Today’s top stories
Russian president Vladimir Putin is to discuss ramping up currency controls with authorities after an extraordinary 3.5 percentage point rate rise failed to halt the rouble’s slide.
A container ship left Odesa port for Istanbul, the first vessel to depart from Ukraine’s ports since Russia threatened to attack civilian shipping in the Black Sea last month. Wheat prices rose over the heightened risk to Ukrainian exports.
The US is pushing Iran to stop selling armed drones to Russia as part of discussions on a broader understanding between Washington and Tehran to de-escalate tensions and contain a long-running nuclear crisis.
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Good evening.
Ministers welcomed today’s data showing UK inflation falling more than expected in July but an unchanged “core” figure keeps the pressure on the Bank of England to continue with its programme of interest rate rises.
Headline CPI fell from 7.9 per cent to 6.8 per cent, the lowest rate of increase since February last year, driven by lower gas and electricity costs.
However, once volatile food and energy prices are stripped out, core inflation is unchanged at 6.9 per cent, while the annual rate for services, which officials see as the best indicator of underlying domestic inflation, actually increased, from 7.2 per cent to 7.4 per cent.
Inflation concerns were also fuelled by labour market data yesterday that showed record wage growth of 8.2 per cent in the three months to June. This was further highlighted by a survey on Monday showing that employers were increasingly resorting to bidding wars to retain staff.
On the positive side, it did mean that annual growth in regular pay exceeded price increases for the first time since March 2022, marking the end of Britain’s “painful pay squeeze”.
Earnings are now finally higher than before the 2008-09 global financial crisis, but at the expense of what Nye Cominetti, economist at the Resolution Foundation think-tank, described as a “15-year stagnation [that] has cost average workers £230 a week — and left Britain a far poorer country”.
Other cost of living pressures remain. Home rental prices in July rose at their fastest rate ever, according to new data, while mortgage rates are expected to stay high for some time.
Today’s data did show a welcome stabilisation of food prices in July, rising just 0.1 per cent in the month, bringing the annual rate down from 17.3 per cent to 14.9 per cent. Separate survey data yesterday showed grocery price inflation falling sharply in the four weeks to August 6 to hit 12.7 per cent, the second-largest monthly drop since research company Kantar began monitoring in 2008.
A fascinating FT Big Read details the changes in UK consumer behaviour since the financial crisis, when recession was followed by a long period of very low interest rates and weak wage growth. The middle classes became more likely to buy from value retailers such as Primark, Aldi and Lidl while the rise of the smartphone boosted online shopping and bargain-hunting.
The era was also defined by a move from buying things to doing things (at least until the pandemic struck) or as one executive at Swedish furniture retailer Ikea put it, the world “hit peak stuff”.
See how your country compares on rising prices with our global inflation tracker
Need to know: UK and Europe economy
The head of Norway’s $1.4tn oil fund told the FT he was worried that political resistance to environmental policies was spreading from the US to the UK. “You have a big country in Europe that is slowing down the work on climate at a time where it’s more important than ever,” he said. Green energy plans are also being jeopardised by locals’ objections to new power infrastructure.
Italy’s deputy prime minister Antonio Tajani joined in the criticism of the government’s controversial bank windfall tax, arguing it should not apply to smaller lenders. Italy has also proposed price caps on flights between the mainland and the islands of Sicily and Sardinia: airlines have called for Brussels to step in.
Need to know: Global economy
China unexpectedly cut a benchmark interest rate by the biggest margin since the start of the pandemic as policymakers attempted to address the country’s faltering recovery. They have also come up with a novel solution to the problem of youth unemployment: stop reporting the figures.
China is becoming more trouble than it’s worth for US investment banks, says Asia financial correspondent Kaye Wiggins. Beijing put the brakes on offshore listings in a 2021 crackdown, then announced new rules in February that gave mainland regulators far more influence than before.
Argentina is struggling to avoid economic collapse after the shock victory of radical rightwinger Javier Milei in a primary poll ahead of the country’s presidential election. The black-market dollar, a staple of Argentine life, has jumped to almost double the new official exchange rate. Whoever becomes president faces a daunting challenge, says the FT editorial board.
Gabon closed the first debt-for-nature swap in continental Africa, highlighting how developing countries are turning to deals that funnel money to conservation and ease their debt burdens. The deal lowers the interest rate on its debt and extends payment deadlines in return for improving a nature reserve and strengthening fishing regulations.
Lord Jim O’Neill, creator of the Brics acronym, said the idea that the group of emerging nations (Brazil, Russia, India, China and South Africa) might develop a common currency was a “ridiculous” idea. The FT editorial board said India needed reform to capitalise on the country’s economic potential.
Need to know: Business
Intel’s attempt to buy Israeli chipmaker Tower Semiconductor became the latest victim of geopolitical tensions after failing to secure regulatory approval in China for the $5.4bn deal. A deal on that scale needs the go-ahead from regulators around the world, including from Beijing.
Carlsberg said it was “shocked” at the Russian seizure of its Baltika Breweries subsidiary last month. The company raised its 2023 profit forecast after strong first-half sales, bucking the wider trend in the beer industry.
Vietnamese electric vehicle start-up VinFast is worth more than Ford or GM after shares of the lossmaking company soared on its US stock market debut. Billions more of investment in US charging infrastructure is needed for electric vehicles to be more widely adopted.
Chinese pharma companies are developing copycat versions of “miracle” western weight-loss drugs. China has the world’s largest overweight and diabetic population. Here’s our deep dive on the “skinny jabs”.
UK retail bellwether Marks and Spencer lifted its annual forecast after reporting higher sales in its clothing and food businesses. The announcement follows recent upbeat statements from other UK retailers including Primark and Next.
Concerns about the Chinese economy and the fact that US interest rates might have to stay higher for longer to curb inflation have turned investors gloomier on the outlook for European stock markets.
The World of Work
Former Goldman Sachs managing director Maeve DuVally told the FT that corporate America needed to “step up” for transgender staff. DuVally’s coming out in 2019 was seen as a watershed moment for Wall Street.
The debate over the “right to disconnect” has created lots of noise but how is it being reflected in real life? Columnist Sarah O’Connor says the trend has had less impact than proponents hoped or critics feared, offering a handy lesson in the perils of performative policymaking.
When good intentions aren’t enough: the Working It podcast discusses why diversity strategies fail — and how to fix them.
Podcast host Isabel Berwick is also your go-to for Office Therapy. The latest problem: should you manage your team the way your boss expects you too or stick to what you believe is the right way? You can sign up for Isabel’s Working It newsletter here.
Some good news
Scientists have shown that machine learning can accurately predict different types of Parkinson’s disease using images from patients’ stem cells, raising hopes that personalised drugs may soon become a reality.
Source: Economy - ft.com
