Today’s top stories
Salesforce became the latest tech company to reduce costs as demand slows, announcing plans to cut 10 per cent of its workers.
UK prime minister Rishi Sunak in his first major policy speech since taking office outlined five promises on which he wants the public to judge him come the general election. One of those big issues is the state of the health service: here’s our explainer on why the NHS is in its worst ever crisis.
The EU is set to impose pre-departure Covid tests on travellers from China in light of the new wave of infections in the country, news of which is spreading, despite Beijing’s propaganda efforts. The WHO called for more transparency.
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Good evening.
“We expect one-third of the world economy to be in recession” was the IMF’s cheerful New Year message as it signalled another potential cut in its projections for 2023, most likely during its annual get-together at Davos later this month.
But although the US, Europe and China will all be subject to some kind of slowdown over the next 12 months, fresh data this week have highlighted some key differences.
In mainland Europe at least, optimism is growing that inflation has peaked. A better than expected fall in the German CPI to 9.6 per cent from 11.3 per cent lifted European stocks and government bonds to one of the best starts to the year ever. German companies have reported an improvement in supply chain disruption and the number of jobs is at a post-reunification high.
Inflation in Spain and France also fell more than expected, suggesting the eurozone-wide figure due on Friday could drop lower than the forecast 9.7 per cent. Outside the EU, Turkey also reported a substantial drop in inflation, albeit from elevated levels of 85 per cent, down to 64 per cent, thanks to lower food and fuel costs.
However, crumbs of comfort are hard to find across the Channel.
Industry data today showed UK food inflation hitting 13.3 per cent, putting further pressure on struggling households. Other data this week have shown manufacturing output shrinking at one of the quickest rates since 2009; shop closures hitting their highest totals in five years; and mortgage approvals falling to their lowest levels in more than two years, highlighting the turmoil in the housing market sparked by the disastrous September “mini” Budget of then-prime minister Liz Truss.
Unsurprisingly, the FT’s annual survey of economists concludes that the UK faces the worst and longest recession in the G7.
China’s economy, which was until recently under severe pressure from crippling pandemic restrictions, is now struggling with a new wave of infection after the country’s sudden reopening, denting factory activity in the process. For the first time in 40 years, China is likely to be a major drag on the global economy in 2023 rather than a driving force, according to the IMF.
The US, which the IMF thinks is likely to escape the worst of the downturn, thanks in part to its strong labour market, publishes monthly figures on Friday, but new data on job openings today were better than forecast.
The country’s manufacturing sector, however, is still struggling, shrinking in December for the second month in a row, according to the closely watched ISM survey, also out today. As for the fight against inflation, minutes from the Federal Reserve’s last policy meeting later (2pm ET/7pm London) will give more clues on policymakers’ next steps.
Need to know: UK and Europe economy
In better news for beleaguered Britons, recent warm weather across Europe means household energy bills are likely to be lower than previously expected, falling below the government’s price guarantee in the second half of the year.
The EU, meanwhile, is planning to overhaul the bloc’s electricity market to prioritise cheaper renewable power. At present, the most expensive fuel — currently gas — sets the price for all power generated. Our Big Read explores whether consumer moves to reduce consumption will have a lasting effect.
Need to know: Global economy
Dhananjayan Sriskandarajah, head of Oxfam Great Britain, argues in the FT for an urgent overhaul of the financial architecture for global aid, with less of an emphasis on charity and more about responsibility — and enlightened self-interest.
Pakistan is turning to China to fund an overhaul of its creaking railway system, despite already owing $100bn in external debt and being at risk of defaulting after a plunge in its foreign exchange reserves.
2023 could well be remembered as the year a new world energy order takes shape as the oil market slowly “de-dollarises”, says columnist Rana Foroohar.
And if you can’t enough of those predictions for 2023, check out this compendium of FT writers’ punts on everything from the war in Ukraine to the likelihood of Fed rate cuts and the future of crypto.
Need to know: business
US tech stocks had a bumpy start to the year, led by big falls for electric-car company Tesla and Apple, which was hit by concerns over waning demand. Markets globally shed more than $30tn last year thanks to inflation, interest rates rises and the impact of war in Ukraine. Premium subscribers can check out commentator Robert Armstrong’s stocks to watch in 2023.
For more positive tech news, try our Tech Champions special report, with winners and shortlists for the cleverest use of technology. And here’s how readers of our sister publication Sifted see the year ahead in European tech.
Hollywood chiefs expect a “year of turmoil” as the economic downturn coincides with a slowdown in streaming growth, an ailing cinema industry and a possible writers’ strike. The boom in TV content spending is also expected to slow. Cineworld, the cinema operator in US bankruptcy protection, is seeking buyers as it tries to avoid being picked apart piecemeal.
The cost of reinsurance has surged up to 200 per cent in crucial January renewals, thanks to the war in Ukraine and extreme weather events. Reinsurers share losses with primary insurers and so have a vital role in what can be insured and at what price.
A strong and prolonged cold and flu season as people mix indoors more after two years of pandemic restrictions, is good news for one sector at least: consumer health. Sales of cold and flu medicines in the UK jumped 28 per cent by value to £288.5mn in the year to November 27.
The World of Work
Will the economic downturn put paid to post-Covid work trends? The FT team discusses what’s in store for 2023 in the new Working It podcast.
Be prepared for what could be a tough year with our new series: Make work better. Read about how to network more efficiently, ask for a pay rise, and, if all else fails, leave on better terms.
Another route to improve life at work is through mental health therapies. Companies have begun to realise that basic wellbeing programmes are failing to make a dent in burnout and stress-related absences among executives.
And in case you missed it, here’s some FT research on how the City of London has adapted to hybrid working and is increasingly adopting a Tuesday-Thursday working week.
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Some good news
There may be troubles ahead but it’s important to acknowledge progress too. Here is Reasons to be Cheerful’s list of 183 ways the world got better in 2022.
Source: Economy - ft.com
