The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Christmas quiz
Our Christmas quiz offers an eclectic test of knowledge of economics and business. The answers and a brief explanation of the factors at work are at the end of this note.
Autumn Statement - tax cuts, difficult decisions deferred
In his Autumn Statement last week the UK chancellor, Jeremy Hunt, managed the seemingly impossible, cutting taxes and reducing public borrowing.
A 2% cut in employee and self-employed National Insurance Contributions and the extension of ‘full expensing’ for corporate investment are significant tax reductions.
American exceptionalism
Join me this coming Thursday, 23 November, from 08:30-09:45 GMT, for a webinar discussion on the intellectual legacy of the great Scottish economist, Adam Smith, widely seen as the founding father of modern economics. 2023 is the 300th anniversary of Smith’s birth, and to mark the occasion I will be joined by the Rt Hon Liam Fox MP, Dr. Linda Yueh, the Oxford University economist and author of “The Great Economists” and Professor Charles Nolan, from Smith’s alma mater Glasgow University, to explore how Smith’s ideas can illuminate our thinking on economics and business today. To register for this webinar please visit:
https://deloitte.zoom.us/webinar/register/4716996208004/WN_C5Ys156vT-SPsNWamfcbfw#/registration
UK public finances… some positives, more challenges
Next Wednesday the UK chancellor of the exchequer, Jeremy Hunt, will present his Autumn Statement, which covers taxation, public expenditure and public debt. In some ways things have improved since Mr Hunt’s budget statement in March. Growth has outperformed the Office for Budget Responsibility’s (OBR) March GDP forecasts, government revenues have come in well ahead of expectations and public debt is on a lower than planned trajectory.
AI job worries, what the data say
Last week’s Bletchley summit on artificial intelligence (AI) concluded with a prediction from Elon Musk that AI will eventually replace all forms of human labour. As Mr Musk put it, “You can have a job if you want a job… but AI will be able to do everything”.
Data doubts
Last month the Office for National Statistics (ONS), the UK’s official statistics authority, published sizeable upward revisions to its GDP numbers for the last few years. The new numbers show that the UK’s recovery from the pandemic was stronger than previously thought. The original numbers indicated that the UK economy had still not recovered to its pre-pandemic size; the new estimates show the UK exceeded that threshold in late 2021.
UK CFO Survey: debt falls out of favour
We have released the latest Deloitte survey of UK chief financial officers this morning. The full report is available at:
https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html
Bond trouble
Borrowing is becoming more expensive for western governments. Last Friday the interest rate, or yield, on US 30-year government bonds reached 4.96%, the highest level in 16 years. German bond yields at close to 3.0% are back to levels last seen during the euro crisis in 2011. UK 10-year bond yields are higher now than they were at the height of the sell-off in the wake of the mini-budget a year ago.
What’s the right level for interest rates?
Interest rates seem to be at or near their peak for this cycle in the US and Europe. With inflation falling and growth likely to remain weak for some time, the focus is shifting to when central banks will cut interest rates.
The sick man of Europe? Don’t write Germany off
All the major economies of Europe and North America have slowed in the last year, but none as fast as Germany. It saw a mild recession at the end of last year and in the first quarter of this year. Output stagnated in the second quarter and seems likely to remain flat at best until spring of 2024.
A year on from the energy crisis, where does Europe stand?
Just over a year ago Europe was on the verge of a looming energy crisis. Natural gas prices had spiked at more than 15 times the levels seen before the invasion of Ukraine. The risk of power cuts and recession were all too real.