High energy prices threaten UK hospital services

LONDON — UK hospitals bosses on Thursday warned that patient care may have to be cut to offset huge increases in energy bills over the winter months.

Most hospital groups contacted by medical journal the BMJ said they expected bills to at least double, as the price hikes kicked in.

The NHS Confederation, which represents health providers in the publicly funded National Health Service, said there would be a knock-on effect.

"The gap in funding from rising inflation will either have to be made up by fewer staff being employed, longer waiting times for care or other areas of patient care being cut back," the group's senior acute lead, Rory Deighton, told the BMJ.

"A failure to properly compensate the NHS for inflation will only heighten pressure on our health service as we move towards a winter that we know will be particularly challenging this year."

UK inflation is at a 40-year high of 10.1 percent with dire predictions that rates could climb to 18 percent or more next year.

Last week households were told that their gas and electricity bills would go up by 80 percent from October, with further rises set for next year.

But non-domestic customers are not covered by the energy price cap, making them more vulnerable to the surge in wholesale prices.

Businesses across the board have warned the huge increases could force many to close if the government does nothing to help.

The BMJ said bosses at Great Ormond Street Children's Hospital in London told it that they expected an energy bill of about £650,000 a month in January and February next year.

At the same time last year, it was about £350,000.

Sheffield Children's Hospital in northern England has anticipated a rise of nearly 130 percent in its total bill for 2022-23.

But Nottingham University Hospital in central England has budgeted for a 214-percent rise in gas and electricity this year, it added.

NHS England set aside £1.5 billion to cover an expected £485-million increase in energy bills. But the estimate was made in May and prices have risen again, prompting concern it may not be enough.

'BREAKING POINT'

The situation only adds to a growing catalogue of problems faced by the publicly funded National Health Service.

The NHS, created in 1948 to provide free healthcare and paid out of general taxation, is a cherished British institution.

But the system, which costs £190 billion a year to run and employs some 1.2 million people in England alone, has long faced significant under-funding.

The NHS Confederation's Deighton said the UK's new prime minister, to be installed next week, needs to act immediately to offset cost of living increases.

"The NHS needs at least £3.4 billion to make up for inflation during this year alone, and that is before we face a winter of even higher wholesale energy prices," he added.

Deighton's boss, chief executive Matthew Taylor, told The Guardian this week that the NHS was "in its worst state in living memory".

Problems include chronic staff shortages, overcrowded accident and emergency departments, ambulance delays and lengthy waiting lists for treatment.

One experienced A&E doctor wrote on the UnHerd website this month that the service was "at breaking point", with patients at risk.

Health experts say the crisis is decades in the making but has been exacerbated by squeezed budgets over the last 12 years of Conservative government, Brexit and the coronavirus pandemic.

Nurses and junior doctors are currently being balloted for strike action as part of widespread industrial action over below-inflation pay offers.

NHS health and social care workers were hailed as heroes during the pandemic but in a sign of the crisis, some hospitals have set up food banks for staff struggling with the rising cost of living.

One NHS manager told LBC radio on Tuesday he was planning to convert spare hospital space into "warm rooms" for employees unable to afford winter heating at home.

Agence France-Presse

Philippine bakeries shrink 'poor man's bread' as inflation bites

MANILA - As the war in Ukraine pushes up wheat prices and a weaker peso raises the cost of imported edible oil, many Philippine bakers are shrinking the size of a popular breakfast roll to cope with higher inflation.

The slightly sweet and pillowy soft "pandesal", which Filipinos often dunk in coffee or stuff with cheese, used to weigh 35 grams at Matimyas Bakery, a breadmaker in suburban Manila.

But as the cost of local and imported ingredients soared in recent months, co-owner Jam Mauleon gradually reduced the size of the roll -- known as the "poor man's bread" because it is cheap -- to around 25 grams to avoid raising the 2.50 peso (about $0.04) price.

She feared that even a slight increase would send cash-strapped customers in her neighborhood to a rival bakery five blocks away.

"We had to reduce the serving size to survive," Mauleon told AFP, as children, workers and retirees arrived early to buy rolls baked in a brick oven that morning.

As the Philippines lifted Covid-19 restrictions and schoolchildren began returning to the classroom this year, Mauleon had hoped economic conditions for the bakery would improve. 

But since December, as wheat and fuel prices surged, the price of flour has increased by more than 30 percent, while sugar is up 25 percent and salt costs 40 percent more, she said.

The bakery survives day to day and does not make enough money to buy ingredients in bulk, leaving it vulnerable to changing prices in domestic and international markets.

After reducing the number of employees and absorbing higher costs, Mauleon was forced this week to raise the price of a pandesal by 20 percent to three pesos. 

Shrinking the size of the roll any further would affect its quality, she said.

"We will try it out if people will still buy it," Mauleon said.

"Pandesal is very important in the lives of Filipinos."

For mother-of-five Laarni Guarino, the price hike means her family now eats fewer rolls for breakfast. 

"We will have to redo our budget. From five pieces each, my children will have to eat just three to four," Guarino, 35, told AFP. 

"Fifty centavos is a big thing for poor people like us."

'SHRINKFLATION'

Lucito Chavez, president of an association representing local bakeries, said thousands of breadmakers were reeling from the higher cost for raw materials, most of which are imported. 

"All of us are struggling, not to make profit, but to survive," Chavez told AFP. 

"We have to protect the pandesal industry."

Inflation in the Philippines hit 6.1 percent in June, the highest level in nearly four years, as steep fuel price hikes pushed up food and transport costs. 

Lawmaker and economist Joey Salceda said bread would be hardest hit by "shrinkflation", where the size of a product gets smaller but the price stays the same.

"Wheat prices have increased by 165 percent," he told reporters recently, urging bakeries to fortify their products with vitamins and minerals.

 Agence France-Presse

Oil stays above $120 per barrel ahead of NATO Russia-Ukraine summit

LONDON - World share markets were choppy on Thursday as the Russia-Ukraine war kept oil above $120 a barrel, while "stagflation" worries rose on renewed talk of aggressive US interest rates hikes and slowing growth.

Europe's main stock indexes barely budged and government bond yields edged up toward multi-year highs hit earlier in the week as March PMI data came in reassuringly robust. 

Focus was otherwise on a Thursday special NATO summit in Brussels, which US President Joe Biden will attend, to discuss further responses to Russia's month-old invasion of Ukraine, which Moscow calls a "special military operation". 

Rabobank's head of macro strategy, Elwin de Groot, said markets would be watching what emerges closely, especially how unified NATO members remain and what Biden can offer European countries to help wean themselves off Russian gas.

"The NATO meeting is certainly important," de Groot said. "At the minimum you would expect the members to come up with preparations for a possible further escalation in the Ukraine war."

Wall Street futures were up a solid 0.6 percent ahead of trading there, but the mood seemed changeable.

MSCI's broadest index of Asia-Pacific shares outside Japan recouped some of its early losses overnight but ended down 0.6 percent after more falls in China and Hong Kong.

Japan's Nikkei bucked the trend, rising 0.25 percent to a nine-week high as its exporters cheered the yen falling to its lowest against the dollar since 2015. 

At 1000 GMT, the dollar was up 0.4 percent versus the yen, at 121.65, with expectations that the Bank of Japan will be far behind other top central banks in raising interest rates.

HAWKISH

Driving some of the volatility, Federal Reserve policymakers on Wednesday signaled they stood ready to take more aggressive action to bring down decades-high inflation, including a possible half-percentage-point rate hike at the next policy meeting in May. 

Those signals pushed all three main US share benchmarks 1 percent lower overnight. 

"The sharp hawkish repricing of Fed rate hike expectations has mainly benefited the US dollar against low yielding currencies whose own domestic central banks are expected to lag well behind the Fed in tightening policy," MUFG currency analyst Lee Hardman wrote in a note to clients.

Oil and gas markets also remained hot amid the geopolitical uncertainty.

Russian President Vladimir Putin said on Wednesday that Moscow would seek payment in roubles for gas sold to "unfriendly" countries, jolting energy markets, although Italy's President Mario Draghi said it planned to keep paying in euros. 

Brent futures were little changed at $121.67 a barrel and US West Texas Intermediate futures fell 41 cents, or 0.35 percent, to $114.5 a barrel

The bond market was starting to shift again with the yield on benchmark 10-year Treasury notes up at 2.37 percent and German bunds creeping over 0.52 percent.

"Inflation is really the big driver," Rabobank's de Groot said, adding that it was also behind falling consumer confidence.

EU leaders are expected to agree at a two-day summit starting on Thursday to jointly buy gas, as they seek to cut reliance on Russian fuels and build a buffer against supply shocks. But the bloc remains unlikely to sanction Russian oil and gas. 

Gold was slightly lower at $1,942.9 per ounce.

(Reporting by Marc Jones; Editing by William Mallard)

-reuters-

Japan inflation edges up but way below target in August

TOKYO — Prices in Japan edged up modestly in August, according to government data on Friday, as the world's third-largest economy continues its years-long battle with deflation.

Inflation stood at 0.9 percent year-on-year in August, still far below the Bank of Japan's two-percent target, even though slightly higher than 0.8 percent in July and June and 0.7 percent in May.

The latest figure was in line with market consensus.

With fresh food and energy stripped out, prices rose by even less -- just 0.4 percent year-on-year in August, the internal affairs ministry said.

Japan has battled deflation for many years and the central bank's ultra-loose monetary policy appears to be having limited impact.

The Bank of Japan will not raise interest rates "for an extended period of time", its chief said after the latest rate-setting meeting, even as US and European peers tighten monetary policy.

Deflation is bad for the economy partly because the expectation of falling prices discourages spending and dampens growth.

The latest data come a day after Prime Minister Shinzo Abe won comfortable re-election as leader of his ruling party, setting him on course to become Japan's longest-serving premier.

During the election campaign for the vote, Abe said he wanted the economy to strengthen enough to allow the central bank to wind up the current super-loose monetary policy "by the end of" his new three-year term.

Analysts say Abe's re-election means that the government will take active fiscal measures to boost the still-fragile economy along with the central bank.

source: philstar.com

Lesson from 6 years of global economic crisis? Keynes was right

Now that the Federal Reserve has brought its program of quantitative easing to a successful conclusion, while the French and German governments have ended their shadow-boxing over European budget “rules,” macroeconomic policy all over the world is entering a period of unusual stability and predictability. Rightly or wrongly, the main advanced economies have reached a settled view on their economic policy choices and are very unlikely to change these in the year or two ahead, whether they succeed or fail. It therefore seems appropriate to consider what we can learn from all the policy experiments conducted around the world since the 2008 crisis.

The main lesson is that government decisions on taxes and public spending have turned out to be more important as drivers of economic activity than the monetary experiments with zero interest rates and quantitative easing that have dominated media and market attention. Fiscal decisions on budget deficits, taxes, and public spending have mostly been debated as if they were largely political choices, with much less influence than monetary policy on macroeconomic outcomes such as inflation, growth, and employment. Yet the reality has turned out to be the opposite. While every major economy in the world has followed essentially the same monetary policy since 2008, their fiscal policies have been very different and the divergence in outcomes, especially when we compare the United States and Europe, has been exactly the opposite to what was implied by the rhetoric of most politicians and central banks.

Countries that took emergency measures to reduce public borrowing have mostly suffered weaker growth, as in the case of Britain from 2010 to 2012, Japan this year, and the United States after the 2013 “sequester” and fiscal cliff deal. In more extreme cases, such as Italy and Spain, fiscal tightening has plunged them back into deep recession and aggravated financial crises. Meanwhile countries that ignored their deficit problems, as in the United States for most of the post-crisis period, or where governments decided to downplay their fiscal tightening plans, as in Britain this year or Japan in 2013, have generally done better, both in terms of economics and finance. The one major exception has been Germany, where budgetary consolidation has managed to coexist with decent growth, largely because of a boom in machinery exports to Russia and China that is now over, pushing Germany back into the recession its stringent fiscal policy suggested all along.

Thus the six years since 2008 have provided strong empirical support for the supposedly outmoded Keynesian view that government borrowing is more powerful than monetary policy in stimulating severely depressed economies and pulling them out of recession. In a sense, it is odd that the power of fiscal policy has come as a surprise – or that it continues to be categorically denied by the German government and the US Tea Party. The underlying reason why fiscal policy is so important in recessions, and has now come to dominate over monetary policy, is a matter of simple arithmetic that should not be open to debate.

Recessions generally occur when private business and households decide to spend less than their incomes in order to reduce their debts or increase their savings. If this process of “deleveraging” is happening in the private sector, which it clearly has been, then simple arithmetic shows that economic balance can only be restored if some other sector of the economy spends more than its income – and such excess spending is only possible if that “other sector” is willing to increase its debts. Disregarding the role of exports and imports, which must sum to zero for the world as a whole, the government is the only possible candidate to play the crucial balancing role as the “other sector.” It is therefore a mathematical certainty that governments must increase their borrowing whenever businesses and households decide to boost their savings by spending less than they earn.

Despite this indisputable arithmetic, there has been surprisingly little interest in the macroeconomic impact of budgetary policies in contrast to the endless debates about every twist and turn of monetary policy. The explanation lies in the monetarist theories that came to dominate standard economic models of the pre-crisis period – and the related institutional changes that elevated central bankers above finance ministers as the supreme arbiters of economic policy.

Monetarism overturned the Keynesian fiscal consensus that prevailed from the 1930s to the 1970s, by introducing one simple assumption into the models that guided governments and central banks. The case for Keynesian fiscal stimulus in deep recessions was simply assumed away by asserting that interest rates could always be reduced sufficiently to stimulate private investment, discourage private savings and so restore growth. As a result, the private sector as a whole would never suffer for long from a shortfall in spending. Therefore government borrowing would never be needed to balance inadequate private demand.

As a result of these assumptions, interest rate decisions by central banks came to be seen as the only effective tool of macroeconomic management, while fiscal policy was relegated to a microeconomic supporting role. Tax structures and public spending levels were seen as supply-side issues influencing incentives and resource allocation, but the demand impact of government borrowing was largely ignored. Whether government borrowing expanded or contracted, interest rates would rise or fall to offset the Keynesian demand effects. Independent central bankers would manage macroeconomic demand with monetary policy, leaving governments to set taxes and spending plans to achieve political or supply-side objectives.

In the era of high inflation when monetarism was introduced, the idea that interest rates could always be cut by enough to revive private economic activity was reasonable enough. After all, when inflation is running at 5 percent, an interest rate of 1 percent is equivalent to minus 4 percent in real terms, imposing a massive tax on savers and offering a big subsidy to private investors. But this argument fails completely when inflation falls to negligible levels or disappears completely, as in the euro-zone and Japan.

Ironically, therefore, the very success of monetarism and central banking in conquering inflation now means that the era of monetary dominance is over. Keynesian fiscal thinking has triumphed and finance ministers are again more important than central bankers, even though most of them have not yet noticed. Once interest rates fell to zero, traditional monetary management lost its ability to provide further stimulus. And now that central banks are providing “forward guidance” which commits them to very low interest rates for years ahead, monetary policy has also lost its ability to offset fiscal easing and restrain demand.

As monetary policy has lost traction, fiscal policy has automatically gained power. With interest rates at or near zero, private demand cannot be simulated with further rate cuts and this means that monetary easing can no longer offset fiscal tightening. As a result, any reduction in budget deficits becomes unambiguously deflationary, which is why the French and Italian governments were right to resist enforcement of the German-inspired fiscal compact in the euro-zone. Conversely, fiscal expansion now provides an unqualified economic stimulus because there is no risk of interest rates rising significantly in the next year or two – and perhaps not until the end of the decade. In short, the world has returned to a period of fiscal dominance, as in the 1950s and 1960s.

source: interaksyon.com