In the lyrics of Friends Will Be Friends by Queen:
Another red letter day
So the pound has dropped and the children are creating.
What does the phrase highlighted in bold mean?
Queen is a British band, and this usage of the intransitive create is British colloquial for "create a fuss", "make noise", or nearly, as ukayer says, "create havoc". The Compact Oxford Dictionary has this:
2 [no object] British informal make a fuss; complain:
little kids create because they hate being ignored
create verb (BE ANGRY) /kriˈeɪt/
[I] UK old-fashioned to show that you are angry
If she sees you with an ice cream she'll only start creating.
4. (Brit slang) to make an angry fuss,
–verb (used without object)
8. British. to make a fuss.
The Collins English Dictionary — Complete and Unabridged also has this:
6. (intr) Brit slang to make a fuss or uproar
See also this post by lynneguist on Separated By a Common Language, where I first encountred the term. It's used mostly for little children (or those considered little children), rather than adults.
Creating as in "creating havoc", i.e. helping to make the day even worse.