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    U.S. Economic Growth Accelerated in the Third Quarter

    Gross domestic product expanded at a 4.9 percent annual rate over the summer, powered by prodigious consumer spending. But the pace is not expected to be sustained.The United States economy surged in the third quarter as a strong job market and falling inflation gave consumers the confidence to spend freely on goods and services.Gross domestic product, the primary measure of economic output, grew at a 4.9 percent annualized rate from July through September, the Commerce Department reported Thursday. It was the strongest showing since late 2021, defying predictions of a slowdown prompted by the Federal Reserve’s interest rate increases.The acceleration was made possible in part by slowing inflation, which lifted purchasing power even as wage growth weakened, and a job market that has shown renewed vigor over the past three months.It’s a far cry from the recession that many had forecast at this time last year, before economists realized that Americans had piled up enough savings to power spending as the Fed moved to make borrowing more expensive.“There’s been an enormous increase in wealth since Covid,” said Yelena Shulyatyeva, senior economist for the bank BNP Paribas, referring to recent Fed data that showed median net worth climbed 37 percent from 2019 to 2022. “People still take not just one vacation, not just two, but three and four.”That level of spending in turn fueled robust job growth in service industries like hotels and restaurants even as sectors that benefited from pandemic shopping trends, like transportation and warehousing, returned to more normal levels. And with layoffs still near record lows, workers have little reason to hold off on making purchases, even if it means using a credit card — an increasingly pricey option as interest rates drift higher.One beneficiary of those open pocketbooks is Amanda McClements, who owns a home goods store in Washington, D.C., called Salt & Sundry. Sales are up about 15 percent from last year and have finally eclipsed 2019 levels.“People can’t get enough candles; that continues to be our top seller,” Ms. McClements said. They are also “entertaining more post-pandemic, so we do really well in glassware, tableware, beautiful linens.”Ms. McClements said business hadn’t been uniformly strong, though: Her plant store, Little Leaf, never snapped back from the depths of the pandemic, and it closed this year. “We’ve been experiencing a really uneven recovery,” she said.Although consumers propelled the bulk of the economy’s growth in the third quarter, other factors contributed as well. Residential investment, for example, provided a boost even in the face of higher interest rates: Those who already own homes have little incentive to sell, so newly constructed homes are the only ones on the market.“The third quarter would be that sweet spot where higher mortgage rates kept people in place, builders capitalized on the lack of existing supply, and that showed up as an improvement from prior quarters,” said Bernard Yaros, lead U.S. economist at Oxford Economics.The rebound in growth will probably be brief. Pitfalls loom in the fourth quarter, including the depletion of savings, the resumption of mandatory student loan payments and the need to refinance maturing corporate debt at higher rates.But for now, the United States is outperforming other large economies, in part because of its aggressive fiscal response to the pandemic and in part because it has been more insulated from impact of the Ukraine war on energy prices.“We’re talking about the eurozone and U.K. certainly looking like being on the cusp of recession, if not already in recession,” said Andrew Hunter, deputy U.S. economist for Capital Economics, an analysis firm. “The U.S. is still the global outlier.”Jeanna Smialek More

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    Why U.A.W. President Shawn Fain Has Taken a Hard Line

    Shawn Fain owes his rise within the United Automobile Workers to a group determined to make the union far more confrontational toward automakers.When Shawn Fain sought the presidency of the United Automobile Workers union last year, he ran on a platform that promised: “No corruption. No concessions. No tiers.”That pledge encapsulated many members’ frustrations with years of union scandal and concessions to the three big Detroit automakers, including the creation of a lower tier of wages for newer employees. The platform helped propel Mr. Fain to the top job — where he has led a mounting wave of walkouts in recent weeks to demand more favorable contract terms.But the platform largely predated Mr. Fain’s candidacy. It was devised by a group called Unite All Workers for Democracy, which was officially formed in 2020 as a caucus — essentially, a political party within the union.The group set out to topple the ruling party, known as the Administration Caucus, which had run the union for more than 70 years. In 2022, Unite All Workers hashed out its party line, recruited candidates and ramped up a campaign operation to elect them.When the dust settled, the slate had won half the seats on the union’s 14-member executive board, with Mr. Fain, previously a union staff member, as president. Unite All Workers’ role helps explain why the union has taken such a hard line with the automakers.“We had a platform we ran on, and we’re trying to push that platform forward,” said Scott Houldieson, a founder of the group and a longtime Ford Motor worker in Chicago. “Shawn has been really upfront about what we’re trying to accomplish.”The first fruits of that approach may have emerged Wednesday, when negotiators for the union and Ford agreed on terms for a new four-year contract, including a wage increase of roughly 25 percent over the four years, according to the union.“We hit the companies to maximum effect,” Mr. Fain said in a Facebook livestream. The deal is subject to ratification by the company’s union workers.Since at least the 1980s, U.A.W. members have formed groups to challenge the union’s top officials, or at least prod them to be more confrontational with automakers. The efforts took on added urgency in 2007, when the union accepted tiers as a way to stabilize the automakers’ financial footing. (General Motors and Chrysler later filed for bankruptcy anyway; Ford avoided it.)Scott Houldieson, a founder of United Auto Workers for Democracy, said, “We had a platform we ran on, and we’re trying to push that platform forward.”Jamie Kelter Davis for The New York TimesBut the Administration Caucus always held a trump card: The union leadership wasn’t elected directly by members. Rather, future leaders were effectively chosen by existing leaders, then approved by delegates to a convention every four years.That changed after a corruption scandal in which two recent U.A.W. presidents were charged with embezzlement in 2020. As part of a consent decree with the federal government, members voted in a referendum on whether to directly elect union leaders. Unite All Workers, which was pressing for the change, waged an all-out campaign to persuade union members to support “one member one vote.”When the initiative passed by nearly a two-to-one ratio, Unite All Workers, whose members paid an annual fee, was poised to become a kingmaker of sorts in the union’s 2022 elections. The group had a budget of over $100,000, two full-time staff members and hundreds of volunteer organizers.“It was obvious that we could use the same infrastructure” of staff and volunteers to compete in the election, said Mike Cannon, a retired U.A.W. member who serves on the Unite All Workers steering committee. “The only question at that point was, were we going to have any candidates?”Unite All Workers announced that anyone who wanted to join its campaign slate would have to fill out a detailed questionnaire and attend at least one meeting with its members.The group wanted to ensure that the candidates it backed were committed to running the union with extensive input from rank-and-file members, and to driving a much harder bargain with employers. It wanted an end to wage tiers, which it said divided and demoralized workers, and a focus on organizing new members, especially among electric vehicle and battery workers.Among those responding to the call was Mr. Fain, then a staff member in the union division responsible for Stellantis, the parent of Chrysler, Jeep and Ram. During his interview process, Mr. Fain explained how, as a local official in Indiana in 2007, he had helped lead opposition to the two-tier wage structure the union had agreed to, and how he had argued for more favorable contract terms after joining the headquarters staff.Some members of the group were skeptical that an employee of the old guard could be a reformer. But other U.A.W. dissidents vouched for him. “I knew the claims were legit,” said Martha Grevatt, a longtime Chrysler employee on the steering committee of Unite All Workers.Martha Grevatt said she had found Mr. Fain’s pledges to shake up the union “legit” even though he had been a staff member under the previous leadership.Daniel Lozada for The New York TimesThe group backed Mr. Fain and six other candidates for the union’s 14-member executive board, and all seven won.As president, Mr. Fain has appointed critics of the former leadership as his top aides, including one who served on the Unite All Workers steering committee. Board members, including Mr. Fain, have attended some of the group’s monthly membership meetings and taken part in one of its WhatsApp chats.Many of the group’s priorities became demands in the union’s contract negotiations, and Mr. Fain has indicated that he hopes to use momentum from the strike to organize nonunion companies like Tesla and Honda, a key objective of Unite All Workers.But for all the connections between the group and the union leadership, they are not one and the same.Some board members who ran on the Unite All Workers slate have at times taken positions in tension with the group’s priorities. In recent weeks, Margaret Mock, the union’s second-ranking official, has expressed concern to fellow board members about the walkout’s cost to the union’s budget. At a special board meeting last week, she offered a proposal intended to scale back spending on organizing during the strike, according to two people familiar with the meeting. The board set aside the proposal; Ms. Mock did not respond to a request for comment.For its part, Unite All Workers considers itself accountable to rank-and-file members, not an extension of the leaders it helped elect. On a tentative deal with any of the three large automakers, Unite All Workers plans to appoint a task force to provide an assessment of the proposal to the union’s members. The group’s members will then decide whether to support it.“I would say it’s not automatic that the caucus endorses” an agreement, said Andrew Bergman, who serves on the Unite All Workers steering committee.Still, as a practical matter, the group is highly unlikely to oppose an agreement, since Mr. Fain has forcefully pressed for its core priorities.“For years, we’ve been playing defense at every step, and we’ve been losing,” Mr. Fain said in a video streamed online on Friday, explaining why the strike would continue. “When we vote on a tentative agreement, it will be because your leadership and your council thinks we’ve gotten absolutely every dollar we can.” This week, the union expanded the strike to the largest U.S. factories at Stellantis and General Motors.The approach has raised concerns among employers and business groups. John Drake, a vice president at the U.S. Chamber of Commerce, said that the Detroit automakers could struggle to remain competitive after the strike, and that Mr. Fain appeared to be overreaching in extracting concessions.“It feels like there’s not really a strategy here,” Mr. Drake said. “It’s like pain is the goal.”Mr. Fain has indicated that he hopes to use momentum from the strike to organize nonunion companies like Tesla and Honda, a key objective of the insurgent group that endorsed his candidacy.Jamie Kelter Davis for The New York TimesThe best analogy for Unite All Workers may be to a group called Brand New Congress, created by supporters of Senator Bernie Sanders, the progressive Vermont independent, to help elect congressional candidates beginning in 2018.Not long after the 2016 presidential election, Brand New Congress urged an obscure New York bartender and activist named Alexandria Ocasio-Cortez to challenge a longtime incumbent in a Democratic congressional primary. A sister group provided her with training and campaign infrastructure. After she won, two people involved with the groups joined her staff.Ms. Ocasio-Cortez has since become far more prominent than those early backers, and in principle she could take positions at odds with their progressive stands. But in practice, it’s unlikely. The worldview is embedded in her political identity.Mr. Fain’s story is similar: a once-obscure progressive who was catapulted to a position of power by a group of insurgents and was determined to enact their shared principles once he got there. Except that, in backing him and his colleagues, Unite All Workers helped win not just a few legislative seats, but the reins of an entire union.After Vail Kohnert-Yount, a Unite All Workers steering committee member, seconded Mr. Fain’s nomination for president at the union’s convention last year, he spoke to her about relying on government assistance as a new parent decades ago.“I remember thinking this guy has not forgotten where he came from — he’s very much stayed that person,” Ms. Kohnert-Yount said. “We did our best to endorse a candidate we believed in.” More

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    U.S. and China commercial property markets face headwinds but UOB is optimistic on Southeast Asia

    Commercial real estate markets in the U.S. and China are economic pain points to monitor in a higher-for-longer rate environment, said Singapore’s United Overseas Bank.
    But the bank remains optimistic about one key region, citing investment flows particularly in the new economy area such as sustainability.

    Commercial real estate markets in the U.S. and China are economic pain points to monitor in a higher-for-longer rate environment, said Singapore’s United Overseas Bank. But the bank remains optimistic about one key region.
    “The U.S. commercial real estate remains a hotspot, especially with the low occupancy rates that we have,” Lee Wai Fai, chief financial officer of UOB told CNBC’s “Street Signs Asia.”

    Vacancy rates for office buildings climbed to a record high of 18.2% in late 2022.
    “The other hotspots will be China, there [are] worries about the quality and whether they can manage the property uncertainty in China,” he added.
    China’s property market has struggled with faltering consumer confidence as major developers like Evergrande and Country Garden remain mired in debt problems.
    Lee added the world is heading into a more “uncertain environment” and the impact of higher-for-longer interest rates is starting to filter through the economy.

    The world’s central banks have hiked interest rates aggressively over the past 18 months or so in a bid to rein in soaring inflation, with varying degrees of success.

    “China recovery has yet to come about. And of course, the recent geopolitical tension has added to the volatility,” he added.

    ASEAN’s resilience

    That being said, in spite of a bumpy macroeconomic environment, Lee expects the ASEAN region to remain resilient, citing investment flows particularly in new economy areas such as sustainability.
    “But [for] our regional fundamentals, we are confident, because we still have low unemployment and robust consumption,” he said, adding that supply chains are also shifting into Southeast Asia.
    Foreign direct investment flows to Southeast Asia have “increased by a factor of nine over the last two decades, with over half of these going to Singapore,” philanthropic organization Hinrich Foundation noted in a February report.
    UOB on Thursday posted a core net profit of $1.5 billion for the third quarter of financial year 2023 ending Sept. 30, rising 5% from a year ago. More

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    U.A.W. and Ford Negotiators Reach Accord on Contract Terms

    The deal, subject to approval by union members, could ease the way for deals with General Motors and Stellantis and end a growing wave of walkouts.Negotiators for the United Automobile Workers and Ford Motor have agreed on terms of a new four-year labor contract, people briefed on the talks said Wednesday, nearly six weeks after the union began a growing wave of walkouts against the three Detroit automakers.The deal includes a roughly 25 percent pay increase over four years, those people said. Any agreement would be subject to the approval of the U.A.W. council that oversees relations with Ford, and then ratification by the company’s union workers.The union continues to negotiate with General Motors and Stellantis, whose brands include Chrysler, Jeep and Ram.Two weeks ago — when it said it had reached the limit of what it could afford without hurting its business — Ford offered to increase wages 23 percent, adjust pay in response to inflation and cut the time for new hires to rise to the top wage, to four years from eight. The other companies have made similar offers.But the U.A.W. and its president, Shawn Fain, have pressed for greater concessions, ratcheting up the walkouts and aiming them at factories producing some of the automakers’ most profitable models.Altogether, about 45,000 workers at Ford, G.M. and Stellantis are on strike across the country, including 8,700 workers at Ford’s Kentucky truck plant in Louisville, the company’s largest, and almost 10,000 others at Ford factories in Illinois and Michigan.The tentative deal with Ford could increase pressure on the other companies to reach an agreement with the union. In the past, once the union reached a deal with one automaker, tentative agreements with the others quickly followed. But that history may not be as relevant now because the U.A.W. had never struck all three companies simultaneously until this year.The companies are investing billions in a transition to battery-powered vehicles, which they say makes it harder for them to pay substantially higher wages. Last week, Ford’s executive chairman, William C. Ford Jr., said the union’s demands risked damaging the ability of Detroit automakers to compete against nonunion companies like Tesla and foreign rivals.“Toyota, Honda, Tesla and the others are loving the strike, because they know the longer it goes on, the better it is for them,” he said. “They will win, and all of us will lose.”The U.A.W. makes a different case: that success in its contract battle with the Big Three will give it momentum to organize autoworkers at other companies as well.The U.A.W. began its walkouts when the companies’ union contracts expired in mid-September. It won immediate support from President Biden, who called on the automakers to “ensure record corporate profits mean record contracts” and briefly joined workers on a picket line at a G.M. plant near Detroit late last month.The union initially demanded a 40 percent wage increase over four years — an amount that union officials have said matches the raises the top executives at the three companies have received over the last four years. Those raises are also meant to compensate for more modest increases the autoworkers received in recent years and concessions the union made to the companies beginning in 2007.In addition, the union has called for an end to a system that pays new hires just over half of the top wage of $32 an hour. It has been seeking cost-of-living adjustments that would nudge wages higher to compensate for inflation. And it wants a reinstatement of pensions for all workers, improved retiree benefits and shorter work hours.G.M. and Stellantis faced the most recent escalation of the U.A.W. walkouts when the union called out 6,800 workers at a large Ram pickup truck plant in Michigan on Monday and 5,000 workers at a G.M. plant in Arlington, Texas, that makes large sport utility vehicles including the Chevrolet Tahoe, the GMC Yukon and the Cadillac Escalade.On Tuesday, G.M. reported a third-quarter profit of $3.1 billion, a 7 percent decline from the same period last year, owing in part to the ongoing strike. Ford is scheduled to announce its third-quarter earnings on Thursday. More

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    The economy probably showed gangbuster growth in the third quarter. But will it last?

    Thursday morning will see the release of the first estimate for third-quarter gross domestic product, which is expected to post a 4.7% annualized gain.
    Policymakers, economists and markets will be focused more on forward-looking signals from an economy that repeatedly has defied expectations.
    Since last year, the bond market has been sending a strong signal it thinks a recession is coming.

    People shop along Broadway in Manhattan on July 27, 2023 in New York City.
    Spencer Platt | Getty Images

    The U.S. economy likely turned in another strong performance heading into the final part of the year, though what’s ahead could be significantly different.
    Gross domestic product, or the sum of all goods and services produced in the U.S. economy, is expected to post a 4.7% annualized gain for the third quarter, according to a Dow Jones consensus estimate. The Commerce Department will release its first estimate of GDP at 8:30 a.m. ET.

    If the projection is correct, it will be the strongest output since the fourth quarter of 2021, when growth was just shy of 7%.
    However, policymakers, economists and markets will be focused more on forward-looking signals from an economy that repeatedly has defied expectations.
    “We ought to look at whatever we print in the third quarter with a large degree of suspicion,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities America. “GDP doesn’t tell us where we’re going. We can feel all warm and fuzzy about a good number. But the real problem is what’s next.”
    For much of the past two years, economists have been waiting for the economy to slow down and possibly enter a recession. In fact, the the Federal Reserve itself had been forecasting a mild contraction, but retracted that recently in the wake of resilient consumer that has kept growth afloat.
    That’s expected to be the case again in the July-through-September period.

    The consumer keeps consuming

    The Atlanta Fed employs a growth tracker it calls GDPNow, which takes in data on a real-time basis and adjusts its projections accordingly. Over the past two years or so, the gauge has had a good track record, outperforming consensus nine of the past 10 quarters, according to recent research from Goldman Sachs.
    For Q3, GDPNow is projecting growth of 5.4%, with more than half — 2.77 percentage points — to come from consumer spending. Exports are expected to contribute about 1 percentage point, while inventories are projected to add 0.7 point.
    LaVorgna, a top White House economist under former President Donald Trump, thinks the consumer will be responsible for more than three-fourths of what he expects to be a 4.1% GDP gain. However, he thinks higher borrowing costs and a general expected pullback in demand for big-ticket items ahead finally could start putting a hit on demand metrics.

    “The income side of the data shows the economy is much softer,” LaVorgna said. “To me, there’s a lot on the docket that suggests, as excited as we want to get for Q3, that definitely might be the last pop in growth that we see for a while.”
    To be sure, the economy and its pivotal consumer component have been written off before.
    Starting in early 2022, there had been a strong Wall Street consensus call that a recession was almost inevitable because of the lagged impact of higher interest rates. That expectation intensified during a brief banking industry crisis in March 2023 that the Fed expected would constrain credit enough to bring about a downturn.
    But the Fed’s move to keep liquidity flowing in the sector, along with ambitious lending efforts from “shadow” nonbanks, helped get the economy through the crisis and keep growth afoot.
    “This consumer feels comfortable spending money, they feel comfortable borrowing money,” said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA. “There is a lot of spending that is being done despite the interest rate environment. That comes from the fact that there is a tight labor market and people feel comfortable in their jobs.”

    The economic ‘Energizer bunny’

    Indeed, companies and the government continue to hire, putting upward pressure on growth and keeping the heat on the Fed to maintain higher rates to fight inflation. Central bank officials have raised rates aggressively while professing to not want to drag the economy into recession.
    “The economy is like an Energizer bunny,” Ricchiuto said. “You have to find a way to stop it, and the Fed keeps on telling everybody they don’t really want to stop it.”
    Markets, then, could interpret a strong GDP in a variety of ways.
    They could see a beat as a sign that the Fed still has more work to do on inflation. Or they could view it as a sign that the economy can withstand higher rates and still grow. Or they could deem Thursday’s Commerce Department report as backward-looking and await more data for clues on the Fed’s next move.
    Since mid-July 2022, the bond market has been sending a strong signal it thinks a recession is coming. Since that point, the yield on the two-year Treasury has eclipsed that of the 10-year note, a phenomenon called an inverted yield curve that has never failed to forecast a looming recession.

    Now, the inversion has lessened sharply to the point where the curve is almost flat again — also a textbook sign that a recession is around the corner. That’s because after inverting, markets ultimately will start pricing in the slower or negative growth ahead through lower yields.
    “The market is sending a message that a recession is coming and the Fed will have to lower rates,” said Quincy Krosby, chief global strategist at LPL Financial.
    “What they’re trying to do is engineer a slowdown but keep the labor market intact,” she added. “Historically, that’s been difficult.”

    Krosby expects markets to pay some attention to the GDP report but also focus on data Friday on consumer spending, sentiment and inflation, with the release of the Fed’s favorite gauge of price increases coming from the Commerce Department.
    “Is the economy going to continue to defy historical trends, such as the unwinding of the inverted yield curve?” she said. “That’s the dilemma in this market.” More

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    Biden Seeks to Tame Oil Prices if Mideast Conflict Sends Them Soaring

    The president has previously drawn down the Strategic Petroleum Reserve to ease price pressures, but that could be more difficult nowBiden administration officials, worried that a growing conflict in the Middle East could send global oil prices soaring, are looking for ways to hold down American gasoline prices if such a jump occurs.Those efforts include discussions with large oil-producing nations like Saudi Arabia that are holding back supply and with American oil producers that have the ability to pump more than they already are producing, administration officials say.A senior administration official said in an interview that it was also possible that President Biden could authorize a new round of releases from the nation’s Strategic Petroleum Reserve, an emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico. Mr. Biden tapped the reserve aggressively last year after Russia’s invasion of Ukraine sent oil prices skyrocketing, leaving the amount of oil in those reserves at historically low levels.The conflict in the Middle East has not yet sent oil prices surging. A barrel of Brent crude oil was trading for about $88 on global markets on Wednesday. That was up from about $84 earlier this month, shortly before Hamas attacked Israel and rattled markets. But analysts and administration officials fear prices could rise significantly more if the conflict in Israel spreads, restricting the flow of oil out of Iran or other major producers in the region.So far, American drivers have not felt a pinch. The average price of gasoline nationally was $3.54 a gallon on Wednesday, according to AAA. That was down about 30 cents from a month ago and 25 cents from the same day last year.Administration officials are wary of the possibility that prices could again jump above $5 a gallon, a level they briefly touched in the spring of 2022. Mr. Biden took extraordinary efforts then to help bring prices down — but those steps are likely to be far less effective in the event of a new oil shock.“They succeeded last year in the second half, but this year I think they’ve kind of run out of bullets,” said Amrita Sen, director of research at Energy Aspects.In part that’s because the administration did not refill the strategic reserve more aggressively when prices were lower, Ms. Sen said. That could undercut its ability to counteract rising prices now.“They got a little overconfident that prices would stay low,” she said. “In some ways, they’ve missed the boat.”

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    Crude oil in the strategic petroleum reserve
    Note: Levels are as of end of each week.Source: Energy Information AdministrationBy The New York TimesMr. Biden released a record 180 million barrels of oil from the strategic reserve, flooding the market with additional supply. His administration replenished just six million barrels when prices dipped this year, leaving the reserve at its lowest level since the 1980s. The Energy Department announced plans last week to continue refilling in the months ahead, but only if prices drop below $79 a barrel.Administration officials insist that tapping the reserve again remains an option. It still holds more than 350 million barrels of oil. That’s more than enough to counteract a disruption in oil markets if one occurs, energy analysts say.The U.S. economy is also less vulnerable to a price spike than in previous decades because the country has become less dependent on foreign oil. The United States produced more than 400 million barrels of oil in July, a record.

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    Monthly U.S. crude oil production
    Source: Energy Information AdministrationBy The New York Times“There’s still a lot of oil in the U.S. strategic reserve, and the U.S. is not in this alone,” said Richard Newell, president and chief executive of Resources for the Future, an energy-focused think tank. He noted that other countries had their own strategic reserves.Still, with Mr. Biden already taking criticism from Republicans for depleting the stockpile, he may be reluctant to tap it again now. “There’s another arrow in the quiver, but there’s only so many arrows right now,” said Jim Burkhard, head of energy markets research for S&P Global Commodity Insights. “Could they repeat it? Yes, but then you’re left with much, much less oil.”The stakes for Mr. Biden are high. Voters often punish presidents for high gasoline prices, and the challenge is amplified for Mr. Biden because, unlike most presidents, he has leaned into his role — intervening aggressively when prices soared early last year, and then claiming credit when prices fell.Independent experts say Mr. Biden is justified in claiming some credit for the moderation in prices last year, though they say other factors — including weaker-than-expected Chinese oil demand — also played a major role.The initial jump in oil prices was driven not by an actual shortage of oil but by a fear of one: Investors worried that millions of barrels of Russian oil would be blocked from the international market, either as a result of Western sanctions or Russian retaliation.Worried that the growing conflict in the Middle East could send oil prices soaring, Biden officials are looking for ways to hold down gasoline prices.Mark Abramson for The New York TimesMr. Biden’s decision to release oil from the strategic reserve provided additional supply at a crucial moment, helping to calm markets and push prices down.Analysts worried that additional sanctions from Europe, which were set to take effect near the end of 2022, would cause a second surge in prices by knocking more Russian supply offline. The Biden administration worked to prevent that by leading an international effort to impose a price cap on Russia that allowed the country to keep exporting oil — but only at reduced prices.That effort has worked to keep Russian oil flowing to markets and avoid a supply shock. In the first half of this year, it also appeared to be denting Moscow’s oil revenues. Increasingly, Russia has found ways around the price cap, forcing administration officials to take steps this month to crack down on enforcement of the cap in hopes of reducing the price at which Russian oil is sold.There is some risk that those enforcement efforts could at least temporarily knock Russian supply off the market at a tenuous time for global oil supply. But more important for the administration, there is little chance that a similar sort of price cap could help keep supply flowing from a large oil producer that could be involved in a widening war in the Middle East — most notably, Iran.Last October, the White House announced that it would enter into contracts to buy oil for the strategic reserve when prices fell below $72 a barrel. Doing so, the administration argued, would not just replenish the reserve but encourage domestic production by guaranteeing demand for oil at a reasonable price. But the effort has gotten off to a fitful start.Rory Johnston, an oil market analyst, said that the administration had been admirably creative in its energy policy, but that its execution had been flawed. Investors, he said, have been left skeptical about the administration’s ability to execute its strategy on refiling the reserve. They are also wondering if Mr. Biden will ever be willing to risk the political hit from driving up oil prices, by buying supply and pulling it off the market to refill the reserve.“If you want to be cynical, they’re very keen to do the price downside stuff and understandably not as keen to do the things that could seen as lifting prices,” Mr. Johnston said. More

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    IMF chief says Israel-Hamas war is a new cloud on the world’s economic horizon

    The head of the IMF on Wednesday dubbed the worsening Israel-Hamas conflict as another cloud on the horizon of an already gloomy economic outlook.
    “What we see is more jitters in what has already been an anxious world,” IMF Managing Director Kristalina Georgieva told a panel hosted by CNBC’s Dan Murphy.
    Georgieva’s assessment that the conflict was adding to “more anxiety in the world” was felt by other senior business figures at the Future Investment Initiative Institute conference.

    Kristalina Georgieva, managing director of the International Monetary Fund, at a press conference at the IMF Headquarters on April 14, 2023.
    Kevin Dietsch | Getty Images News | Getty Images

    The head of the International Monetary Fund on Wednesday dubbed the worsening Israel-Hamas conflict as another cloud on the horizon of an already gloomy economic outlook.
    “What we see is more jitters in what has already been an anxious world,” Managing Director Kristalina Georgieva told a panel hosted by CNBC’s Dan Murphy at the Future Investment Initiative Institute conference in Riyadh.

    “And on a horizon that had plenty of clouds, one more — and it can get deeper.”  
    Georgieva said that the economic fallout from the war, now in its third week, would be “terrible” for the sides involved, as well as have significant repercussions for the region. Those include negative impacts on trade and tourism.

    “It is terrible in terms of economic prospects for the epicenter for the war,” she said. “[There will be] negative impact on the neighbors: on trade channels, on tourism channels, cost of insurance.”
    Georgieva noted that countries including Egypt, Lebanon and Jordan were already feeling the ramifications.
    “Uncertainty is a killer for tourists inflows. Investors are going to be shy to go to that place,” she said.

    She did not reference the economic implications of the conflict for the wider global economy, but noted that the outlook was already stagnant.
    Georgieva’s assessment that the war is adding to a sense of “a more jittery world, more anxiety in the world” was felt by other senior business figures at the FII conference.
    Dubbed “Davos in the desert,” the event typically focuses on economic and investment prospects around the Middle East region. This year, it has been overshadowed by Israel’s ongoing offensive against the Gaza Strip, following the Oct. 7 terror attacks carried out by Palestinian militant group Hamas against Israel.
    The hostilities came as Israel had been making moves to normalize diplomatic ties with its neighbors, including Saudi Arabia.
    Georgieva said the IMF’s first priority was “the tragic lost of life” caused by the offensive and called for a resolution as soon as possible.
    “The sooner there is a resolution, the better,” she said. More

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    Peace talks in the Middle East will take time to resume, World Bank chief says

    The president of the World Bank said Tuesday that it will be some time before progress toward a more peaceful Middle East can resume in earnest.
    Ajay Banga told CNBC that the onset of the Israel-Hamas war has thrown nascent normalization talks off course.
    “I think it’s clearly going to be a little while until this sort of works out one way or the other,” Banga told Dan Murphy.

    MARRAKESH, MOROCCO – OCTOBER 13: Ajay Banga, President of the World Bank Group, speaks during the International Monetary Fund (IMF) meeting in Marrakesh, Morocco on October 13, 2023. (Photo by Abu Adem Muhammed/Anadolu via Getty Images)
    Anadolu Agency | Anadolu Agency | Getty Images

    The president of the World Bank on Tuesday said that it will be some time before progress toward a more peaceful Middle East can resume in earnest.
    Ajay Banga told CNBC that the onset of the Israel-Hamas war has thrown nascent normalization talks off course, making regional cooperation much more difficult.

    “We were working towards a more peaceful Middle East and many countries in this region have begun to speak to each other about the opportunity of moving forward with a new platform of being together,” Banga told CNBC’s Dan Murphy.
    “I think it’s clearly going to be a little while until this sort of works out one way or the other,” he added.

    Banga was speaking at the Future Investment Initiative Institute conference in Riyadh, where business leaders are gathered to discuss economic and investment prospects of the Middle East region.
    This year, the event has been overshadowed by Israel’s ongoing offensive against the Gaza Strip, following the Oct. 7 terror attacks carried out by Palestinian militant group Hamas against Israel. The hostilities came as Israel had been making moves to normalize diplomatic ties with its neighbors, including Saudi Arabia.
    The World Bank chief said that the conflict could have ramifications not only for the region, but also for the wider global economy — most notably for energy markets.

    Oil prices have climbed in the more than two weeks since the onset of the violence amid concerns over supply constraints within the energy-rich region.
    Banga also spoke of the potential impact on food and fertilizer prices, which similarly spiked in the wake of the Russia-Ukraine war.
    “Other such things we saw when Russia came into Ukraine — that food and fertilizer and oil spiked,” he said.
    “The world took a little while to come back from that, I’m worried that that will be another piece of danger,” Banga added.
    It comes as the world economy confronts a new era of higher interest rates and slower growth, “something we’ve not been used to,” he said.
    Banga’s comments were echoed on Wednesday by the head of the International Monetary Fund, who dubbed the Israel-Hamas conflict as another cloud on the horizon of an already gloomy economic outlook.
    “What we see is more jitters in what has already been an anxious world,” Managing Director Kristalina Georgieva told a panel at the FII conference.
    “And on a horizon that had plenty of clouds, one more — and it can get deeper.”   More