Sunak says policy making process would be worse if business didn’t engage with government as a result of the Greensill scandal:

And I would imagine this whole thing might change the way people feel about engaging with the government.

He says some businesses might be more “reluctant to share private or positive thoughts with ministers” that could inform policy “if they think that can’t be private.

If people feel that they can’t ... that will be enormous. They might backfire which would be disappointing and damaging to the policy process.

Chancellor Rishi Sunak says David Cameron’s involvement and lobbying was not a consideration when weighing the value of Greensill’s proposal to gain access to the CCFF.

We look at the issue of it the issue on the merits, the identity of the person talking about it was not relevant to the amount of attention and proper diligence of the issue

Sunak says that the issue front of mind was the plight of SMEs.

That was a matter of enormous concern to me, and the department during this period.

Lord Myners, who has been a critic of Greensill, previously told the Committee that the direct costs to taxpayers could run upwards of £1bn - and as high as £5bn when considering indirect costs.

However, Roxburgh denies that figure.

I do not know how Lord Myners came up with that number, we don’t recognise that. You’ll have to ask Lord Myners how he arrived at it.

Instead, Roxburgh says the direct costs (as listed in the administration documents of Greensill Capital’s UK business) are as follows:

• $8m to HMRC and
• $168,000 to two local authorities
• $10,000 to one foundation trust

He says some of that will be recovered, but roughly means the taxpayer could be on the hook for about £5m

Scholar says the Treasury treated Greensill’s proposals with an “appropriate degree of scepticism” and decided there were other ways to help small businesses and supply chains.

But when it comes to the lessons learned from this episode Scholar singles out ... record keeping:

The main lesson to learn is the absolute paramount importance of following proper, correct procedures when going about our work. So giving proper objective impartial advice, keeping proper records of telephone conversations, making sure its all stored correctly...recording contacts from companies or people acting on behalf of companies

He said he’s been stressing this to staff recently.

Next up, Parliament’s Treasury Committee are holding further hearings as part of their inquiry into Greensill Capital, the collapsed supply chain finance company.

At 2.30pm, they’ll hear from Sir Tom Scholar, Permanent Secretary, HM Treasury; and Charles Roxburgh, Second Permanent Secretary, HM Treasury.

Then at 4pm, chancellor Rishi Sunak will answer questions.

The hearing will look into former prime minister David Cameron’s lobbying for Greensill at the height of the pandemic, in an increasingly desperate attempt to ask the government to allow the lender to access the largest state-backed Covid loan scheme, the CCFF.

That included messaging ministers and officials more than 50 times, including nine WhatsApp messages to Rishi Sunak, and 12 texts to Sir Tom Scholar.

The committee say:

In the first evidence session, the Committee is likely to examine how HM Treasury responded to lobbying from David Cameron, the supply chain finance industry, and what regulatory lessons can be drawn from the failure of Greensill Capital.

In the second evidence session, the Committee is likely to ask how Mr Cameron’s lobbying of HM Treasury affected the Chancellor, the communications between Mr Cameron and the Chancellor, and the lessons for financial stability coming out of the failure of Greensill Capital.

My colleague Kalyeena Makortoff, the Guardian’s banking correspondent, will track the action....

The drop in US jobless claims to 406,000 last week shows that America’s economy is strengthening as the Covid-19 vaccine rollout continues, says John Leiper, chief investment officer at Tavistock Wealth.

Leiper adds that the jobs recovery could lead to more market jitters about interest rate rises.

“With half of all Americans having now received at least one dose of Covid-19, and the ongoing easing of government restrictions, more businesses are re-opening every day. This is reflected in the number of initial jobless claims filed last week which fell to 406,000, below the consensus forecast of 425,000 and the prior week’s pandemic-era low of 444,000. Continuing claims, which have gone sideways for the last few weeks, came in marginally lower than expected at 3.642 million versus 3.68 expected and 3.751 during the prior week.

Investors are watching the jobs data closely because the Fed has made it clear it will prioritise full employment over price stability objectives. Any sign that the economy is starting to overheat could prompt a dramatic volte-face as monetary policy is normalised at a faster rate than current market expectations imply. This raises the prospect of a renewed bout of market volatility later this year. 10-year US Treasury yields rose 3bps in the run-up to the release and are currently trading around 1.61%.”

The surging US economy may increase pressure to end the federal government’s expanded $300/week unemployment benefits (as many Republican states have already done), says Neil Birrell, Premier Miton Chief Investment Officer.

The initial jobless claims number came in better than expected. The demand for labour from business is spiking as the economy re-opens and there may even be a need to reduce the enhanced benefits for not working to avoid a labour shortage.

An increase in wages would have the same effect but that would up fuel the pick-up in inflation. The overall story remains the same; the US economy is surging ahead.”

The number of Americans filing new claims for unemployment benefit has fallen to a fresh pandemic low, as firms look to hold onto staff as the economy strengthens.

Just 406,000 new ‘initial claims’ were filed last week (on a seasonally-adjusted basis), down from 444,000 in the previous seven days.

That suggests that fewer US firms are laying off workers this month, amid reports of labor shortages in some sectors as the economy reopens and Covid-19 cases fall.

It is the smallest initial claims total since March 14, 2020, just before the first lockdown (when there were 256,000 initial claims).

Ignoring seasonal adjustments, the initial claims total fell to 420,000 last week - also a pandemic low.

Another 94,000 self-employed workers and freelancers sought help from the Pandemic Unemployment Assistance program.

That means the total number of new jobless claims has halved since mid March, as this chart from Daniel Zhao of Glassdoor shows:

Here comes the flurry of US economic data...

And first up, we have confirmation that America’s economy grew at a pacey 1.6% in the first quarter of this year (or 6.4% on an ‘annualised’ basis)

That matches the initial estimate, up from 4.3% annualised growth, in October-December, as vaccine rollouts helped the US economy to expand.

The BEA says it has revised up its forecasts for consumer spending and nonresidential fixed investment, but these are offset by downward revisions to exports and private inventory investment.

Imports, which are a subtraction in the calculation of GDP, were revised up, it adds.

The pound has jumped half a cent, after Bank of England policymaker Gertjan Vlieghe suggested that UK interest rates could rise sometime early next year.

In a lecture at the University of Bath, Vlieghe said his central forecast is that the first rate rise (from the current record low of 0.1%) would come “well into” 2022, given unemployment is likely to rise as the furlough scheme ends.

Vlieghe, who is one of the external members of the Monetary Policy Committee, says:

My central scenario is that the economy evolves similarly to the MPC’s central projection in May, but with somewhat more slack than in the central projection. Relative to the MPC’s central projection, I worry that the transition out of furlough does involve a modest rise in the unemployment rate, while the economy’s supply potential is somewhat less adversely affected, so that there is still some excess supply around the turn of the year.

In that scenario, the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter.

However, a hike earlier in 2022 could be appropriate... if there is a smaller increase in job losses, putting upward pressure on inflation and wages, he adds:

On the upside, should the transition out of furlough happen more smoothly, with the unemployment rate at or a little below current levels by the end of the year, with associated signs of upward inflation and wage pressure beyond the temporary and base effects, then a somewhat earlier rise in Bank Rate would be appropriate.

It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a rise in Bank Rate could be appropriate soon after, along a slightly steeper path than in my central case.

This seems to have given sterling a lift - it’s now up half a cent at $1.4177 against the US dollar.

The pound is also up around 0.3% against the euro, at €1.1616.

Vlieghe’s MPC term ends in August, but these comments may also give an insight into how the committee are seeing the situation, points out DailyFX.

Vlieghe also warned that new Covid-19 variants could slow the recovery (as our Covid Crisis Watch series warned).

That could prompt new stimulus - which could include negative interest rates.

He says:

On the downside, the economy might not recover as quickly, perhaps as lingering concerns about “variants of concern” continue to weigh on demand, which in turn results in more adverse unemployment dynamics as fewer furloughed workers are hired back straight away, with weaker underlying wage pressure.

In that case, it is still possible that monetary policy might be required to simulate the economy a little further to help eliminate slack and ensure inflation, after its temporary rise later this year, does not subsequently fall back below its 2% target persistently.

This chart from Vlieghe’s speech shows how these scenarios could play out:

Vlieghe also points out that the “neutral rate of interest” (the rate at which monetary policy is neither stimulating nor slowing the economy) is very low relative to the past several decades, and probably even lower due to the pandemic.

In other words, rates are unlikely to rise significantly to keep inflation on target, he explains:

That was apparent before we were hit by the Covid shock, when Bank Rate was just 0.75% and inflation pressures were too weak. A low neutral interest rate will remain relevant once the Covid shock has passed. If anything, Covid may have lowered it by increasing the perception of tail risks.

So if interest rates do need to rise once the data show that medium-term inflationary pressures are rising, then I suspect that interest rates will not need to rise very much to slow the economy to a pace that is consistent with our 2% inflation target.

Here’s the speech:

UK bed and mattress retailer Dreams is being bought by US bedding giant Tempur Sealy in a £340 deal, from private equity Sun European Partners.

The deal comes eight years after Sun took Dreams out of administration for £23m, after it collapsed with the loss of 400 jobs.

Since then, CEO Mike Logue has been pushing a turnaround plan - pitching Dreams as an ‘sleep experts’, and also introducing smaller, brighter stores, new fleet of delivery vans and a sizeable investment in ecommerce.

Logue says the deal is a ‘milestone’ for Dreams.

“We are delighted to be joining the Tempur Sealy family. Today marks a milestone for Dreams.

It is recognition of the transformation we have delivered, and is an endorsement of our customer-focused strategy, our culture and our values. With Tempur Sealy we expect to drive our growth strategy and build on our position as the most recommended, specialist bed retailer. I would like to take this opportunity to thank our 2,000 colleagues for their hard work, dedication and commitment. Together we will continue to improve what we make, sell and deliver, to provide better sleep for all our customers.”

Here’s George MacDonald of Retail Week on the deal:

Airbus has told suppliers it is planning for record production of its bestselling planes within two years in a sign of the manufacturer’s hopes for a belated but strong recovery for aviation from the coronavirus pandemic.

The European manufacturer said on Thursday it would increase production of A320 single-aisle aircraft to 45 per month by October, up from 40.

However, it said suppliers should be ready for a rate of 64 per month by the spring of 2023 for the A320, which is well suited to short-haul travel that is expected to bounce back the quickest. That would beat its previous highest rate target of 63, and would be followed by 70 per month at the start of 2024 and as high as 75 by 2025.

The aerospace industry has endured months of weak demand for planes during the pandemic as airline customers cut back on orders as their revenues dried up. Airbus and its US rival, Boeing, together cut tens of thousands of jobs worldwide as demand plummeted. Demand for Boeing planes was hit further by the crisis over its previously top-selling 737 Max, which was grounded for over a year after two fatal crashes caused by malfunctions.

There is still confusion over when people across the world will be allowed to travel for tourism purposes. Airline and holiday firm bosses on Wednesday attacked the UK government’s “utterly confusing” advice on foreign travel.

However, aerospace analysts have long expected demand for air travel – alongside the sector’s carbon emissions – to overtake pre-pandemic levels rapidly once vaccines start to diminish the risks of the coronavirus. In the long term, the growth of the middle class in Asia and Africa is expected to continue the structural growth in flight number.

Here’s the full story:

Boris Johnson has been warned by business leaders that a fresh package of economic support would be required if rising Covid-19 infections prevent the further relaxation of pandemic restrictions next month, my colleague Richard Partington explains.

After the reopening of hospitality venues indoors across all four nations of the UK, the Guardian’s latest monthly assessment of economic developments suggests the country is on course for a short-term growth boom this summer.

Retail sales have surged above pre-pandemic levels, while customers returning to restaurants, pubs and cafes have driven a sharp rise in consumer spending to begin repairing the damage from the worst recession in 300 years.

However, concerns are mounting over the Covid variant first detected in India – B.1.617.2 – and the possibility that rising infections could delay the next phase of the government’s roadmap for relaxing controls in England.

Here’s the full story:

The proportion of workers on furlough has fallen to its lowest level this year, as the UK economy emerges from lockdown.

New figures from the ONS shows that 8% of the workforce were furloughed in the two weeks to May 16, the lowest total seen so far in 2021. That equates to around 2.2m, and is down from 10% around the start of the month.

The report also shows a surge in people returning to restaurants since indoor dining was allowed again last week.

Restaurant bookings in the week to Monday May 24th were 32% higher than their level two years earlier, as people took the opportunity to eat out indoors again.

Firms are also posting more online job adverts - a sign that the economy is picking up as restrictions are relaxed.

Online job adverts on 21 May 2021 were 18% higher than the average in February 2020 - an increase of 4 percentage points on last week, according to data from Adzuna.

The largest weekly increase was for “transport, logistics and warehouse” jobs, which surged 21 percentage points to 275% of its February 2020 average level -- the highest level since the series began in February 2018.

Manufacturers also posted more job adverts - up 14 percentage points week-on-week, to 231% of its February 2020 average level.

But “catering and hospitality” saw a small dip, down 2 percentage points on last week, to around 113% of its February 2020 average.

The ONS adds:

This follows a recent upward trend for this category, having risen by 55 percentage points since 9 April 2021, just before the first easing of hospitality restrictions when pubs and restaurants reopened in England.

Top US and Chinese trade negotiators held “candid” talks today, their first under the Biden presidency, as Washington continues to raise concerns over Beijing’s trade practices.

In the long-awaited first official engagement between the US trade representative Katherine Tai and the Chinese vice-premier, Liu He, held virtually on Thursday morning Beijing time, the two sides emphasised the importance of the bilateral trade relations and agreed to further negotiations.

A statement from China’s commerce ministry said the US and China held “candid, pragmatic and constructive exchanges with an attitude of equality and mutual respect”.

In Washington, the office of the US trade representative said that Tai “discussed the guiding principles of the Biden-Harris administration’s worker-centred trade policy and her ongoing review of the US-China trade relationship, while also raising issues of concern.”

Here’s the full story:

While the pandemic has hit air travel, it has also created a boom in pet ownership.

UK retailer Pets at Home has achieved sales of more than £1bn for the first time, as more people have turned to furry, feathered and scaled friends in the lockdown.

My colleague Jasper Jolly explains:

The retailer and vet chain estimated that pet numbers increased by 8% during a year in which many people were stuck at home. The boom has led to pet food shortages.

The pandemic “structurally altered the dynamics of the UK pet care market”, the company said, with increased home working removing a barrier to pet ownership and increasing the emotional attachment to – and willingness to spend on – animals.

Pets at Home revenues grew by 7.9% to £1.1bn in the year to 25 March, which coincided almost exactly with the start of the UK’s lockdowns. That was a record in the company’s 30-year history.

It said there had been a pet “baby boom”. Sales of kitten and puppy products surged by 37% and 26% respectively, with training products and heated puppy beds in particular demand. Even less cuddly fish tank sales increased.

Reuters says Airbus has laid out ‘sweeping goals’ to expand production of its A320 jetliners over the next few years (initially from 40 per month today to 45 by the end of the year, and 64 per month by Q2 2023).

Demand for single-aisle jets is recovering as domestic travel rebounds, especially in the United States and China.

In anticipation of a continued recovery in that market, Airbus is asking its suppliers to “enable a scenario” where it can produce 70 single-aisle jets a month by the first quarter of 2024.

“Longer term, Airbus is investigating opportunities for rates as high as 75 (a month) by 2025,” it said.

Analysts at Jefferies described the move by Boeing’s main rival as “punchy production plans”.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

After seeing demand battered by the pandemic, aerospace manufacturer Airbus says the recovery is beginning.

It’s alerted its suppliers to prepare for a steep acceleration in production of its popular A320 single-aisle passenger jets, as it sets target above pre-pandemic levels in two years time.

The European aerospace group has confirmed plans to increase A320 output to 45 jets per month in the last quarter of this year, from 40 at present.

It has also set suppliers a new target -- 64 a month by the second quarter of 2023, and wants to ensure it has the long term capacity in place. That’s above the 60/month peak it hit in 2019, before Covid-19.

Airbus says it expect the commercial aircraft market to recover to pre-COVID levels between 2023 and 2025, led by the single-aisle segment.

Guillaume Faury, Airbus CEO, says this morning:

“The aviation sector is beginning to recover from the COVID-19 crisis”

Looking further ahead, Airbus is anticipating a “continued recovering market”. It also asking suppliers to “ enable a scenario” for production to expand further to 70 by the first quarter of 2024.

And long term, it’s also investigating whether it could boost production to 75 by 2025.

This steep ramp up looks like a sign of confidence in the recovery of the aviation industry from the pandemic - with Covid-19 vaccinations enabling a pick-up in international tourism.

Faury says Airbus wants its suppliers to be ready for the pick-up in demand.

“The message to our supplier community provides visibility to the entire industrial ecosystem to secure the necessary capabilities and be ready when market conditions call for it.

In parallel, we are transforming our industrial system by optimising our aerostructures set-up and modernising our A320 Family production facilities. All these actions are set in motion to prepare our future.”

Airbus is also slightly increasing its production goals for its small A220 jet, and the wide-body A350 - again, in a mix of provisional goals and firm plans.

• A220 Family: Currently at around rate five aircraft per month from Mirabel and Mobile, the rate is confirmed to rise to around six in early 2022. Airbus is also envisaging a monthly production rate of 14 by the middle of the decade.
  
  
• A350 Family: Currently at an average production rate of five per month, this is expected to increase to six by autumn 2022.
  
  
• A330 Family: Production remains at an average monthly production rate of two per month.

Also coming up today

Big Oil is reeling from a series of blows yesterday, over their failure to move faster to tackle the climate emergency.

US oil giants ExxonMobil and Chevron both suffered shareholder rebellions, with 61% of Chevron shareholders supporting a resolution to set targets to reduce all of its emissions. Activist hedge fund Engine No. 1 got two directors elected to the board of ExxonMobil.

And in a landmark case in the Hague, a Dutch court ruled that Royal Dutch Shell must reduce its global carbon emissions by 45% by the end of 2030.

Dan Gocher, Director of Climate & Environment at the Australasian Centre for Corporate Responsibility (ACCR) says these developments have “massive implications”.

“This news is nothing short of extraordinary, and it will have massive implications for the Australian oil and gas industry.

“Chevron, ExxonMobil and Shell are three of Australia’s largest oil and gas producers, and therefore three of our largest carbon polluters.

“All three companies will now be under enormous pressure from both shareholders and the wider public to cut emissions, and cut them fast.

European markets are rather subdued, after a lacklustre day’s trading in Asia which saw Japan’s Nikkei drop 0.3% and the Hong Kong Hang Seng dip 0.2%.

Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, says:

Some of the week’s froth has come out of the markets in Asia today, with equities edging lower, along with energy and precious metals and our good friends, the cryptocurrency space, while the US Dollar edged higher after an impressive rally overnight.

All the financial markets space, the price action looks corrective, rather than a structural turn, as short-term momentum ran out of the “inflation is dead, buy everything” that has swept markets this week.

A flurry of US economic data might move the dial later, with new durable goods orders, weekly jobless claims figures, and a second estimate of US growth in the first quarter.

The agenda

• 9.30am BST: ONS weekly realtime economic activity indicators
• 12pm: Bank of England policymaker Gertjan Vlieghe Speech: What government bond yields can tell us about future growth and inflation’
• 1.30pm BST: US weekly jobless figures
• 1.30pm BST: Second estimate of US GDP for Q1
• 1.30pm BST: US durable goods orders for April
• 3pm BST: US pending home sales for April