UK inflation starts climb as effects of COVID-19 and Brexit combine

UK inflation starts climb as effects of COVID-19 and Brexit combine
Consumer prices rose 0.6 percent in annual terms after a 0.3 percent increase in November. (Reuters)
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Updated 20 January 2021

UK inflation starts climb as effects of COVID-19 and Brexit combine

UK inflation starts climb as effects of COVID-19 and Brexit combine
  • Inflation has been below the Bank of England’s 2 percent target since mid-2019
  • ‘We are going to be talking a lot more about inflation in 2021 than we did 2020’

LONDON: British inflation gathered speed in December, starting what is expected to be a climb this year as pandemic-fighting measures, Brexit and a recovery in the economy combine to push up costs for consumers and businesses.
Consumer prices rose 0.6 percent in annual terms after a 0.3 percent increase in November, the Office for National Statistics said.
A Reuters poll of economists had pointed to a rate of 0.5 percent.
A temporary easing of COVID-19 travel restrictions helped to push up air and sea fares while a rise in global oil prices made fuel more expensive and the price of clothes also rose.
Inflation has been below the Bank of England’s 2 percent target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.
But it is likely to rise as the impact of value-added tax cuts and other emergency pandemic measures fade from the statistical comparisons, and because of Britain’s new, less open trading relationship with the European Union.
“We are going to be talking a lot more about inflation in 2021 than we did 2020,” said Jeremy Thomson-Cook, an economist at foreign exchange company Equals Group. “Both Brexit and COVID-19 are factors that have caused substantial pain for businesses and their supply chains.”
A Reuters poll of economists published last week showed inflation is likely to rise to close to the BoE’s 2 percent target by the end of this year, and some like Capital Economics think it will peak at 2.5 percent.
But economists see little pressure on the BoE to start raising interest rates from their all-time low any time soon with Britain’s economy still about 10 percent smaller than before the pandemic.
Samuel Tombs, an economist with Pantheon Macroeconomics, said a rise in unemployment after the end of the government’s job protection scheme — scheduled for April — was likely to keep a lid on domestic inflation pressures.
“The (BoE) will not need to even talk about the prospect of interest rates rising in future within the next two years,” Tombs said.
The ONS said air and sea fare prices rose last month, making transport services the biggest contributor to the increase in inflation during December.
Prices at petrol pumps rose by 1.5 pence per liter.
Clothing and footwear prices — which rose last month, unlike in December 2019 — also contributed to higher inflation.
The ONS said factory gate prices fell last month by the least in annual terms since March, down 0.4 percent, and the measure for core output prices rose by the most since September 2019, up 1.2 percent.


US House tees up vote on Biden’s $1.9tn COVID-19 relief plan

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan
Updated 35 min 44 sec ago

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan
  • Final passage appeared likely after the measure cleared a procedural hurdle by a partyline vote of 219 to 210.

WASHINGTON: The US House of Representatives moved on Friday toward a late-night vote on President Joe Biden’s $1.9 trillion coronavirus aid bill, as Democrats who narrowly control the chamber steered the sweeping measure toward approval.
Final passage appeared likely after the measure cleared a procedural hurdle by a partyline vote of 219 to 210.
With Republicans lining up in opposition, Democrats who hold a slim majority have few votes to spare.
“I am a happy camper tonight. This is what America needs,” Democratic Representative Maxine Waters said in debate on the House floor.
Democrats said the package was needed to fight a pandemic that has killed more than 500,000 Americans and thrown millions out of work, while Republicans criticized it as too expensive.
The measure would pay for vaccines and medical supplies and send a new round of emergency financial aid to households, small businesses and state and local governments.
Democrats aim to get the bill for Biden to sign into law before mid-March, when enhanced unemployment benefits and some other types of aid are due to expire.
But their path has been complicated by the Senate’s rules expert, who said on Thursday that they cannot include an increase in the minimum wage to $15 per hour in the package.
House Speaker Nancy Pelosi predicted the bill will pass Congress with or without the increase, but said Democrats would not give up on the matter.
“We will not stop until we very soon pass the $15 minimum wage,” she said at a news conference.
Opinion polls have found broad public support for the package.
Republicans who have broadly backed previous COVID-19 spending say another $1.9 trillion is simply too much. They said too much would go to Democratic priorities they called unnecessary, and only a fraction to directly fighting the virus.
“We need targeted tailored relief that actually helps the American people, not this $2 trillion boondoggle,” Republican Representative Debbie Lesko said.
The White House and some economists say a big package is needed to revive the world’s largest economy.
Biden has focused his first weeks in office on tackling the greatest public health crisis in a century, which has upended most aspects of American life.
Pelosi is counting on nearly all of her rank and file to get the bill passed before sending it to a 50-50 Senate where Democratic Vice President Kamala Harris holds the tie-breaking vote.

MINIMUM WAGE HIKE
The House bill would raise the national hourly minimum wage for the first time since 2009, to $15 from $7.25. The increase is a top priority for progressive Democrats.
That is unlikely to win approval in the Senate.
The chamber’s parliamentarian ruled on Thursday that, unlike other elements of the sweeping bill, it could not be passed with just a simple majority of 50 senators plus Harris, rather than the 60 needed to advance most legislation in the 100-seat chamber.
At least two Senate Democrats oppose the $15 hourly figure, along with most Republicans. Some are floating a smaller increase, in the range of $10 to $12 per hour.
Senate Majority Leader Chuck Schumer might add a provision to penalize large corporations that do not pay a $15 minimum wage, a Senate Democratic aide said.
The bill’s big-ticket items include $1,400 direct payments to individuals, a $400-per-week federal unemployment benefit through Aug. 29, and help for those in difficulty paying rents and home mortgages during the pandemic.
An array of business interests also has weighed in behind Biden’s “America Rescue Plan” Act, as the bill is called.
Efforts to craft a bipartisan coronavirus aid bill fizzled early on, shortly after Biden was sworn in as president on Jan. 20, following a series of bipartisan bills enacted in 2020.

Related


BA owner calls for COVID health passes after record $9 billion loss

BA owner calls for COVID health passes after record $9 billion loss
In this Tuesday, Jan. 10, 2017, file photo, British Airways planes are parked at Heathrow Airport in London. (AP)
Updated 27 February 2021

BA owner calls for COVID health passes after record $9 billion loss

BA owner calls for COVID health passes after record $9 billion loss
  • Tighter travel restrictions have threatened to ruin Europe's critical summer season

LONDON: British Airways owner IAG is counting on digital health passes to help spur a travel recovery this summer, after the pandemic pushed it to a record €7.4 billion ($9 billion) loss last year, when it ran just a third of normal flights.

Tighter travel restrictions over the last two months have threatened to ruin Europe’s critical summer season and leave some airlines needing more funding, analysts have warned.
But after taking on new loans, IAG said it had €10.3 billion of liquidity and was well set to ride out the crisis.
“We’ve got very strong liquidity going into 2021 ... so no, we will not need additional funding,” finance chief Steve Gunning told reporters on a call.
European airlines hope travel restrictions will soon be eased to allow them to make money again. Britain on Monday laid out plans for travel markets to possibly reopen from mid-May, prompting a flood of bookings.
IAG chief executive Luis Gallego said if the UK plans went ahead, it would be a “positive summer,” but digital health passes were needed to unlock the market.
“Health passes are going to be the key to restart the aviation and the travel,” said Gallego, who is six months into the job, calling for a digital system that could include test results and proof of vaccination.
Several countries are considering health passports to help revive travel, but are worried about risks to civil liberties. However, Britain’s Heathrow Airport warned this week that dealing with a big rise in passengers would not be possible with current paper-based checks.
IAG shares were up 4 percent at 194 pence in morning trading. They have jumped 13 percent in the last five days, after Britain’s announcement on a travel restart, but over the last 12 months have lost half their value.

Cash burn
The pandemic has already crippled airlines like Norwegian Air, and left major players such as Air France-KLM and Lufthansa relying on state support.
While a recovery is now in sight, there is still much uncertainty.
IAG, which also owns Aer Lingus, Iberia and Vueling, said it could not give profit guidance for 2021, and asked how many flights it might run this year, Gallego said: “To be honest nobody knows what’s going to happen.”
For January-March, IAG said it expected to fly about 20 percent of 2019’s capacity, compared to the whole of 2020 when it flew at 34 percent of capacity.
IAG’s focus for now is on cutting costs to reduce cash burn. Weekly cash burn fell to €185 million in the first quarter, down 30 million from the previous quarter.
Last October, IAG secured shareholder backing for a €2.74 billion capital hike and Goodbody analysts said it might have to call on investors again.
“With further losses expected this year ... another rights issue can’t be ruled out in the medium term,” they said.
IAG’s operating loss before exceptional items, its preferred measure, came in at €4.37 billion, slightly better than analysts’ consensus forecast for a 4.45 billion loss.


India’s economy expands 0.4% in Oct.-Dec.

India’s economy expands 0.4% in Oct.-Dec.
A vendor speaks on his mobile phone as he waits for customers displaying clothing in front of a store in a market in New Delhi on February 23, 2021. (AFP)
Updated 27 February 2021

India’s economy expands 0.4% in Oct.-Dec.

India’s economy expands 0.4% in Oct.-Dec.
  • India’s central bank, the Reserve Bank of India, is projecting the gross domestic product growth of 10.5 percent in financial year 2021-22

NEW DELHI: India’s economy expanded by a weaker-than-expected 0.4 percent in the October-December quarter, which still allowed it to escape recession following large contractions in the two previous quarters during the coronavirus pandemic, the government said Friday.
The National Statistical Office projected an 8 percent contraction for the 2020-21 financial year, which ends in March. In January, it had projected a contraction of 7.7 percent for the fiscal year, following 4 percent growth in 2019-20.
It said fertilizer production rose by 2.7 percent in January, steel by 2.6 percent and electricity generation by 5.1 percent. Coal production declined by 1.8 percent, crude oil by 4.8 percent and natural gas by 2 percent, it said in a statement.
India’s economy contracted by 7.5 percent in the July-September quarter following a record plunge of 23.9 percent in the previous three months. The government had imposed a strict two-month lockdown across the country in March after the outbreak of the pandemic.

HIGHLIGHTS

● India’s economy contracted by 7.5 percent in the July-September quarter following a record plunge of 23.9 percent in the previous three months.

● The government had imposed a strict two-month lockdown across the country in March after the outbreak of the pandemic.

A country enters a technical recession if its economy contracts in two successive quarters. India’s recovery is expected to improve with a rise in consumer demand and investment.
India’s central bank, the Reserve Bank of India, is projecting the gross domestic product growth of 10.5 percent in financial year 2021-22. The International Monetary Fund has projected 11.5 percent growth in calendar 2021.
The IMF estimated that the Indian economy contracted 8 percent in 2020.


Airbus reveals carbon footprint of its planes

Airbus reveals carbon footprint of its planes
Airbus calculated that the 863 planes that it delivered in 2019 will emit 740 million tons of CO2 during an estimated 22 years in service. (AFP/File)
Updated 27 February 2021

Airbus reveals carbon footprint of its planes

Airbus reveals carbon footprint of its planes
  • The current commercial aircraft fleet, including older aircraft, is estimated to emit on average 90 grams per passenger km, according to the NGO International Council on Clean Transportation (ICCT)

PARIS: Airbus unveiled Friday the carbon footprint of its aircraft, a move that will help measure progress made by the aviation industry toward its goal of reducing emissions.

It is the first time an aircraft manufacturer has released lifetime carbon emissions of its aircraft, and Airbus Executive VP Corporate Affairs Julie Kitcher said it was an opportunity to increase transparency in the sector.
“We really want to demonstrate our commitment to driving decarbonization of the sector,” she said.
The industry currently represents 2 percent of global CO2 emissions, according to the International Civil Aviation Organization, but a forecast rise in passenger air traffic means it could add more pollution to the skies unless measures are taken rapidly.
And between the “flygskam” movement, a Swedish neologism meaning “flight shame,” to increasing social responsibility expectations among investors, the industry is under mounting pressure to meet its promise to cut its carbon emissions by half from 2005 levels by 2050.
Airbus calculated that the 863 planes that it delivered in 2019 will emit 740 million tons of CO2 during an estimated 22 years in service.
As a point of comparison, France is estimated to have emitted 441 million tons of CO2 in 2019.
Airbus used the accounting measure for emissions used by most leading firms, the Greenhouse Gas Protocol, including measuring the use of its products by consumers.
Airbus pointed out, however, that the efficiency of its planes is improving.
It calculated that the planes delivered in 2019 will produce on average 66.6 grams of CO2 per passenger per km.

BACKGROUND

● It is the first time an aircraft manufacturer has released lifetime carbon emissions of its aircraft.

● Airbus Executive VP Corporate Affairs Julie Kitcher says it is an opportunity to increase transparency in the sector.

● The industry currently represents 2 percent of global CO2 emissions, according to the International Civil Aviation Organization.

● A forecast rise in passenger air traffic means it could add more pollution to the skies unless measures are taken rapidly.

In 2020, that figure dropped to 63.5 grams per passenger km.
The current commercial aircraft fleet, including older aircraft, is estimated to emit on average 90 grams per passenger km, according to the NGO International Council on Clean Transportation (ICCT).
It estimates that cars produce an average of 122 grams per km, but that figures needs to be divided by the number of passengers in the vehicle to offer a real comparison.
While the information is useful, Airbus’s Kitcher pointed out that it only offers a snapshot of the situation today.
That is because the industry is hoping for the development of sustainable aircraft fuels (SAF) made from renewable sources to reduce its emissions.
The predicted carbon dioxide emission levels would drop if the aircraft that Airbus delivered in 2019 are certified to accept up to 50 percent SAF, although the amount of the green fuel available today is extremely low.
“If we had 50 percent of SAF going into our aircraft today we could reduce the emissions of our aircraft flying already by 40 percent,” Kitcher said.
An increase to 100 percent SAF, the use of hydrogen produced in a renewable manner, or battery powered aircraft could push down emissions even further.
But to reach the 2050 goals, as well as head toward zero emissions, requires a fleet of planes that is 90 percent more efficient than those in 2005 given the expected increase in air travel.
Last year Airbus released three zero-emission concept planes powered by hydrogen that it said could enter service by 2035.
The aviation industry is also counting on better air traffic control and efficiency gains from engines to reduce CO2 emissions.


ECB’s Stournaras calls for increasing bond buying to calm markets

ECB’s Stournaras calls for increasing bond buying to calm markets
The headquarters of the European Central Bank (ECB) are pictured in Frankfurt, Germany, July 8, 2020. (REUTERS)
Updated 27 February 2021

ECB’s Stournaras calls for increasing bond buying to calm markets

ECB’s Stournaras calls for increasing bond buying to calm markets
  • There is an unwarranted tightening of bond yields, so it would perhaps be desirable for the ECB to accelerate the pace of PEPP purchases.

FRANKFURT: Greece’s Yannis Stournaras became the first European Central Bank policymaker on Friday to openly call for increasing the pace of ECB bond purchases to stem a rise in borrowing costs.
With eurozone bond yields set for their biggest monthly rise in three years, the ECB is under some pressure to make good on its promise to keep borrowing costs easy for the coronavirus-stricken bloc through its Pandemic Emergency Purchase Programme (PEPP).
“In my view, there is an unwarranted tightening of bond yields, so it would perhaps be desirable for the ECB to accelerate the pace of PEPP purchases to ensure favorable financing conditions during the pandemic,” Stournaras told Reuters in an interview.
“In my view there’s fundamental justification for a tightening of nominal bond yields in the long end,” the Greek central bank governor said.
Stournaras said ECB policymakers should instruct the Executive Board, which runs day-to-day business including bond purchases, to intervene accordingly when they meet on March 11.
He added that they may also alter the ECB’s policy message “slightly,” although he said no material change was needed as the central bank still had almost €1 trillion left to spend in its PEPP arsenal.
Germany’s 10-year yield, the region’s benchmark, fell to its lowest for the day at -0.287 percent after Stournaras’ comments. It was still set for its biggest monthly gain since January 2018, however, with a 24 basis-point rise.
Earlier on Friday, ECB board members Philip Lane and Isabel Schnabel had said bond yields warranted monitoring but stopped short of calling for more purchases.
“At this stage, an excessive tightening in yields would be inconsistent with fighting the pandemic shock to the inflation path,” Lane said in an interview with Spanish newspaper Expansión.
“But at the same time, it is crystal clear that we are not engaged in yield curve control, in the sense that we want to keep a particular yield constant.”
Schnabel was even more cautious, saying that a gradual rise in bond yields would even be welcome if it reflected higher inflation expectations, showing that the ECB’s stimulus is working.
“Even gradual increases in real yields may not necessarily be a cause of concern if they reflect improving growth prospects,” Schnabel added.