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    Economic Toll of Los Angeles Fires Goes Far Beyond Destroyed Homes

    The ongoing disaster will affect residents’ health, local industries, public budgets and the cost of housing for years to come.After decades of mounting damage from climate-fueled natural disasters, researchers have compiled many misery-filled data sets that trace the economic fallout over weeks, months and years.The fires still burning in Los Angeles are sure to rank among America’s most expensive — but there is no perfect analogue for them, making it difficult to forecast the ultimate cost.The main reason is that wildfires have typically burned in more rural locations, consuming fewer structures and attacking smaller metropolitan areas. The Los Angeles conflagration is more akin to a storm that hits a major coastal city, like Houston or New Orleans, causing major disruption for millions of people and businesses.“It looks a lot more like the humanitarian situation from a flood or a hurricane than a wildfire that people are watching in the hills,” said Amir Jina, an assistant professor at the University of Chicago’s Harris School of Public Policy, who has studied the economic impact of climate change.On the other hand, several mitigating factors could lead to lower costs and a stronger rebound relative to other places. The cinema capital’s wealth and industrial diversity, along with other natural advantages from geography and weather, may allow Los Angeles to stave off a worst-case scenario.Estimating the likely economic losses is tricky at this stage. The weather data company AccuWeather has offered a figure of $250 billion to $275 billion, though a Goldman Sachs report said it found the estimate high. (Declining to provide a breakdown because its methodology is “proprietary,” AccuWeather said it considered many factors including long-run health impacts as well as short-term losses in the value of public companies exposed to the disaster.)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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    New Zealand won’t ‘get rich’ by focusing trade in the South Pacific alone, PM says

    New Zealand is the latest country to sign an economic partnership with the United Arab Emirates.
    New Zealand’s prime minister told CNBC that the South Pacific island nation has to look beyond its own backyard for trade opportunities.
    The free trade agreement signed on Monday between New Zealand and the UAE is seen by Prime Minister Christopher Luxon as a chance to expand bilateral trade between the countries.

    Cattle photographed in New Zealand. Agriculture plays a major role in New Zealand’s economy, especially when it comes to exports.
    David Clapp | Stone | Getty Images

    New Zealand’s prime minister told CNBC the country has to look beyond its own backyard for trade opportunities, as the South Pacific island nation signs an economic partnership with the United Arab Emirates (UAE).
    The free trade agreement, known formally as the Comprehensive Economic Partnership Agreement (CEPA), is seen by Prime Minister Christopher Luxon as a chance to expand bilateral trade between the countries and makes the UAE one of the island’s largest markets in the Middle East.

    “We’ve had a long-standing relationship over 40 years of diplomatic recognition, and really the chance now for us is to deepen and to broaden the economic relationship,” Luxon told CNBC Monday.
    “That’s why the signing of the CEPA and also the bilateral investment treaty is really important, because actually these are two small advanced economies in the world that actually have a lot in common and alot of common values, and we want to be able to work together and build out that relationship.”
    New Zealand’s key exports to the UAE include dairy, industrial products, meat, horticultural products and travel services, the government said as it announced the deal. The agreement, expected to come into force later this year, comes as the government aims to double the value of exports in 10 years. It said the CEPA will mean that 99% of New Zealand goods exporters are able to access the UAE market duty free.
    “This includes all New Zealand’s dairy, red meat, horticultural and industrial products immediately when the Agreement enters into force,” it noted. 
    “One in four of our jobs in New Zealand are tied very much to trade,” Luxon, head of the center-right New Zealand National Party who’s been in power since late 2023, told CNBC’s Dan Murphy in Abu Dhabi Monday.

    “When you see a New Zealand company that’s exporting out to the world, it’s able to pay its workers7% higher salaries and wages, and they’re often our more productive companies. The message to people at home is that they understand that we are a trading nation. We don’t get rich just selling stuff to each other in the South Pacific or within New Zealand,” he said.
    “We actually need to send out great products and services out into the world, of which there’s huge demand for, and make sure we open up new markets like the Middle East to actually get those products too. In doing that, we bring more money back at home, and that, obviously, is the way in which we can afford better public services like health and education,” Luxon added.
    New Zealand is in need of an economic boost after its economy contracted last year and entered recession territory in the third quarter. The economy shrunk by 1% in the July-September quarter, data released in December showed.
    The fall followed a 1.1% contraction in the previous quarter. Two straight quarters of negative growth is widely considered a technical recession.

    WELLINGTON, NEW ZEALAND – NOVEMBER 03: Incoming Prime Minister and National Party leader Christopher Luxon speaks during a media stand-up at Parliament on November 03, 2023 in Wellington, New Zealand. Special votes cast overseas and by mail were certified on Friday, finally sealing the results of New Zealand’s general elections. The Labour party was soundly defeated by the National Party, led by Christopher Luxon, winning the most votes. National will however need the support of both ACT and NZ First parties to form the next coalition Government. (Photo by Hagen Hopkins/Getty Images)
    Hagen Hopkins | Getty Images News | Getty Images

    Luxon said there was no doubt that the past three years had been “a very challenging time” for the country, but said inflation, at 2.2% in October, was under control and interest rates were coming down. The country’s central bank has flagged that further easing is to come at its next meeting on Feb. 19.
    “We’ve got business confidence at a 10-year high. We’ve got consumer confidence at a three-year high. We’ve got farmer confidence the highest it’s been since 2017 so we know we’ve got the conditions that people are believing there’s a better future,” he added.
    “Now we’ve got to convert and really drive into growth, and that’s where these stronger international trading connections are, but also encouraging inbound investment to New Zealand as well.”
    Asked how he felt about Donald Trump returning to power in the U.S., and the possibility of tariffs on exports to the States as the president-elect has widely signaled (with a potential universal tariff of 10% or 20% on all goods imported to the U.S.), Luxon said he was in “wait-and-see” mode.
    “We’re going to work well with whichever Administration the Americans select, and they’veselected Donald Trump and the Republican Administration. And I’ve got every confidence we’ll work very constructively with them. We’ll have to wait and see as to what is the tariff policy in terms of how it actually does get played out, or what gets played out,” he said. More

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    California’s Insurance System Faces Crucial Test as Wildfire Losses Mount

    It’s too soon to know how the Los Angeles fires will change life in California, but it may heavily depend on the answer to a single question: Will a once-obscure insurance program run out of money?That program, the California FAIR Plan, was created by state lawmakers in 1968 to cover people who couldn’t get standard home insurance for various reasons. But as climate change makes wildfires more frequent and intense, causing commercial insurance companies to pull back from the state, the rapidly growing FAIR Plan has become the linchpin holding together California’s increasingly fragile insurance market.Because of the fires that started last week, that linchpin may be about to break, with consequences that would reverberate throughout California’s economy.As of last Friday, the FAIR Plan had just $377 million available to pay claims, according to the office of Senator Alex Padilla, Democrat of California. It’s not yet known how much in claims the plan will face but the total insured losses from the fires so far has been estimated at as much as $30 billion. Because the fires are still burning, that number could grow.Unlike regular insurance companies, the FAIR Plan can’t refuse to cover homes just because they’re in vulnerable areas. As a result, as the risk of wildfires grows, homes deemed too dangerous by major insurers have been piling up on the FAIR Plan’s books.Between 2020 and 2024, the number of homes covered by the plan more than doubled, to almost half a million properties with a value that tripled to about half a trillion dollars.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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    Budget deficit rose in December and is now 40% higher than it was a year ago

    The three-month fiscal year 2025 deficit rose to $710.9 billion, some $200 billion more than the comparable period in the prior year, or 39.4%.
    Rising financing costs along with continued spending growth and declining tax receipts have combined to send deficits spiraling and have pushed the national debt past the $36 trillion mark.

    A view from the United States Department of the Treasury building in Washington DC, United States on December 30, 2024. The US Treasury Department was cyberattacked by a Chinese state-sponsored actor in early December. 
    Celal Gunes | Anadolu | Getty Images

    The federal budget sank further into red ink during December, leaving the first fiscal quarter deficit nearly 40% higher than it was the prior year.
    For the final calendar month of 2024, the shortfall totaled $86.7 billion, which actually represented a 33% decline for the same period a year prior, according to a Treasury Department report Tuesday. However, that brought the three-month fiscal year total to $710.9 billion, some $200 billion more than the comparable period in the prior year, or 39.4%.

    Rising financing costs along with continued spending growth and declining tax receipts have combined to send deficits spiraling, pushing the national debt past the $36 trillion mark.
    Though short-term Treasury yields have held fairly steady over the past month, rates at the far end of the duration curve have surged. The benchmark 10-year note most recently yielded close to 4.8%, or about 0.4 percentage point above where it was a month ago.
    At the same time, outlays during the first quarter were 11% higher than a year ago while receipts fell by 2%.
    Interest on the national debt has totaled $308.4 billion in fiscal 2025, up 7% from a year ago. Financing costs are projected to top $1.2 trillion for the full year, which would surpass 2024’s record.
    The government this year has spent more on interest payments than any other category but Social Security, defense and health care.

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    Inflation watch: Wholesale prices rose 0.2% in December, less than expected

    The producer price index rose 0.2% in December, less than the 0.4% increase in November and below the Dow Jones consensus estimate for 0.4%.
    Excluding food and energy, the so-called core PPI was flat compared with the forecast for a 0.3% rise.
    The release is the first of two key inflation readings this week that likely will figure into the Federal Reserve’s interest rate decision later in January.

    A measure of wholesale prices increased less than expected in December, providing indication that pipeline inflation pressures eased to close the year though likely not enough to provoke another Federal Reserve interest rate cut anytime soon.
    The producer price index rose just 0.2% on the month, less than the 0.4% increase in November and below the Dow Jones consensus estimate for 0.4%, according to a Bureau of Labor Statistics report Tuesday.

    Excluding food and energy, the so-called core PPI was flat compared with the forecast for a 0.3% rise. Excluding food, energy and trade services, the measure rose just 0.1%.
    On an annual basis, headline PPI rose 3.3% for the full year, well ahead of the 1.1% increase in 2023.
    Goods prices increased 0.6%, pushed by a 9.7% surge in gasoline prices. Upward moves in several food- and energy-related measures were offset by a 14.7% slide in prices for fresh and dry vegetables.
    On the services side, prices were flat, despite a 7.2% increase in passenger transportation that was offset by a fall in prices for traveler accommodation.
    Stock market futures shot higher following the report while Treasury yields moved lower after pushing sharply higher in the early days of 2025.

    The release is the first of two key inflation readings this week that likely will figure into the Federal Reserve’s interest rate decision later in January.
    On Wednesday, the BLS will release its more closely watched reading on the consumer price index. That is expected to show 0.3% monthly gains on both the headline and core readings and respective annual inflation rates of 2.9% and 3.3%.
    Though the central bank focuses more on the Commerce Department’s personal consumption expenditures price index as its main inflation gauge, the PPI and CPI readings figure into that calculation.
    Markets pricing overwhelmingly points to the Fed staying on hold at the Jan. 28-29 meeting. However, policymakers, and Chair Jerome Powell in particular, could lay the groundwork for what is ahead as far as rates go.
    Fed funds futures pricing Tuesday implied just one rate cut through the rest of the year; Bank of America economists on Monday said they think the Fed could be done this year. Fed officials at their December meeting penciled in the equivalent of two cuts this year, assuming quarter percentage point moves.

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    Biden Administration Adds 37 Chinese Companies to Forced Labor List

    The administration announced it would penalize its largest-ever batch of companies linked to Xinjiang, including major suppliers of critical minerals and textiles.The Biden administration said on Tuesday that it would block imports from more than three dozen Chinese companies, citing their alleged ties to forced labor in the Xinjiang region of China.The administration’s move is the single largest batch of additions to a list of companies that are barred from bringing products into the United States because of concerns about human rights violations.The action was taken under a 2021 law, the Uyghur Forced Labor Prevention Act, which prevents the United States from importing products that are made in whole or in part in Xinjiang, a far-western region of China where the government has detained and surveilled large numbers of minorities, including Uyghurs.China denies the presence of forced labor in Xinjiang, but the U.S. government has said the Chinese government uses forced labor, mass detentions and other coercive practices to subdue the region’s predominantly Muslim ethnic groups, particularly the Uyghurs.The 37 entities that were added on Tuesday to a special list created by the law include subsidiaries of a major supplier of critical minerals, Zijin Mining. The New York Times reported in 2022 that Zijin Mining had links with labor transfer programs in Xinjiang.The additions also include one of the world’s largest textile manufacturers, Huafu Fashion, and 25 of its subsidiaries. It’s not clear which retailers Huafu currently supplies, but H&M previously said that it had an indirect relationship with a mill belonging to Huafu Fashion and that it would cut those ties.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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    Cleveland-Cliffs Signals a Possible New Bid for U.S. Steel

    The company’s renewed interest comes after the Biden administration blocked Nippon Steel from acquiring the onetime American powerhouse.A possible new takeover bid for U.S. Steel emerged on Monday, teeing up more turmoil over the once-dominant company’s future after President Biden’s decision to block its acquisition by a Japanese company.Lourenco Goncalves, the chief executive of an American competitor, Cleveland-Cliffs, said his company had “an All-American solution to save the United States Steel Corporation,” stressing that acquiring U.S. Steel was a matter of “when,” not “if.” But he offered no details of the bidding plans.The renewed expression of interest from Cleveland-Cliffs comes less than two weeks after Mr. Biden blocked a $14 billion takeover of U.S. Steel by Nippon Steel, arguing that the sale posed a threat to national security. Cleveland-Cliffs tried to buy U.S. Steel in 2023, an offer that was rejected in favor of Nippon’s higher bid.CNBC reported on Monday morning that Cleveland-Cliffs would seek to take over U.S. Steel and sell off its subsidiary, Big River Steel, to Nucor, another American producer. But Mr. Goncalves, at a news conference later in the day, would not confirm any partnership with Nucor on a bid.U.S. Steel and Nucor did not immediately respond to requests for comment.Investors seemed pleased by the potential bid, sending shares of U.S. Steel up as much as 10 percent on Monday when CNBC reported the potential offer. Shares of U.S. Steel finished about 6 percent higher on Monday but are down 23 percent over the past year, including Monday’s spike.But the fate of Nippon’s proposed takeover remains in limbo. U.S. Steel and Nippon sued the United States government last week in the hopes of reviving their merger, accusing Mr. Biden and other senior administration officials of corrupting the review process for political gain and blocking the deal under false pretenses.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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    Spike in UK borrowing costs raises specter of public spending cuts

    The march higher in U.K. government bond yields since the Labour government presented its debut budget plan in October has sparked concern, as borrowing costs rose to breached numerous decade highs.
    Economists at research group Capital Economics said gilts may be trapped in a “vicious circle,” in which “the rise in U.K. yields puts a strain on public finances, therefore calling for an even bigger tightening of fiscal policy, but in turn putting additional strain on the economy.”

    The march higher in U.K. government bond yields since the launch of the Labour government’s debut budget plan in October sparked widespread concern last week, as borrowing costs rose to breach numerous decade highs.
    The prospect of public spending cuts or further tax rises came into focus last week, as 30-year gilt yields hit their highest level since 1998. Despite initially falling after Labour’s election victory in July, 2-year gilt yields have also climbed back above 4.5%, while the 10-year yield reached levels not seen since 2008.

    Waning investor confidence in the U.K. was particularly highlighted by a concurrent fall in sterling, which on Friday hit its lowest level against the U.S. dollar since November 2023.

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    Borrowing costs are also rising in the euro area and the U.S., and economists point out that the U.K. is being weighed on by external factors including the return of Donald Trump to the White House and expectations for broadly higher interest rates than previously expected this year.
    But the surge in U.K. yields is nonetheless a major headache for the U.K. government, which has pledged to reboot economic growth while ensuring debt declines as a share of the economy within five years. U.K. public sector net debt currently stands at nearly 100% of GDP.
    “The rise in gilt yields has a self-reinforcing feedback loop through the U.K.’s debt sustainability, by increasing borrowing costs used for budgeting purposes,” ING Senior European Rates Strategist Michiel Tukker said in a Friday note.
    Tukker cited analysis by the independent Office of Budget Responsibility which indicates that the recent rise in yields — if sustained — would wipe out the government’s estimated headroom of £9.9 billion ($12.1 billion) for meeting its self-declared fiscal rules. Those regulations commit Labour to covering day-to-day government spending with revenues, as well as a goal of moving toward a decline in the U.K.’s debt to GDP ratio on a longer timeframe.

    The Institute for Fiscal Studies think tank said Friday there is a “knife edge,” chance of the U.K. achieving the former fiscal rule, but that Finance Minister Rachel Reeves could “get lucky.”
    She otherwise faces an “unenviable set of options,” said IFS Associate Director Ben Zaranko, including bringing forward upcoming changes to how debt is calculated to free up more headroom, paring back current spending plans and announcing more tax rises, which could be conditional on changes within the coming years. The minister could also opt to do nothing and break her rule.
    Economists Ruth Gregory and Hubert de Barochez at research group Capital Economics also said U.K. gilts may be trapped in a “vicious circle,” in which “the rise in U.K. yields puts a strain on public finances, therefore calling for an even bigger tightening of fiscal policy, but in turn putting additional strain on the economy.”

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    Pound vs dollar.

    Bank of America Global Research strategists on Friday said that it was unlikely Labour would breach its rules and would instead announce further fiscal consolidation — measures to reduce public debt, generally public spending cuts or tax hikes — in the spring or earlier.
    That would potentially be achieved through spending cuts, they added, coming off the back of the £40 billion in tax hikes that Labour announced in October.
    A Treasury spokesperson told CNBC: “This Government’s commitment to fiscal rules and sound public finances is non-negotiable.”
    “The Chancellor has already shown that tough decisions on spending will be taken, with the spending review to root out waste ongoing. And over the coming weeks and months, the Chancellor will leave no stone unturned in her determination to deliver economic growth and fight for working people.”

    UK in ‘slow growth trap’ — but not a mini-budget crisis

    Former U.K. Finance Minister Vince Cable told CNBC on Friday that higher bond yields were being seen in many countries and were not an “emergency panic situation” — but that markets had realized Britain was stuck in a “slow growth trap.”
    “We’ve been there for many years, since the Financial Crisis, then Brexit, then a problem with Covid[-19] and Ukraine war, and we’re stuck with relatively high inflation, very slow growth, and so the markets are marking the U.K. down, relatively speaking. But this is not a panic situation, it’s not a crisis of the old-style balance of payment sell-off situation,” Cable said.
    Labour should have gone for a broader range of tax rises rather than focusing on a hike in National Insurance — a levy on wages — which has been slammed by the U.K. business community, Cable said. However, he added that the market has broader concerns over U.K. growth and the global economic picture, which is clouded by external factors, such as the weaker Chinese outlook.

    Britain’s economy flatlined in the third quarter, revised figures show

    Cable also downplayed comparisons with the U.K. mini-budget crisis in 2022, when then-Prime Minister Liz Truss’s announcement of sweeping tax cuts triggered massive volatility in the bond market.
    “The Truss moment was a prime minister just taking a reckless leap into the dark with a big increase in the budget deficit on the assumption this will somehow trigger economic growth. Well, that clearly isn’t what’s happened this time. The argument is about whether they’ve done enough tightening and whether they’ve done it in the right way, but it’s a different kind of problem,” Cable told CNBC.
    That sentiment was broadly reflected in wider analysis. Bank of America strategists called comparisons with the mini-budget “overblown,” noting that the bar for the Bank of England to intervene in the gilt market, as it did at the time, was high.
    Capital Economics said last week’s higher gilt yields were an economic headwind but not a crisis, with smaller and slower moves than after the mini-budget. David Brooks, head of policy at consultancy Broadstone, said there did not appear to be any “systemic issues at play” in the liability-driven investment (LDI) funds, which were the biggest concern back in 2022. More