Aurelia Butler

Guedes rejected criticism by The Economist this week that he was backing the government’s attempt to bypass a constitutional spending cap that was crucial in righting Brazil’s finances.”The Economist should look at its own navel. Brazil is better than the big economies, particularly the United Kingdom,” he said, referencing the country that headquarters the magazine.Guedes ironized: “The one that must be doing well is England. There are lines there to get buy a car, a shortage of meat, and the GDP dropped by 9.7% while we fell by 4%,” he said.The Brazilian central bank’s Focus survey of economists, which is seen as an indicator of market sentiments, reduced growth expectations for next year to 1% from 1.2%. Some financial analysts are already forecasting growth at close to zero, warning there is a risk of stagflation, or sustained inflation with slow growth.”They continue to underestimate Brazil. They underestimated when we went down, and I think they will be mistaken again,” Guedes told Reuters on Friday in a telephone interview.He said Latin America’s largest economy has a solid base, despite the coronavirus-induced economic shock that cause record unemployment. “Fiscal fundamentals are very strong and the central bank is chasing inflation,” he said. In October, the consumer price index rose 1.25%, the biggest monthly rise since 2002 speeding up annual inflation to 10.67%.Guedes stated that, despite the pandemic, the country is generating massive investments, such as those committed by private companies in the 5G spectrum telecoms auction last week. More

(Reuters) – The number of Americans voluntarily quitting their jobs rose to a record high in September while job openings stayed stubbornly above pre-pandemic levels, a sign that businesses may have to continue to raise wages in order to attract workers.The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, released on Friday, reflects an uneven economy with strong demand grinding against labor and goods shortages, driving overall inflation to its biggest annual gain in 31 years.Wage inflation shows few signs of abating even as the daily case rate of coronavirus infections ebbs, with employers in almost every industry competing to lure workers and three million fewer people in the labor force compared to pre-pandemic levels.The scramble for workers boosted wage growth to an annual increase to 4.9% in October, although this has been outstripped by overall inflation, leading to a fall in real earnings. A separate survey by the University of Michigan, also on Friday, showed consternation among consumers with sentiment on the economy falling to a decade low, with few believing policymakers are taking sufficient steps to tackle inflation.Quits rose by about 164,000 in September, lifting the total to a record high of 4.4 million. The quits rate is seen as a good measure of labor market confidence as workers leave when they are more secure in their ability to find a new job.There were 56,000 people who quit in the arts, entertainment and recreation industry while 47,000 left in the other services category. State and local government education saw 30,000 departures.”The continued surge in quits points to wage growth of between 4.5%-5.0%, well above rates that would be consistent with inflation falling sustainably back towards the Fed’s 2% target,” said Michael Pearce, senior U.S. economist at Capital Economics in New York, following the report.The Federal Reserve has so far resisted calls to take stronger action to combat higher-than-expected inflation, arguing that it remains transitory even if it persists well into next year. The central bank announced at its last meeting that it will begin to taper its massive bond buying program this month, seen as precursor move to raising interest rates from their current level near zero. Investors currently expect a rate liftoff in mid 2022.Job openings, a measure of labor demand, edged down by 191,000 to 10.4 million on the last day of September. Hiring also remained largely unchanged at 6.5 million in September. The number of job openings was little changed in all four regions with vacancies increasing most in healthcare and social assistance, and state and local government, excluding education. The government reported last Friday that nonfarm payrolls increased by 531,000 in October after posting gains of 312,000 in September. Job growth has averaged 582,000 per month this year. (GRAPHIC: JOLTS – https://graphics.reuters.com/USA-STOCKS/myvmnkbdapr/jolts.png) Labor shortages could persist a while longer even as the Delta wave of COVID-19 infections slide from their mid-September high. All-time high savings fueled by government aid, as well as a strong stock market and record house price gains, look set to continue to provide a short-term buffer as workers weigh up when to re-enter the jobs market. Higher-than-normal early retirements are also playing a role.That said, there is hope that with infections declining and schools fully reopened for in-person learning, more people will rejoin the labor force once excess savings helped by the generous government aid, some of which has ended, is depleted.CONSUMER SENTIMENT AT DECADE LOWFewer Americans are feeling better about the economics outlook, at least in the short term. U.S. consumer sentiment plunged in early November to the lowest level since November 2011 as surging inflation cut into households’ living standards, the University of Michigan’s consumer sentiment survey showed. Its index dropped to 66.8 in its preliminary November reading from October’s final reading of 71.7. Economists polled by Reuters had forecast a reading of 72.4. (GRAPHIC: UMich – https://graphics.reuters.com/USA-STOCKS/gkplgdjmdvb/umich.png) “One-in-four consumers cited inflationary reductions in their living standards in November, with lower income and older consumers voicing the greatest impact,” Richard Curtin, the survey’s director, said in a statement.There is a “growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation,” he added. (GRAPHIC: UMich inflation expectations – https://graphics.reuters.com/USA-STOCKS/gkvlgdbrbpb/umich-inflation.png) Consumers see inflation in the year ahead accelerating at a 4.9% pace, the fastest since 2008, though they continue to expect it to abate over the medium term, with the five-year outlook at 2.9%, the survey showed.The survey’s consumer expectations index fell to 62.8 – the lowest since October 2013 – from 67.9 in October. Its gauge of current conditions slid to 73.2 – the lowest since August 2011 – from 77.7. More

The Fed said https://www.reuters.com/business/with-bond-buying-taper-bag-fed-turns-wary-eye-inflation-2021-11-03 earlier this month it will buy $70 billion of Treasuries and $35 billion of mortgage-backed securities per month starting on Monday, a pace that will drop to $60 billion of Treasuries and $30 billion of MBS per month in mid-December. The schedule for Treasury purchases can be found here https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details and the schedule for MBS purchases can be found here https://www.newyorkfed.org/markets/ambs_operation_schedule. More

The US Democratic party has an ancestral fear of rising energy prices. For good reason: Jimmy Carter, president from 1977 to 1981, is indelibly associated, in the minds of voters of a certain age, with queues of cars outside petrol stations and his well-meaning but seemingly ineffectual instructions to turn down the thermostat and put a sweater on. The incumbent president, Joe Biden, now has reason to fear that his domestic agenda and popularity, like those of his predecessor, will be forever tainted by higher fuel prices. Figures this week showed that the US inflation rate was at its highest level for three decades during October. The data provides some more support for “team permanent” — those economists who believe that the current rise in inflation will sustain itself. As well as a higher headline figure beating expectations, the increase is broad-based and reflects a particularly sharp increase in rents. Short-term US government debt sold off after the figures were published, indicating investors believed the Federal Reserve would need to raise rates sooner rather than later.On the other hand, “team transitory”, who include among their number the Fed chair Jay Powell, can find some consolation. Used car prices have rocketed again, linked to the shortage of semiconductor chips, but they are likely to resume their downward slide soon. Powell has distinguished between inflation being “shortlived” and transitory, pointing out that what the Fed is interested in is how the current spike affects the long-term trend rather than how long it lasts. Removing volatile food and energy to gain a measure of “core inflation” and the figures look less dramatic: at 4.6 per cent rather than 6.2 per cent. That is still high, but around the same level it was in June. Biden, for his part, cannot afford to ignore what is happening to energy prices, especially after votes in New Jersey and Virginia underlined swings against the Democrats. Fuel prices are particularly politically sensitive, as Carter found to his cost. Joe Manchin, the West Virginia senator and swing voter in the Senate, has said he is concerned about the impact of another package of spending — the administration’s infrastructure bill — on inflation. That might be unfair. Infrastructure money will be parcelled out only gradually, perhaps after the current bout of inflation has passed. Nevertheless, the rise in energy costs adds to the impression of an administration losing momentum. It provides more fuel for sceptics of going further and faster on climate change, including Manchin.There is little that Biden can do, however, beyond the temporary salve of unleashing the strategic oil reserve. He has rallied against the Opec cartel, calling on Russia and Saudi Arabia to drill more. He could also look closer to home for culprits: US shale producers have, for the most part, failed to respond to higher prices by ramping up production. While smaller drillers are expected to drive up US oil production next year, the majors are still hanging back as shareholders demand more discipline instead of spending on production. Some majors also say they have learned from price wars before the pandemic that, ultimately, they will not be able to win a war for market share against Opec.Biden has promised to “build back better” after the coronavirus pandemic. His big spending has already helped to deliver a historic recovery, with US national income back at a level above its pre-pandemic peak. The challenge will now become harder: to demonstrate he can deliver higher living standards without jeopardising his pledge to tackle climate change. More

That’s the conclusion some economists drew from the unexpected slump in consumer sentiment reported Friday, driven primarily by fears about surging prices. A drop in early November may foretell a moderation in consumption in the coming months.“In the near term, shortages and prices should restrain inflation-adjusted spending,” Bloomberg economist Eliza Winger said in a note. “Looking ahead, the risk is outsize, persistent price rises feed into the consumer-inflation psyche.”The University of Michigan’s sentiment measure dropped this month, trailing all forecasts. And the report showed that buying conditions for household goods also deteriorated sharply, falling to the second-lowest reading in data back to 1978. One in four respondents in the survey said inflation had reduced their living standards, with more consumers noting rising prices for homes, vehicles and durable goods. That’s a notable change from the previous month, when one in five mentioned a deterioration in living standards.“With views of rising inflation and pessimistic outlooks on finances, it’s of little surprise that buying conditions tumbled in early November,” Wells Fargo (NYSE:WFC) & Co. economists said in a note. “Consumer spending has already begun to transition from goods back to services, but at face value these perceptions are concerning for the outlook.”Research published in early October argued that declining consumer expectations suggest the economy is in recession even though employment and wage growth indicate otherwise.While wages are increasing at a record pace as companies work to attract new employees, inflation is eroding buying power. Inflation-adjusted average hourly earnings in October were 1.2% lower than a year earlier.“Businesses have been able to stave off a hit to their profits by passing higher input costs along to consumers,” the Wells Fargo economists said in their note. But they “may soon be met with resistance given the pessimistic move in consumers’ views of their household finances.”Still, many American households remain awash with cash from savings accumulated during the pandemic. Even as pandemic aid has expired and prices are rising, there’s a lot of pent-up demand ahead of the holiday season, especially from higher-income families.“We would be surprised if this dip in confidence is followed by softening spending, which ultimately is what matters,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.©2021 Bloomberg L.P. More

BEIJING/PARIS (Reuters) -Louis Vuitton is considering opening its first duty free store in China on the emerging luxury island hub of Hainan, according to two sources, in a move that would mark a new approach for the world’s largest luxury label.The brand, which is the main profit engine of French luxury giant LVMH, is known for maintaining an iron grip on distribution  and famously never offering discounts on its leather monogrammed bags.Yet executives are looking at the possibility of opening a duty free shop in the Haitang Bay shopping centre in Sanya, through an agreement with the mall’s state-owned operator, China Duty Free Group, the sources said.The plan, which would help Louis Vuitton capitalise on pent-up demand for luxury goods by Chinese shoppers – the sector’s most avid consumers – was unveiled by brand executives at an early September presentation in Shanghai, according to a person who attended it.Louis Vuitton originally declined to comment when asked about plans for a duty free shop in Hainan, which has boomed as a high-end shopping destination during the COVID-19 pandemic with Chinese consumers unable to travel abroad. The company provided a statement on Friday saying it is exploring opportunities in Hainan but not considering any options within the licensed duty free market. China Duty Free Group, the largest duty free operator in the country, did not reply to a request for comment. Some European and U.S. brands including Kering-owned Gucci and Ferragamo – both of which are highly exposed to travel retail compared to peers – sell products in the shopping centre, and there are signs of growing interest from high-end watch and jewellery labels.But LVMH’s higher profile fashion and leather goods brands, which include Dior, are not present in Hainan beyond selling their range of perfumes and cosmetics. A Louis Vuitton duty free shop on the island would be one of only a handful of such retail outlets worldwide for the label.The global duty free industry was worth $86 billion in 2019, before the pandemic knocked the figure down by nearly half, to $45 billion in 2020, according to Generation Research, a provider of travel retail and duty free shopping statistics.International travel restrictions mean that spending is being rapidly repatriated to China, and the Chinese government is keen to keep it that way, according to analysts at Bernstein.Last year, the Chinese government tripled the amount that consumers could buy duty free in Hainan to 100,000 yuan ($15,635) a year and lifted certain purchase limits.The disruption in international transportation caused by the pandemic hurt the grey market driven by “daigou”, professional shoppers who buy high-end products abroad – in Europe, but also in South Korea – on behalf of mainland Chinese.That helped duty free sales in Hainan, which has surged as much as fivefold compared to pre-pandemic levels, while a government target for sales of 700 million yuan by 2030 implies annual growth of 37%, according to Bernstein analysts.”International travel will come back, but a strong company presence in Hainan will become paramount,” they said.Gaining a foothold in Hainan gives luxury brands access to a broader customer base. Yet Louis Vuitton and its rivals are wary of discounts, which erode the exclusive aura of their products, and of the risk of feeding a grey market if their handbags and clothes can be bought more cheaply in some places.”As long as we are talking to real clients, end clients and not to daigou… we are OK with doing business in Hainan,” LVMH finance chief Jean-Jacques Guiony told analysts at an earnings presentation in October.”If Hainan becomes a hub for daigou, that will be a different story,” he said.Bruno Lannes, a partner at consultancy Bain’s consumer products and retail practice in Shanghai, said brands had to make sure that offering luxury goods at a lower price would not damage their image.”If you go back to the original definition of luxury, luxury’s exclusive, and exclusive means that you exclude consumers — it’s not for everybody, so that’s the challenge.” ($1=6.39 yuan) More

President Joe Biden and President Xi Jinping will hold a virtual meeting on Monday, in an intensified effort to smooth relations amid concerns about China’s military activity near Taiwan and its growing nuclear arsenal.The White House said that Biden and Xi would speak on Monday evening, Washington time, following two calls held earlier this year between the American and Chinese leaders. Biden had hoped for an in-person summit, but Xi has not left China for almost two years because of the pandemic.“The two leaders will discuss ways to responsibly manage the competition between the United States and the People’s Republic of China as well as ways to work together where our interests align,” said Jen Psaki, the White House press secretary. The virtual summit comes as US-China relations remain in their worst state since the countries normalised diplomatic relations in 1979. Biden has taken China to task for everything from its assertive activity around Taiwan to its persecution of Uyghurs in Xinjiang. Meanwhile, China has criticised the US for interfering in its national interests.The meeting comes on the heels of a Pentagon warning that China is rapidly expanding its nuclear forces and plans to more than quadruple its arsenal of nuclear warheads to at least 1,000 weapons this decade.Over the summer, China also tested two hypersonic weapons, including one that flew around the earth. The latter spooked the Pentagon because it showed that China had found another way to target the US with its nuclear capabilities.A senior US official said Biden had made clear that while he welcomed “stiff competition” with China, he did not want conflict. “This meeting is a way for him to make sure there’s no misunderstanding on that,” the official said.“This is not about seeking specific deliverables or outcomes. This is about setting the terms of an effective competition where we are in the position to defend our values and interests and those of our allies and partners,” the official added. “When such terms — or guardrails — are established, we can sustain a vigorous competition.”Speaking to Asia-Pacific leaders this week, Xi warned other countries not to join the US in trying to counter China, saying the region “cannot and should not relapse into the confrontation and division of the cold war era”.His comments came as the Chinese Communist party for the first time in four decades passed a “historical resolution”, which credited Xi with being the “key to the great rejuvenation of the Chinese nation”. The move strongly suggests that the party will break with precedent and give Xi a third term as general secretary next year, paving the way for reappointment for a third term as president starting in 2023.Follow Demetri Sevastopulo on Twitter More

US consumer sentiment has weakened to its lowest level in a decade, reflecting Americans’ concerns about rising prices and a belief that the Biden administration has failed to address the surge in inflation.The University of Michigan’s consumer sentiment index slipped to 66.8 in November, according to a survey published on Friday. That was down from 71.7 in October and well below economists’ forecast for a stronger reading of 72.4.The decline in sentiment this month came amid “an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation”, said Richard Curtin, chief economist of the university’s consumer surveys.The drop-off in consumer sentiment came alongside fresh evidence that the nationwide worker shortage is becoming more pronounced as the number of people quitting their jobs reached new heights. Data released on Friday showed a record 4.4m Americans quit their jobs in September while the number of job openings remained near a record high. “Today’s report looked consistent with labour supply struggling to meet labour demand, with firms having a hard time filling positions and workers able, or confident in their ability, to find other jobs,” said Daniel Silver, an economist at JPMorgan.Ian Lyngen, head of US rates strategy at BMO Capital Markets, said the data gives credence to the view that wages will need to rise further to attract workers, which is likely to feed into even higher inflation.One-quarter of consumers in the Michigan survey cited inflation-related reductions in their living standards, which hit lower-income and older consumers the most. Consumers reported nominal income gains, but half of all families said they anticipated lower incomes next year when adjusted for inflation.The Biden administration has been rushing to reassure Americans that it is focused on fighting inflation as rising prices threaten to undercut the recovery from the pandemic. That messaging took on a new urgency this week after data showed consumer prices had risen 6.2 per cent in October from a year ago, the fastest pace in 30 years, as inflationary pressures broadened throughout the economy beyond sectors linked to the reopening from the pandemic. During a visit to the Port of Baltimore on Wednesday, after the data was released, Joe Biden acknowledged the pressure that inflation was putting on family budgets. “Everything from a gallon of gas to loaf of bread cost more,” he said. “It’s worse even though wages are going up. We still face challenges.”

Senior officials at the Federal Reserve, including chair Jay Powell and Richard Clarida, the vice-chair, have previously said they expect the sharp rise in inflation over the past few months will prove “transitory” and fade over time as supply-chain disruptions are fixed and labour markets steady. But the recent inflation readings have challenged that view, economists say.“The description that inflation would be ‘transient’ has the undertone that consumers could ‘grin and bear it’ as economic policies counted on a quick and automatic self-correction to supply and labour shortages,” Curtin said.“Instead, the pandemic caused economic dislocation unlike any prior recession, and has been intertwined with partisan interpretations of economic developments.”Respondents in the survey reported rising prices for homes, vehicles and durable goods more frequently than any other time in more than half a century, according to Curtin.Consumers’ inflation forecasts for the year ahead edged up by 0.1 percentage points to 4.9 per cent, the highest since July 2008. Their five-year outlook held steady at 2.9 per cent. Market measures of inflation expectations point to a more subdued outlook, although they have moved up significantly in recent days. The 10-year break-even rate, one popular measure, jumped to 2.73 per cent on Friday, a level last reached in 2006.“High prices are taking a bite out of spending power, but the effect that will have on the level of spending is probably low given Americans are flush with cash, have months of pent-up demand and are ramping up spending month after month regardless of inflation fears,” said Robert Frick, corporate economist at Navy Federal Credit Union. Analysts at Oxford Economics also noted that consumers have “continued to spend at a healthy clip” despite inflationary pressure. However, they said supply-chain headaches will probably worsen in the fourth quarter, suggesting that consumer sentiment will also struggle to bounce back this year.Additional reporting by Mamta Badkar in New York More