Aurelia Butler

Lithuanian businesses reported being unable to export or import into China after allowing self-ruled Taiwan, which China views as part of its territory, to open a representation office last year.China has pressed multinationals to sever ties with Lithuania or face exclusion from its market, a harsh move that has dragged companies into a political dispute and placed Beijing on a collision course with the European Union. Lithuania was promissed by European Commissioner for Competition Margrethe Vestager the state support for the businesses would be reviewed as soon as possible, the economy ministry said in a statement on Friday.In addition to the fund, which can loan companies up to 10 million euros, Lithuania wants to allow the affected businesses to access the upcoming 200 million euros loan fund which is being set up to fight the effects of COVID-19 pandemic.”China’s actions affect the entire EU single market, so a strong and coordinated European policy response is needed to discourage such actions”, Minister Ausrine Armonaite said in the statement. More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Friday said two years of universal early childhood education and an expanded income tax credit were critical components of the $1.7 trillion Build Back Better plan that is still being negotiated with Congress.U.S. President Joe Biden this week said he needs to break up the signature legislation, passing a large chunk now and other measures later in the year, after running into opposition from fellow Democrats, Senators Joe Manchin and Kyrsten Sinema.Biden on Wednesday https://www.reuters.com/world/us/biden-says-he-will-look-pass-build-back-better-elements-piecemeal-2022-01-19 cited strong support for the bill’s $555 billion in climate change spending and noted that Manchin supported early childhood education, but conceded that plans to fund two years of free community college and a child tax credit would likely be dropped to ensure passage.Yellen said final details were still being worked out with lawmakers, but singled out as “core” Biden’s proposals to provide two years of universal pre-kindergarten, expand elder care, cap childcare expenditures for most families at 7% of their income, and expand the Earned-Income Tax Credit.Those measures would bolster economic security for households and boost economic growth, while incentivizing lower-income workers to seek employment, Yellen told an event hosted by the World Economic Forum, omitting any mention of the expanded child tax credit payments favored by progressive and moderate Democrats, but opposed by Manchin.The child tax credit is a credit for having dependent children younger than age 17. The Earned-Income Credit (EIC) is a credit for certain lower-income taxpayers, with or without children.Yellen’s remarks at a virtual event hosted by the World Economic Forum revealed the emerging framework for a slimmed-down version https://www.reuters.com/world/us/how-white-house-hopes-save-bidens-spending-bill-2022-01-18 of Biden’s initial Build Back Better plan.She said the social spending would help reverse the ongoing decline in U.S. labor force participation, which has been dragged lower by early retirements and some younger and middle-aged workers staying out.Biden made a big push in December to win passage in Congress of the spending bill, with higher taxes on big companies and wealthy Americans slated to cover the cost.But the bill’s progress was stymied when Manchin, a conservative Democrat from West Virginia, pulled his support in December after citing concerns about the deficit and inflation.With all 50 Republicans in the 100-seat Senate opposed to the spending bill, the White House has to win over Manchin and any other Democratic holdouts. If it succeeds, Democratic Vice President Kamala Harris could cast a tie-breaking vote.Manchin indicated earlier this month that he supported $555 billion in climate spending, including production tax credits for solar and wind industries, which are seen as vital to ensure the United States reaches its 2030 emissions reduction goals. More

Bank of England policymaker Catherine Mann on Friday indicated more interest rate rises would be needed in the coming months, and said current price and wage expectations are “inconsistent” with the central bank’s 2 per cent inflation target.“Going into 2022, current price and wage expectations coming from the monthly decision maker panel [a monthly business survey] are inconsistent with the 2 per cent target, and if they are realised in 2022 are likely to keep inflation strong for longer,” Mann said.In a speech to the Official Monetary and Financial Institutions Forum, a central banking think-tank, she told delegates that monetary policy needs to “temper the 2022 expectations for wage and price increases to prevent them from being embedded in the decision-making of firms and consumers”.Andrew Goodwin, economist at Oxford Economics, said the speech contained “a clear message that multiple interest rate hikes are on the way”. Presenting the latest data, Mann noted businesses had not only raised prices by more over the past year than before the coronavirus pandemic, but that they plan to make similarly steep increases in the coming months. “It should be a concern that the costs from 2021 are becoming reflected in price expectations for 2022,” she said, adding: “Changing expectations is the first defence against a reinforcing wage-price dynamic.” “In my view, the objective for monetary policy now should be to lean against this ‘strong-for-longer’ scenario,” she said, hinting at rate increases. Many economists expect the BoE to raise rates to 0.5 per cent on February 3, after having increased them to 0.25 per cent in December in the first rise for more than three years. Mann was among the Monetary Policy Committee members backing the rise. At the time, the central bank warned that further “modest tightening” was likely to be necessary to meet the 2 per cent inflation target. Other central banks are considering policy tightening as inflation rises. The US Federal Reserve has kept interest rates at a record low but has warned it might need to raise rates sooner and at a faster rate than anticipated. However, the European Central Bank in December said it was “very unlikely” to raise rates this year.Britain’s Office for National Statistics on Wednesday reported UK inflation had risen to a 30-year high of 5.4 per cent, with many economists forecasting it will peak in April at above the BoE’s most recent estimate of 6 per cent. Mann said the inflation surge in 2021 was initially viewed as transitory, but it has now “morphed to more product categories and into labour markets”, with all measures of underlying inflation being well above the MPC’s target. She pointed out tightening monetary policy is not aimed at making the UK’s cost-of-living squeeze worse, but rather the opposite. “I aim to bring inflation back down to target such that workers can enjoy real wage gains from their labour,” she said. But Goodwin said her “idea that adding to those pressures now will mean consumers suffer less in the future is not very convincing”. More

Intel plans to invest more than $20bn to establish two chip factories at a new manufacturing site near Ohio’s capital city of Columbus, a move that supports the Biden administration’s efforts to revitalise US manufacturing and boost domestic supply chains.The Santa Clara, California-based company expects to begin construction later this year and bring production online in 2025. The “mega-site” in the Midwestern state will be able to accommodate up to eight chip factories — also known as fabs — across nearly 1,000 acres, the company said on Friday. The initial phase of the buildout is expected to generate 3,000 Intel jobs and 7,000 construction jobs. The investment is the latest in a series of giant bets by Intel as it tries to make up lost ground in chip making against Taiwan’s TSMC and Samsung. The US company last year promised investments of around $100bn in two other US facilities, along with a new site in Ireland that would cost nearly as much over a number of years. Intel said that total investment in the Ohio site could reach as much as $100bn in the next decade, “making it one of the largest semiconductor manufacturing sites in the world.” But the company warned earlier on Friday that the investment could be slowed or cut back if Congress fails to pass legislation that would offer subsidies for semiconductor manufacturing, known as the Chips Act. The bill passed the Senate last year but has stalled in the House of Representatives. US president Joe Biden cheered the plan for a massive new chip plant in the key political swing state from the White House on Friday, saying he wanted Congress to pass the bill “right away” and stressing the importance of “increasing our production here at home”. “Let’s do it for the sake of our economic competitiveness and our national security,” he said at an event where he appeared with Pat Gelsinger, Intel chief executive.A global chip shortage during the Covid-19 pandemic has been made worse by snarled supply chains, hitting the car industry particularly hard. The Ohio investment comes after Intel committed $23.5bn to expand production capacity throughout its manufacturing locations in Arizona and New Mexico last year. The site in Licking County, Ohio, will be Intel’s first new manufacturing location in 40 years.The establishment of a new domestic manufacturing site is an effort to “help build a more resilient supply chain”, particularly in the US, Gelsinger said in a statement.Ohio’s governor, Mike DeWine, said the complex will be the largest single private-sector investment in the state’s history. “For decades, we have underinvested in our domestic semiconductor manufacturing capacity, which has undermined our economic and national security,” said Brian Deese, director of the National Economic Council. “That is starting to change in a big way”. Biden added that his administration is working on securing the raw materials needed for manufacturing semiconductors in the US. More

While acknowledging that price rises represent “a valid policy concern,” Yellen said on Friday that “it’s important to note that professional forecasters think that inflation will substantially abate next year.” She made the remarks in a speech delivered by video to the World Economic Forum’s Virtual Davos Agenda.She also called the U.S. labor market “exceptionally strong” and called forecasts for 3.3% growth in 2022 a “stunning economic and policy achievement.”The Treasury secretary’s remarks contrast with widespread public sentiment in the U.S. that the economy is on the wrong track, amid worries that high inflation will continue to erode the buying power of households.While growth and employment has bounced back strongly from the collapse in early 2020 at the outset of the coronavirus pandemic, inflation has roared to an almost 40-year peak.Public DissatisfactionConsumer prices rose 7% in 2021, their biggest 12-month jump since 1982, driven by supply constraints connected to the pandemic and government stimulus meant to support families and businesses through the economic fallout.President Joe Biden has seen his approval ratings tumble amid public dissatisfaction with the state of the economy. A recent CBS News poll showed his rating for handling the economy was at 38%, with two-thirds of Americans thinking the president isn’t focused enough on the burden of inflation. Meantime, the University of Michigan consumer sentiment index in November hit the lowest in almost a decade.©2022 Bloomberg L.P. More

This year, the World Economic Forum had to postpone the January event with Covid cases surging. But after the Swiss government announced on Wednesday that it will ease travel restrictions for vaccinated and recovered persons from Jan. 22, the organization founded by Klaus Schwab decided the situation was promising enough to set a new date. This optimistic step stands in stark contrast to last year, which saw the meeting at first moved to Singapore, only to be canceled entirely in May after the insecure pandemic situation made reliable planning impossible. It was replaced with the Davos Agenda 2022, a virtual meeting of world leaders and executives that ended Friday. For Davos locals, the rescheduling is a sigh of relief. The forum is vital moneymaker for the community of around 11,000 permanent residents, with hotels and apartments fully booked months in advance. Switzerland’s Covid-related hospitalizations have been stable despite the country trailing western European vaccination rates. Its hospital capacity has also remained manageable, prompting the government to discuss further easing restrictions on Feb. 2. Read More: Swiss Extend Home Office Order Through February on Omicron (1)If these trends hold up, Davos will welcome back around 3,000 participants this May, when temperatures average 12 degrees Celsius (53.6 degrees Fahrenheit). ©2022 Bloomberg L.P. More

The Conference Board said on Friday its Leading Economic Index rose 0.8% last month after advancing 0.7% in November. Last month’s increase was in line with economists’ expectations. “The U.S. LEI ended 2021 on a rising trajectory, suggesting the economy will continue to expand well into the spring,” said Ataman Ozyildirim, senior director of economic research at the Conference Board in Washington. “For the first quarter, headwinds from the Omicron variant, labor shortages and inflationary pressures, as well as the Fed’s expected interest rate hikes, may moderate economic growth.” The Conference Board estimated that gross domestic product growth would slow to a 2.2% annualized rate in the first quarter. It is forecasting growth of 3.5% this year.The government is scheduled to publish its snapshot of fourth-quarter GDP next week. More

The head of the IMF said that the global economy would have to navigate an “obstacle course” this year with the ongoing pandemic and geopolitical tensions deepening a global inflation problem.Speaking on Friday at the virtual World Economic Forum held instead of the normal in-person gathering at Davos, Kristalina Georgieva warned that the outlook for the global economy this year would be far from smooth. “[The year] 2022 is like navigating an obstacle course,” the fund’s managing director said. “We anticipate the [global] recovery to continue but it is losing some momentum and it is faced with the renewal of [Covid-19] infections . . . much more persistent than anticipated inflation and . . . record high debt levels.” With an eye to the worsening tensions between Russia and Ukraine, Georgieva said that many of the causes of inflation were not simply explained by levels of spending and demand being too high compared with global supply capacity. Commenting that inflation was not just a problem that central bankers could fix, the IMF head added that “the pressure on prices comes from food prices shooting up [caused] to a certain degree because of [the] climate . . . and energy prices shooting up, and this is a very complicated story in which there is also an element of geopolitical tensions”. Georgieva said the US Federal Reserve was “acting responsibly” in its tightening of monetary policy, and was balancing the need to fight rising prices and protect the recovery at a time when “inflation in the US is turning into an economic and social concern”.

However, higher US interest rates would hit some countries, especially those with high levels of dollar denominated debt, which “could throw cold water on what for some countries is already a weak recovery”. Georgieva urged them to act quickly. “If you have currency mismatches, now is the moment to address them,” she said. Noting China’s slowing economy, Georgieva said this was a concern for the rest of the world in 2022 and that Beijing should think about both loosening policy to encourage growth and whether its zero-Covid policy was still optimal given the more contagious Omicron variant. “What Omicron is teaching all of us is that it is a highly transmittable variant of Covid and may be much more difficult to contain without a dramatic impact on the economy and our view is that this has to be taken into account,” she said. “We will see how China integrates this message, both in terms of the policies they apply but also in terms of how they advance on the direction of what are the vaccines that are most effective and how that would be integrated [into] China’s [policies to control infections].”The IMF will publish its latest forecasts for the global economy on Tuesday next week. More