News & Current Affairs

July 2, 2009

Student maintenance cash frozen

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Student maintenance cash frozen

Graduation ceremony

The system of student finance is different around the UK

Student maintenance grants and loans in England will be frozen for the academic year 2010-2011, the government has announced.

However, loans to cover tuition fees will be raised in line with the increase in the fees themselves.

Tuition fees will increase by 2.04% from September 2010, higher education minister David Lammy said.

He insisted that “difficult decisions” had to be made in the current economic climate.

The full maintenance grant, payable to students whose family income does not exceed £25,000, will remain at £2,906.

Maintenance loans and thresholds will also remain at 2009/10 levels.

Grants available for trainee teachers will also be reduced to be brought into line with amounts available to other students, Mr Lammy said in a written ministerial statement.

He said: “In these difficult economic times, we are continuing to take difficult decisions in the interests of students, universities and taxpayers alike.

“We have therefore decided to maintain the current package of maintenance support for full-time students, reflecting the current low inflationary environment.”

Recession

The Russell Group of 20 leading universities said it was “vital” that income from tuition fees kept pace with inflation.

“The introduction of fees has managed to halt a long-term decline in funding per student but funding for higher education in Britain is still significantly lower than in most other OECD countries,” said its director general, Wendy Piatt.

“The system of student support in England remains one of the most generous – and expensive – in the world.”

But the National Union of Students President, Wes Streeting, said: “Students are already racking up thousands of pounds of debt, and in a recession every penny counts.

“It appears that the inflation rate is being applied where it suits universities, but not where it will improve student support.

“In the context of the current recession, these real terms cuts in student support will be felt in students’ pockets.”

And the General Secretary of the University and College Union, Sally Hunt, said ministers had “failed” to ensure higher education was not a victim of the recession.

Loans

Students in England can apply for a means-tested grant to cover living costs – the value of this depends on their family income.

They can make up any shortfall by applying for a maintenance loan.

In addition, a tuition fee loan to cover fees is paid by the government on behalf of every student directly to the institution they attend.

These are repayable after graduation once annual income reaches £15,000.

Students in Northern Ireland are charged the same fees as in England.

The situation in Scotland and Wales differs – both countries charge higher fees to students from elsewhere in the UK coming to study there.

In Scotland, home students do not pay any fees.

February 24, 2009

US recession ‘may last into 2010’

US recession ‘may last into 2010’

US Federal Reserve chief Ben Bernanke has warned Congress that without the right policies from the government, the US recession could last into 2010.

But he said if the Obama administration and the central bank can restore some measure of financial stability, 2010 could be a year of recovery.

Mr Bernanke made the comments to the Senate Banking Committee.

He also warned that the global nature of the downturn was a threat because exports would be hit.

In its attempts to revive the economy, the Federal Reserve has cut its key interest rate to nearly zero, while the Obama administration has recently signed a $787bn (£546bn) economic stimulus package.

Mr Bernanke said that the potential economic turnaround would hinge on the success of such measures in getting credit and financial markets to operate more normally again.

“Only if that is the case, in my view there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” he said.

Vicious circle

Mr Bernanke reassured legislators that he was, “committed to using all available tools to stimulate economic activity and to improve financial market functioning”.

But he also outlined long-run predictions for the economy, which he said reflected “the view of policymakers that a full recovery of the economy from the current recession is likely to take more than two or three years”.

He described a vicious circle of rising unemployment and shrinking house prices and savings forcing consumers to cut back, which would in turn increase unemployment.

“To break that adverse feedback loop, it is essential that we continue to complement fiscal stimulus with strong government action to stabilise financial institutions and financial markets,” he said.

Speaking of the concern about bankers benefiting from bail-outs, he added that the country “ought not abstain from saving the financial system just because it rewards people who erred”.

Sliding confidence

Mr Bernanke’s testimony came shortly after data showed that consumer confidence in February had fallen to the lowest level since the Conference Board began reporting the figures in 1967.

Its sentiment index fell to a much worse-than-expected 25.0 in February from January’s figure of 37.4.

“We just got the worst consumer confidence number ever on record,” said Matt Esteve, a foreign exchange trader at Tempus Consulting in Washington.

“Following yesterday’s awful sell-off in the stock market, it just highlights the risk that there is right now.”

House prices

There were also figures showing that the decline in US house prices had accelerated.

The S&P Case Shiller house price index showed the price of a single-family home had fallen 18.5% in December, compared with the same month of 2007.

It was the biggest drop since the index began being calculated 21 years ago.

“There are very few, if any, pockets of turnaround that one can see in the data,” said David Blitzer, chairman of S&P’s index committee.

“Most of the nation appears to remain on a downward path.”

September 12, 2008

Japan’s economy sees a sharp fall

Japan’s economy sees a sharp fall

Japanese shoppers

Japan now seems at real risk of recession

Japan’s economic output has recorded its sharpest quarterly fall in almost seven years as the country appears to be falling into recession.

The world’s second largest economy contracted at an annualized rate of 3% in the April to June quarter, as both domestic demand and exports weakened.

It was the first decline in more than a year, and the biggest since the third quarter of 2001.

The government has called on firms to raises wages to help boost spending.

The Japanese economy, like most around the world, has also been affected by higher energy and food prices.

“It is desirable that income for employed people increases,” said Economy and Fiscal Policy Minister Kaoru Yosano.

“We want company managers to recognize that pay rises would compensate for price rises.”

Last month the Japanese government announced an economic stimulus package worth 11.7 trillion yen ($107bn; £61bn).

A country is generally considered to be in recession when it sees two consecutive quarters of declining economic output.

September 10, 2008

Britain ‘to fall into recession’

Britain ‘to fall into recession’

German car production line

Many exporters have been hit by the stronger euro

The UK, Germany and Spain will fall into recession in 2008, the European Commission has predicted.

Brussels said the three countries would see two negative quarters of economic growth in a row, which is the technical definition of a recession.

In its latest economic forecast, the commission also downgraded its outlook for eurozone growth again.

It said the 15-nation bloc would now grow by 1.3% this year, against previous projections of 1.7%.

Earlier this month, data showed the region’s economy shrank by 0.2% between April and June – the bloc’s first decline since its creation in 1999.

The contraction was driven by a slowdown in exports and consumer spending.

But high inflation in the region led policy makers at the European Central Bank to keep interest rates at 4.25% at its latest meeting, allowing no relief for the eurozone’s slowing economies.

In its latest report, the commission believed that inflation was now likely to creep up to 3.6% in the eurozone – above its previous predictions of 3.2% and way above the government’s target of 2%.

Gloomy outlook

Shaken by a housing slump and volatile financial markets, the Brussels-based organization predicts that the UK economy, which is not a member of the eurozone, will shrink by an annual rate of 0.2% in each of the next two quarters.

The grim outlook echoes forecasts from the Organization for Economic Cooperation and Development (OECD) out earlier this week, which were even worse.

According to the latest official figures, the UK economy did not grow at all in the second quarter of 2008.

The European Commission said the UK economy would grow by 1.1% in 2008 – much less than the 1.7% previously forecast and a sharp reduction from the official Treasury forecast of 2.5%.

A second quarter of negative growth is also expected in the German and Spanish economies, which are expected to contract by 0.2% and 0.1% respectively.

Stubborn inflation

Economic and Monetary Affairs Commissioner Joaquin Almunia blamed ructions in the financial markets, soaring commodity prices and the housing slump for the gloomy outlook.

“In a context of an unusually high degree of uncertainty, the external headwinds not only had a direct adverse impact on inflation and capital costs, but also an indirect one on confidence,” he said.

Stamping out hopes of an interest rate cut in the near term, Mr Almunia said even if economic activity were to slow further, inflation risks were still “tilted to the upside”.

“The risk of second-round effects can not be excluded, although there is no evidence of any widespread such effects so far.”

September 6, 2008

US rules out new economic package

US rules out new economic package

Worker rolls a spool of cloth at the Nice-Pak factory in New York state

Jobs are being lost in the service, business and manufacturing sectors

The United States government says it does not see an immediate need for new measures to stimulate the US economy despite a sharp rise in unemployment.

The latest figures show a rate of 6.1% – the highest since December 2003.

A White House spokeswoman said that while the figures were disappointing, the existing economic stimulus plan was having the impact intended.

A call for more action had been made by the Democratic Party presidential candidate, Barack Obama.

A higher-than-expected 84,000 jobs were lost last month, which together with the unemployment rate has added to concern about the US economy and its ability to stave off a recession.

In a further blow, the Labor Department revised upwards job loss figures for each of the past two months.

The Federal Reserve said earlier that economic activity remained “weak”.

A separate report by the Mortgage Bankers Association said that almost one in 10 US homeowners were behind with their mortgage payments or was in foreclosure procedures.

The 9.2% default rate between April and June was up from 8.8% in the previous quarter, and nearly double the rate one year ago.

‘Convincing evidence’

The number of jobs lost last month was significantly higher than the 75,000 forecast by economists.

All sectors of the economy were affected with manufacturing worst hit, shedding 61,000 jobs.

This is more convincing evidence that the economy is still in trouble
Gary Thayer, Wachovia Securities

The labor market has worsened noticeably in recent months, reflected by the fact that it is now apparent that more jobs were lost in June and July than was previously thought.

Revised figures show that in June, 100,000 jobs were lost while in July 60,000 jobs disappeared. This was up from the 51,000 figure initially forecast for both months.

“It seems unemployment in the US really is accelerating,” said the BBC’s North America business correspondent, Greg Wood.

“There do not seem to be many sectors of the US economy which are hiring.”

‘Clearly deteriorating’

In the first eight months of 2008, 605,000 jobs have been lost.

Employers have now reduced their payrolls for eight straight months, with the dramatic downturn in the housing market and the credit crunch hurting all sectors of the economy.

“This is more convincing evidence that the economy is still in trouble,” said Gary Thayer, senior economist at Wachovia Securities.

“The economy is clearly deteriorating.”

Political focus

Both candidates in November’s Presidential election are under pressure to come up with concrete proposals to help the growing number of people out of work and families battling against rising living costs.

Although the US economy grew a robust 3.3% in the second quarter, businesses are struggling to cope with the high cost of raw materials and energy, fragile consumer confidence and weaker export markets.

The Federal Reserve, which meets to decide on interest rates next week, has warned that the US is facing the twin threats of weak growth and rising inflation.

The bleak employment picture means the Fed is unlikely to raise rates in the foreseeable future while further cuts seem equally unlikely against a background of rising inflation.

“The jobs number is weak again but we think this probably is not the time to panic,” said Steve Goldman, strategist at Weeden & Co.


Have you recently been made unemployed in the US? Are you affected by the issues in this story? What are your experiences? Send us your comments

August 28, 2008

US GDP rebounds with 3.3% growth

US GDP rebounds with 3.3% growth

A US shopper

Tax rebates have encouraged consumers to spend more

The US economy grew at a revised 3.3% annually in the second quarter of 2008, the Commerce Department said, much higher than its first estimate of 1.9%.

The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.

GDP grew at a rate of 0.9% in the first quarter, after a 0.2% contraction in the last three months of 2007.

The Federal Reserve has warned the economy will remain weak this year.

“While we’re not out of the woods yet, maybe we’re beginning to see some sunlight,” said John Wilson, equity strategist at Morgan Keegan.

“At some point, the market will begin to look through the trough and gauge the strength of the coming upturn.”

‘No recession’

The data showed that exports grew at an annualized rate of 13.2%, higher than the government’s initial estimate of 9.2%.

Imports fell at a rate of 7.6% as the US economic slowdown reduced demands for goods made overseas.

The improved trade balance added 3.1 percentage points to second-quarter GDP, the biggest since 1980.

The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending.

Consumer spending, boosted by the government’s $600 tax rebate payments, rose by 1.7%, slightly higher than the previous quarter’s 1.5%.

Some observers said that the figures lent support to the argument that the US was not heading for a recession.

“For a recession the economy is certainly growing very quickly,” said Avery Shenfeld, senior economist at CIBC World Markets.

“A lot of that growth is driven off exports and pessimists might say that can’t continue during slowing growth overseas.

“But I would say this happened precisely during the period of slowing growth overseas … this is still an economy that faces slow times but not a recession.”

16-year low

However recent data on the US housing market suggests a grim outlook for the sector.

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report released earlier this week.

The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes were at an annual rate of 515,000 units in July, up slightly from June, but still near a 16-year low, and half the rate of new home sales one year ago.

August 14, 2008

Sterling losses gather momentum

Sterling losses gather momentum

Graph

The pound has fallen further against the dollar, hitting its lowest level in almost two years amid fears the UK will fall into recession.

Sterling touched its lowest level since October 2006 at $1.8617 but later edged up to trade at $1.8691.

Measured against a basket of trade-weighted currencies, the pound is now at its weakest level since 1996.

The pound dropped sharply on Wednesday after the Bank of England issued a gloomy assessment of the UK economy.

The fall in sterling will hurt holidaymakers who have benefitted from a strong pound when traveling overseas- and make it more expensive for people to buy second homes abroad.

However, it could help exporters whose goods will be cheaper overseas.

The Bank’s governor Mervyn King said economic growth would be flat for the next year or so and that inflation would rise to 5% or above before falling.

But with domestic demand weak, a revival of exports could help the economy and limit job losses.

Rate cuts

Economists had thought inflation would prevent the Bank of England from cutting rates, but the Bank’s suggestion that inflation will begin to ease raised expectations of interest rate cuts and this hit the pound.

Notes and coins
We have long argued that sterling has been significantly overvalued in recent years
Jonathan Loynes, Capital Economics

Lower interest rates mean investors get lower returns on sterling deposits, which makes the pound less attractive.

Simon Derrick, currency strategist at Bank of New York Mellon, described the pound’s fall this week a “dramatic collapse” that recalled the aftermath of sterling’s ejection from European Exchange Rate Mechanism (ERM) in 1992.

However, he said the currency’s slide should begin to ease.

“Even within the most ferocious sterling downtrends in the past, significant corrections emerged in the middle of the moves,” he said.

But Jonathan Loynes, chief European economist at Capital Economics, thinks the pound could fall as far as $1.65 by the end of 2009.

“We have long argued that sterling has been significantly overvalued in recent years,” he said.

Deteriorating outlooks

Recent official figures have already shown the UK is struggling with high inflation and faltering growth.

Fears about European growth have also helped the dollar bounce back from record lows.

The US economy is still reeling from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has given the dollar a boost.

Falling commodity prices have also supported the US currency. Investors had bought gold and oil to protect against dollar weakness and are now unwinding their positions.

The euro was trading at $1.4816 on Thursday, almost at the six-month low of $1.4815 struck this week. Earlier this year, the euro was trading at $1.60.

The euro has been further undermined by the military conflict in Georgia.

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