Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.France is increasing pressure on the European Commission to address complaints raised by protesting farmers, including about imports from Ukraine and a trade deal being negotiated with Latin American countries.As farmers in France continue to blockade highways and disrupt food supplies, President Emmanuel Macron on Tuesday pledged to defend their interests “not by opposing or pointing to Europe as the culprit” but by asking for EU policy reforms. “At the European level, we must have a policy that is consistent with the food sovereignty that we defend.”Macron reiterated France’s long-standing concerns that a free-trade deal with the Mercosur group of countries — Argentina, Brazil, Uruguay and Paraguay — would lead to imports that do not respect European standards, such as on antibiotic usage on chicken farms. “We ask that the agreement as it is in place not be signed,” he said.Macron’s comments come as farmers in France protest about rising costs, falling profits and new regulations as Brussels tries to cut carbon emissions and improve biodiversity. Similar protests are also starting in Belgium where farmers on Tuesday moved to block a crucial port, while German farmers have also blocked motorways and prevented a minister from disembarking a ferry.Among farmers’ grievances are local and EU regulations, while in France, Poland, Slovakia and Romania, they have also objected to cheaper imports from Ukraine flooding their markets. After the Russian full-scale invasion in 2022, the EU agreed to lift tariffs on Ukrainian grain and produce, which have lower production costs and do not have to follow EU standards.On the issue of agricultural imports from Ukraine, another irritant for farmers, Macron said he would raise it at the summit as well because they were “destabilising the European market” for chicken and eggs.The commission has bowed to demands to add quotas on eggs, poultry meat and sugar in its proposal to extend the measures, which is expected on Wednesday, two officials told the Financial Times. Once imports exceed the average annual level of 2022 and 2023 Ukrainian exporters will pay the EU tariff. Poland has signalled it will lift its unilateral embargo once these measures are agreed.The farmers’ protests, and the desire for EU governments to extract concessions from Brussels required to placate them, were set to gatecrash an EU leaders’ summit on Thursday designed to focus on aid to Ukraine. Macron said he would meet the head of the commission, Ursula von der Leyen, to discuss agricultural and trade issues on the sidelines of the summit. Leaders from countries with farmer protests are co-ordinating ahead of the summit, people briefed on the discussions told the FT, and would bring a united front demanding flexibility from the commission.Among the concerns raised at protests across the bloc is the rigidity of rules governing what agricultural activities are eligible for EU subsidies. “Farmers across the EU need support if they are going to be a part of the green transition,” said one of the people. “So it’s a co-ordinated approach between capitals [ahead of the summit].”Brussels hands about €60bn annually to farmers through the Common Agricultural Policy, in what is the biggest single chunk of the EU budget, and it has been tightening green standards to qualify for the subsidies. The commission also ceded on another demand made recently by France and a coalition that Paris said included 22 member states: to push back the reintroduction of an EU requirement for farmers to leave 4 per cent to 7 per cent of their land fallow to protect biodiversity. The rule had been suspended since the outbreak of the war in Ukraine to boost farm production, but was supposed take effect this year. Von der Leyen’s spokesman Eric Mamer on Tuesday said the commission would renew the exemption to allow farmers to plant on the land. The exact details might change, he said.On the Mercosur trade deal, Mamer said talks would continue despite France’s renewed push against it, but added that an agreement was not imminent. “The negotiations are ongoing but we are not there,” he said. EU officials suggested the talks could be strung out beyond June elections for the European parliament, and wait for the political heat to die down. France, the biggest agricultural producer in the EU, has long opposed finalising a deal provisionally agreed in 2019 but Macron has been increasingly vocal about it in recent months, arguing that the pact would be bad for the environment and French farmers. In other EU countries too, agriculture groups have objected to the deal’s increased quotas for meat and produce from Latin America.Trade commissioner Valdis Dombrovskis in December told the FT he could push the deal through without France given that it requires support from a majority of member states, not unanimity.Other member states including Germany, Spain and Sweden are in favour of the deal. “We still hope negotiations will continue and French tractors in the street won’t stop it,” said an EU diplomat.“The vast majority of member states want this deal. We are concerned about these reports,” said another.Additional reporting by Henry Foy in Brussels More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The IMF has warned UK chancellor Jeremy Hunt against cutting taxes, arguing the country needs to curb public borrowing and prioritise spending in areas such as health, education and tackling climate change.Pierre-Olivier Gourinchas, IMF chief economist, told the Financial Times the UK’s focus should be on “the path towards a fiscal consolidation” despite expectations that Hunt will cut taxes at his spring Budget.Hunt should be “trying to rebuild fiscal buffers . . . in the context in which there are important spending needs”, Gourinchas said, rather than add to the £20bn of personal and business tax cuts delivered in November.“We would rather wish they would not do this type of tax cuts, and that they would instead focus on both addressing the spending needs and on the path towards a fiscal consolidation,” Gourinchas added.The comments came as the IMF predicted the UK economy will expand by a tepid 0.6 per cent in 2024, the second-slowest pace in the G7 after Germany and little better than the 0.5 per cent rate estimated for 2023.UK gross domestic product growth is forecast to accelerate to 1.6 per cent in 2025, the IMF added in an update on Tuesday to its most recent World Economic Outlook.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Hunt and Prime Minister Rishi Sunak have stoked expectations that the upcoming March 6 Budget will contain a fresh round of tax giveaways to bolster the Conservatives’ polling figures ahead of the general election.On a visit to Davos, Switzerland, earlier this month, Hunt dropped heavy hints that he wants to cut taxes again at the Budget as he argued lower-tax economies tended to grow faster.The IMF last summer said the Treasury would probably need to lift spending by more in the medium term than it currently expects to preserve “high-quality” public services and invest in the green transition.As a result, the UK needed to bolster taxation on carbon and on property, while eliminating loopholes in wealth and income taxation, the IMF said at the time in its “Article IV” assessment of the UK economy.Real-terms spending by UK government departments is currently meant to rise by just 1 per cent a year, according to Treasury plans. The IMF said the government’s spending plans would be “very challenging to achieve”.Hunt rejected the IMF’s recommendations on tax policy on Tuesday.“The IMF expect growth to strengthen over the next few years, supported by our introduction of the biggest capital investment tax reliefs anywhere in the world, alongside national insurance cuts to improve work incentives,” he said.“It is too early to know whether further reductions in tax will be affordable in the Budget, but we continue to believe that smart tax reductions can make a big difference in boosting growth,” Hunt added.UK underlying public debt as a share of GDP is forecast by the Office for Budget Responsibility to rise from 89 per cent this year to more than 93 per cent in three years’ time, before edging down in half a decade.Hunt’s scope for tax cuts will hinge heavily on the remaining “fiscal headroom” that the chancellor has as he tries to meet his self-imposed fiscal rule of ensuring public debt falls as a share of GDP in five years.Richard Hughes, chair of the OBR — the government’s official fiscal watchdog — has said that the £13bn Budget headroom forecast in Hunt’s Autumn Statement in November is heavily exposed to changing assumptions on interest rates and data revisions.Internal estimates from the Treasury suggested last week the headroom going into the March Budget may not be far off the November prediction, leaving Hunt with only modest scope to cut taxes and hit his fiscal target.Gourinchas said it was important that the UK continues its progress towards lower inflation, noting that price growth is coming down faster than expected.Consumer prices inflation edged up to 4 per cent in December from 3.9 per cent the previous month, but that is well under levels exceeding 10 per cent a year earlier.The IMF in its report said in many regions around the world inflation has been falling more rapidly than expected, opening the door to a “soft landing” for the global economy in the wake of aggressive central bank interest rate increases. But it has been counselling against immediate rate cuts given the need to decisively quash inflation.The Bank of England is widely expected to maintain its policy interest rate at 5.25 per cent on Thursday as it seeks to keep the lid on price growth.The IMF said it expected the BoE to hold firm in the coming months, before it cuts its official rate by half a point in the second half of this year.The IMF upgraded its forecasts for global growth this year by 0.2 of a percentage point to 3.1 per cent, and said Russia’s GDP was forecast to rise 2.6 per cent this year, more than double the rate it predicted in October. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Russia’s economy will expand much more rapidly this year than previously expected, according to the IMF, as President Vladimir Putin’s military spending feeds through into wider growth. Gross domestic product is forecast to rise 2.6 per cent this year, more than double the pace the IMF predicted as recently as October, and slightly slower than the 3 per cent expansion estimated for 2023. The Russian upgrade, by 1.5 percentage points, is the largest for any economy featured in an update to the fund’s World Economic Outlook, released on Tuesday.The figures will raise fresh questions over the effectiveness of multiple rounds of western sanctions aimed at depressing the fiscal revenues harvested by the Kremlin to finance its war in Ukraine.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The IMF’s prediction paints a stronger picture of the Russian economy’s immediate outlook than even the Kremlin’s own forecasters. Russia’s conservative central bank forecast growth of just 0.5-1.5 per cent in 2024 last November, a drop from 2.2-2.7 per cent in 2023. The more bullish economy ministry has said growth in 2023 may reach 3.5 per cent but expects a smaller rise of 2.3 per cent this year. Pierre-Olivier Gourinchas, the IMF’s chief economist, said the new projections remained “somewhat preliminary” as the fund’s economists attempted to validate Russian statistics. “It is definitely the case that the Russian economy has been doing better than we were expecting and many others were expecting,” he told the Financial Times in an interview. This could be explained by the strong stimulus provided by government spending in the Russian “war economy”, he said. Firm commodity prices were helping to hold up fossil fuel-related export revenues and were an important contributor to overall activity. But Gourinchas warned that in the longer term the potential growth of the Russian economy was likely to be lower than before the full-scale invasion of Ukraine almost two years ago. Putin, who traditionally leaves macroeconomic policy to his technocrats and has shown even less interest in its finer points since the invasion, has himself predicted that growth will rise even above Russia’s official forecast. The Russian president has said GDP growth for 2023 could rise above the 3.5 per cent prediction and potentially even past 4 per cent. “It’s constantly being calculated, so there might be more GDP growth,” Putin told an audience of businessmen in Khabarovsk this month. Putin said the country’s economic performance was “an amazing result. They are supposed to be smothering and pressuring us from all sides.”A week later, Putin claimed Russia’s 2023 growth was “founded foremost on domestic consumer and investment demand”, which he said included record spending on construction as well as industry, agriculture, tourism, and freight transport.But senior economic officials warned the spending could be overheating the economy. “If you try to drive faster than the car’s design allows and step on the gas as hard as you can, then the engine will overheat sooner or later and we won’t get far. We might go fast, but not for long,” central bank governor Elvira Nabiullina said in December.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The fund’s predictions for Russia’s economy are stronger than those of the World Bank, which earlier this month said it expected growth of 1.3 per cent in 2024 and 0.9 per cent in 2025. The analysis came as the IMF upgraded its forecasts for global growth this year by 0.2 percentage points to 3.1 per cent in an update to its October outlook. Growth is expected to hold firm at 3.2 per cent in 2025, it added. The improved global outlook comes as inflation falls more rapidly than expected in most regions, meaning the likelihood of a “hard landing” — in which elevated borrowing costs induce a sharp slowdown — for the world economy has receded further. “Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy,” the IMF said. It predicted global inflation would fall to 5.8 per cent in 2024 and 4.4 per cent in 2025. Additional reporting by Anastasia Stognei in Riga More

The 30-year fixed mortgage rate rose to nearly 8% in the fourth quarter, the highest in two decades, prompting potential homeowners to put off their purchase plans. Pulte reported revenue of $4.29 billion, missing expectations of $4.47 billion, according to LSEG data. The third-largest U.S. homebuilder by volume sold 7,615 homes in the quarter, down 13.9% from the prior year, and reported a 2.5% drop in average selling prices. Homes sold were also below the company’s estimate of 8,000.Its gross margins of 28.9% also came in below its forecast of 29-29.5%, mirroring a similar trend at D.R. Horton. Atlanta-based Pulte reported net income of $3.28 per share, compared with analysts’ average estimate of $3.22 per share. The company also said it would buy back shares worth $1.5 billion.Shares of the company fell 1% to $105 in premarket trading. More

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