Today's business and finance round up 28th January 2022
📈US economy grows at fastest rate since 1980s
28th January 2022
Bite-sized business news from the UK and beyond
Good morning With millions of people reluctant to return to the office now the work from home order has ended, train companies are coming up with creative ways to entice commuters back. National Rail are introducing rewards including free food and drink from Greggs as well as access to a mindfulness app. To get the freebies all you need to register your details here.
- Roaring back – US economy grows at fastest rate since 1980s
- Getting physical – Klarna launches UK physical credit card
US economy grows at fastest rate since 1980s
What’s going on?
In the final three months of last year the US economy grew by 6.9%, smashing the 5.5% expected by the market. Over the whole of 2021 the world’s largest economy expanded by 5.7% - the fastest rate since 1984.
Why is this important?
This week has seen some key economic news from across the pond:
- On Wednesday the Federal Reserve all but confirmed that it would raise interest rates for the first time since 2018 in March in order to curb American inflation which is at 7% - a 40-year high.
- Then yesterday data showed the US economy accelerated more than expected in the final quarter of 2021. Growth was driven by strong consumer demand and businesses building up their inventory supplies.
- Separately yesterday, new claims for unemployment benefit fell more than expected from a three-month high last week to 260,000.
Putting it all together shows that the American economy is strong and recovering well from the pandemic.
But of course Covid is still around and the Omicron variant is still causing problems with a wave of American workers either sick or isolating.
This along with the Fed’s hawkish approach – that is to act quickly to control inflation by raising interest rates – could put the brakes on US economic growth in 2022.
Last year the US economy benefited from low interest rates, huge injections of government support — including $1,400 cheques to most households — and the widespread rollout of vaccines. This year those gains are set to fade or go all together.
Klarna launches UK physical credit card
Swedish payment giant Klarna is launching its first physical credit card in the UK in a bid to take market share from traditional lenders like high street banks.
Founded in Stockholm in 2005, Klarna pioneered buy now pay later (BNPL) which allows customers to spread online purchases over multiple interest-free payments instead of using a credit card.
The sector has flourished in recent years as ecommerce has rocketed during the pandemic. A recent survey found that one in five Brits planned to use BNPL during Christmas, to spread out the costs.
The new physical credit card will allow customers to shop in bricks and mortar stores and delay payments for up to 30 days. Klarna said it had built up a waitlist of 400,000 consumers in the UK. The company already has 15m British customers using its online BNPL services and 90m worldwide.
Unlike a typical bank credit card the Klarna card won’t charge interest or late payment fees.
But the company and BNPL industry has drawn criticism from debt charities that warn that the services encourage people to spend beyond their means.
Stat of the day
Private rents in Britain are rising at their fastest rate on record with the average rent outside London increasing by 10% in the past year
Other stories to keep you in the loop
- Supply chain bottlenecks take a bite out of McDonald's profits
- Bain, McKinsey, and BCG outgun Big Four with huge salaries and bonuses
- British Gas customers can get £750 to help with energy bills
- Musk: Robots to be bigger business than Tesla cars
- LVMH reports record fashion and leather goods revenue
- Facebook gives up digital asset ambitions
- Rihanna's Savage x Fenty secures £93m investment
Interesting links from around the web