Rishi Sunak in London
LONDON: Escalating inflation, higher borrowing costs and a likely recession are in store for Liz Truss’ successor as the United Kingdom’s prime minister.
UK consumer prices rose 10.1% last month, the first double-digit reading in four decades, and energy costs are set to soar further this winter.
Eurozone inflation just managed to slip below the 10% mark and the bloc’s economy is seen shrinking next year, led by a contraction in Germany.
In the UK, no matter who replaces Truss, the next British prime minister will inherit an economy damned for the immediate future by rising borrowing costs, crippling energy bills, high taxes and no strategy about how to revive growth.
The incoming premier will struggle to craft a plan to rescue the UK from the recession it may already be in or its longer term limits, no matter what’s said on the campaign trail.
Soaring food prices drove UK inflation back into double digits in September, intensifying pressure on the government and central bank to act.
The Consumer Prices Index rose 10.1% last month from 9.9% the month before. That matched a 40-year high reached in July and exceeded economists expectations for 10%.
Meanwhile in Europe, the eurozone economy is expected to shrink next year as it battles surging energy costs and the risk of shortages following Russia’s invasion of Ukraine.
Output in the currency bloc will drop by 0.1% in 2023, led by a 0.5% contraction in Germany, according to economists polled by Bloomberg who were still predicting growth of 0.3% a month ago.
The eurozone’s first ever brush with double-digit inflation was revised away by a fraction in a fuller sample of data for September that still revealed rampant price pressures bearing down on the region.
The annual rate of increase, which remains a record in the history of the single currency, is now measured at 9.9% instead of 10%, Eurostat said in a statement last week in Luxembourg.
Eurozone consumer confidence stayed close to a record low in October, highlighting the continued risk of a recession this winter as households struggle with surging inflation and an acute cost of living crisis.
As for the United States, its factory utilisation last month matched the highest level in more than two decades, raising the risk that inflationary pressures will remain elevated in the near term. Some of the worst bouts of inflation in US history, such as the late 1970s, have emerged after utilisation rates surpassed 80%.
Many Wall Street economists are holding firm to their bet that US inflation will slow substantially over the next year even as they’re being forced to keep raising their predictions for coming months.
In the emerging markets, satellite images, loading and unloading data compiled from ports and vessel location transmissions obtained by Bloomberg place ships like Amur 2501 at the heart of what industry experts say is Russian shippers’ illicit commodities trade.
The exporters are mixing grain from multiple ports and vessels, obscuring the origin of commodities like wheat and barley, and allowing large volumes to be sold abroad without detection.
As for Asia, Japan’s inflation hit 3% for the first time in over three decades excluding the impact of tax hikes, an acceleration that adds to the doubts over the need for continued central bank stimulus.
Young Kiwis are increasingly opting out of workplace pensions in an early warning sign that the global cost of living crisis could have lasting consequences.
With prices surging for everything from gas and rent to groceries and child care, Kiwis are taking more of their pay to cover expenses rather than putting it away for retirement, even though unemployment remains at a record low. — Bloomberg
