Good morning, and welcome to our rolling coverage of the world economy, financial markets, the UK supply chain crisis and trade.
Supply chain problems are gripping the global economy, threatening a weakening recovery, and increasing fears of a stagflationary recession – an ill mix of rising prices and slowing growth.
With energy prices rising, and companies still struggling to get their hands on parts and raw materials, policymakers fear the rebound from recovery is faltering.
Governor of the Bank of England Andrew Bailey has warned that it will take longer than expected for Britain to recover to its pre-pandemic shape, as supply chain problems drag on growth – and help push the pound to its lowest level this year.
sky News
(@sky News)The pound has come under pressure on fears of “inflation” in the economy amid a supply chain crisis and rising energy prices. https://t.co/CqzjfjGWvv
Bailey told a European Central Bank panel along with other major central bank chiefs that Britain’s GDP probably won’t reach pre-pandemic levels until early next year, a few months later than anticipated in August.
“I expect we will be back to pre-pandemic levels early next year, possibly a month or two later than we thought we would be in early August.”
Bailey said that:
“The big challenge now is how can we get through this period of uneven growth, supply-side bottlenecks and come out from the other side with a smooth recovery and a balance of both supply and demand.”
MSN UK
(@msnuk)Supply chain crisis derailing recovery, warns Andrew Bailey https://t.co/Js6D4fqItW
Other central bankers also worry that supply chain constraints will stall recovery and push up consumer prices.
They are watching closely for signs that higher-than-expected inflation leads to wage increases, creating a cycle that could increase pressure for central banks to increase borrowing costs – although theirs. Arguably, these disruptions will be temporary.
Jay Powellhandjob chair US Federal ReserveSaid it is “disappointing” that supply-chain constraints are holding back the recovery of the world’s largest economy.
He told EBC’s panel:
“The combination of strong demand for goods and constraints means that inflation is operating well above target.
We expect it to continue to do so in the coming months before the barriers are eased.”
ECB president Christine Lagarde also worried that supply constraints are “intensifying in some areas”:
“How long will it take for these obstacles to be overcome is a question we are monitoring very closely and it is on our radar screen.”
financial Times
(@financial Times)Fed’s Powell warns inflationary supply chain disruptions could persist https://t.co/QYowbpyqPR
The rise in energy prices is a particular headache – raising costs for businesses and ravaging consumers with high energy bills, and causing the collapse of three more UK energy firms tomorrow.
Wholesale prices of gas and coal are both hitting records, as the Northern Hemisphere heads into a very rough winter:
Xavier Blass
(@XavierBlas)GAS MARKETS: European natural gas closed at a new all-time high today (for both the UK NBP and Dutch TTF benchmarks) after rising more than 10%. In the end, European gas was worth ~$29 per mBtu, or close to $170 per barrel, equivalent to oil. Yes, you read that correctly.
Xavier Blass
(@XavierBlas)Asian benchmark coal (Newcastle) has been changing hands above $200 a tonne in the spot market over the past few days, well above the weekly all-time high set in July 2008. Incredible Prices, ESG-Crunch Unbelievable Prices With Fugitive Sugar Demand Against Supply | # commodity inflation pic.twitter.com/fMalfrCPKc
Michael Hewson of CMC Markets says:
Fears seem to be mounting over stagflation, after all, how can they not when you look at what is witnessing a rise in energy prices, a trend that will eat away at people’s disposable income, thus at other events. reduce their ability to spend.
These supply chain problems in the UK have been seen intensified this week, during the fuel crisis.
With petrol stations still struggling, the government yesterday began deploying its reserve tanker fleet operated by citizens to boost fuel delivery.
and troops are expected to be deployed to steer the tankers over the next few dayssTo help address the queues and shortfalls that started about a week ago.
The government says the situation is improving, Business Secretary Quasi Quarteng said.
“The last few days have been tough, we have seen huge queues. But I think the situation is stabilizing, we are bringing petrol to the forecourt. I think we’re going to see our way through this.”
But the widespread supply chain crisis, with shortages in stores and courtyards, remains acute.
Asked if the government was certain the problems would be resolved for Christmas, Quarteng said:
“I’m not guaranteeing anything. All I’m saying is that I think the situation is stabilizing.
work schedule
- 7am BST: Nationwide House Price Index for September
- 9.30am BST: ONS’s weekly survey of real-time indicators of economic activity and social change
- 10am BST: Eurozone unemployment report for August
- 1pm BST: German inflation report for September
- 1.30 a.m. BST: US weekly jobless figures
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