Back to the 80s: UK inflation hits double digits

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Inflation in the UK has hit double digits for the first time in more than 40 years, raising the likelihood of interest rates rising further and faster, and is approaching labor market data showing real wages falling rapidly.

The July CPI jump to 10.1 percent, the highest in the G7, had risen from 9.4 percent in June and was fueled by a 12.7 percent rise in food prices, the largest rise in more than 20 years. year. Excluding volatile food and energy, the core interest rate was also higher than expected at 6.2 percent.

Short-dated UK government bonds sold sharply on the news as traders raised their expectations for Bank of England rate hikes to more than two percentage points by May next year.

economics editor Chris Giles argues that the BoE must recognize the flaws in its approach to contain inflation and that the replacement of Boris Johnson as prime minister must reconsider his mandate. (You can read what the two Tory candidates think about the economy and other key issues in our explanation).

As Giles points out, BoE policymakers are keen to highlight what they see as the benefits of an independent central bank that controls inflation. One even deployed data going back about 800 years (!) to make his point.

Today’s news follows yesterday’s report that real levels of UK wages declined the fastest in the second quarter in at least 20 years, highlighting the difficulties households are facing even before energy bills rise sharply in October.

Different ONS analysis showed that poorer households faced higher inflation because they spend a larger proportion of their budget on energy and food, the two fastest-rising components.

Economists said the blow to households would lead to lower economic growth. Jamie O’Halloran of Pro Bono Economics, an organization that advises the charitable sector, said the rapid rise in prices has “caused a debilitating crisis in the cost of living as the threat of a recession draws closer”.

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Need to know: the economy

A further increase of natural gas prices in Europe and the US, some of the world’s largest economies are in danger of plunge into recession. The most recent European price is equivalent to $400 a barrel of oil in energy terms, as Russia cuts supplies and traders rush to secure supplies for the winter.

The US Federal Reserve is releasing the minutes of its policy meeting July 26-27 at 2 p.m. ET / 7 p.m. London time today. Check FT.com for details.

Latest for UK and Europe

Experts call for a makeover for the 25-year-old Northern Ireland peace agreement. The region has been without a fully functioning executive for six months due to a row over trade arrangements after Brexit. Michelle O’Neill, the leader of Sinn Féin, the party that won the most votes in the May election, told the FT she would not allow the agreement to fall apart.

fears of a German recession have deepened, according to the closely watched ZEW survey, which reached its lowest level since 2011.

A 46 percent increase in the value of Turkish export Russia has sparked fears that the countries are working together to circumvent international sanctions. The first grain carrying ship Leaving Ukraine since the Russian invasion appears to be docked in Syria, a strong ally of Moscow.

Brussels is trying to increase the production of native raw materials needed for green energy by lowering regulatory barriers to mining and production of materials such as lithium, cobalt and graphite, which are used in wind farms, solar panels and electric vehicles. Denmark Vestas, the world’s largest maker of wind turbines, and Ørsted, the world’s largest developer of offshore wind farms, said governments should simplify their planning processes.

Worldwide last

Kenyan presidential candidate Raila Odinga contests William Ruto’s narrow victory in the election to succeed Uhuru Kenyatta. The uncertainty has led to fears of a return of deadly violence after the 2007 and 2017 elections.

Former Salomon Brothers economist Henry Kaufman – the Wall Street original Dr Doom – says the US Federal Reserve must “step up” its fight against inflation. “If you want to change someone’s action, you can’t hit them on the hand, you have to hit them in the face,” he argues.

Market editor Katie Martin discusses impact on investors as central banks move from quantitative easing to quantitative tightening in their fight to contain inflation in the new Behind the Money podcast.

Are we heading for a global recession? Our economics editor Chris Giles and US economics editor Colby Smith are in conversation in a Instagram live on August 18 at 4pm BST/11am ET.

Need to know: business

Multinational companies prepare contingency plans in case tensions arise Taiwan explode into armed conflict. “This little island that was always a little simmering. . . all of a sudden it is seen in many headquarters as if it is going to be the next Ukraine,” said the head of the EU Chamber of Commerce in China.

The Norwegian Oil FundThe world’s largest sovereign wealth fund and owner of the equivalent of 1.5 percent of every publicly traded company in the world, has suffered a major loss, slumped by a sell-off in all sectors except energy.

Toyota and Apple supplier Foxconn are among companies facing electricity problems due to water shortages in southwestern China due to drought and heat waves. The Lex column says the problems could push China back toward coal and an increase in carbon emissions.

Tencent, China’s most valuable company, reported a decline in quarterly earnings for the first time ever. The tech business is also being impacted by changing consumer behavior: “The international games market is experiencing a post-pandemic digestion period as players resume offline activity,” it said.

walmartthe world’s largest retailer and DIY chain DIY store both reported better-than-expected results, easing fears of an impending recession in the US. Walmart shrugged off its recent profit warnings, while Home Depot reported its highest-ever quarterly revenue and profit. Rival Targethowever, reported a larger-than-predicted decline in earnings after offering discounts to shift inventory.

The U.S semiconductor industry faces a sudden downturn after the boom during the pandemic, forcing some of the largest chipmakers to drastically cut capital expenditures just as Washington passes a new law to subsidize an increase in domestic capacity.

British hospitality According to a sector survey, companies have lost nearly 200,000 foreign workers since the end of 2019 due to Brexit and the pandemic. A London restaurateur said his wage bill had risen nearly 20 percent in the past year in efforts to recruit staff. “The growth in hospitality over the past 30 years has been fueled almost entirely by a non-UK workforce,” he said.

The world of work

Apple chief Tim cooks has told its staff to return to the office three days a week from September to maintain the “personal collaboration that is so essential to our culture.”

August is the traditional time to make yourself scarce in the office. So why are so many still working this month, Pilita Clark wonders. Is the phenomenon caused by the emergence of hybrid work when bosses are at work while they are also on the coast with their families?

Economists are starting to use real-world data to study every day sexual harassment in the workplace, Sarah O’Connor writes, with results showing that male offenders tend to have less impact on their careers than women.

O’Connor also senses an end to the “anti-worktrend that emerged during the pandemic as inflation, falling real wages and chaotic financial markets push many back into the workforce.

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