Aurelia Butler

(Reuters) – U.S. automakers on Friday reported a slump in first-quarter domestic sales, as the entire industry was slammed by chip shortages and disruptions to supply chains. Toyota , which in 2021 upstaged GM as the top-selling automaker in the United States, outsold the company in the first quarter on increased demand for its Lexus hybrid and electric vehicles. South Korea’s Hyundai Motor and Kia Motors and Japan’s Mazda Motor (OTC:MZDAY) Corp all posted a drop in overall U.S. quarterly auto sales. Hyundai said electrified vehicle retail sales surged 241% in the January-March period from a year earlier. “If gas prices remain high, that’s going to continue to push consumers toward green technology,” said Randy Parker, Hyundai’s senior vice president for U.S. sales. “Skyrocketing gas prices were top of mind for consumers in March, but the lack of inventory is what ultimately depressed new vehicle sales in the first quarter,” said Jessica Caldwell, Edmunds’ executive director of insights. She said inventory issues will persist well into the rest of the year as Russia’s invasion of Ukraine would add to supply chain challenges. Jack Hollis, senior vice president of automotive operations at Toyota Motor (NYSE:TM) North America, said he does not expect a major, long-term shift in the U.S. vehicle market – where about three-quarters of new vehicles sold are trucks and SUVs. Sales of some large SUVs and trucks held up. GM reported sales of its largest and most expensive SUVs, the Chevrolet Suburban, GMC Yukon and Cadillac Escalade, rose during the quarter from a year ago.Detroit-based GM said quarterly sales fell 20.1% to 512,846 vehicles and its shares fell 1.8%. GM said improved semiconductor supplies helped production in the quarter, but it expects inventory to remain relatively low throughout the year due to high demand. Automakers are encouraged by the strong U.S. job market. The company’s chief economist said in a statement that “ordinarily, a U.S. economy this strong would translate into light-vehicle sales in the 17-million range.” U.S. new-vehicle sales in March finished at 1.25 million, with an annual sales rate of 13.33 million, according to Wards Intelligence. More

Economy Minister Paulo Guedes pledged last month that a tax cut on industrialized products would be extended to 33% from 25%, amid record tax revenues that have been boosted by higher oil prices.Adopted in February, the initial 25% cut represents a fiscal loss of around 20 billion reais ($3.9 billion), with the federal government giving up 10 billion reais and the rest coming from state and municipal revenue.The tax cut was aimed at helping industry recover from the pandemic downturn and fighting inflation by stimulating price reductions.Officials had indicated that the additional reduction would come out this week, but Bolsonaro signed a decree published on Friday that only renews the rate cut of 25% for 30 days.Five Economy Ministry officials said, on condition of anonymity since the discussions are private, that the president decided late on Thursday to hold the additional tax reduction.Two of the sources said the reason was related to legal issues. An injunction filed by the Pros political party at the Supreme Court questions the constitutionality of the measure, arguing that it threatens the Manaus Free Trade Zone, in the state of Amazonas.Companies operating in the Manaus Free Trade Zone are exempt from paying IPI, and can generate credits equivalent to the industrial tax and make deductions from other tax obligations. The lower the IPI rate, the smaller their potential credits, which reduces their fiscal advantage.Politicians from Amazonas state said they would question the tax cut in court, saying it was an attempt to grant benefits in an election year. More

WASHINGTON (Reuters) -Fear that the war in Ukraine would tilt the U.S. economy towards a 1970s-style bout of stagflation has given way to signs that Americans plan to keep traveling, returning to restaurants, and continuing a steady if still incomplete return to “normal.”The latest nonfarm payrolls report released Friday showed employers added 431,000 jobs in March and the unemployment rate fell to 3.6%, continuing a strong run of hiring that has left key aspects of the U.S. labor market “little different” from where they were before the pandemic, the Bureau of Labor Statistics reported. An additional nearly 600,000 people were employed or looking for work in March compared to the month before, adding to a recent steady rise in labor supply that Fed officials see as key to helping ease inflation, keeping hiring on track, and avoiding a joint run-up in both wages and prices. “The labor supply concerns of last year continue to fade,” wrote Nick Bunker, economic research director at job site Indeed. “The job market is on a solid trajectory as robust demand pulls more workers into employment with strong and increasingly stable wage growth.”There remain major gaps in the post-pandemic economy. Downtown office buildings are still underused in what may be one of the more persistent changes as workers and employers realized many jobs could be done from home. Businesses still struggle to find supplies and hire workers at a time of record job openings.But following a winter in which war, a new coronavirus surge, and already high inflation painted a potentially grim picture of even faster rising prices and slowing growth, recent government and high-frequency data show an expansion seemingly poised to roll on.The number of people teleworking continues to fall, as does the number of people saying they were kept out of the labor force by the pandemic, which fell below a million in March, according to the BLS. Gasoline consumption did edge down in March as prices nationally topped $4 a gallon, but Energy Information Administration data still shows gasoline use remains around 95% of pre-pandemic levels, roughly where it has been since the start of 2022.Air travel is nearing 90% of pre-pandemic levels. Data from restaurant reservation site OpenTable shows in-person dining at 95% of pre-pandemic levels on 15 of the last 18 days through March 30.Inflation, which is running at three times the Federal Reserve’s 2% target, may mean consumers are getting less for their money. Spending data for February showed consumption actually declined on an inflation-adjusted basis, and energy sapped a larger share of household budgets.The drop, however, came after a spending surge in January, and analysts and Fed policymakers this week agreed that neither global events nor the ongoing pandemic have put much of a dent in the U.S. economy.”To this point, high gasoline prices have not led to demand destruction,” analysts from RBC Capital Markets wrote this week. Between rising wages and savings still flush for many households from pandemic assistance payments, “the average American has never been more financially able to absorb $4 gasoline than today.”The outbreak of war in Eastern Europe threatened to further fan inflation, currently running at a four-decade high. The prospect of a more aggressive Fed response to the surge in prices amplified talk of a “hard landing” – a recession sparked by rising interest rates, tighter credit, and a subsequent pullback in business and household spending.One closely watched part of the bond market this week showed continued concern about that outcome when yields on 10-year Treasury notes briefly fell below those for 2-year Treasury notes – a sign of sagging faith in future economic growth.Still, what economists and Fed officials regard as more telling signals from the bond market remained healthy.”It’s premature to start the recession countdown,” wrote Jefferies analysts Aneta Markowska and Thomas Simons. “This does not look like a late-cycle economy … It’s a mid-cycle economy and the business cycle has room to run.”RETURN TO NORMALFar from hitting the brakes on the economy, the Fed’s target policy rate remains far below the level that would discourage spending or investment. The U.S. central bank increased its federal funds rate by a quarter of a percentage point on March 16, lifting it from the near-zero level set in March 2020 to offset the economic impact of the pandemic.Interest rates are expected to rise steadily from here, with Fed officials projecting increases of at least a quarter of a percentage point at each of their six remaining policy meetings this year – with the potential for even larger increases that could, by the end of the year, remove any remaining Fed support for economic growth.Fed policymakers this week said they will carefully watch how those anticipated rate hikes impact inflation and economic growth, and be poised either to raise borrowing costs faster if prices don’t respond or pause them if it is appropriate. But they emphasized the economy seems resilient at this point, with companies perhaps struggling to find workers and supplies but also filling record demand, booking strong profits, and lifting wages.By some measures the return to normal is here. Oxford Economics recently “retired” its weekly economic recovery tracker because the data it indexed, measuring employment, financial conditions, mobility and other issues, were “essentially back to pre-pandemic levels,” Oxford analyst Oren Klachkin wrote. There are signs also that larger changes, expected by economists as part of a “normalizing” economy, are beginning to take shape.Spending on services jumped in February while declining for goods, a rotation Fed officials have been expecting and which may be helpful in the inflation fight. Consumers bought record amounts of goods during the pandemic, when service spending options were limited by social-distancing rules and measures that shuttered many businesses. High demand for cars, bikes, appliances and other goods clashed with a global supply system unable to keep pace, resulting in rising prices.Foot traffic data from cellphone tracking firm Unacast showed visits to home goods and electronics stores as well as auto dealers are down significantly in 2022 compared with last year, while the hotel sector was rebounding quickly.There are even some tentative signs inflation may be moving in the right direction.Data for February showed year-over-year prices continuing to increase, but a key measure of month-to-month inflation fell one-tenth of a percentage point.One month does not make a trend, but at a news conference following the end of the March 15-16 policy meeting, Fed Chair Jerome Powell said that sort of month-to-month decline is “really what we’re looking for.” More

For 400 years, Carletta Heinz’s family has produced bespoke glass bottles for the world’s leading perfumeries in a factory on the edges of Germany’s Franconian forest. But Russia’s invasion of Ukraine may force the 38-year-old chief executive to close the business before it enters its fifth century.In the event of prolonged gas shortages, if Moscow decides to cut supplies to European countries that have imposed sanctions on Russia over the war, “we won’t be able to survive as a company”, she said. “We’d have to shut down the [glass-melting furnaces] completely, we’d lose the workforce . . . and it would be very hard to just restart production after a year or two.”Heinz-Glas is not the only German company raising the alarm. More than half the natural gas consumed in the country each year comes from Russia — the highest share for any major EU economy — and gas-reliant industries are warning that by winter their operations could be at the mercy of Moscow.Their fears were heightened on Wednesday when the German government, worried Russia would cut off gas supplies after EU states rebuffed Moscow’s demand to be paid in roubles, activated the first of three warning stages in its emergency supply plan.

Under a law put in place during Arab exporters’ oil embargo of the 1970s, German industry would be forced to curtail gas consumption in the event of a shortage, with supplies reserved for critical infrastructure and households.Such a step would cost Europe’s largest economy tens of billions of euros, estimates suggest, and could plunge it into recession. Union leaders have warned hundreds of thousands of jobs would be at risk.The German economy could even enter its “worst crisis since the end of the second world war”, Martin Brudermüller, chief executive of BASF, the world’s largest chemical company by sales, told the Frankfurter Allgemeine Sonntagszeitung broadsheet on Thursday.Christian Seyfert, the head of VIK, which represents energy-intensive German groups such as steel or chemical manufacturers, said the crisis “could definitely be worse than the [Covid-19] pandemic”. Coronavirus “hit our members very hard, but thanks in part to demand from China, there was soon an economic recovery”, he said. “This is a situation of even greater concern.”While many German companies have adjusted their earnings forecasts to account for rising energy costs as a result of the war, some of the country’s core industries say they will not be able to operate without sufficient gas supplies.A worker at Heinz-Glas. The 400-year-old company faces closure if the Ukraine war causes prolonged gas shortagesHeinz-Glas’s furnaces — most of which are heated with gas to 1,600C — run round the clock, with roughly six glowing bottles emerging from the production line every second of the day. They are delivered to prominent customers across the world, including Yves Saint Laurent, Tiffany and Estée Lauder. If cooled, the molten glass in the furnaces would solidify and the equipment would have to be replaced, at a cost of millions of euros.The much larger chemical and steel industries face a similar predicament. About 15 per cent of Germany’s gas supply is consumed by the chemical sector, according to VCI, its representative body. BASF’s plant in Ludwigshafen in south-west Germany — the world’s largest integrated chemical complex — uses almost 4 per cent of the country’s gas.While gas used for electricity generation can be replaced by coal-fired power stations, its role as a raw material or a fuel for blast furnaces and other industrial processes is not easily substituted.BASF told the FT that steam crackers — units that break hydrocarbons into basic chemical components — at its Ludwighsafen site would come to a complete standstill if gas deliveries dropped below 50 per cent of their normal level, endangering the supply of substances used for medical, hygiene and food products.Henrik Follmann, head of family-owned chemicals manufacturer Follman Chemie, based in North Rhine-Westphalia in western Germany, said gas supplies were crucial to making naphtha. “We need this feedstock,” he said. “If we don’t get it, the refineries are going to stop, then the chemical industry will stop and the whole of German industry will stop.”He added: “I supply chemicals to the wood and furniture industries — if they don’t get it from me what are they going to do? It is the same for the chipmaking industry, which relies on chemicals, or the carmaking industry.”Steelmakers are similarly alarmed by the government proposals. In the western city of Duisburg, the blast furnaces at Europe’s largest steelworks rely on gas as a back-up if their coal supplies run short. Carletta Heinz, chief executive of Heinz-Glas, right, and her father and former company head Carl-August Heinz. Moving production away from Germany would be the last resort, the family says © Lisa Lampert-MüllerA person close to Thyssenkrupp, which owns the plant, said: “Going under a critical amount of gas [supply] would be dangerous. It would cause serious damage to our assets.” Any cut in Germany’s gas supplies is unlikely to exceed 50 per cent, say analysts. So-called “demand destruction” caused by soaring prices would cut gas consumption, they argue. Meanwhile, roughly a third of Russian imports could be replaced by deliveries from other countries, according to BDEW, which represents German utilities.Efforts to curb domestic gas use could further reduce the pain. In the event of a supply crunch, according to Allianz economists, “for every one [percentage point] reduction in the gas consumption of households . . . up to 25,000 jobs will be protected in manufacturing”.It is unclear whether energy suppliers would be deemed liable if they failed to deliver gas to customers. If the government forced suppliers to cut deliveries, utility groups would be shielded from compensation claims, according to Christian Hampel, a partner at BDO Legal who is advising companies on the potential fallout from gas shortages.

But “as long as a replacement procurement is possible, the gas supplier must deliver”, he added. Suppliers’ economic existence “may be at risk” if they are forced to pay exorbitant prices for replacement gas or compensate customers, he said.While German industry has faced energy crises in the past, the government seemed unprepared this time, according to executives. Carletta Heinz’s father, Carl-August, led the family’s glass company through the 1970s oil embargo. But the retired 71-year-old said this crisis was “clearly the more dangerous one”.Moving production away from Germany “would be the very last resort”, Carletta Heinz said. She remained unimpressed by the political decisions that had led to her company facing an existential threat.“Our country has really failed to secure a second source [for gas],” she said. “No company would do it this way.” More

NEW YORK (Reuters) -U.S. prosecutors have found evidence that Russian oligarchs are trying to evade sanctions put in place to pressure Moscow to stop its invasion of Ukraine, the head of a new Justice Department task force said on Friday.Andrew Adams, a veteran prosecutor tapped to lead the “KleptoCapture” task force established last month, told Reuters in an interview that in some cases, even oligarchs who have not yet had sanctions imposed on them are trying to move assets ahead of potential future sanctions. But even as they try to hide yachts, planes or other mobile property in countries they believe to be secretive, Adams warned that oligarchs trying to evade sanctions are facing an “all-time high” level of international cooperation to track the ill-gotten gains of Russian elites. “There are efforts afoot – some of them publicly reported – to move, for example, moveable property in the forms of yachts, airplanes … into jurisdictions where, I think, people have the perception that it would be more difficult to investigate and more difficult to freeze,” Adams said. The task force’s goal is to put the finances of Russian oligarchs under strain in a bid to pressure President Vladimir Putin to cease his weeks-long assault on Ukraine.The unit’s name is a play on the word “kleptocracy,” which refers to corrupted officials who misuse power to accumulate wealth. The task force includes prosecutors, investigators and analysts from multiple federal agencies.The United States and its allies have imposed several rounds of sanctions targeting Putin, many of his wealthy friends and dozens of Russian businesses and government agencies.’SHARED SENSE OF PURPOSE’Tracing oligarchs’ assets is often difficult because they are hidden behind “layers of shell companies scattered around the globe,” Adams said.U.S. prosecutors are receiving information from places previously thought to be safe havens, Adams said. “Especially in the current context, and the current climate … the level of shared sense of purpose I think is at an all-time-high,” Adams said.He declined to provide details of specific jurisdictions that have provided the task force with information, or to name specific people under investigation. He said targeting assets located overseas was a major component of the unit’s work, adding that the United States has not been an attractive country for supporters of Putin’s government since around 2014 due to a series of sanctions over Moscow’s annexation of Crimea from Ukraine.European countries have already found and detained the yachts of wealthy Russian businessmen.Spain’s government temporarily seized the $140 million Superyacht Valerie, which has been linked to Sergei Chemezov, a former KGB officer who heads state conglomerate Rostec.France last month detained a vessel belonging to Rosneft boss Igor Sechin, while Italy sequestered a yacht owned by Russian billionaire Andrew Igorevich Melnichenko.The Justice Department said last month that information provided by U.S. law enforcement to foreign partners had contributed to multiple vessel seizures.”The United States has not been a friendly place to be parking your money as an oligarch,” Adams said. “The most ostentatious, the most obvious sorts of assets are not in the United States.”Adams cited a 2019 case in which U.S. authorities seized the Wise Honest, a North Korean cargo ship accused of making illicit coal shipments in violation of U.S. sanctions even though the vessel was initially located outside American waters, as a “playbook” for some of the task force’s future cases.LONG LEGAL FIGHTS AHEADAdams said that criminal charges and asset seizure warrants could come in the “early days” of the unit, which was also prepared for lengthy legal battles by oligarchs seeking to prevent the United States from permanently confiscating their assets through civil forfeiture. Those cases can allow the department to take ill-gotten property in cases where people are outside the country and cannot be extradited. Criminal forfeitures, meanwhile, can accompany an indictment against the property owner.”We should anticipate that extremely well-heeled litigants will take things to court. We will be engaged in litigation that will take awhile,” Adams said.The task force may also target banks, cryptocurrency exchanges or other financial institutions who help sanctions violators by turning a blind eye towards suspicious transactions. Adams said many institutions had voluntarily provided information. “The cooperation from the private sector has been already frequent.” More