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UK economy slipped into recession in 2023

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UK economy slipped into recession in 2023

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Rishi Sunak’s pledge to “grow the economy” suffered a serious blow on Thursday as official figures showed Britain entered a technical recession at the end of 2023.

Labour claimed the prime minister’s promises on the economy were “in tatters” after gross domestic product contracted more than expected in the last three months of last year.

GDP fell 0.3 per cent in the final three months of last year compared with the previous three months, following a 0.1 per cent decline in the third quarter, according to data published by the Office for National Statistics.

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Two consecutive quarters of contracting GDP is commonly defined as a technical recession.

Traders increased bets on rate cuts by the Bank of England this year. Swaps markets are pricing in three quarter point rate cuts this year, with a 75 per cent probability of the first rate cut being delivered by June, up from around 65 per cent before the GDP data was released.

Interest rate sensitive 2-year gilt yields fell 0.06 percentage points to 4.5 per cent and the FTSE 100 index of blue-chip stocks rose 0.75 per cent in anticipation of interest rate cuts. Sterling nudged down 0.2 per cent to $1.254.

Rachel Reeves, shadow chancellor, said Sunak’s promise at the start of 2023 to “grow the economy” was “now in tatters”.

She said: “The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off.”

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But chancellor Jeremy Hunt said there were signs the British economy was “turning a corner”.

“Forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low.”

Economists polled by Reuters had forecast the economy would contract by 0.1 per cent in the final quarter as high borrowing costs, inflation and strikes hit activity.

In 2023, the economy largely stagnated as it grew only 0.1 per cent. This was well below the 2.5 per cent expansion registered in the US, and weaker than the 0.5 per cent growth of the eurozone.

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The figures create a challenging backdrop for Hunt as he prepares for a March Budget. He is considering slashing billions of pounds from public spending plans to fund pre-election tax cuts in an effort to boost the Conservative party’s re-election chances.

The data comes as the Tory party risks losing two seats in by-elections on Thursday in Wellingborough, Northamptonshire and Kingswood, near Bristol.

The ONS said all the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.

There was a fall in the volume of net trade, household spending and government consumption in the final quarter, only partially offset by an increase in investment.

The ONS said that in December output was down 0.1 per cent from the previous month, softer than the 0.2 per cent contraction forecast by analysts.

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Earlier in the week, Andrew Bailey, BoE governor, warned against putting “too much weight” on the economy slipping into a technical recession as it was expected to be “very shallow”.

“What I would put more weight on is that the indicators we have seen since then have shown some signs of upturn,” he said.

The BoE upgraded its forecast for 2024 growth, which it now says will be 0.25 per cent — up from its previous prediction of zero growth. It forecasts 0.75 per cent growth for 2025.

The GDP figures follow UK inflation data published on Wednesday which showed price growth at 4 per cent in January, the same rate as December and lower than forecast by the BoE.

However, on Tuesday, official data also revealed that pay growth was still strong, raising concerns about the persistence of underlying price pressures.  

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Additional reporting by Mary McDougall

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Win McNamee/Getty Images

The Supreme Court on Monday intervened in New York’s redistricting process, blocking a lower court decision that would likely have flipped a Republican congressional district into a Democratic district.    
  
At issue is the midterm redrawing of New York’s 11th congressional district, including Staten Island and a small part of Brooklyn. The district is currently held by a Republican, but on Jan. 21, a state Supreme Court judge ruled that the current district dilutes the power of Black and Latino voters in violation of the state constitution.  
  
GOP Rep. Nicole Malliotakis, who represents the district, and the Republican co-chair of the state Board of Elections promptly appealed to the U.S. Supreme Court, asking the justices to block the redrawing as an unconstitutional “racial gerrymander.” New York’s congressional election cycle was set to officially begin Feb. 24, the opening day for candidates to seek placement on the ballot.  
  
As in this year’s prior mid-decade redistricting fights — in Texas and California — the Trump administration backed the Republicans.   
 
Voters and the State of New York contended it’s too soon for the Supreme Court to wade into this dispute. New York’s highest state court has not issued a final judgment, so the voters asserted that if the Supreme Court grants relief now “future stay applicants will see little purpose in waiting for state court rulings before coming to this Court” and “be rewarded for such gamesmanship.” The state argues this is an issue for “New York courts, not federal courts” to resolve, and there is sufficient time for the dispute to be resolved on the merits. 
  
The court majority explained the decision to intervene in 101 words, which the three dissenting liberal justices  summarized as “Rules for thee, but not for me.” 
 
The unsigned majority order does not explain the Court’s rationale. It says only how long the stay will last, until the case moves through the New York State appeals courts. If, however, the losing party petitions and the court agrees to hear the challenge, the stay extends until the final opinion is announced. 
 
Dissenting from the decision were Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Writing for the three, Sotomayor  said that  if nonfinal decisions of a state trial court can be brought to highest court, “then every decision from any court is now fair game.” More immediately, she noted, “By granting these applications, the Court thrusts itself into the middle of every election-law dispute around the country, even as many States redraw their congressional maps ahead of the 2026 election.” 

Monday’s Supreme Court action deviates from the court’s hands-off pattern in these mid-term redistricting fights this year. In two previous cases — from Texas and California — the court refused to intervene, allowing newly drawn maps to stay in effect.  
  
Requests for Supreme Court intervention on redistricting issues has been a recurring theme this term, a trend that is likely to grow.  Earlier last month  the high court allowed California to use a voter-approved, Democratic-friendly map.  California’s redistricting came in response to a GOP-friendly redistricting plan in Texas that the Supreme Court also permitted to move forward. These redistricting efforts are expected to offset one another.     
   
But the high court itself has yet to rule on a challenge to Louisiana’s voting map, which was drawn by the state legislature after the decennial census in order to create a second majority-Black district.  Since the drawing of that second majority-black district, the state has backed away from that map, hoping to return to a plan that provides for only one majority-minority district.    
     
The Supreme Court’s consideration of the Louisiana case has stretched across two terms. The justices failed to resolve the case last term and chose to order a second round of arguments this term adding a new question: Does the state’s intentional creation of a second majority-minority district violate the constitution’s Fourteenth and Fifteenth Amendments’ guarantee of the right to vote and the authority of Congress to enforce that mandate?    
Following the addition of the new question, the state of Louisiana flipped positions to oppose the map it had just drawn and defended in court. Whether the Supreme Court follows suit remains to be seen. But the tone of the October argument suggested that the court’s conservative supermajority is likely to continue undercutting the 1965 Voting Rights Act.   

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Map: Earthquake Shakes Central California

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Map: Earthquake Shakes Central California

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

A minor earthquake with a preliminary magnitude of 3.5 struck in Central California on Monday, according to the United States Geological Survey.

The temblor happened at 7:17 a.m. Pacific time about 6 miles northwest of Pinnacles, Calif., data from the agency shows.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Monday, March 2 at 10:20 a.m. Eastern. Aftershocks data is as of Monday, March 2 at 11:18 a.m. Eastern.

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US says Kuwait accidentally shot down 3 American jets

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US says Kuwait accidentally shot down 3 American jets

The U.S. and Israel have been conducting strikes against targets in Iran since Saturday morning, with the aim of toppling Tehran’s clerical regime. Iran has fired back, with retaliatory assaults featuring missiles and drones targeting several Gulf countries and American bases in the Middle East.

“All six aircrew ejected safely, have been safely recovered, and are in stable condition. Kuwait has acknowledged this incident, and we are grateful for the efforts of the Kuwaiti defense forces and their support in this ongoing operation,” Central Command said.

“The cause of the incident is under investigation. Additional information will be released as it becomes available,” it added.

In a separate statement later Monday, Central Command said that American forces had been killed during combat since the strikes began.

“As of 7:30 am ET, March 2, four U.S. service members have been killed in action. The fourth service member, who was seriously wounded during Iran’s initial attacks, eventually succumbed to their injuries,” it said.

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Major combat operations continue and our response effort is ongoing. The identities of the fallen are being withheld until 24 hours after next of kin notification,” Central Command added.

This story has been updated.

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