Aurelia Butler

To the tourists complaining about how much more expensive it is to visit the Greek island of Sifnos this summer, hotel manager Isidora Chandeli has a simple riposte: eggs.“Our visitors think we are taking advantage of high demand. They don’t consider the high inflation we all face,” Chandeli said. “Just so you understand, a single egg last year cost 25 cents — now it’s 45 cents.”Around Europe’s tourism hotspots, visitors have faced sharp price increases as businesses pass on rising costs to their customers. Claudio Scarpa, head of the Venice hotel keepers’ association, said the laundries the city’s innkeepers rely on had linked their prices to energy bills, which soared last year. “That’s had a significant impact on our budgets,” Scarpa said. “It has forced hotels to adjust their prices by 20 per cent.”Now rate-setters at the European Central Bank are becoming concerned that a fresh wave of summer inflation spurred by tourism could complicate their efforts to keep prices under control. The cost of flights, hotel rooms and holidays have risen fast as the sector, almost completely shut down in 2020, nears pre-pandemic levels of activity. The rebound in tourism, which directly provides about 4 per cent of EU output and indirectly supports 10 per cent, has added to the resilience of the region’s economy, which expanded 0.3 per cent between the first and second quarters.However, it is also contributing to services inflation. At 5.6 per cent in the year to July, this is now at an all-time high and well above the central bank’s overall target for consumer price growth of 2 per cent. Fabio Panetta, a member of the ECB executive board, pinned the blame for the latest rise in services prices on “robust” spending on holidays and travel. “It is important to monitor this component and its implications for the risks to overall inflation.”9.1mn visitors arrived in Spain in June, up 10% from last year © Enric Fontcuberta/EPA/ShutterstockThe evidence of higher costs is plentiful. Accor, Europe’s largest hotel chain with more than 3,000 sites across the region, said it had increased its average room rate 18 per cent in the first six months of this year from a year earlier. The average price of bookings through tour operator Tui has risen 7 per cent from last year, returning it to profit for the first time since the pandemic. Its chief executive said this month the recent heatwave and wildfires in parts of Europe had “only damped temporarily the previously strong dynamic”. The weighted average price of flights in Europe this year has increased 31.6 per cent from last year, according to data provider RDC.

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Data from Airports Council International Europe indicates more visitors are arriving from outside Europe, especially the US. Those long-distance flyers tend to spend a lot more than local counterparts once they arrive. A survey by the European Travel Commission, a body which promotes tourism in the region, found 41 per cent of travellers in the region expected to spend more than €1,500 per person on summer holidays this year, compared with 33 per cent last year. Demand, meanwhile, is soaring despite higher prices. Italy’s tourism minister Daniela Santanchè forecast more than 19mn visitors and €10bn of tourism income in July, despite heatwaves and floods, which helped it to overtake pre-pandemic levels. However, Italian tourist bookings dipped 1 per cent year on year to 82mn in August. Greece welcomed 5.76mn international visitors in the first five months of this year — up a third from a year earlier and surpassing pre-pandemic levels. Greek tourism revenues hit €1.75bn in May — a quarter higher than in the same month in 2022.Croatia, which became the eurozone’s newest member when it joined in January, welcomed 2.7mn foreign tourists in June, up 2.8 per cent from last year. The picture is similarly upbeat in Spain, where tourism minister Héctor Gómez hailed an “extraordinary” recovery after 9.1mn visitors arrived in the country in June, up 10 per cent from last year. “People are spending less on cars, or buying fewer clothes, but they aren’t giving up on holidays,” said Ramón Estalella, secretary-general of CEHAT, a Spanish holiday accommodation trade group. Estalella justified an 8 per cent rise in room rates in the year to June by saying they had still lagged behind overall inflation since 2019. “Hoteliers have not been able to cover the cost of inflation,” he said, adding that many were still paying off debts accrued during the pandemic. Chandeli shared that sentiment, saying this year’s 15 per cent rise in room rates at the boutique Astra Verina hotel in Sifnos was the first in four years. Greek tourism revenues hit €1.75bn in May — a quarter higher than in the same month in 2022 © Aris Messinis/AFP/Getty ImagesThat relative moderation may not be enough to convince the ECB to pause increases in borrowing costs once rate-setters return from their summer break. The central bank signalled last month it may be ready to pause its string of interest rate rises at its next policy meeting on September 14. But if services inflation stays high, it could be enough to convince them a further rate rise is needed.“The doves will be able to argue in September that, on the basis of lower forecasts for growth, the ECB should stop hiking,” said Holger Schmieding, chief economist at German bank Berenberg. “The problem is that an expensive summer tourist season could keep core inflation still elevated for a few more months.” More

BENGALURU (Reuters) – Thailand’s economy likely grew 3.1% in the April-June quarter from a year ago, up from 2.7% in the previous quarter, driven by increased foreign tourist arrivals, according to the median forecast of 21 economists polled by Reuters.On a quarterly basis, gross domestic product (GDP) was forecast to have grown by a seasonally-adjusted 1.2%, a slowdown from the 1.9% growth in the preceding quarter, according to a smaller sample of forecasts in the Aug. 14-17 poll.While the country’s tourism-driven economy is expected to improve gradually, visitor numbers are still well below pre-pandemic levels. Thailand is predicted to receive 29 million tourists this year, down from 40 million visitors in 2019, the last full year before the COVID pandemic.Exports, a key driver of growth, have contracted since October 2022, indicating weak global demand, especially from China, Thailand’s biggest trading partner.”The ongoing foreign tourism recovery amid returning visitors including from China, and resilient private consumption underpinned the economic expansion,” wrote Chua Han Teng, economist at DBS.”Yet, the drop in merchandise exports, while stabilising, continued to drag headline growth, and prevented a stronger growth improvement in 2Q23, given the challenging global economic environment.” Growth was forecast to average 3.7% this year, in line with the Bank of Thailand’s estimate, and 3.8% in 2024, a separate Reuters poll showed. More

In a statement, the ministry said the government will cut taxes in exchange for the price freezes, but added that the tax benefits can be “taken away” if companies violate the agreement.The agreement followed a meeting between economy minister Sergio Massa and executives from oil companies such as YPF and Vista earlier in the afternoon.The South American nation has been battling against sky-rocketing annual inflation which topped 113.4% through July, with monthly inflation set to rise again in August. More

BRUSSELS (Reuters) – When the United States launched its massive green subsidies push a year ago, many in Europe feared it would be a fresh blow to their regional economy grappling with the knock-on effects of war in Ukraine and lingering aftershocks of the COVID-19 pandemic.Yet while critics argue the European Union has yet to offer a coherent counter-plan to Joe Biden’s Inflation Reduction Act (IRA), Brussels appears to have done just enough to ease the most pressing concern that European companies would leave in search of dollar subsidies. This week marks the first anniversary of the Biden administration’s IRA legislation which offers $369 billion in tax breaks over 10 years for the production of electric vehicles, batteries, hydrogen or solar panels in the United States.The EU initially welcomed the climate-friendly shift by Biden, but became worried Europe’s best clean tech companies would up sticks to secure U.S. tax breaks, draining Europe of know-how, investment, new technologies and future jobs.So far there is little evidence of that happening.”There was a general anxiety that after the pandemic and the start of the war in Ukraine, a fear that the IRA would be a final blow to the EU economy,” said Niclas Poitiers, an economist at the Bruegel think tank in Brussels.”The importance of the IRA for investment decisions was somewhat overstated,” he said, adding there was no data yet on whether there was any massive diversion of investment away from the EU and into the United States as a result of the IRA.”There probably was some, there is some anecdotal evidence, but not massive.”Key to allaying the IRA’s attraction for European firms was an EU decision in March to relax its state aid rules to allow every national government to match the subsidies a European company would get in the United States.And already, those subsidies are flowing: German conglomerate Thyssenkrupp (ETR:TKAG) will invest around 3 billion euros ($3.27 billion) in a proposed green steel plant in Duisburg, Germany, including over 2 billion euros in state subsidies given EU approval in late July.STRAINED BUDGETS Officials also point out that the EU was supportive of green industries much earlier than the United States and that 37% of its massive post-pandemic recovery fund of 800 billion euros is earmarked for climate friendly investment.”Much of the ‘reaction’ to IRA was already in place before President Biden launched (his) own climate package,” a policy brief for the European Parliament requested by the economic committee said.To create longer-term, stable conditions for investment for companies involved with electric vehicles, batteries, hydrogen, solar panels, heat pumps or wind turbines, the EU is still working on a Net Zero Industry Act and the Critical Raw Materials Act that built on the Chips Act from 2022.Many EU officials were disappointed the European Commission dropped plans in June to propose a European Sovereignty Fund, the size of which has never been specified, that was to finance Europe’s transition to a green economy. But the plan faced resistance from national capitals reluctant to pump more money into EU coffers just as their budgets were strained by rising energy costs, migration challenges and support for Ukraine against Russian invasion.The parliament paper said the option finally chosen – which includes using funds from an already-agreed pandemic recovery fund – was not ideal because those disbursements will end in 2026. But it noted the U.S. model also had uncertainty built in because a change of administration could end IRA subsidies.However, the EU response is not without its critics.The complexity of EU financing through the recovery fund means it is available only to bigger companies, leaving smaller firms struggling to benefit. The EU approach also focuses on investment to build production and research capacity, helping at the start, whereas the U.S. tax break system means it pushes down running costs of production for the next 10 years.Loosening the EU’s state aid framework, while solving the problem of quick support that would match U.S. levels, means large, rich economies like Germany, France or Itay can afford to subsidise corporate investments, while relatively poorer EU members cannot – creating a rift in the EU’s single market, one of the bloc’s most prized achievements.The European Commission did not immediately respond to a request for comment.It also remains the case that Europe is, for the near future at the very least, dependent on China for clean tech components ranging from solar panels to the elements required for EV batteries.Now the race is on to pass the Critical Raw Materials and Net Zero Industry acts through the EU’s multi-layer legislative pipeline before the European Parliament dissolves itself in April 2024 ahead of new elections to the assembly.If that race is lost, those laws would have to be passed on to the new parliament and probably not be agreed on until 2025.($1 = 0.9184 euros) More

(Reuters) – Wall Street’s top regulator is set next week to adopt new transparency rules for the $20-trillion private investment fund industry, according to an official notice, acting on a proposal that has drawn sharp industry objections.The five-member U.S. Securities and Exchange Commission is also due to vote on Aug. 23 on a proposal, initially unveiled in 2015, that would require more broker-dealers to register with the Financial Industry Regulatory Authority (FINRA).In early 2022, the SEC proposed a set of changes for private fund advisers that would, among other things, require them to produce quarterly statements on performance and fees and submit to annual audits. They would also be prohibited from charging fees for services never rendered, among other provisions.The final version of the proposal, which has not yet been released, may have changed after an extended notice-and-comment period. Democrats hold the majority on the commission, meaning the final version is virtually assured to pass.Lawmakers and regulators have sought to increase oversight of the private asset management sector, citing risks to financial stability and insufficient investor protections in an industry that according to SEC figures has more than doubled in size over the last decade.Financial-reform advocates and Democratic lawmakers have supported the changes, saying they would help protect millions of retirement savers, much of whose money is parked in privately managed funds, and the retail investors increasingly drawn to private credit funds.Industry organizations say the SEC lacks the legal authority to adopt the rule and point to a 2022 Supreme Court ruling which sharply curtailed the federal government’s power to issue climate regulations.”Congress did not intend to give the Commission unbounded power to regulate private fund advisers or to limit the ability of investors to negotiate for terms that they and advisers believe are prudent,” the Securities Industry and Financial Markets Association said in a letter.The second proposal under consideration next week could, if adopted, require dozens of broker-dealers to register with FINRA. The SEC had originally issued the proposal in 2015 under then-Chair Mary Jo White.Under current rules, some broker-dealers who perform proprietary trades on exchanges of which they aren’t members need not join FINRA. However SEC officials say this exemption is outdated, given the growth of securities markets, and unduly shields some investment firms from oversight.The proposal would now require FINRA membership for such broker-dealers unless they are members of national securities exchanges and carry no customer accounts. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Japanese inflation grabs the Asian economic data spotlight on Friday as investors close out a bruising week marked by a soaring U.S. dollar, rising global bond yields and crumbling equity markets.The gloom enveloping markets will not have been lifted by the news late on Thursday that Chinese property developer Evergrande, the most indebted developer in the world, filed for bankruptcy protection in the U.S.With the nominal 10-year U.S. Treasury yield a whisker from printing its highest level since 2007 and the inflation-adjusted ‘real’ yield already the highest since 2009, there is a growing sense that the post-2008 world of ultra-low interest rates and borrowing costs might be gone for good.At the very least, investors are nervous and scrambling to adjust to the higher yield environment. A poor auction of 20-year Japanese Government Bonds on Thursday – one of the worst in decades, according to some analysts – only deepened the sense of anxiety.Figures on Friday are expected to show that core consumer price inflation in Japan eased to a 3.1% annual rate in July from 3.3% in June.The Bank of Japan is in a tight spot. It is reluctant to take another step back from ultra-loose monetary policy until it is sure the economy is out of deflation for good, but the yen’s weakness is raising expectations the BOJ will have to spend billions from its FX reserves to support the currency.The dollar rose to 146.50 yen on Thursday, and the euro this week rose above 159.00 yen for the first time since 2008.Japan’s second quarter growth smashed expectations thanks to booming exports, but July trade figures suggest that engine is already sputtering. Exports fell last month, and perhaps more importantly, shipments to China tumbled 13.4%.The People’s Bank of China insists it will keep liquidity reasonably ample and retain “precise and forceful” policy to support the economy. But given the tightening of financial conditions around the world, investors remain wary.The 10-year U.S. Treasury yield is above 4.30%, a whisker from highs not recorded since 2007 and the 10-year real yield at almost 2.0% is already at levels last seen in 2009. The dollar index is at a two-month high and has risen 4% in a month.This is taking its toll – financial conditions across emerging markets are the tightest since early December, according to Goldman Sachs (NYSE:GS)’s EM financial conditions index, and risk assets are getting pounded.The MSCI World, Asia ex-Japan and Emerging Market indexes are all down 11 of the last 13 sessions, and all three are having their worst months since September last year.The weekend can’t come quickly enough.Here are key developments that could provide more direction to markets on Friday:- Japan inflation (July)- Malaysia GDP (Q2)- Malaysia trade, retail sales (July) (By Jamie McGeever; Editing by Josie Kao) More