Aurelia Butler

TOKYO (Reuters) -Japan’s economy contracted much faster than expected in the third quarter as global supply disruptions and fresh COVID-19 cases hit business and consumer spending, raising challenges for the new government’s growth plans.While many analysts expect the world’s third-largest economy to rebound in the current quarter, worsening global production bottlenecks pose increasing risks to the outlook.”The contraction was far bigger than expected due to supply-chain constraints, which hit output and capital spending hard,” said Takeshi Minami, chief economist at Norinchukin Research Institute.”We expect the economy to stage a rebound this quarter but the pace of recovery will be slow as consumption did not get off to a good start even after COVID-19 curbs were eased late in September.” The economy shrank an annualised 3.0% in July-September after a revised 1.5% gain in the first quarter, preliminary gross domestic product (GDP) data showed on Monday, compared with a median market forecast for a 0.8% contraction.The weak GDP contrasts with more promising readings from other advanced nations such as the United States, which saw its economy expand 2.0% in the third quarter on strong pent-up demand.On a quarter-on-quarter basis, GDP fell 0.8% compared with market forecasts for a 0.2% decline.Prime Minister Fumio Kishida plans to compile a large-scale economic stimulus package worth “several tens of trillion yen” on Friday, but some economists were sceptical about its impact on growth near-term.”The package will likely be a mixed bag of near-term and long-term growth measures, and the focus may be blurred, so it won’t have much impact near-term,” Norinchukin’s Minami said.Consumption fell 1.1% in July-September from the previous quarter after a 0.9% gain in April-June.Capital expenditure also decreased 3.8% after rising a revised 2.2% in the previous quarter.Domestic demand shaved off 0.9% point to GDP growth.Exports lost 2.1% in July-September from the previous quarter as trade was hit by the chip shortages and supply-chain constraints.Analysts polled by Reuters expect Japan’s economy to expand an annualised 5.1% in the current quarter, as consumer activity and auto output pick up thanks to a drop in COVID-19 cases and easing supply disruptions.Japanese firms still face risks from higher commodity costs and supply bottlenecks, which threatens to undermine the economic outlook over the short- to mid-term. More

LONDON (Reuters) – British private-sector employers expect to raise staff pay by an average of 2.5% over the next 12 months, well below the likely rate of inflation, according to a survey that could ease worries at the Bank of England about the risk of a wage-price spiral.The quarterly figures from the Chartered Institute of Personnel and Development (CIPD) suggested companies were taking only cautious steps to battle growing recruitment difficulties.The CIPD said the median annual pay settlement which private-sector employers plan to offer between September 2021 and the same month next year had risen to 2.5% from 2.2% in its previous quarterly survey, its highest since the summer of 2019.The BoE has said it is looking closely at the labour market as it considers whether to raise interest rates from their all-time, coronavirus-emergency low. The BoE forecast this month that consumer price inflation would peak at nearly 5% in the second quarter of next year.Public-sector employers planned a 1% pay rise, but the CIPD said the survey of more than 1,000 employers took place before finance minister Rishi Sunak announced last month that there would be more widespread public-sector pay rises.The CIPD said the proportion of employers who reported hard-to-fill vacancies had jumped to 47% from 39% in its previous quarterly survey, while hiring intentions were the strongest since the survey began in its current form in late 2012.By contrast, a separate survey of 1,400 British businesses by Accenture (NYSE:ACN) and IHS Markit, also released on Monday, showed hiring intentions had fallen from a record high seen four months earlier, as businesses found it harder to recruit.Even so, hiring plans were still their second-strongest since June 2015.Overall business confidence dropped to a 12-month low due to supply chain difficulties and record inflation expectations. But confidence was still high by historical standards and greater than in continental Europe.Britain has suffered widespread labour shortages in sectors such as truck driving, food processing and hospitality, and official data shows a record number of job vacancies.But there has been less evidence of whether this is translating into broader increases in pay. The CIPD said 47% of employers reported raising wages over the past six months to attract staff, while 44% had retrained existing employees.”There’s a relatively long tail of employers who could be doing more to attract and make full use of available workers,” said Gerwyn Davies, the CIPD’s senior labour market adviser. More

Solving Britain’s so-called productivity puzzle has been an unresolved challenge for economists and policymakers for years.Britain’s productivity level, measured in terms of output per hour worked, is around 15% below that in the United States, Germany and France – though above that in Japan, Italy and Canada – and has barely grown since the financial crisis.Last month Prime Minister Boris Johnson highlighted the problem – as have his predecessors – though few economists agreed with his diagnosis that the past immigration of low-paid workers from the European Union bore much of the blame.Monday’s study, by researchers at the London School of Economics and the Resolution Foundation think tank, said low business investment was the clearest difference between Britain and higher-productivity nations.Business capital investment in Britain was 10% of gross domestic product in 2019, compared with 13% on average in the United States, Germany and France.British business investment in research and development was 1.2% of GDP, compared with an average 2% elsewhere, and the rate of patenting was half that in the other countries, despite strong scientific research.A global survey of management practices also suggested high-quality management was more common in the United States and Germany, although not in France.However, other commonly cited factors – such as Britain’s smaller manufacturing sector, big gaps between the most and least productive companies, or workers being stuck in ‘zombie’ firms – did not explain Britain’s underperformance.”The UK entered the 2020s with an abysmal productivity record, and a misdiagnosis of why this is happening. Rather than focus on the UK’s long-tail of unproductive firms, we need to see economy-wide improvements to how firm invest and innovate, as well as how staff are managed and trained,” said Greg Thwaites, research director at the Resolution Foundation.Faster productivity growth is seen by almost all economists as key to long-run improvements in living standards.But in the short run, raising Britain’s business investment to U.S., German or French levels would squeeze household consumption or require Britain to increase already-high overseas borrowing, the researchers said.Such an increase in business investment funded by domestic resources alone would generate an extra 8 percentage points in GDP growth over 20 years, but it could take 15 years before household consumption recovered from an initial fall.”The balance between investment, consumption and net imports, and whose consumption takes any hit, are two of the difficult tradeoffs that policy will need to address,” the research said. More

The UK has misdiagnosed its productivity crisis and will fail to improve living standards if it continues seeking to raise the performance of a large number of very inefficient companies, according to a new report. The findings from the Resolution Foundation and the Centre for Economic Performance at the London School of Economics challenge the government’s view that levelling up poorly performing companies or poorer regions will raise productivity significantly for the UK as a whole. Raising productivity among the 40 per cent of workers in low-productivity firms by 10 per cent would only raise the overall performance of the UK economy by 1.2 per cent, the report found because the long tail of weak companies lags so far behind those run more efficiently. The results of the work contradicts Boris Johnson’s view that a “high-wage, high-skill, high-productivity” economy comes from restricting immigration so that truck drivers and other shortage occupations are paid more, levelling up the country. Torsten Bell, chief executive of the Resolution Foundation, which exists to devise policy to improve the lives of middle and lower-income households, stressed the government’s ambitions to improve weaker companies is “really important for jobs and places”. But he added that pulling up the poor performers “can’t be your answer to the national productivity and living standards problem”. The research examined the productivity of individual UK companies in greater detail than before using new data. This showed, as with previous studies, that there was a large number of extremely inefficient businesses. Productivity levels — measured by the value each employee creates every hour — in the worst performing tenth of companies was 16 times lower than in the top 10 per cent of companies.But the research showed that contrary to earlier work, the UK was far from unusual in having a very large number of low-productivity companies. This meant the long tail of weak companies did not explain why output for every hour worked in UK companies was 16 per cent lower than in economies such as France, Germany and the US. Greg Thwaites, research director at the Resolution Foundation, said: “The UK entered the 2020s with an abysmal productivity record, and a misdiagnosis of why this is happening.“Rather than focus on the UK’s long tail of unproductive firms, we need to see economy-wide improvements to how firms invest and innovate, as well as how staff are managed and trained,” he added.Instead of pulling up weak companies, the report said it would be better if more work was done by stronger, more-efficient companies. This would involve quite a reallocation of work and the closure of many firms. While the research accepted it would be impossible to relocate workers from, say, a local chippy to Goldman Sachs, they advocated the country should focus more on investment in machinery, people and better management practices to improve overall performance. This would not be cost free and would rely on the nation being willing to consume less, while it invested more in the short-term so that it could be richer and more productive in future. “These are not quick productivity fixes, and they are likely to cost money in the short term. But they need to be pursued as part of a new economic strategy that will deliver stronger growth and higher living standards in the years to come,” Thwaites said. More

(Reuters) -Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday he expects higher inflation continuing over the next few months but warned that the U.S. central bank should not overreact to elevated inflation as it is likely to be temporary.”The math suggests we’re probably going to see somewhat higher readings over the next few months before they likely start to taper off,” Kashkari told CBS News’ “Face the Nation” in an interview on Sunday https://cbsn.ws/3wN0aj6.”But my view is we also need to not overreact to some of these temporary factors, even though the pain is real,” Kashkari said in the interview.Kashkari on Tuesday said he expects more clarity on the economic outlook by the time the Fed ends its bond-buying program in mid-2022, and is keeping an “open mind” on the timing of any rate hikes to follow.President Joe Biden’s economic advisers defended his policies on Sunday amid rising inflation that they said was a global issue related to the COVID-19 pandemic, not a result of the administration’s programs.U.S. consumer prices rose 6.2% in October compared to a year earlier, the fastest annual rate in 31 years, driven by surges in the cost of gasoline and other goods.When asked about Biden’s pending decision on whether to reappoint Fed Chair Jerome Powell to another term, or choose Fed Governor Lael Brainard to succeed him, Kashkari said both were capable.”Well, I think both Chair Powell and Gov. Brainard are outstanding, very seasoned, experienced monetary policy makers, and I think if either of them got the nod from President Biden, I think we would be in very good capable hands”, Kashkari said. More

(Reuters) – Tesla (NASDAQ:TSLA) Inc Chief Executive Elon Musk got into a spat with Bernie Sanders on Sunday after the U.S. senator demanded the wealthy pay their “fair share” of taxes. “We must demand that the extremely wealthy pay their fair share. Period,” Sanders wrote on Twitter (NYSE:TWTR). Taking a jibe at the 80-year-old senator, Musk responded by saying “I keep forgetting that you’re still alive.” The billionaire CEO who had already offloaded a combined $6.9 billion worth of shares in the electric car company as of Nov. 12, further wrote, “Want me to sell more stock, Bernie? Just say the word.” Sanders’ tweet comes amid the backdrop of Washington’s efforts to hike taxes for the super-wealthy.U.S. Senate Democrats have unveiled a proposal to tax billionaires’ stocks and other tradeable assets to help finance President Joe Biden’s social spending agenda and close a loophole that has allowed them to defer capital gains taxes indefinitely. A week ago, Musk tweeted that he would sell 10% of his shares if users of the social media platform endorsed the move. About 57.9% of people voted for the stock sale. More

Hello and welcome to the working week.London’s status as the world’s financial services capital has been battered by the UK’s departure from the EU. But that is the past. What this newsletter cares about is the future. And the City’s bankers could this week get a glimpse of the government’s vision for it.Boris Johnson, prime minister, will on Monday deliver the annual speech at the Mansion House, addressing the newly installed Lord Mayor of London, for whom the building is his official residency. Does the answer to the UK financial services industry lie in embracing the green movement or reforming City regulations, such as listing rules? Probably a mixture of them all. Or perhaps Johnson will return to one of his current pastimes: bashing big business.In other world news, watch out on Wednesday for the resumption of a landmark Vatican alleged-corruption trial that revolves around the purchase by the Holy See’s secretariat of state of a commercial and residential building in London’s South Kensington. The Financial Times has charted this story and this week produced this insightful video to bring you up to speed.Thank you for your emails about The Week Ahead — send to [email protected]. We listen, which is why this week — at the suggestion of several readers, who read the economic report ahead of the companies preview, we are switching the order a bit.Economic dataBefore Boris pontificates in front of the City’s business executives on Monday, Westminster politicians will be grilling Bank of England governor Andrew Bailey and other members of the Monetary Policy Committee when they appear before the Treasury committee.MPs will want to know why the MPC did not vote to raise the base rate to tackle growing UK inflation when the governor had previously suggested that a move was imminent. We will get a better picture of the relative recovery of big economies around the world with the publication of the IHS Markit purchasing managers’ surveys on Monday. We will also get quarterly gross domestic product estimates and inflation data with Japan, the EU, the UK and others reporting data. If you want to understand a bit more about inflation and why central bankers might need to be able to change their opinions, read this edition of Robert Armstrong’s Unhedged newsletter.CompaniesWe are approaching the end of the earnings season, so there are fewer big name companies reporting this week.Investors in Vodafone will be assessing the telecoms group’s post-pandemic growth prospects when it reports interim results on Tuesday. Vodafone has been busy doing deals in the UK to broaden its broadband footprint in the home market, and transferring its majority stake in Vodafone Egypt to Vodacom Group Limited, its sub-Saharan African subsidiary, increasing its ownership of Vodacom from 60.5 per cent to 65 per cent. Other factors are working in Vodafone’s favour. The return of international travel and the general uptick in business activity should have helped lift mobile phone use, although this is tempered by weaker consumer purchasing power.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayCanada, monthly manufacturing survey and wholesale trade figuresChina, monthly retail sales and industrial production figuresChina, Europe, France, Germany, UK, US: IHS Markit business outlook dataEU, Eurostat monthly trade in goods figuresJapan, monthly industrial production and quarterly GDP figuresNigeria, inflation dataUK, voluntary real living wage rate announced by mayor of London Sadiq Khan and Rightmove monthly house price indexResults: Logitech Q2TuesdayEU, preliminary GDP estimate and employment dataFrance, inflation dataInternational Energy Agency monthly oil market reportItaly, Consumer Price Index figuresUK, labour market data and productivity estimateUS, retail sales and production figures, plus import and export price indicesResults: Bouygues Q3, Home Depot Q3, Imperial Brands FY, Landsec H1, Vodafone H1, Walmart Q3WednesdayCanada, CPI dataCommonwealth Bank of Australia Q1 trading updateEU, Eurostat inflation figuresUK, Producer Price Index and CPI figures, plus house price dataUS, residential construction figuresResults: British Land H1, Cisco Systems Q1, Experian H1, Lowe’s Q3, Manchester United FY, Nvidia Q3, Sage Group FY, SSE H1, Target Q3ThursdayJapan, inflation rate figuresUK, ONS comparisons of all-cause mortality between European countries and regions, plus business demography dataResults: Daily Mail and General Trust FY, Thyssenkrupp FY, National Grid H1, Nationwide Building Society H1, Royal Mail H1FridayCanada, monthly retail sales figuresFrance, quarterly employment dataGermany, monthly PPI figuresFTSE Group announces quarterly change to companies on its share indexUK, ONS consumer confidence, retail sales and public sector finance dataWorld eventsFinally, here is a rundown of other events and milestones this week. MondayInternational Atomic Energy Agency’s board meets in ViennaUK, Bank of England governor Andrew Bailey and other members of the bank’s MPC give evidence to parliament’s Treasury committeeBritish prime minister Boris Johnson addresses business leaders at the annual City Banquet at London’s Mansion HouseUS, president Joe Biden hosts a bipartisan bill-signing ceremony for his Infrastructure Deal (Infrastructure Investment and Jobs Act) TuesdayDenmark, local elections heldThe Macklowe Collection, said to be the most expensive art collection ever to come up for auction, goes under the hammer at Sotheby’s in New YorkWednesdayCzech Republic, Slovakia: anniversary of the Velvet Revolution, seen widely as a turning point leading to the collapse of communist regimes in eastern EuropeVatican trial of 10 people accused of financial crimes, including Cardinal Angelo Becciu, resumes. The case centres on a property deal in London’s wealthy South Kensington by the Vatican’s secretariat of stateThursdayBeaujolais Nouveau Day, when 2021 bottles of the classic French wine go on saleTonga, general electionsFridayEuropean Central Bank president Christine Lagarde addresses the 31st Frankfurt European Banking Congress 2021SaturdayUS president Joe Biden turns 79SundayChile, general election More