Aurelia Butler

The survey from National Australia Bank (OTC:NABZY) Ltd (NAB) released on Tuesday showed its index of business conditions dipped one point to +17 in January, still well above its long-run average.The volatile measure of confidence fell back to -4, erasing January’s bounce to +6.”Overall, the survey confirms the ongoing resilience of the economy through the first months of 2023, though we continue to expect a more material slowdown in demand later in the year when the full effect of rate rises has passed through,” said Alan Oster, NAB’s chief economist.The survey paints a mixed picture for the Reserve Bank of Australia (RBA) which cited the strength of business activity as one reason it hiked interest rates to a decade-high of 3.6% this month.Markets had thought another two hikes were likely, until turmoil in the U.S. banking sector radically altered thinking on policy tightening worldwide.Now, swaps and futures imply only a minor chance the RBA will lift rates at its April meeting, and suggest it could be done tightening altogether.The survey was conducted from Feb. 20 to 28, so it missed the recent chaos in financial markets after Silicon Valley Bank’s collapse.Conditions were generally upbeat with the survey’s measure of sales at a very high +27 in February, supported by historically low unemployment and rapid population growth.Measures of employment edged up 1 point to +11, while profitability eased a touch to +14.The survey’s measure of labour costs ticked up to a quarterly rate of 2.8%, but retail price growth eased to 1.9%. More

Siemens is scouting for investments in south-east Asia to diversify away from China, as multinationals work to reduce supply chain risks against a backdrop of geopolitical tension between the west and Beijing. The German group, one of the world’s biggest industrial conglomerates, is taking on staff and considering adding factories in fast-growing economies including Indonesia, Vietnam and Thailand, said Judith Wiese, Siemens’ chief people and sustainability officer, in an interview.“It is a very varied region, but one that has a lot of potential and with the world talking very much about the US and China from a diversification perspective, it is very interesting for us,” Wiese, also a member of Siemens’ management board, said in Singapore.Rising tension between Washington and Beijing has made many multinationals wary of their dependence on China. Supply chains are being hit by US efforts to curb China’s access to cutting-edge technology, adding to shocks caused by the country’s former Covid-19 policy as well as slowing growth.Wiese said that while China remained Asia’s main manufacturing hub, it was more easily replaced as other places evolved. South-east Asia “has opportunities as a market as well as from a manufacturing perspective”, Wiese said.Siemens, a bellwether of the global economy that employs more than 311,000 people, has a large office in Singapore but China is its largest market in Asia and the second-largest overseas after the US. In 2021, 13 per cent of group sales came from China but the country is more important for some divisions, such as Siemens’ industrial automation and digitisation arm, which in the same year made a fifth of revenues there.In the wake of Russia’s invasion of Ukraine, which has forced Germany to reassess how its economy could have become so reliant on Russia, the country’s industrial giants have also come under increasing pressure to review their dependence on China.Philip Buller, analyst at Berenberg, said Siemens “cannot ignore geopolitics and since Russia invaded Ukraine, every government on the planet has started rethinking political ties, not just with Russia but also China”.But the driving force behind Siemens’ investment decision, Buller said, would be outlook on demand and growth. “For several decades, China has been the growth engine, but that is now moderating,” he added.

A number of multinationals are reducing exposure to China and building up a supply chain role for other countries, in a “China plus one” production strategy. Sony, Apple, Samsung and Adidas are among businesses that have shifted production from China to south-east Asia, including Vietnam and Thailand.“European companies have been slower to shift their footprint to south-east Asia, but I think you’re going to see a rush now thanks to the escalating threat of confrontation and conflict between the US and China,” said one Singapore-based lawyer who advises global manufacturing businesses. India has similarly profited from companies moving or adding production lines out of China. Unlike south-east Asia, where groups must navigate a number of countries with different regulations, India is a single large market and has been touted as having potential to recreate the conditions that made China the world’s manufacturing powerhouse. Wiese said: “In terms of diversification [in Asia], it is China, India and Asean [the Association of Southeast Asian Nations].” More

The Westpac-Melbourne Institute index of consumer sentiment was unchanged in March, following a dive of 6.9% the month before. The index reading of 78.5 meant pessimists greatly outnumber optimists.”Index reads below 80 are rare, back-to-back reads even rarer,” noted Westpac chief economist Bill Evans. “Both the COVID shock and the Global Financial Crisis saw only one month of sentiment at these levels.”The result was echoed by a weekly survey from ANZ which showed a 2.9% drop to the lowest since April 2020, when the pandemic closed much of the country.Both found mortgage holders and tenants were particularly gloomy after the Reserve Bank of Australia (RBA) lifted its cash rate a quarter point to 3.60% on March 7.Markets had thought another two rate hikes were possible, until turmoil in the U.S. banking sector radically altered thinking on policy tightening world wide.Now, swaps and futures imply only a minor chance the RBA will lift rates at its April meeting and could, in fact, be done tightening altogether.The impact of higher borrowing costs on household budgets was already clear with the Westpac measure of whether it was a good time to buy a major household item sliding 4% to the lowest in over a decade. The index of the economic outlook for the next 12 months dropped 2.3%, though the outlook for the next five years did bounce 5.6%. The survey’s measure of family finances compared with a year ago edged up 2.2% after diving in February, while the outlook for finances over the next 12 months fell 1.8%. More

LONDON/NEW YORK (Reuters) -The International Monetary Fund (IMF) and Argentina reached a staff-level agreement on the fourth review of their $44 billion loan program, the IMF said in a statement on Monday, confirming that some economic targets for the country could be eased.The IMF staff said that adjustments were being requested to key targets to build up foreign currency reserves, which has been hampered by a major drought gripping the grains producing nation that has hurt exports of soy, corn and wheat.It said adjustments would be focused on early 2023 and would help adapt the program for the “impact of the increasingly severe drought”, while also taking into account plans by the country to save dollars by cutting spending on energy imports.Argentina, the world’s biggest exporter of soymeal and soyoil and the No. 3 for corn, is facing the worst drought in at least six decades, combined with repeated heat waves.The IMF said that the country would need to strengthen its policy package in the face of the drought to ensure stability, rein in annual inflation running near 100% and address what it called “recent policy setbacks”.Reuters previously reported that Argentina was looking to lower the bar on the reserves targets agreed with the IMF, including by linking the targets to its exports.”The IMF is acknowledging that the macroeconomic backdrop has become more challenging, especially considering the severe drought,” said Gordian Kemen, a New York-based head of EM sovereign strategy at Standard Chartered (OTC:SCBFF).Even so, he said, it was unclear how Argentina would be able to “re-accelerate reserve accumulation later”, especially with pressure to spend ahead of elections slated for October.SCARCE RESERVESArgentina’s net reserves stood at around $4.2 billion at the end of February, according to calculations from Buenos Aires-based firm FMyA.The review is now pending board approval, after which some $5.3 billion would be made available to Argentina.The current loan arrangement was worth $44 billion when it was agreed in early 2022 to replace a failed $57 billion program from 2018. Most of the cash would be used to pay the fund back.Argentina surprisingly announced in January a debt buyback despite depleted hard currency reserves – a move that Moody’s (NYSE:MCO) considered a default, while S&P and Fitch did not. A top IMF official later said the fund would “prefer not to have actions that undermine the reserve accumulation that we’re assuming in the program.” More