Michael Simmons

Reprieve! The British consumer has received a stay of execution. Figures just released by the Office for National Statistics (ONS) show inflation last month fell to 2.8 per cent – down from 3.3 per cent in March and by more than most economists had forecast. But don’t bother reading the ‘corner has been turned’ press release that the government will issue later, because today’s improvement is sadly not about to become a trend. Rachel Reeves has played some part in these figures: by removing various energy levies from household bills and freezing some other regulated costs. That's meant price rises in April were not as bad as they might otherwise have been. But the real reason the figures have come down is because of how bad Awful April was last year.

When Labour MPs eventually hoof Keir Starmer out of office, the Prime Minister and his neighbour in No. 11 will surely come to be remembered for one failing above all others: the youth unemployment crisis. Look at unemployment among Britain’s young and an even bleaker, yet more concrete, picture emerges Figures just released by the Office for National Statistics (ONS) show the unemployment rate climbed again to 5 per cent – up half a percentage point on a year ago. Worse: the true unemployment figure is probably a tad higher. The single-month estimate for February is implausibly low compared with neighbouring months (it's 5.5 per cent in March) and so, when it falls out of the three-month average next month, an even worse picture will likely emerge.

This may be barely concealed trauma from my time as a Scottish civil servant but, when I look at Andy Burnham, I see Nicola Sturgeon.  The cultivated public image of Labour’s miracle man in the north is a powerful one. He pulls off the ‘one of us’, ‘man of the people’, ‘our lad done good’ shtick better than most politicians – in spite of his Blairite origins. Sturgeon wielded a similar power. It always surprised me how popular she was with the mums. As long as she said ‘sorry’ occasionally, most people – even those who did not vote for her – were sympathetic and felt she was often unfairly criticised during her nine-year tenure as first minister. Burnham seems to possess some of that voter appeal and, in turn, that political immunity too.

Reality Check verdict: false You know things are hotting up in Westminster when reporters start unironically using the word ‘febrile’. Today, we’re well past febrile. So much so that Westminster turmoil seems to be spilling out into the markets, sending gilt yields (the government borrowing cost) skywards. For one Labour MP though that’s no problem. Speaking on Times Radio yesterday, Paula Barker claimed ‘the markets will have to fall into line’ and that investors would flood to Britain for ‘progressive policies that do speak to our communities’. Reality Check asked one investor for their views of the MPs comments and the response was unprintable.

In a relief for mortgage holders, anyone with a job and the government, the Bank of England’s Monetary Policy Committee (MPC) has voted 8–1 to hold interest rates at 3.75 per cent. That is despite rising inflation thanks to the Iran war, which is likely to hit Britain worse than almost anywhere else. Had it not been for the war and the disruption to energy supplies through the Strait of Hormuz, April was to be the month when the Bank of England finally met its 2 per cent inflation target. Instead, prices are shooting in the wrong direction as energy costs feed through to the wider economy – most notably in fuel.

The Iran war is being felt in Britain’s economy. Figures just released by the Office for National Statistics (ONS) show inflation rose to 3.3 per cent in March – up from 3 per cent the month before.  The rise was mainly driven by fuel prices, which jumped at their fastest rate in more than three years. Plane tickets and food prices shot up too as rising energy and input costs were felt across the raw materials that drive the economy.  A Consumer Prices Index increase thanks to the oil price spike was expected but the trouble is these higher manufacturing input costs take time to feed through into the economy meaning this new bout of inflation could be a prolonged one.

On the face of it, the Office for National Statistics (ONS) have just released great news on unemployment. The rate – against all expectations – has fallen from 5.2 per cent to 4.9 per cent. Radio 4’s Today programme welcomed the ‘surprising’ news. But this is no good news story. To be classed by statisticians as unemployed you have to be actively seeking work. If you’re not then you’re put in the ‘economically inactive’ category. And that’s the bad news: whilst the unemployment rate has decreased, so too has the employment rate. What’s gone up is the inactivity rate – accounting for almost all of the change in unemployment. So what’s going on?

It must be bittersweet being Rachel Reeves. Figures just released by the Office for National Statistics (ONS) show the economy grew by 0.5 per cent in February. That is significantly better than economists had expected and, coupled with the fact that January growth has been revised up, it marks probably the first piece of seriously good economic news for the Chancellor since she entered No. 11 Downing Street. Pretty much everything other than manufacturing saw improved performance and demand at the start of the year. Car sales, publishing and real estate helped drive services up by 0.5 per cent. Production grew too and even construction, which has been shrinking, saw one per cent month-on-month growth. The trouble is, of course, this is data from a different world.

Rachel Reeves lands in Washington tonight to be greeted with bad news. The International Monetary Fund (IMF) – whose spring meeting the Chancellor is attending – has just handed Britain the largest GDP downgrade of any G7 country.  In the freshly released update to their world economic outlook, the IMF forecast growth for the UK this year of just 0.8 per cent – down from the 1.3 per cent they’d previously projected. Things don’t get much better next year either, with just 1.3 per cent growth forecast, again downgraded from 1.5 per cent.  This downgrade singles out Britain and our European neighbours.

This week Rachel Reeves ruled out a blanket energy bailout to manage the fallout from the Iran war. That’s the right approach. But her targeting of a bailout – reportedly to those on benefits – risks solidifying Britain’s welfare trap. When the Chancellor gave her economic update to the Commons on Tuesday following an emergency Cobra meeting, she took a potshot at Liz Truss. Not for the ex-prime minister’s mini-Budget but for her multi-billion-pound energy price guarantee that sent the gilt market into meltdown. ‘As we respond to this crisis, we must learn from the mistakes of the past,’ Reeves told MPs. The previous government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss.

The Organisation for Economic Co-operation and Development (OECD) has just confirmed what we already knew: Britain will be hit harder than almost anywhere else by the economic fallout triggered by the war in Iran. Updated OECD forecasts released today slashed predictions of UK growth for this year to just 0.7 per cent from the 1.2 per cent previously expected. That’s a larger downgrade than any other G20 country. On inflation, the Washington-based organisation expects UK inflation to hit 4 per cent – the second highest in the G7. The causes are clear: an energy price hike, prolonged in nature, that simultaneously makes everything more expensive, reduces supply and destroys consumer demand. The result is even more stark: stagflation.

Prices rose by 3 per cent last month – the same rate as the month before. Figures just released by the Office for National Statistics (ONS) show that – ironically – falling petrol costs were one of the main things keeping the Consumer Prices Index (CPI) from climbing. This data was, of course, collected before the latest conflict in the Middle East – and we can soon expect the numbers to start heading in the wrong direction. Elsewhere, clothing costs were the largest upward driver of inflation, while food inflation remained broadly flat. In good news for drinkers, the cost of alcohol came down thanks to increased promotional activity in February. In a different world, the government would be cautiously welcoming today’s figures.

After a record tax take and surplus in January, normal service has resumed. Britain experienced its second-largest February borrowing splurge since records began, according to figures just released by the Office for National Statistics (ONS). Last month we borrowed some £14.3 billion, which was £2.2 billion more than a year before and the second highest figure for a February since records began in 1993. Tom Davies, senior statistician at the ONS, said: ‘While [tax] receipts were up last year, that was outweighed by a rise in spending.’ A large part of that jump in spending was our debt interest payments which, at £13 billion, was the highest ever recorded for February, as this rather striking graph shows: Some £4.

In a surprise to no one, the Bank of England’s Monetary Policy Committee (MPC) has voted nine-zero to hold interest rates at 3.75 per cent. The unanimous decision is the first time the MPC have been in complete agreement since September 2021. Before Trump and Israel’s bombs rained down on Iran, the markets had been overwhelmingly expecting a rate cut. This would have been welcome news for mortgage holders and the government. But with an energy price shock sending inflation expectations in the wrong direction, we are lucky the MPC didn’t hike rates this time. The markets are now expecting a rate hike towards the end of summer after inevitably higher energy prices lead to higher inflation.  Even before today’s announcement the mortgage market was feeling the pressure.

Figures just released by the Office for National Statistics (ONS) show the economy ground to a halt in January, with no growth recorded. That was despite economists and businesses reporting a brighter start to the year. Economists had expected January to see growth of 0.2 per cent. Over the three months to January we did see some growth, though just 0.2 per cent. Within that figure, services expanded 0.2 per cent while production grew 1.3 per cent. The positive numbers end there, however, with the construction sector contracting by 2 per cent. It’s unlikely things are going to get much better as the year goes on.

With Donald Trump signalling that he does not want a long war in Iran, markets have started to settle down. Traders are no longer betting on interest rate hikes, the FTSE is in the green and a barrel of oil is hovering around $90. Nevertheless, the pressure on the Chancellor to set out further financial support to tackle the cost of living is on. The average five-year fixed mortgage passed 5 per cent today for the first time since November, prices at the pumps have jumped at their fastest pace in four years, and Morgan Stanley is the latest bank to warn that inflation could hit 5 per cent later this year.  On petrol and diesel, Rachel Reeves is angry with service stations.