Evelyn Reynolds

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    Germany slashes 2024 growth forecast to just 0.2% as economy in ‘tricky waters,’ minister says

    Germany on Wednesday said that it was slashing its expectations for gross domestic product growth for 2024 to 0.2%, down from a 1.3% estimate previously.
    The country narrowly avoided a recession at the end of 2023 and has faced a series of economic crises.
    “The economy is in tricky waters,” Habeck said in a statement released online, according to a CNBC translation. “We are coming out of the crisis more slowly than we had hoped.”

    Robert Habeck, German Minister for Economy and Climate Protection and Vice Chancellor, is pictured during the weekly meeting of the cabinet on February 21, 2024 in Berlin, Germany.
    Florian Gaertner | Photothek | Getty Images

    Germany’s gross domestic product is now expected to grow by just 0.2% this year, as the country wades in “tricky waters,” German Economy Minister Robert Habeck said Wednesday.
    The revised GDP growth forecast is down from a previous estimate of 1.3%. Habeck said the government now anticipates German GDP to increase by 1% in 2025.

    Speaking during a news briefing, the minister attributed the revised forecast to an unstable global economic environment and to the low growth of world trade, alongside higher interest rates.
    Those issues have negatively impacted investments, especially in the construction industry, he said.
    German housebuilding is among the sectors that have been most affected by this, with developers canceling projects and order numbers declining, according to recent data. Analysts fear the sector may face further difficulties this year.
    “The economy is in tricky waters,” Habeck said in a statement released online, according to a CNBC translation. “We are coming out of the crisis more slowly than we had hoped.”
    This is despite energy costs and inflation falling and consumer spending power increasing again, he said. Habeck nevertheless maintained that Germany has proven resilient in the face of losing access to Russian seaborne crude and oil product supplies, as a result of the war in Ukraine.

    Budget crisis

    The country narrowly avoided a recession in the second half of 2023, despite its GDP declining by 0.3% in the final quarter as well as for the full-year 2023. The third-quarter GDP for 2023 was revised to reflect stagnation, however. It means the country dodged a technical recession, which is characterized by two consecutive quarters of negative growth.
    Habeck pointed to Germany’s recent budget crisis which left a 60 billion euro ($65 billion) hole in the government’s financial plans over the coming years as an additional economic challenge.
    Last year, the country’s constitutional court ruled that it was unlawful for the government to reallocate emergency debt that was taken on but not used during the Covid-19 pandemic to its current budget plans. This caused significant disruption to financial planning and forced the government to make cuts and savings.
    The biggest challenge for Germany is a lack of skilled workers, which will only intensify in the years ahead, Habeck said in remarks published Wednesday. He also said there were various structural issues which need to be addressed to “defend” the competitiveness of Germany as an industrial hub.
    Habeck also addressed the outlook for inflation, saying it is expected to fall to 2.8% throughout 2024, before returning to the 2% target range again in 2025. The harmonized consumer price index for January 2024 came in at 3.1% on an annual basis. More

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    U.S. Economy: Has an Era of Increased Productivity Returned?

    Thirty years ago, the U.S. entered an era of productivity gains that enabled healthy growth. Experts are asking if it could happen again.The last time the American economy was posting surprising economic growth numbers amid rapid wage gains and moderating inflation, Ace of Base and All-4-One topped the Billboard charts and denim overalls were in vogue.Thirty years ago, officials at the Federal Reserve were hotly debating whether the economy could continue to chug along so vigorously without spurring a pickup in inflation. And back in 1994, it turned out that it could, thanks to one key ingredient: productivity.Now, official productivity data are showing a big pickup for the first time in years. The data have been volatile since the start of the pandemic, but with the dawn of new technologies like artificial intelligence and the embrace of hybrid work setups, some economists are asking whether the recent gains might be real — and whether they can turn into a lasting boom.If the answer is yes, it would have huge implications for the U.S. economy. Improved productivity would mean that firms could create more product per worker. And a steady pickup in productivity could allow the economy to take off in a healthy way. More productive companies are able to pay better wages without having to raise prices or sacrifice profits.Several of the trends in place today have parallels with what was happening in 1994 — but the differences explain why many economists are not ready to declare a turning point just yet.The Computer Age vs. the Zoom AgeBy the end of the 1980s, computers had been around for decades but had not yet generated big gains to productivity — what has come to be known as the productivity paradox. The economist Robert Solow famously said in 1987, “You can see the computer age everywhere but in the productivity statistics.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Will Food Prices Stop Rising Quickly? Many Companies Say Yes.

    Food companies are talking about smaller price increases this year, good news for grocery shoppers, restaurant diners and the White House.Few prices are as visible to Americans as the ones they encounter at the grocery store or drive-through window, which is why two years of rapid food inflation have been a major drag for U.S. households and the Biden administration.Shoppers have only slowly regained confidence in the state of the economy as they pay more to fill up their carts, and President Biden has made a habit of shaming food companies — even filming a Super Bowl Sunday video criticizing snack producers for their “rip off” prices.But now, the trend in grocery and restaurant inflation appears to be on the cusp of changing.After months of rapid increase, the cost of food at home climbed at a notably slower clip in January. And from packaged food providers to restaurant chains, companies across the food business are reporting that they are no longer raising prices as steeply. In some cases that’s because consumers are finally pushing back against price increases after years of spending through them. In others, it’s because the prices that companies pay for inputs like packaging and labor are no longer rising as sharply.

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    Year-over-year change in consumer price indexes
    Source: Bureau of Labor StatisticsBy The New York TimesEven if food inflation cools, it does not mean that your grocery bill or restaurant check will get smaller: It just means it will stop climbing so quickly. Most companies are planning smaller price increases rather than outright price cuts. Still, when it comes to the question of whether rapid jumps in grocery and restaurant prices are behind us, what executives are telling investors offer some reason for hope.Some, but not all, consumers are saying no.Executives have found in recent months that they can raise prices only so high before consumers cut back.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Bank of England rate cuts likely later but larger, Goldman Sachs says

    The Bank of England is likely to hold interest rates higher for longer, new forecasts from Goldman Sachs show.
    The Wall Street bank now sees five consecutive 25 basis point interest rate cuts this year, with the first in June rather than May.
    Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.

    Blurred buses pass the Bank of England in the City of London on 7th February 2024 in London, United Kingdom. 
    Mike Kemp | In Pictures | Getty Images

    The Bank of England is likely to hold interest rates higher for longer before slashing them more sharply than expected in the second half of the year, new forecasts from Goldman Sachs show.
    In a research note released Tuesday, the Wall Street bank pushed back its expectations for rate cuts by one month, from May to June, citing several key inflation indicators “on the firmer side.”

    But it said the central bank was then likely to cut rates more quickly than previously anticipated as inflation shows signs of cooling.
    Goldman now sees five consecutive 25 basis point interest rate cuts this year, lowering rates from their current 5.25% to 4%. It then sees the Bank settling at a terminal rate of 3% in June 2025.
    That compares to more moderate market expectations of three cuts by December 2024.

    “We continue to think that the BoE will ultimately loosen policy significantly faster than the market expects,” the note said.
    Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.

    “The market is essentially embodying in the curve that we will reduce interest rates during the course of this year,” Bailey told U.K. lawmakers at the Treasury Select Committee.
    “We are not making a prediction of when or by how much [we will cut rates],” he continued. “But I think you can tell from that, that profile of the forecast … that it’s not unreasonable for the market to think about.”
    The Bank’s Chief Economist Huw Pill also said last week that the first rate cut is still “several” months away.

    Cooling underway

    Goldman analysts put their delay down to the persistent strength of the British labor market and continued wage growth. However, it noted than those pressures were likely to subside in the second half of the year, with lower inflation suggesting a “cooling is underway.”
    U.K. inflation held steady at 4% year-on-year in January, though price pressures in the services industry remained hot. Meanwhile, the month-on-month headline consumer price index fell to -0.6% after recording a surprise uptick in December.
    Goldman said there was a 25% chance the BOE would delay rate cuts beyond June if wage growth and services inflation remained sticky. However, it also said there was an equal chance of the Bank cutting rates by a more aggressive 50 basis points if the economy slips into a “proper” recession.

    The U.K. economy slipped into a technical recession in the final quarter of last year, with gross domestic product shrinking 0.3%, preliminary figures showed Thursday.
    Bailey said Tuesday, however, that the economy had already shown signs of an upturn.
    “There was a lot of emphasis again on this point about the recession, and not as much emphasis on … the fact that there is a strong story, particularly on the labor market, actually also on household incomes,” he said.
    Still, he noted that the Bank did not need to see inflation fall to its 2% target before it begins cutting rates.
    U.K. government bond yields fell as Bailey spoke, suggesting increased investor expectations of rate cuts. More

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    Israel’s GDP contracts nearly 20% in fourth quarter amid Gaza war

    Analysts predicted a contraction of around 10%.
    Israel’s high-tech economy is particularly affected by the fact that it has mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.

    An Israeli national flag above produce for sale at Carmel Market in Tel Aviv, Israel, on Nov. 7, 2023.
    Bloomberg | Bloomberg | Getty Images

    Israel’s gross domestic product shrank nearly 20% in the fourth quarter of 2023, according to official figures.
    The contraction was significantly larger than expected, as analysts predicted a contraction of around 10%. It reflects the toll of the country’s war against Hamas in Gaza, now entering its fifth month.

    The economic data out Monday “pointed primarily to a contraction in private sector consumption and a deep contraction in investment, especially in real estate,” analysts at Goldman Sachs wrote in a research note.
    “The deep GDP contraction occurred despite a strong surge in public sector consumption as well as a positive net trade contribution, with the decline in imports outpacing the decline in exports.”
    Official figures showed a 26.9% quarter-on-quarter annualized drop in private consumption, and fixed investment plummeting nearly 68% as residential construction ground to a halt amid a shortage of both Israel workers due to military mobilization and Palestinian workers as the latter group has been mostly barred from entering Israel since Oct. 7.
    Before then, more than 150,000 Palestinian workers from the occupied West Bank entered Israel daily for work in a range of sectors, predominantly in construction and agriculture.

    Israel’s GDP contraction “was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza,” Liam Peach, senior emerging markets economist at London-based Capital Economics, said in an analysis note.

    “While a recovery looks set to take hold in Q1, GDP growth over 2024 as a whole now looks likely to post one of its weakest rates on record.”
    Israel’s high-tech economy is particularly affected by the fact that it has mobilized 300,000 of its men and women as military reservists to deploy in both Gaza and on its northern border with Hezbollah in Lebanon.
    The mobilization was triggered by the terror attack of Oct. 7 led by Palestinian militant group Hamas that killed about 1,200 people in Israel. Israel’s subsequent offensive against the Gaza strip and relentless bombing campaign has killed more than 28,000 people in the blockaded territory, according to Gaza’s Hamas-run health ministry. More

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    For Michigan’s Economy, Electric Vehicles Are Promising and Scary

    Last fall, Tiffanie Simmons, a second-generation autoworker, endured a six-week strike at the Ford Motor factory just west of Detroit where she builds Bronco S.U.V.s. That yielded a pay raise of 25 percent over the next four years, easing the pain of reductions that she and other union workers swallowed more than a decade ago.But as Ms. Simmons, 38, contemplates prospects for the American auto industry in the state that invented it, she worries about a new force: the shift toward electric vehicles. She is dismayed that the transition has been championed by President Biden, whose pro-labor credentials are at the heart of his bid for re-election, and who recently gained the endorsement of her union, the United Automobile Workers.The Biden administration has embraced electric vehicles as a means of generating high-paying jobs while cutting emissions. It has dispensed tax credits to encourage consumers to buy electric cars, while limiting the benefits to models that use American-made parts.But autoworkers fixate on the assumption that electric cars — simpler machines than their gas-powered forebears — will require fewer hands to build. They accuse Mr. Biden of jeopardizing their livelihoods.“I was disappointed,” Ms. Simmons said of the president. “We trust you to make sure that Americans are employed.”Tiffanie Simmons works in Wayne, Mich., at a Ford Motor factory that builds Broncos.Nick Hagen for The New York TimesMs. Simmons’s union has endorsed President Biden, but “I was disappointed” in him, she said.Nick Hagen for The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Awards $1.5 Billion to Chipmaker GlobalFoundries

    The grant will go toward chips for the auto and defense industries, and is the largest award to date from $39 billion in government funding.The Biden administration on Monday announced a $1.5 billion award to the New York-based chipmaker GlobalFoundries, one of the first sizable grants from a government program aimed at revitalizing semiconductor manufacturing in the United States.As part of the plan to bolster GlobalFoundries, the administration will also make available another $1.6 billion in federal loans. The grants are expected to triple the company’s production capacity in the state of New York over ten years.The funding represents an effort by the Biden administration and lawmakers of both parties to try to revitalize American semiconductor manufacturing. Currently, just 12 percent of chips are made in the United States, with the bulk manufactured in Asia. America’s reliance on foreign sources of chips became an issue in the early part of the pandemic, when automakers and other manufacturers had to delay or shutter production amid a dearth of critical chips.The award to GlobalFoundries will help the firm expand its existing facility in Malta, N.Y., enabling it to fulfill a contract with General Motors to ensure dedicated chip production for its cars.It will also help GlobalFoundries build a new facility to manufacture critical chips that are not currently being made in the United States. That includes a new class of semiconductors suited for use in satellites because they can survive high doses of radiation.The money will also be used to upgrade the company’s operations in Vermont, creating the first U.S. facility capable of producing a kind of chip used in electric vehicles, the power grid, and 5G and 6G smartphones. If not for the investment, administration officials said the facility in Vermont would have faced closure.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Nature Has Value. Could We Literally Invest in It?

    “Natural asset companies” would put a market price on improving ecosystems, rather than on destroying them.Picture this: You own a few hundred acres near a growing town that your family has been farming for generations. Turning a profit has gotten harder, and none of your children want to take it over. You don’t want to sell the land; you love the open space, the flora and fauna it hosts. But offers from developers who would turn it into subdivisions or strip malls seem increasingly tempting.One day, a land broker mentions an idea. How about granting a long-term lease to a company that values your property for the same reasons you do: long walks through tall grass, the calls of migrating birds, the way it keeps the air and water clean.It sounds like a scam. Or charity. In fact, it’s an approach backed by hardheaded investors who think nature has an intrinsic value that can provide them with a return down the road — and in the meantime, they would be happy to hold shares of the new company on their balance sheets.Such a company doesn’t yet exist. But the idea has gained traction among environmentalists, money managers and philanthropists who believe that nature won’t be adequately protected unless it is assigned a value in the market — whether or not that asset generates dividends through a monetizable use.The concept almost hit the big time when the Securities and Exchange Commission was considering a proposal from the New York Stock Exchange to list these “natural asset companies” for public trading. But after a wave of fierce opposition from right-wing groups and Republican politicians, and even conservationists wary of Wall Street, in mid-January the exchange pulled the plug.That doesn’t mean natural asset companies are going away; their proponents are working on prototypes in the private markets to build out the model. And even if this concept doesn’t take off, it’s part of a larger movement motivated by the belief that if natural riches are to be preserved, they must have a price.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More