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Bank of England's Haldane sees V-shaped recovery, but fears 1980s-level jobless surge - business live Bank of England's Haldane sees V-shaped recovery, but fears 1980s-level jobless surge - business live
(32 minutes later)
Rolling coverage of the latest economic and financial news, as BoE chief economist says Covid-19 recovery is underwayRolling coverage of the latest economic and financial news, as BoE chief economist says Covid-19 recovery is underway
Over in the US, consumer confidence has jumped - despite rising Covid-19 infections in several states.
The Conference Board’s monthly gauge of consumer morale jumped to 98.1 for June, from 85.9 in May. That’s more than expected.
Consumers reported that their current economic situation had improved - suggesting that the easing of lockdown restrictions has fed through. Economic expectations also improved, but not by as much, indicating some caution about future prospects.
That’s understandable, given some restrictions are now being reimposed in an attempt to stamp out an increase in coronavirus infections in California, Florida and Texas, for example.
More jobs gloom. UK pilots union BALPA has revealed that easyJet is proposing to cut one in three pilots.
Balpa was told today by easyjet that 727 of their pilots are at risk of redundancy, or almost a third of the roster. The budget airline is also proposing to completely close its bases at Stansted, Southend and Newcastle airports, Balpa adds.
Brian Strutton, BALPA General Secretary, says the scale of the planned cuts are a shock. The union is also unhappy that easyJet paid out £174m in dividends to shareholders back in March, even as it was seeking government help.
There’s some scepticism in the economics community about Andy Haldane’s claim that a V-shaped recovery is on the cards.There’s some scepticism in the economics community about Andy Haldane’s claim that a V-shaped recovery is on the cards.
Geriant Johnes, professor of economics at Lancaster University, points out that a surge in Covid-19 cases, either nationally or at local hot spots, could derail growth.Geriant Johnes, professor of economics at Lancaster University, points out that a surge in Covid-19 cases, either nationally or at local hot spots, could derail growth.
Former MPC member David Blanchflower also sounds unconvinced:Former MPC member David Blanchflower also sounds unconvinced:
Wall Street has made an underwhelming start to the final trading day of the quarter (and what a quarter it was!).Wall Street has made an underwhelming start to the final trading day of the quarter (and what a quarter it was!).
The Dow Jones industrial average has dipped by 69 points, or 0.27%, in early trading to 25,526, while the broader S&P 500 index is 0.2% higher.The Dow Jones industrial average has dipped by 69 points, or 0.27%, in early trading to 25,526, while the broader S&P 500 index is 0.2% higher.
That means both indices are still on track to post their best quarterly gains since 1998.That means both indices are still on track to post their best quarterly gains since 1998.
The coronavirus pandemic has already had a very severe impact on workers around the globe - with women worst affected.The coronavirus pandemic has already had a very severe impact on workers around the globe - with women worst affected.
That’s according to the UN’s labor agency, the International Labour Organisation. It had found that total hours worked has slumped by 14% this year due to lay-offs, reduced hours, and furloughing schemes.That’s according to the UN’s labor agency, the International Labour Organisation. It had found that total hours worked has slumped by 14% this year due to lay-offs, reduced hours, and furloughing schemes.
That’s the equivalent of 400m full-time jobs, worse than the ILO previously expected.That’s the equivalent of 400m full-time jobs, worse than the ILO previously expected.
And with female workers more at risk, modest progress in workplace gender equality is being undermined, as my colleague Larry Elliott explains:And with female workers more at risk, modest progress in workplace gender equality is being undermined, as my colleague Larry Elliott explains:
The Harveys furniture chain has gone into administration, the latest in a series of UK retail casualties.The Harveys furniture chain has gone into administration, the latest in a series of UK retail casualties.
Some 240 jobs have definitely been lost, and another 1,300 are at risk if administrators can’t find a buyer for the company.Some 240 jobs have definitely been lost, and another 1,300 are at risk if administrators can’t find a buyer for the company.
My colleagues Sarah Butler and Zoe Wood have the details:My colleagues Sarah Butler and Zoe Wood have the details:
The Canadian economy has suffered its biggest ever monthly contraction.The Canadian economy has suffered its biggest ever monthly contraction.
Canadian GDP shrank by 11.6% in April alone, the most on record, as the Covid-19 lockdown had an all-too predictable impact on the economy.Canadian GDP shrank by 11.6% in April alone, the most on record, as the Covid-19 lockdown had an all-too predictable impact on the economy.
That’s better than feared, and an improvement on the UK’s 20% slump during the same month. It follows a 7.5% contraction in March, as non-essential Canadian businesses shuttered.That’s better than feared, and an improvement on the UK’s 20% slump during the same month. It follows a 7.5% contraction in March, as non-essential Canadian businesses shuttered.
And while the worst may be over, the road to recover will be long and bumpy. Statistics Canada says its initial flash estimate for May points to growth of 3.0 per cent, so not the V-shaped recovery policymakers are hoping for.And while the worst may be over, the road to recover will be long and bumpy. Statistics Canada says its initial flash estimate for May points to growth of 3.0 per cent, so not the V-shaped recovery policymakers are hoping for.
Andy Haldane’s claim that the UK economy is recovering faster than expected hasn’t cheered the City much.Andy Haldane’s claim that the UK economy is recovering faster than expected hasn’t cheered the City much.
The FTSE 100 index of blue-chip shares has sunk by nearly 1%, or 55 points, back down to 6169 - wiping out much of Monday’s rally.The FTSE 100 index of blue-chip shares has sunk by nearly 1%, or 55 points, back down to 6169 - wiping out much of Monday’s rally.
Traders seem to be taking their lead from Wall Street, where the US market is being called lower.Traders seem to be taking their lead from Wall Street, where the US market is being called lower.
Concerns over rising Covid-19 cases may be overshadowing economic optimism (market sentiment has been swinging between these two points for several weeks now).Concerns over rising Covid-19 cases may be overshadowing economic optimism (market sentiment has been swinging between these two points for several weeks now).
But this shouldn’t stop the FTSE posting its best quarter in a decade, while the US S&P 500 is on track for its best quarter in over 20 years.But this shouldn’t stop the FTSE posting its best quarter in a decade, while the US S&P 500 is on track for its best quarter in over 20 years.
In a blow to film fans, the UK’s largest chain of cinemas has pushed back its scheduled reopening date by three weeks.In a blow to film fans, the UK’s largest chain of cinemas has pushed back its scheduled reopening date by three weeks.
Cineworld is delaying its reopening until the end of July, rather than the 10th, due to delays in getting hold of new titles.Cineworld is delaying its reopening until the end of July, rather than the 10th, due to delays in getting hold of new titles.
My colleague Catherine Shoard explains that cinema bosses are under pressure to ensure patrons comply with rules to prevent the spread of Covid-19:My colleague Catherine Shoard explains that cinema bosses are under pressure to ensure patrons comply with rules to prevent the spread of Covid-19:
Andy Haldane’s comments are timely - a few minutes ago, Boris Johnson announced plans to boost infrastructure spending to help “level up” the UK and limit the damage caused by the recession.Andy Haldane’s comments are timely - a few minutes ago, Boris Johnson announced plans to boost infrastructure spending to help “level up” the UK and limit the damage caused by the recession.
An upbeat-sounding Johnson pledged £5bn for infrastructure spending, plus reforms to the planning rules to speed up home-building an extensions, and to help builders convert commercial properties to homes.An upbeat-sounding Johnson pledged £5bn for infrastructure spending, plus reforms to the planning rules to speed up home-building an extensions, and to help builders convert commercial properties to homes.
The PM said:The PM said:
Johnson has suggested he’s channelling the spirit of Franklin D. Roosevelt -- however, today’s plan is more like Small Potatoes than New Deal. These days, £5bn simply isn’t a lot of money. It’s about 0.2% of the UK economy.Johnson has suggested he’s channelling the spirit of Franklin D. Roosevelt -- however, today’s plan is more like Small Potatoes than New Deal. These days, £5bn simply isn’t a lot of money. It’s about 0.2% of the UK economy.
As Alan Custis, Head of UK Equities at Lazard Asset Management, puts it:As Alan Custis, Head of UK Equities at Lazard Asset Management, puts it:
Andy Haldane has also warned that the Covid-19 pandemic could drive up Britain’s ‘natural rate of unemployment’.Andy Haldane has also warned that the Covid-19 pandemic could drive up Britain’s ‘natural rate of unemployment’.
Reuters has the details:Reuters has the details:
CNBC’s Sam Meredith has been number-crunching, and found that more than a dozen major stock markets are still down over 10% this year, despite the surge in stocks since the end of March.
Greece, Spain and Russia are deepest into correction territory, while the UK market is still down almost a fifth (despite clawing back 10% in the last quarter).
He writes:
You can read Andy Haldane’s speech yourself, here. Haldane-watchers will be disappointed that there are no references to cricket, or dogs chasing frisbees.
Here’s some early reaction, first from economist John Hawksworth:
Sam Tombs of Pantheon Economics agrees that there are plenty of risk ahead, which could force the Bank to act again.
Here’s Andy Bruce of Reuters:
And Andy Verity of the BBC:
Haldane’s webinar also shows how the Bank of England has dramatically expanded its balance sheet, to pump money into the UK economy and cushion the recession.
He reminds us that the Bank’s monetary policy committee boosted its stock of asset purchases by £200bn in March, when it also cut interest rates from 0.75% to 0.1%. It added another £100bn of bond-buying this month (which Haldane opposed).
Add in other measures, and the Bank’s balance sheet is on track to hit 45% of (2019) UK GDP by the year-end, more than double its previous high-water mark, Haldane says, adding:
Andy Haldane has also revealed that the Bank of England’s policymakers haven’t discussed the idea that it might start unwinding its asset-purchase scheme before raising interest rates.
Last week, BoE governor Andrew Bailey suggested that it made sense to sell some of the government bonds bought under the QE scheme, before hiking borrowing costs. That would be a reversal of his predecessor, Mark Carney’s view.
But it sounds like there’s nothing official yet (and I guess any decision is someway off...)
The Bank of England’s chief economist has warned that Britain must avoid a return to the mass unemployment that scarred the country during the Thatcher government.
In a webinar this morning, Andy Haldane argues that the UK economy is now recovering from the deep economic shock caused by Covid-19.
Haldane cites various ‘fast-track’ indicators, such as payment data, energy demand, traffic flow, high street footfall, and consumer spending:
He also points to the monthly Purchasing Manager Index surveys which show a pick-up in growth in China (as we saw this morning).
This, Haldane argues, suggests we actually are experiencing a V-shaped recovery, after the worst four-month slump on record from January-April:
But he also cites the risk of a surge in unemployment, if firms decide to lay staff off when the government’s furlough scheme ends.
Haldane (the only Bank policymaker not to vote to extend its stimulus programme this month) says:
He also points out that 9 million workers are currently furloughed, 2.5m self-employed people are receiving support, and eight million are working fewer hours than usual.
The trio of government-backed loan schemes led by commercial banks – covering bounce back loans, CBILS and the scheme for larger businesses known as CLBILS - hit a milestone, with over 1 million firms granted emergency funding so far.
Government data released this morning showed that banks had approved over 1 million loans worth £42.9bn as of 28 June. Over 1.3 million businesses have applied. More details here.
The recovery in the stock market is partly thanks to stimulus measures such as the UK government’s Job Retention Scheme - without which many firms would have slashed their workforces.
New figures show that this scheme is now supporting 9.3m workers, who are currently furloughed on 80% of their wages (up to £2,500 per month). That’s an increase of around 100,000 in the last week, suggesting that some firms are still struggling even as the economy reopens.
The total cost of the furlough scheme has now reached £25.5bn. It runs until the end of October, but today is the last day to add new workers to the list. The scheme is also being ‘tapered’ from August, with employees picking up more of the wage bill.
Air cargo demand remained extremely weak in May, according to the latest data from industry body IATA.
IATA reports that cargo tonne-kilometres (a measures of how much stuff was flown around the world) slumped by 20.3% last month compared to the previous year.
Global capacity contracted by 34.7% during the month, as many aeroplanes remained grounded during the pandemic.
IATA says that activity appears to be picking up from Aprils lows, as some economies eased out of their lockdowns. However, it’s still hard to predict the length, or severity, of the recession.
The last six months have been pretty grim for savers.
The emergency cut in UK interest rates, to just 0.1%, has prompted banks and building societies to slash their own rates - meaning income on savings is extremely thin.
Comparison site Moneyfacts.co.uk has calculated that variable rate savings accounts have dropped by the largest amount seen over the first six months of any year since 2009.
Rachel Springall, finance expert at Moneyfacts, says savers will feel “frustrated and disappointed”, as their incomes are hit by the Coronavirus pandemic and base rate cuts.
Just in: the eurozone has crept away from deflation, as consumers are hit by rising food prices.
Prices across the single currency region rose by 0.3% per year in June, up from just 0.1% y/y in the previous month. Food, drink and alcohol price continued to rise steeply, while energy prices remained much lower than a year ago.
Statistics body Eurostat says: