Aurelia Butler

OTTAWA (Reuters) – Canada and the United States are going to argue at a North American leaders’ summit next week that resolving a dispute over measures that favor Mexican energy companies would help draw more foreign investment to Mexico, Prime Minister Justin Trudeau said on Friday.”Both (U.S) President (Joe) Biden and I are going to be… fairly clear with President (Andres Manuel) Lopez Obrador that this… needs to be understood as a way to help Mexico develop, a way to continue to draw in investments from companies in Canada and the United States,” Trudeau told Reuters.Asked if he hoped to make progress at the summit in Mexico City, Trudeau said: “Absolutely”. The United States and Canada entered into dispute settlement talks last year with Mexico under a North American trade deal, known as the USMCA, charging that Mexican energy policies were discriminatory and undermine international firms.Trudeau will arrive in Mexico City on Monday for a three-day visit, which will include bilateral meetings with both Biden and Lopez Obrador. He will meet with business leaders from all three countries on Monday.Lopez Obrador, a leftist energy nationalist, has pledged to revive state-owned power utility Comision Federal de Electricidad (CFE) and oil producer Petroleos Mexicanos (Pemex), which he argues his predecessors deliberately undermined to cede Mexico’s energy market to foreigners.”I understand he wants to put more of an emphasis on the state-owned energy companies,” Trudeau said in his office in Ottawa, “but it has to be done in a responsible way, in a way that understands that he’s a part of (USMCA) and he has to abide by those rules.”The United States and Canada are challenging amendments to Mexican legislation that prioritize distribution of CFE-generated power over cleaner sources of energy provided by private-sector suppliers, such as wind and solar. “Canadian companies invested about C$13 billion ($9.7 billion) in energy infrastructure. In Mexico, C$5 billion of that is specifically around renewables,” Trudeau said. His message to business leaders will be that the new trade pact is working, he said, and is “creating jobs, opportunity and growth across our countries”.Talks with Biden will likely focus on “maximizing economic opportunities” because there is a great deal of “economic turbulence coming in the coming months,” Trudeau said, citing supply chains, the war in Ukraine, inflation and higher interest rates.($1 = 1.3437 Canadian dollars) More

WASHINGTON (Reuters) -The U.S. economy appears headed for a soft landing, with recent economic data pointing to an ongoing recovery, not a recession, White House economist Heather Boushey told Reuters on Friday.Boushey welcomed Friday’s data showing the U.S. economy adding jobs at a solid clip in December, with the unemployment rate dropping to a pre-pandemic low of 3.5%, and said the biggest economic challenge now was persistent tightness in labor supply.Asked whether the United States could avoid a recession, Boushey, a member of the White House Council of Economic Advisers, said, “There are no indications that that is where we are now.” “The steps have been taken and it looks like we are in a very good position to have that soft landing that everyone is talking about,” she said. A soft landing is the ideal Federal Reserve policy goal after raising interest rates, a situation in which inflation slows but there are not enough job losses to trigger a recession. Other challenges include the impact of the war in Ukraine on energy prices and ongoing COVID-19 risks, especially with China’s shifting away from its zero-COVID policy, Boushey said.Boushey said she also worried that challenges finding affordable care for children, the elderly and the disabled were still keeping workers out of the labor force. President Joe Biden had hoped to enact reforms to fund universal preschool and ensure improvements to the “care economy,” but failed to win sufficient support in Congress. Prospects have dimmed further given the divided Congress, but Boushey said Biden would continue to push for progress.”We continue to see there is a crisis of care that is holding back labor force participation for both men and women,” she said, adding that U.S. rates were “quite low” relative to other advanced economies.”It is an important issue,” she said. “If you care about getting more people into the labor force, this is exactly where we need to focus our attention.” Still, supply chain issues driving inflation higher have been addressed and prices looked likely to continue to ease, she said.”The data that keeps coming out month after month shows that we continue to move forward. The evidence is not consistent with what a recession typically looks like,” she said. “The signs all point to ongoing recovery and robustness in the labor market.” More

The accelerating pace of food price inflation in recent months has come as a nasty shock to British consumers, who had grown accustomed to their weekly shop becoming cheaper relative to household incomes.According to data from the British Retail Consortium and NielsenIQ, UK food prices were 13.3 per cent higher in November than in the same month a year ago. The official ONS measure is even higher, at 16 per cent for the same month. Not since the late 1970s have prices risen at such a rate.Supermarkets all say their own prices are rising at a slower rate than the headline figures, which make no allowance for shoppers trading down to cheaper products or simply buying less. But they also acknowledge that customers are feeling the squeeze and looking to economise in any way they can. Several have publicly stated that they will forgo some profit this year to keep pricing competitive.If they are not profiting from rising prices who — if anyone — is?

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Feed, fuel and fertiliserThe most significant costs across the food chain are the “three F’s” — feed, fuel and fertiliser. Increases in the prices of these are felt first by farmers, followed by processors and finally by retailers and their customers. Processors are often shielded from price increases for a while by forward purchasing of ingredients. Charles Hall, head of research at Peel Hunt, said this meant it was quite normal for price rises to take six months or more to filter through to the consumer.“If you take dairy, farmers started to see feed prices rise at the end of 2021. That then accelerated into 2022 with the Ukraine war but the prices of milk didn’t really start to rise until May,” he said.Livestock farming had been particularly affected by rising feed prices, because it accounted for up to 70 per cent of the cost of rearing chickens and pigs, he added.The prices of many staple commodities have since fallen back, but some processors will still be on contracts agreed months ago when conditions were different. “You’ve still got probably another six months before [raw material costs] start to ease off,” said Hall. At its half-year results in September, prepared meals maker Bakkavor said it expected “significant” inflation to persist throughout 2023, having forecast a 12-14 per cent rise in its current financial year.

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Greenback whackEven if global commodity prices fall, there is a complicating factor for food producers in the UK and Europe. The US dollar has strengthened this year — partly because it usually does at times of geopolitical uncertainty and partly because the Federal Reserve has raised interest rates more rapidly than other central banks. Forward purchasing and treasury management will have ameliorated some of this impact. But the effects of a stronger dollar — the currency in which almost all globally traded commodities are priced — are still likely to be felt for the rest of 2023.Greenhouse effectMost areas of food processing and retailing are not especially energy-intensive and historically the industry has not worried much about the cost of gas and electricity because it was a relatively small component of overall production costs.That changed with a vengeance in 2022. Companies such as Premier Foods, meat processor Hilton, poultry giant 2 Sisters and Associated British Foods are often paying three times more for energy compared with a year ago, driving food prices higher.Hall said the prices of many winter vegetables would rise as growers that used greenhouses passed on higher heating costs. Cucumbers and peppers have already been affected, with prices rising and homegrown crops declining as some farmers decided they were no longer cost-effective. Although wholesale gas prices have moderated from their 2022 peaks, UK government support to help businesses cope with sharply higher energy prices is set to become less generous from April.Wage price spiralOne big issue for food producers and retailers predates the Ukraine crisis: labour costs. In the UK, the minimum wage — paid to most workers in the food industry — has risen from £7.20 in 2016, to £9.50 now and will increase by a further 9.7 per cent to £10.42 in April.Most supermarkets are already paying more to attract staff following the departure of older workers from the jobs market and fewer arrivals from eastern Europe because of Brexit.Recruitment is also a problem for labour-intensive parts of food production, such as meat and poultry processing and fruit farming, which had also been reliant on low-paid workers from eastern Europe.Ministers have launched a visa scheme for seasonal farm workers, allotting 45,000 this year. But extra administrative expenses and the need to look as far afield as Indonesia and Nepal for workers have ramped up costs. Agricultural labour costs rose 13 per cent in the year to autumn 2022, according to data prepared for the National Farmers’ Union.Rising costs have especially affected egg farmers, who have reduced their flocks as costs outweighed the prices they receive for eggs, leading to shortages on UK supermarket shelves. Dairy farmers, by contrast, had benefited from steeply rising milk costs, helping their profits to recover, said Clive Black, head of research at Shore Capital. “It really is a complex jigsaw of winners and losers.”

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Brand powerRising prices for so many things at once have left companies at all stages of the supply chain scrambling to cut other costs and calculate how much of the increases they can pass on without losing market share.Large branded food groups such as Nestlé, Unilever and Mars have much bigger margins than commoditised processors and retailers. Their brand strength makes it easier for them to push through price increases while their superior profitability allows them a little more leeway to absorb rising costs.“The global tier-one manufacturers have been much more ruthless — because they can be, because they control their brands — in putting through price rises,” said Black.Most took a hit to profit margins in 2022: for example, Unilever’s operating margin declined 2 percentage points to 15.2 per cent in the first half from a year earlier. One group bucking that trend was Premier Foods, maker of Mr Kipling cakes and Sharwood’s sauces, which pushed up trading profit margin from two years earlier.Shoppers are beginning to turn to supermarket own-brands to save money, but profitability at the companies producing these goods is low. “Private label manufacturers, which tend to incur inflation early and get cost recovery late, are challenged by the present inflationary environment,” Black said.Food retailing is a highly consolidated industry in the UK, with the top four traditional supermarkets — Tesco, J Sainsbury, Asda and Morrisons — plus the two discounters Aldi and Lidl controlling more than four-fifths of the market. But competition is intense and recent history suggests those that do not maintain competitive pricing lose customers very quickly.And profits are meagre: even at market leader, Tesco, operating margin was 3.9 per cent in the UK and Ireland in the first six months of the year and costs have escalated further since then. More

The median forecast of 11 analysts shows annual inflation at 7.85% in December, up from the 7.80% posted in November, but still below the record of 8.70% it reached in August and September.Economists attribute December’s outlook largely to higher prices for food items and carbonated beverages.Inflation has blown past the Bank of Mexico’s target rate of 3%, plus or minus one percentage point, prompting it to increase its key lending rate by 650 basis points to 10.50% during the current hiking cycle, which began in June 2021.Banxico, as Mexico’s central bank is known, is considering another interest rate hike at its next monetary policy meeting scheduled for Feb. 9, according to the minutes of its last board meeting. The government said Friday it will issue a new decree for a temporary exemption on import tariffs for various items in an effort to pull the brakes on price increases.Meanwhile, annual core inflation, considered a better gauge of the price trajectory since it excludes items of high volatility, was forecast to hit 8.35% in December, after peaking at 8.51% in November, its highest level in two decades.In December alone, consumer prices are forecasted to have grown by 0.42% from the previous month, while the median projection for monthly core inflation was seen at 0.65%.,Mexico’s statistics institute will release inflation data for December on Monday. More

NEW ORLEANS/SAN FRANCISCO (Reuters) – A jump in the workforce and easing wage growth suggests the U.S. job market is starting to move the way the Federal Reserve has hoped it will, to bring the supply and demand for workers into better balance and help in its battle against inflation. After a year in which many basic metrics of the jobs market stalled at levels the U.S. central bank feels are inconsistent with stable prices, employment data for December published on Friday brought a hint of relief.Nearly 165 million people were either in jobs or looking for them last month, a record high that showed a long-hoped-for improvement in labor supply. U.S. firms added 223,000 payroll jobs to cap a year in which 4.5 million people were hired, a total exceeded in the post-World War Two era only by 2021’s 6.7 million. At the same time, hourly wages – the price of labor – grew at the slowest annual pace in 16 months and has dropped by a full percentage point since the end of the first quarter of 2022. Weekly average earnings gained 3.1%, the slowest pace since May 2021. Average hourly earnings growth: https://www.reuters.com/graphics/USA-FED/JOBS/myvmnzoaapr/chart.png The jobs report is “the embodiment of the soft landing narrative – this idea that can you have a strong labor market with slowing wage growth,” said Simona Mocuta, chief economist at State Street (NYSE:STT) Global Advisors. “You can kind of, in this case, have your cake and eat it too,” she added, with earnings growth coming off the boil but no collapse in labor demand or widespread layoffs. Ideally, she said, that should allow the Fed to slow and soon pause its interest rate hikes. Employment recovery by race: https://www.reuters.com/graphics/USA-ECONOMY/UNEMPLOYMENT/znvnexbyepl/chart.png Traders took the report as evidence the Fed’s work is near to being done. U.S. stocks rose and interest-rate futures traders added to bets the Fed will slow its rate hike pace further at its Jan. 31-Feb. 1 meeting and ultimately stop short of the 5.00%-5.25% policy rate range that nearly all U.S. central bankers have signaled they believe will be needed to bring inflation to heel. ‘FAR TOO HIGH’Fed policymakers, however, had a decidedly more sober take on Friday’s data, signaling they are locked into further rate hikes and will want to see a lot more data confirming easing of price pressures before they stop the tightening.Atlanta Fed President Raphael Bostic on Friday said he expects the policy rate this year to get to the range just above 5.00% that he and his colleagues signaled last month and stay there until “well” into 2024. That’s a stark contrast to traders’ expectations for the policy rate, now in the 4.25%-4.50% range, to top out at 4.75%-5.00% and then for the Fed to begin cutting borrowing costs in the second half of this year. “Today I would be comfortable with either a 50 or a 25 (basis-point increase),” Bostic told broadcaster CNBC, referring to the Fed’s upcoming rate-setting decision. “If I start to hear signs that the labor market is starting to ease a bit in terms of its tightness, then I might lean more into the 25-basis-point position,” he said, adding that at this point he doesn’t see wages as driving inflation. Minutes of last month’s policy meeting, which were published this week, reflected the anxiety the Fed has over how the labor market was affecting its inflation fight, with officials worrying that core inflation components “would likely remain persistently elevated if the labor market remained very tight.”The U.S. unemployment rate fell back to a pre-pandemic low of 3.5% in December. Unemployment rate: https://www.reuters.com/graphics/USA-ECONOMY/UNEMPLOYMENT/gdpzymqoqvw/chart.png The employment data, while only reflecting a single month, nonetheless presented a welcome easing in some of those dynamics that have weighed so heavily on officials’ minds in their bid to keep reducing inflation, which was running at the highest rates in 40 years in the middle of last year. By the Fed’s preferred measure, the personal consumption expenditures price index, inflation rose at an annual rate of 5.5% in November, down from earlier in 2022 but still more than twice the central bank’s 2% target.The Fed pulled out all the stops last year in its bid to quash inflation, taking its policy rate from near zero in March to the current level in the swiftest series of rate hikes in more than a generation.More inflation data due next week will play into the Fed’s calculus about where to go in the months ahead, with the Labor Department’s Consumer Price Index expected to show price pressures had softened further in December. The annual CPI rate is expected to have dropped to a 14-month low of 6.5% in December from 7.1% in the prior month, and the month-to-month rate is forecast to have been unchanged, an abrupt turnaround for a measure that had been running at its highest rate since the early 1980s just six months earlier.”We have seen the inflation dynamics in the U.S. slow significantly,” Robin Brooks, chief economist at the Institute of International Finance, said on Friday at the annual meeting of the American Economic Association (AEA) in New Orleans. “That is a very real development. And it has more or less persisted.””That’s really good news.”That may be true, but Fed officials – who got caught flatfooted in their early response to inflation’s surge – are far from chiming victory bells.”Recent data suggest that labor-compensation growth has indeed started to decelerate somewhat over the past year,” Fed Governor Lisa Cook told the AEA meeting. Still, she said, “inflation remains far too high, despite some encouraging signs lately, and is therefore of great concern.” More

The brand’s exit from the Central Asian nation of 20 million divided opinion on social media and among onlookers near one of the Almaty restaurants where workers were taking down the large white letters from the top of the building.”It was one of the nicest places where I used to spend time with my friends,” said local resident Karina, who only gave her first name.”I doubt any other company will be able to compete with McDonald’s in Kazakhstan at the moment as no other fast food chain can replicate the menu that McDonald’s had for the same price.”Others described the brand’s departure as a minor inconvenience or said they would check out other fast food joints.Chains such KFC, Burger King, and Hardee’s have restaurants in Kazakhstan and Popeyes said last month it would open dozens of restaurants in the former Soviet republic in partnership with local firm Centras Group.Many Kazakhs, proud of their meat-focused cuisine, expressed incredulity that McDonald’s Kazakh licensee, Food Solutions KZ, could not source its beef patties locally and imported them from Russia until the war forced it to stop and ultimately shut down.Industry insiders, however, say certificates and audits required by the U.S. brand were expensive and lengthy, and local meat producers did not want to bother with them.Food Solutions did not immediately respond to an email requesting comment. McDonald’s said its agreement with the licensee had been terminated but did not answer questions about the reasons.The Kazakh company said on Thursday it would soon reopen its restaurants under a new brand due to “supply issues”.Many Kazakh businesses have faced supply problems in the wake of Russia’s invasion of Ukraine and the Western sanctions against Moscow that followed. Neighbouring Russia is Kazakhstan’s main trading partner. More

Shares of the company fell about 50% to 18 cents in afternoon trade.The party supplies retailer, which has a market capitalization of about $41 million, has been struggling with weaker sales as persistently high inflation has impacted the demand for its products.The company is in discussions with its bondholders to convert debt into equity to trim the balance sheet, the report said.The report further added that Party City has engaged AlixPartners LLP as a restructuring adviser. Party City and AlixPartners did not immediately respond to Reuters requests for comment. Separately, Bed Bath & Beyond Inc (NASDAQ:BBBY) was also preparing to seek bankruptcy protection in the coming weeks, people familiar with the matter told Reuters on Thursday, following poor sales and an inability to compete with large online and big-box retailers. More

The seasonally adjusted PMI fell to 33.4 last month from 51.4 in November, its lowest level since April 2020 and well below the 50 threshold that indicates a decrease in activity.The Ivey PMI measures the month to month variation in economic activity as indicated by a panel of purchasing managers from across Canada.The gauge of employment fell to an adjusted 49.8 from 54.3 in November, while the inventories index was at 43.5, down from 48.0.It was the seventh straight month of declines for the inventories measure after peaking at 69.8 in May last year.Higher interest rates likely increase the cost of financing inventories, while demand for goods could weaken if the economy slows as many economists expect.The unadjusted PMI fell to 40.6 from 51.5. More