recession due to a significant slowdown in private sector activity, with the UK experiencing its poorest performance since the Covid lockdown and Germany being hit particularly hard; the US is also showing signs of strain, with activity slowing to near-stagnation levels.
Core inflation in the UK may continue to remain high and volatile due to the implementation of Brexit, discrepancies in wage growth, the direct effects of Brexit on prices, and fiscal policy challenges, which could result in higher and more unpredictable inflation compared to the US and euro area.
The UK economy recovered to pre-pandemic levels in the fourth quarter of 2021, earlier than previously thought, with GDP growth revised up by 0.9 percentage points to an 8.5% increase in 2021, according to the Office for National Statistics.
British factories in August experienced their weakest month since the start of the COVID-19 crisis due to shrinking orders caused by rising interest rates, according to a survey, resulting in a decline in purchasing activity, inventory holdings, and staffing levels. However, the slowdown in domestic and export demand has alleviated inflation pressures, potentially leading to a decrease in goods price inflation. With the economy showing signs of a slowdown, the Bank of England is expected to raise rates for the 15th consecutive time, despite concerns that it may lead to a recession.
Surging interest rates in the UK have led to a slump in factory output, the biggest annual drop in house prices since the global financial crisis, and signals of distress in different sectors of the economy, posing a dilemma for the Bank of England as it decides whether to raise interest rates further.
Revisions to economic data by the Office for National Statistics (ONS) have revealed that the UK economy was 0.6% larger at the end of 2021 than previously estimated, improving the country's performance relative to its peers in the G7. The revisions also highlight the impact of stockpiling in 2020 and indicate stronger growth in 2021, particularly in sectors such as wholesale trade and health services. However, while the revisions provide a more positive outlook, the UK's economic narrative remains relatively mediocre compared to pre-pandemic levels.
Despite previous concerns about the UK economy, revised GDP data shows that the economy had already recovered to its pre-Covid size in 2021, indicating that Brexit's impact on the economy has been weaker than previously thought.
Wage growth in the UK has caught up with rising prices, resulting in real pay no longer falling, according to official figures, although the unemployment rate has risen and job vacancies have fallen. The data will also impact the state pension, which is set to increase by 8.5% next April.
UK gross domestic product (GDP) fell by 0.5% in July, below expectations, with services output being the main drag on the economy, indicating a potential mild recession, and causing investment banks to revise down their growth forecasts; however, some experts still believe that the economy is growing, albeit at a slower pace.
UK inflation is projected to average 7.2% in 2023, the highest rate among advanced economies, according to the Organisation for Economic Co-operation and Development (OECD), which also raised its forecast for UK inflation.
The UK economy is predicted to continue its stagnant state in 2024, with some economists and business groups even foreseeing a recession, while others, including the Bank of England, the IMF, and the OECD, anticipate modest growth despite high interest rates and a slowing global economic outlook. Different factors, such as labor hoarding and regions bucking the trend, complicate the overall picture, but overall, a stagnant or minimally growing economy seems likely.
New Zealand's economy, which slipped into a recession earlier this year, experienced modest growth of 0.9% in June, but economists warn that the weak figures are unlikely to improve significantly due to the looming global economic downturn caused by the pandemic and supply chain disruptions. The ruling Labour Party, facing declining support in the polls ahead of the October 14 election, is also grappling with rising prices and concerns about inflation.
The UK's inflation-fueled cost-of-living crisis is predicted to increase premature deaths and widen the wealth-health gap, with the most deprived households experiencing four times the number of extra deaths compared to the wealthiest households, according to a study published in BMJ Public Health.
The UK economy shows signs of recovering from the economic shocks of the pandemic and Ukraine war, but deep-rooted challenges remain, particularly in terms of underinvestment in both the private and public sectors, low productivity, and declining public services.
The US economy is performing better than expected in the midst of pressure from the BRICS alliance, with Bank of America CEO Brian Moynihan predicting a soft landing but cautioning that inflation remains a top concern.
The UK economy has outperformed France and Germany since the pandemic, with revised figures showing a 1.8% growth, boosting Chancellor Rishi Sunak, although economists caution that other countries may also revise their growth figures.
Americans have $1.2 trillion more in excess household savings than previously estimated, which could be good news for the economy as it tries to address inflation and could delay the depletion of savings until next year, according to revised government data.
The UK GDP YoY growth rate is in line with expectations, showing a positive response to July's contraction, while the three-month average also meets forecasts, indicating a choppy economic outlook domestically and internationally as global growth slows down.
Despite high interest rates and sluggish GDP growth, analysts predict that the UK will avoid a recession due to a likely end to rate increases, falling inflation, and a return to real pay growth.
Economists warn that Britain's economy will grow less than expected next year due to the impact of higher interest rates and a weaker labor market, with GDP growth expected to be 0.7% in 2024. However, EY upgraded its GDP growth forecast for 2023 to 0.6%, citing an end to interest rate increases, falling inflation, and a return to real wage growth as factors that should prevent a recession. Inflation is expected to fall faster than previously forecast, reaching 4.5% by the end of the year before hitting the Bank of England's 2% target in the second half of 2024.
Average pay growth in the UK has surpassed inflation for the first time in almost two years, indicating a potential easing of living costs, with wages rising at an annual rate of 7.8% between June and August, outpacing average inflation over the same period. However, there remains a significant disparity between public and private sector pay, and while inflation is slowing, it still remains above the Bank of England's target.
UK inflation remains high at 6.7%, above the Bank of England's target, while rising fuel prices and a weakening job market continue to put pressure on households; however, average wage growth outpaced inflation for the first time in two years, and state financial support is available to low-income households.
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