Aurelia Butler

LONDON (Reuters) -Global industrial production and containerised freight flows remained in the doldrums at the start of the third quarter, confounding predictions earlier in the year for a strong rebound.Manufacturers and distributors in North America and Europe were struggling to reduce excess inventories after the post-pandemic rotation from goods to services spending.Rising interest rates and a cost-of-living squeeze have also dampened expenditure on expensive long-lived durable items.Global industrial output was up by less than 1% in the second quarter of 2023 from the same period in 2022, according to the Netherlands Bureau for Economic Policy Analysis (CPB).Such slow growth has been associated in the past with cycle-ending recessions or pronounced mid-cycle slowdowns (“World trade monitor”, CPB, August 25).The volume of world trade was actually down by almost 2% compared with the same period a year earlier, a retreat that has always been associated in the past with outright recession.As a result, global growth is entirely dependent on the services sector as consumers boost spending on travel, tourism and other personal services in reaction to the lockdowns of 2020-2022.The commodities side of the economy is stuck in the doldrums as households pare back pandemic-era spending on products and businesses try to clear excess stocks.Chartbook: Global container freightIn the United States, the volume of container trade handled through the nine largest ports in July was the lowest for the time of year since 2017.The volume of container freight hauled on the major railroads in June was the lowest for the time of year since 2012.Road freight has held up better than rail but it was still down by almost 1% in June compared with a year earlier.In Japan, the volume of freight handled through Narita airport in the first seven months as a whole was the lowest for over a decade, with the exception of the pandemic’s first wave in 2020.In the United Kingdom, freight through Heathrow airport had fallen in the first seven months to the lowest since 2007 with the exception of the pandemic in 2020 and the recession in 2009.Air freight is considerably more expensive than ground shipping so it is used only for high-value items and when speed is a priority.But with inventories high throughout the supply chain there is no urgency for deliveries and air cargo carriers have struggled to compete.Surface freight volumes appear to be growing a bit more in Asia, boosted by China’s re-opening after particularly severe lockdown restrictions and devastating exit wave from the epidemic.Container trade through the port of Singapore, a major transshipment point for the region, has climbed to record levels.Throughput hit 3.43 million twenty-foot equivalent units (TEUs) in July 2023 up from 3.29 million in July 2022 and 3.24 million in July 2019.In other parts of Asia, the picture is more mixed. China’s coastal ports handled 23.7 million TEUs in July 2023 up by less than 2% from 23.3 million a year earlier.But the country’s internal freight carried by road, rail, air and river shipping reached a record 2,016 billion tonne-kilometres in July up by more than 7% from 1,881 billion a year ago.South Korea’s KOSPI-100 equity index, which is a good proxy for trends in global trade, given its high-weighting of exported-oriented firms, has been up year-on-year since June.Rising share prices would be consistent with an improving outlook for global trade, but the evidence for it so far is limited.Globally, industrial activity and freight still seem to be flatlining after the merchandise-led boom associated with the pandemic gives way to a services-led post-pandemic period.The worst of the freight downturn between the middle of 2022 and the start of 2023 appears to be over, but there is no sign of a significant recovery.Related columns:- Global container freight stuck in doldrums (June 23, 2023)- Global freight shows signs of bottoming out (April 27, 2023)John Kemp is a Reuters market analyst. The views expressed are his own More

ABOARD AIR FORCE ONE (Reuters) – The White House expects to see meaningful progress on GE jet engines and civil nuclear technology in upcoming bilateral talks between U.S. President Joe Biden and India Prime Minister Narendra Modi, national security adviser Jake Sullivan told reporters on Thursday.Earlier this year, the aerospace unit of General Electric (NYSE:GE.N) announced it had signed an agreement with India’s state-owned Hindustan Aeronautics to jointly make engines in India to power fighter jets for the Indian Air Force. More

LONDON (Reuters) – British employers concerned about the economic outlook reduced the number of workers they hired via recruitment agencies last month at the fastest pace in more than three years, an industry survey showed on Friday.The Recruitment and Employment Confederation (REC), a trade body, said hiring of permanent staff fell by the most since June 2020, early in the COVID-19 pandemic, while spending on temporary workers dipped for the first time since July 2020.”For now, the labour market has more slack than it has since the heights of the first lockdown,” REC Chief Executive Neil Carberry said – though he added there were some signs that employer confidence might improve later this year.REC also reported that starting salaries rose at the joint-slowest pace since March 2021, although this was still a large increase by historic standards.Friday’s figures highlight the dilemma for the Bank of England as it tries to judge if the economy is cooling enough to reduce wage growth – which was a record 7.8% in the three months to June – to a level that will allow inflation to return to its 2% target.A BoE survey on Thursday showed employers expect to raise wages by 5% over the coming year, above the 3-4% rate typical before the pandemic, when inflation stayed close to target.BoE Governor Andrew Bailey said on Wednesday that the BoE was near the end of its cycle of rate hikes – which have taken interest rates from 0.1% to 5.25% in less than two years – but it was too soon to know if the job was done.A risk for the BoE is if the pandemic, Brexit and high inflation have disrupted Britain’s labour market in a way that makes wages less responsive to economic downturns, meaning more unemployment than before would be needed to tame inflation. REC said there were “widespread reports” from its members that the pool of jobseekers had been swollen by increased redundancies. The number of candidates rose in August at the second-fastest rate since December 2020.The REC surveyed around 400 recruitment agencies between Aug. 10 and Aug. 24. More

Senior Federal Reserve officials signalled on Thursday that the US central bank would hold interest rates steady at its meeting in September, even as they resisted declaring victory in their fight against inflation.Lorie Logan, president of the Dallas Fed and voting member on the Federal Open Market Committee, became the latest official to signal support for the central bank to keep its benchmark rate at a 22-year high when the FOMC gathers later this month.“I’m not yet convinced that we’ve extinguished excess inflation. But in today’s complex economic environment, returning inflation to 2 per cent will require a carefully calibrated approach — not endless buckets of cold water,” she said at a Dallas Business Club event.Logan lauded the decision to slow the pace of rate rises at the June meeting, when the Fed skipped an increase only to resume tightening in July. “Another skip could be appropriate when we meet later this month,” she said.Logan, who is considered one of the Fed’s most hawkish officials, also cited the recent tightening of financial conditions as potentially offsetting the need for further rate rises, even though she maintained that momentum in the labour market and economy remained strong.Logan’s comments followed those from John Williams, president of the New York Fed and a permanent FOMC voter, who on Thursday said that monetary policy was in a “good place”. Williams said the Fed would be closely parsing incoming data as it determines whether or not the fed funds rate is at a level considered “sufficiently restrictive” to get inflation under control in a timely fashion.

In the clearest indication that the Fed may need to tighten money supply later in the year, Logan emphasised that the recent easing of price pressures would not necessarily translate to “low-enough inflation”, adding that there was “work left to do”. After 11 interest rate increases since March 2022, the federal funds rate hovers between 5.25-5.5 per cent. Jay Powell, the Fed chair, has also said the central bank should approach further decisions “carefully”.Christopher Waller, another hawkish Fed governor, is also on board with this approach. He said this week that US economic data did not suggest the Fed needed to do anything “imminent” in terms of monetary tightening, though it was too early to say whether the recent moderation in inflation represented a “trend” or just a “fluke”.“I want to be very careful about saying we’ve kind of done the job in inflation until we see a couple of months continuing along this trajectory,” Waller told CNBC in an interview on Tuesday. More

Yu’s bind highlights the difficulty Beijing faces in kick-starting weak consumer spending. While lowering interest rates eases the financial burdens for households, a dire economic outlook and lack of longer-term reforms in areas such as pensions and healthcare, means consumers don’t have the means to loosen the purse strings, analysts say.”The rate cuts have little impact on my spending power,” said Yu, who works for an asset management firm, pointing to one of the government’s stated aims for those measures.China said last week it would cut interest rates on existing mortgages and eased rules for first-time buyers in big cities, in what the central bank and financial regulators jointly said were moves “conducive to expanding consumption.”But to prevent profit margins from shrinking further, state-owned banks have also lowered deposit rates by 10-25 basis points in a coordinated move.Analysts at Nomura estimate the mortgage rate cuts could save borrowers 200-300 billion yuan ($27-$41 billion) a year. But they also warn that a 15 basis point cut in interest rates on Chinese households’ 131.4 trillion yuan of deposits reduces interest income by 197 billion per year.Mortgage rates for first homes are around 4%, while one-year fixed deposit rates are roughly 1.5%.”It’s more of a redistribution of income,” said Ting Lu, chief China economist at Nomura, adding it had “limited” impact on consumption.Trying to stabilise the property market in an economy where 70% of household wealth is in real estate is not without merit, analysts say. But ultimately, the most effective way to encourage Chinese people to spend would be to transfer resources to consumers from other sectors of the economy, rather than from household savings.”The main constraint is people’s income,” said Zhaopeng Xing, senior China strategist at ANZ, adding the rebound in consumer confidence of the latest measures will be “mild.”DEPOSITORS HITYu estimates his monthly mortgage payments would drop by 1,000 yuan, which would be somewhat offset by the lower interest income on his deposits.In the hope of preserving his future returns, he may move some money into stocks and bonds.But others are more risk averse, especially amid growing job uncertainty.Li Xiao, a data analyst in Shanghai, says he will keep the money in the bank despite being unhappy with the lower rates.”The government wants to boost consumption, but ultimately it’s the depositors who bear the costs,” Li said. “People don’t consume because they don’t have money so cutting deposit rates cannot really work.”Guo, who works at a state-owned company in the southern Guangdong province and spoke on condition of partial anonymity, said he plans to keep saving “even if deposit rates drop to zero.””The economy is bad, and people don’t have enough confidence,” he said. “Making sure you don’t lose the principal is already a win.”Nancy Yang, who works for an auto parts supplier in the central city of Wuhan, said the main reason she is not spending her money is that her employer did not pay out end-year bonuses for 2022.”I’m not saving for the small amount of interest, but because there are too many uncertainties: unstable businesses, no rise in income, mortgage payments, child raising,” Yang said.”Keeping cash is really important.”($1 = 7.3108 Chinese yuan) More