City disappointed by falling manufacturing output and weak consumer demand, fuelling fears of return to recession The City was braced for the UK economy to grow by little more than 1% this year after the latest figures for national output showed that Britain’s deepest and longest postwar recession is being followed by the slowest recovery since the Great Depression of the 1930s. Analysts predicted the Treasury would be forced to cut its growth estimate after gross domestic production data showed that activity increased by just 0.2% in the second quarter of 2011 – after flatlining in the previous six months. Data from the Office for National Statistics (ONS) showed the level of activity still almost 4% below the peak in early 2008, with no sign of the rebalancing of growth towards manufacturing and exports predicted by the government. Germany and the United States have already recouped the ground lost during the recession of 2008-09, but at the current rate of progress it will be 2013 at the earliest before the UK economy is back to where it was at its peak in the first quarter of 2008. City analysts described the easing back of growth from the 0.5% recorded in the first quarter as disappointing, even though the ONS said one-off factors such as the royal wedding and the production shutdowns caused by the Japanese tsunami had probably knocked 0.5% off growth between April and June. With Britain’s main export market, Europe, affected by the sovereign debt crisis, the ONS estimated that output from Britain’s factories fell in the second quarter of 2011 and remains almost 8% below its level of five years ago. Overall industrial production – which includes output from the North Sea, mines and the electricity and gas industries as well as manufacturing – has suffered an even bigger fall during the recession and its aftermath, and is still more than 11% down on its 2006 level. The economy’s fastest growing sector since the slump has been business services and finance, which includes the City. The ONS figures showed the output of accountants, banks, lawyers and management consultants up by almost 5% since 2006, and by just over 3% since the banks began to recover from the financial crisis in the autumn of 2008. Neil Prothero, analyst at the Economist Intelligence Unit, said: “The UK economy is continuing to splutter along in first gear. Despite historically low interest rates and a still-huge fiscal deficit of around 10% of GDP, the economy has barely grown at all since September last year. “The official release tried to put a positive spin on things, estimating that the additional April bank holiday, the royal wedding and the after-effects of the Japanese tsunami had cut 0.5% from the quarterly GDP figure. While some downward impact is likely to have occurred, this seems an optimistic assessment, and there is no guarantee of a rebound effect in Q3. “Forward-looking surveys continue to point to an economy handicapped by insipid demand at home and weakening demand abroad. We expect GDP growth of 1.1% in 2011, well below official forecasts, which implies a high probability of the government missing its deficit-reduction target.” Britain started to emerge from recession in the final few months of 2009 and in the second quarter of 2010, when the coalition government was formed, activity expanded by 1.1%, its fastest rate of growth for nine years. But the pace of growth slowed to 0.6% in the third quarter of 2010 before GDP contracted by 0.5% in the final three months, in part due to the blizzards that shut down large parts of the economy last December. Richard Driver, analyst for Caxton FX, said 0.2% quarterly growth was “very poor indeed. With growth in the previous two quarters dead flat, the longer-term picture of the UK economy is pretty bleak. Manufacturing, industrial production and retail sales growth has slowed particularly badly in recent months, but in truth the situation is pretty dire across the board. “Sentiment towards the UK economy is rightfully very negative,” Driver said. “The financial markets value fiscal conservatism and deficit reduction, but fears that the UK economy will dip back into recession are mounting with every poor growth figure.” Businesses called on the Bank of England to restart its quantitative easing programme, which pumped £200bn into the economy in 2009 and 2010. David Kern, chief economist at the British Chambers of Commerce, said: “To sustain demand, we think the Bank of England should persevere with low interest rates and consider an increase in the QE programme. We believe increasing the productive potential of the economy is more important to our economic success than simply boosting consumption. This means implementing growth-enhancing policies and removing regulatory burdens that hamper businesses in their efforts to create jobs and export.” Andrew Smith, chief economist at KPMG, said: “Output has been broadly flat for the last nine months and – despite the depressing special factors – there is little reason to think things have improved much since. The big picture is that domestic demand is being weighed down by government cutbacks and falling real wages, and exports and investment are still not strong enough to take up the slack.” Economic growth (GDP) Economics Economic policy George Osborne Manufacturing data Manufacturing sector Consumer spending Conservative and Liberal Democrat cabinet Conservatives Liberal Democrats Liberal-Conservative coalition Larry Elliott guardian.co.uk
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Norway gunman told lawyer he expected to be killed before he reached Utøya island The man behind Norway’s terror attacks has told his lawyer he was surprised he was not stopped straight after he bombed Oslo city centre, and that he expected to be killed before he reached the island where he shot dead 68 people. Anders Behring Breivik was a “very cold” man who had taken drugs to keep himself awake during the shootings, the lawyer, Geir Lippestad, told a press conference yesterday. Breivik, who has confessed to killing 76 people in the atrocities in Oslo and on Utøya island, told Lippestad he was at war with the world, and that killing was justified in a war. “He was a little surprised he succeeded – in his mind succeeded,” Lippestad said. “He was expecting to be stopped earlier by the police or someone else during the actual day. He was surprised that he reached the island. “He thought he would be killed after the bombing, after the action in the island, and he also thought he would be killed at the trial. He believes someone will kill him.” Breivik also claimed that he was part of an anti-Islam network that has two cells in Norway and “several” more abroad. Asked to explain Brievik’s mindset, Lippestad said: “He says he is sorry he had to do this but it is necessary. He looks upon himself as a warrior. And he started this war, and takes some kind of pride in that. “He believes this is the start of a war that will go on for 60 years,” Lippestad said. “He believes the other cells will continue the war.” Lippestad said that after several meetings with his client, he believed Breivik was mentally ill. “This whole case indicated that he is insane,” Lippestad said of the 32-year-old, who denies he is a criminal. The lawyer, a member of Norway’s Labour party whose youth wing was targeted by Breivik, said he did not know why the killer had chosen him to represent him. He added that if his client were to refuse to take psychological tests he would quit from his defence. Two psychiatric experts will now evaluate Breivik’s mental state. According to Lippestad, Breivik remains unaware of the revulsion his attacks have sparked and does not know the number of people he killed last Friday. Detained in isolation, a request by the suspect for a copy of the WikiLeaks files was reportedly rejected by the authorities last night. It also emerged the Utøya Island massacre was, partly, drug-fuelled. Lippestad said the gunman had taken unspecified drugs in order “to be strong, to be efficient, to keep him awake” during the shootings. Focus continues to intensify on links between UK far-right groups and Breivik with London, the city where the suspect claimed to have launched his so-called organisation to “save Europe from Muslim takeover”. Johan Fredrikson, the chief of Oslo police, said that despite an international investigation, including involvement by British police, they still had no evidence that there was an accomplice or network behind the attacks. Breivik’s claims that he was surprised not to have been stopped earlier will add to pressure on police, who have been criticised for taking more than an hour to reach Utøya island. It emerged on Tuesday that the nearest police helicopter available was not able to intervene during the massacre because its pilots were on holiday. Teenagers trapped on the island during the shootings last Friday claimed that they were told to stay off the line because authorities were dealing with the earlier Oslo bombing, according to relatives and local reports. Ambulances heading to the island to help the wounded were said to have been held up as police attempted to secure the area. But Fredrikson said on Tuesday evening it had taken police 47 minutes once they were notified to get counter-terrorism officers to the island and another two minutes on the island until Breivik surrendered. “I can’t see how this could have gone any faster. We would do it the same way if we had the same situation again,” he said. Broader questions have since emerged concerning the failure of Norwegian intelligence over the attacks. Breivik was allegedly placed on a watch list after buying fertiliser in Poland that may have been used to build the Oslo bomb. It is thought that no further action was taken. On Tuesday officials confirmed they have opened an investigation into a Polish chemist after he admitted supplying chemicals to Breivik. The internal security agency in Warsaw said that a Polish man faces up to eight years in prison for selling to Breivik via the internet “substances that could be potentially dangerous to the life and health of many people”. The device that exploded on Friday had a devastating ferocity. Since the blast, the justice minister, Knut Storberget, has revealed that employees from his department still remain missing in the ruins of the capital’s government building. Anders Behring Breivik Norway Europe The far right Mark Townsend Helen Pidd guardian.co.uk
Continue reading …Christian Vanneque has big plans for his latest wine purchase—which happens to be the priciest ever. The former sommelier has just dropped $117,000 on a bottle of Chateau d’Yquem from 1811—the so-called “comet year,” which legend has it produced superior wine thanks to the appearance of a…
Continue reading …Are Happy Meals soon to become Healthy Meals? Well, at least healthi er : McDonald’s, under pressure from nutrition advocates, will add a serving of fruit or vegetables to all of the children’s meals, the LA Times reports. But the French fries will still be included, albeit in a smaller serving…
Continue reading …When it comes to the economy, the public is getting increasingly fed up with pretty much everyone in Washington. Roughly equal numbers blame President Obama and the Republicans for the state of the economy, according to a new Washington Post poll. And though Obama scores slightly higher than Republicans when…
Continue reading …Thanks to the recession, the wealth gap between whites and minorities is at its widest level in 25 years. Census data show that the median wealth of white US households was $113,149 in 2009: That’s 20 times that of black households ($5,677) and 18 times that of Hispanic…
Continue reading …President Obama and John Boehner gave dueling speeches last night, and the news was not good. Here’s what the pundits are taking away from it all: If people—or markets—were looking for reassurance, “they were out of luck,” observes Politico . Instead, Obama and Boehner “treated viewers to the unsettling…
Continue reading …You were likely shocked to read that Anders Behring Breivik, who admitted to killing 76 people in two Norway terror attacks, faces a maximum of 21 years in prison —but Norwegian police are considering a new charge that could increase that amount. The current terror-related charges Breivik faces come with…
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IMF chief warns of serious consequences for world economy as Obama and Republicans fail to agree on approach America’s debt crisis has moved closer to disaster as the battle between Barack Obama and the Republicans intensified and talks appeared to have reached a stalemate. With no compromise in sight over a deal to increase the US’s borrowing limit ahead of an 2 August deadline, the IMF chief, Christine Lagarde, warned the political impasse in Washington would have serious consequences for the world economy. “The clock is ticking and clearly the issue needs to be resolved immediately,” Lagarde told the Council on Foreign Relations thinktank. Her warning came after the row over the national debt reached a new level on Monday night, when Obama and the Republican House speaker, John Boehner, addressed the nation about the looming debt crisis. With a week left until the deadline that could see the US default on its debt for the first time in its history, Obama expressed dismay over the standoff: “It is a dangerous game we’ve never played before, and we can’t afford to play it now. Not when the jobs and livelihoods of so many families are at stake. We can’t allow the American people to become collateral damage to Washington’s political warfare.” A week ago the two men were in private negotiations on what Obama called “a balanced approach” and he said the only reason it isn’t “on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a different approach, a cuts-only approach, an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all”. He rejected a Republican proposal for a stop-gap deal, saying it would only mean them returning again next year to use the same tactics to seek more cutbacks. Boehner went live on television within minutes of the president to deliver his own statement: “The sad truth is that the president wanted a blank cheque six months ago, and he wants a blank cheque today. That is just not going to happen.” He said he had attempted to work with the president but Obama “would not take ‘yes’ for an answer”. Financial markets have reacted nervously to the debt crisis but economists said they still appeared to be betting that the fight was largely political posturing and likely to be resolved. If the two sides cannot reach a solution by next week, the government will run out of cash and have to stop paying many of its bills. Gus Faucher, director of macroeconomics at Moody’s Analytics, said the consequences would be dire. “This could push us back into recession,” he said. “It would be a stupid, self-inflicted wound.” Ken Goldstein, economist at the Conference Board, said stock markets seemed to think a stop-gap solution was inevitable: “Asking them to do more than bungle through is asking them to do more than they are capable of.” He said a more long-lasting solution would have to wait until after the election in 2012. Some political pundits believe Tuesday’s deadline may pass without a resolution. Joshua Trevino, author of the conservative Redstate blog, said many Republicans were convinced it was better in the long-term to block any rise in the US debt and Democrats were convinced Republicans were damaging their political chances with their refusal to compromise. “At the moment each side does not see sufficient downside in default,” he said. Both the Democrats and Republicans say it is unthinkable for the US to default but time is running out fast to reach a compromise and get the necessary legislation passed by the House and Senate. Boehner and the Democratic leader in the Senate, Harry Reid, on Monday released rival proposals aimed at resolving the crisis. The two roughly agreed on the total amount of proposed cuts to debt over the next ten years, with Reid proposing $2.7trn (£1.64trn) and Boehner $3trn. Crucially too for the Republicans, Reid has dropped Democratic demands for tax rises for the wealthiest. One of the biggest differences is over timing, with Reid wanting the debt ceiling raised to a point where it will not be an issue until after next year’s White House election in November. Boehner wants only a short-term deal and a return to the issue next summer. Obama, who earlier in the day threw his support behind the Reid plan, warned of the serious damage that will be caused to the US economy if the country defaults. “We would not have enough money to pay all of our bills – bills that include monthly social security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses,” he said. “For the first time in history, our country’s triple-A credit rating would be downgraded, leaving investors around the world to wonder whether theUnited States is still a good bet. Interest rates would skyrocket on credit cards, mortgages and car loans, which amounts to a huge tax hike on the American people.” “The American people may have voted for divided government, but they didn’t vote for a dysfunctional government,” he said. US economy Global economy Global recession US Congress US politics United States Democrats Republicans Barack Obama John Boehner Ewen MacAskill Dominic Rushe guardian.co.uk
Continue reading …Operation Fast and Furious, the bungled ATF gun-trafficking probe , was even more bungled than originally thought: Federal agents lost track of more than 1,000 firearms purchased by suspected gun smugglers during the Arizona investigation. The information comes from a new congressional report ahead of a House hearing today examining…
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