Economy

(Reuters) – For central bankers wrestling with the question of whether inflationary pressures are transitory, industry chiefs around the world have a clear message: prices are only going higher.Shortages of workers, fuel, cargo ships, semiconductors and building materials as the global economy bounces back after pandemic lockdowns have companies from electric car makers to chocolatiers scrambling to keep a lid on costs.Some of the world’s biggest brands are now passing on higher prices to consumers and are warning any policymakers sitting on the inflationary fence that things are going to get worse.”We expect inflation to be higher next year than this year,” said Graeme Pitkethly, finance chief at Unilever (NYSE:UL), which says its products, from Dove soap to Ben & Jerry’s ice cream to Persil washing powder, are used by 2.5 billion people every day.Earlier this week, the world’s biggest food maker, Nestle, said it would increase the prices of its products, which include Nescafe and Purina pet food, further in 2021 and then again in 2022 as raw material costs carry on climbing.The view from the boardroom contrasts with a more ambivalent tone among finance ministers and central bank governors faced with trying to work out when to start withdrawing monetary and fiscal stimulus without choking off the economic recovery.A draft communique ahead of a gathering of top policymakers in Washington last week called on central banks to be ready to take “decisive actions to maintain price stability”. But by the end of the meeting, the language had been toned down.Instead, The International Monetary Fund’s steering committee (IMFC) urged global policymakers to monitor pricing dynamics closely but “look through” inflationary pressures that will fade as economies normalise.”The key question is to know whether this is a transitory inflation or not. Nobody has a response to that key question,” French Finance Minister Bruno Le Maire said after the meeting.STRUCTURAL SCARCITYBank of England Governor Andrew Bailey has said he continues to believe the recent jump in inflation – currently at 3.1% and expected to climb – is temporary but the British central bank is widely expected to be the first major monetary authority to raise interest rates in the post-pandemic cycle.For executives at companies with a finger on the pulse of dozens of commercial sectors, such as global recruitment firm Randstad, some of the problems leading to higher prices are structural, and here to stay.Randstad said on Thursday that it expected labour shortages https://reut.rs/3lYmIKe to persist for years to come with older employees leaving and fewer entering the workforce.”We do think that scarcity is going to be structural,” Randstad’s outgoing Chief Executive Jacques van den Broek said. “Jobs in demand are in healthcare, education, technology and logistics.”Wage disputes have emerged in several countries with one of Germany’s biggest unions calling for an inflation-busting wage increase of 5.3% for nearly 900,000 construction workers.Swiss engineering company ABB, which is grappling with the global semiconductor supply crunch, also said labour shortages, especially in the United States, had hit its deliveries of industrial robots, among other products.The scarcity of chips has already hurt vehicle production around the world, bringing some assembly lines to a halt.Swedish truck maker AB Volvo said on Thursday that while it was facing strong demand, shortages of components such as chips and freight capacity were both driving up costs and disrupting its production. Swiss elevator and escalator manufacturer Schindler said it too was cautious about its outlook due to higher raw materials prices, soaring cost inflation and supply chain bottlenecks that were set to persist.Federal Reserve Governor Christopher Waller said this week that if inflation keeps rising at its current pace in the coming months rather than subsiding as expected then U.S. policymakers may need to adopt “a more aggressive policy response” next year. Should interest rates start rising, though, banks will benefit from charging more for loans. Jes Staley, chief executive of Britain’s Barclays (LON:BARC), said he was relatively relaxed about rising prices and an annual inflation rate of up to 4% in Britain could be positive for the bank, as long as it was supported by economic growth.But banking staff too will be looking for compensation for the price pressures. In Germany, workers at public sector banks have staged warning strikes to underscore their demands for a 4.5% pay rise. More

The federal and state governments usually announce twice a year adjustments in inflation-linked wages on top of an annual increment. The Indian cabinet has approved a 3% increase in the ‘dearness’ allowance – a part of monthly wages and pensions provided to cushion against rises in the cost of living – for 6.9 million employees and 4.7 million pensioners, Anurag Thakur, India’s information and broadcasting minister, told reporters after the cabinet meeting.The hike, effective from July 2021, would cost 94.89 billion rupees ($1.27 billion) annually to the government, he said.The rise in wages could boost consumer spending as it comes ahead of the Diwali festival, which this year falls in early November and marks the country’s busiest shopping season for consumer goods. Both federal and state governments had frozen inflation-linked increases in salaries and pensions last year after the outbreak of COVID-19 pandemic to generate over $10 billion for spending on pandemic relief. The freeze was lifted in July, when the federal government announced a 11% increase in the dearness allowance. India’s retail inflation eased to a five-month low of 4.35% year-on-year in September, amid softer food prices and demand, while rising petrol, cooking gas and other manufacturing prices have dampened consumer sentiment. However, the majority of workers in small businesses and farm sector – which represents 90% of the country’s total workforce – have faced a fall in wages and job losses since the pandemic began last year. ($1 = 74.8725 Indian rupees) More

Kaisa was the first Chinese developer to ever default back in 2015 and turmoil caused by the China Evergrande crisis has put it back in the firing line.The firm’s most imminent international bond, which is due to be repaid on December 7 fell 10 cents to around 60 cents on the dollar which 40% below face value. Other bonds due to mature around the middle of next year dropped below 35 cents on the dollar while its longest term bonds fell below 30 cents. More

LONDON (Reuters) – A lack of access to vaccines is dampening economic recovery in sub-Saharan Africa and the region will lag behind developed nations for years, the International Monetary Fund said on Thursday.Confirming its sub-Saharan Africa growth forecast of 3.7% for this year and 3.8% for 2022 in its regional economic outlook, the fund said rising commodity prices and favourable harvests had benefited some countries, though the overall picture was perilous. “The outlook remains extremely uncertain, and risks are tilted to the downside,” the IMF team led by Shushanik Hakobyan wrote in its report, adding much hinged on the trajectory of the pandemic and vaccinations, but disruptions in global activity and financial markets could also derail recovery. Sub-Saharan Africa’s 2021 projected growth rates mean the region already suffered the “slowest recovery in the world”.South Africa – the continent’s most industrialised nation – is expected to expand by 5.0% this year before growth slows down to 2.2% in 2022. Higher oil prices will help Nigeria expand by 2.6% in 2021 with rates remaining at that level for the foreseeable future, the report predicted. Angola’s economy will contract by 0.7% in 2021, but its six year recession will end next year when it will return to 2.4% growth, though this is slower than previously expected due to falling investments and technical problems in the oil sector. Rising food inflation is set to remain a burning issue, especially for the about 30 million people thrown into extreme poverty by the pandemic, the fund found. Food inflation had steadily increased since 2019 and stood at 10.9% in August across 25 countries where monthly data was available. “The crisis has worsened inequality not only across income groups, but also across subnational geographic regions, which may add to the risk of social tension and political instability,” the authors of the report said. “Without external financial and technical assistance, the divergent recovery paths of sub-Saharan Africa and the rest of the world may harden into permanent fault lines, jeopardizing decades of hard-won progress.” More

The world’s largest alternative asset manager Blackstone is advising its private equity portfolio of about 100 companies around the world to prepare for higher inflation and continued supply chain disruptions.“We are talking to our companies now about having their supply chains closer to home, and keeping more inventory on-site,” Blackstone’s president Jonathan Gray told the Financial Times in an interview. From port backlogs to semiconductor shortages and soaring commodity prices, bottlenecks threaten the global economic recovery and have seen consumer groups like Unilever, Nestlé and paint company Akzo Nobel increasing how much they charge their customers.“Our expectation is that we will see higher levels of inflation,” said Gray, who is advising chief executives to budget for higher energy, food and labour costs. “This is going to stick with us.”Gray’s comments come as Blackstone’s portfolios, which span buyouts to real estate, credit and infrastructure investments, continue to perform as the global economy reopens in the wake of the pandemic. The New York-based group on Thursday morning reported record profits and investment activity for the third quarter as assets under management hit a new record.Blackstone’s distributable earnings per share, a metric favoured by analysts as a proxy of cash flow, more than doubled to $1.6bn from this time a year ago. Earnings were led by record management fee revenues and realised performance fees as Blackstone sold investments amid feverish capital market activity and buoyant valuations.Blackstone sold assets worth $21.8bn in the quarter, including the $5.7bn sale of The Cosmopolitan hotel in Las Vegas, a symbol of the reopening. Though the selling was brisk, Blackstone’s pace in making new investments was faster. It deployed more than $37bn in the quarter, putting total new investments for the year at more than $100bn, another record.

“Today, Blackstone reported the best results in our 36-year history,” chief executive Stephen Schwarzman said in a statement. “All of our key financial and capital metrics reached record or near-record levels.”Blackstone generated $6.2bn in quarterly revenues and its distributable earnings per share were $1.28, up 112 per cent from this time last year. Its announced quarterly dividend of $1.09 a share was double that of the previous year.The company experienced inflows of more than $500m a day, or $47bn in total for the quarter. As a result of such inflows, Blackstone ended the quarter with a record-sized war chest of $731bn — an increase of 25 per cent compared with the previous year.Blackstone continued to attract new assets from wealthy investors and insurance-related investment strategies seeking yield. These investors now account for a third of Blackstone’s overall assets and favour investing in perpetual investment strategies where funds are not returned every 10 to 12 years.The perpetual vehicles are allowing Blackstone to invest faster than ever, according to Gray. “The broadening of the investment platform has led to an increase in the velocity of investments,” he said. More

LONDON (Reuters) -Britain should legislate to stop scam adverts online, to help combat a surge in fraud attacks on consumers, regulators and lawmakers said on Thursday.The Financial Conduct Authority said paid-for advertising promoting scams should be included in the government’s planned Online Safety Bill, which currently only covers user-generated content.The watchdog said fraud should be classed as ‘priority’ illegal content, requiring online platforms such as Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) to monitor and take preventative action.Mel Stride, head of parliament’s powerful Treasury committee, echoed the call in an interview with Reuters.”The committee is deeply disappointed that some of these online platforms are just continuing to take advertising pounds from individuals and scammers without enough due diligence,” Stride said.There is growing alarm among lawmakers, banks and consumer groups about a fraud epidemic in Britain, after criminals stole a record 754 million pounds ($1 billion) through scams in the first six months of 2021.Stride said the committee’s ongoing inquiry into fraud in the UK would include recommendations on toughening up laws to police online platforms’ “culpability and responsibilities”.”We’re in the absurd situation where Google has been paid by the FCA for advertisements, trying to warn people off various advertisements that are appearing on their site, to the tune of about 600,000 pounds in the last year,” Stride said.Google began prohibiting investment ads that are not FCA-authorised from Sept. 6 this year and has previously said it offered the FCA $1.5 million in advertising credits for fraud awareness campaigns.The FCA made its recommendation as part of its so-called “perimeter report”, an annual review of its remit.The watchdog also repeated its call to close loopholes in rules that currently allow high-risk investments to be promoted to consumers.”We see real risks to consumers from outside our remit from both online advertising and from those using exemptions to sell products to ordinary customers,” said Nikhil Rathi, Chief Executive of the FCA.”Change is needed and we will continue to push for powers where we need them.”($1 = 0.7248 pounds) More

Investing.com — Tesla (NASDAQ:TSLA) reported its best-ever quarter, but its stock struggled to build on its sky-high valuation. Donald Trump is set for a return to social media. Intel (NASDAQ:INTC) and AT&T (NYSE:T) will report earnings in the course of the day. The U.S. releases weekly jobless claims numbers and China Evergrande is closer to being formally in default. And the first lockdown of fall is there, as Moscow orders all shops, bars and restaurants to be shut against a backdrop of record deaths and infections (and a miserably low vaccination rate). Here’s what you need to know in financial markets on Thursday, 21st October.1. Tesla’s record quarterTesla delivered its best quarter ever for revenue and profit but its stock struggled to build on gains that have left its valuation looking stretched, even by its own standards. The stock currently trades at 20 times sales and 451 times last year’s earnings.The company had already reported record production and delivery numbers for the three months through September. Its best-ever operating margin – achieved despite an unfavorable product mix and the well-documented sectoral problems involving shipping and component shortages – painted a picture of a company that is no longer dependent on emissions credits to turn a profit.The only off notes struck were in the absence of CEO Elon Musk from the regular analyst call, leaving CFO Zachary Kirkhorn to warn that supply chain issues and higher input costs may yet weigh on future quarters.2. Trump returns to social mediaDonald Trump is returning to social media, ahead of a widely-expected run for the Presidency in 2024.Trump announced on Wednesday that he will establish a new social media platform called TRUTH Social “to challenge the tyranny of Big Tech”. He has been banned from Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) since his supporters stormed the Capitol on January 6th in an effort to stop Congress certifying Joe Biden’s election victory.The platform, to be owned by Trump Media and Technology Group, will go public by a merger with Digital World Acquisition (NASDAQ:DWAC), a SPAC that listed in September. DWA stock soared 45% in premarket trading.Facebook stock and Twitter stock reacted only moderately to the news, inching down by less than 1% in line with benchmark stock futures.3. Stocks set to open lower; jobless claims dueU.S. stocks are set to open lower later, as earnings continue to pour in. Wednesday’s round of results were solid enough to push the S&P 500 to within a whisker of its record high close in August, but consolidation is likely to be the order of the day ahead of the release of weekly jobless claims at 8:30 AM ET (1230 GMT), the day’s only major economic release.By 6:20 AM ET (1010 GMT), Dow Jones futures were down 100 points, or 0.3%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.The day’s earnings roster is headed by AT&T before the open and by Intel after the close. Medical devices group Danaher (NYSE:DHR) already put out results ahead of expectations, as did Anglo-Dutch consumer giant Unilever (NYSE:UL), which followed Nestle and Procter & Gamble (NYSE:PG) in saying it expects to be able to pass higher input prices on to consumers.4. First of the autumn lockdowns in RussiaThe pandemic isn’t over yet. The first lockdowns of the northern hemisphere winter are here, with Russia ordering a week-long factory shutdown and its capital Moscow ordering all shops, bars and restaurants to close from Oct. 28.That comes as levels of both new cases and deaths running at record levels, a result of popular resistance to the locally-developed Sputnik vaccine, which was the first effective vaccine against Covid-19 to be authorized by any G20 country. Less than one-third of the country’s 140 million population is fully-vaccinated.Elsewhere, the U.K. government has been forced to play down suggestions that it will reintroduce Covid-19 prevention measures, after dropping mask mandates and refusing to adopt vaccination passes earlier in the summer. New case levels are running at over 60,000 a day, while death levels are also running at a steady rate of between 130-140 a day.5. Evergrande rumbles on toward formal defaultChina Evergrande inched closer to a formal default after failing to complete the sale of a key money-making asset to help meet its short-term obligations.The stricken developer’s stock fell as much as 14% in Hong Kong as it resumed trading after a three-week hiatus, after announcing the end of talks to sell a stake in its property services unit to Hopson Developments.The grace period for the first dollar bond on which Evergrande missed payments expires at the end of Friday. Other developers are currently missing full payments on their dollar bonds on a near-daily basis.  The yuan remained stable, reflecting confidence in official reassurances that systemic risks are being contained. More

Malaysian company Supermax, a supplier of rubber gloves to Britain’s NHS health service, has been hit by a US customs order banning its products from the American market over allegations it uses forced labour. US Customs and Border Protection said it had “ample evidence” that Supermax and its subsidiaries produced gloves “in violation of US trade law” and would seize its products at all ports of entry, making the company the second Malaysian rubber glove manufacturer this year to receive such a ban.“We will continue to exclude products made by modern slavery from entering into the United States,” said Troy Miller, CBP acting commissioner. The CBP’s decision adds to growing allegations of the mistreatment of workers in Malaysia, which is a crucial supplier of personal protective equipment to the world. Supermax has also sold large volumes of surgical gloves to the NHS, just as Malaysian glove manufactures have garnered criticism from UK politicians and activists. Andy Hall, a workers’ rights specialist who filed the complaint with CBP, said Malaysia was “one of the worst in the world” for forced labour. Hall said migrant workers paid high fees to get access to some Malaysian manufacturing jobs, for which they borrowed large sums. To repay these debts, they often ended up in a form of bonded labour. Workers also often received meagre salaries and worked in cramped conditions and many had not been able to freely leave their compounds since the start of the pandemic. Supermax did not respond to requests for comment. But the company said in May there was no evidence of any modern slavery and human trafficking in its supply chain.In March last year, Supermax made headlines in the UK when the government purchased the entire inventory of rubber gloves held by the Malaysian company’s UK subsidiary, Aurelia Gloves. A government procurement order from the time shows a contract worth £312m awarded to Supermax. The UK government has denied reports of forced labour at Malaysian factories. Lord Syed Kamall, parliamentary under-secretary of state for innovation at the Department of Health and Social Care, said this month there had been “no substantiated allegations of modern slavery in relation to a departmental supplier”, adding that due diligence had been carried out on all NHS suppliers.The health department did not immediately respond to requests to comment on the CBP ban.The move comes just over a month after CBP revoked a similar ban it had issued against the world’s largest rubber glove maker, Malaysian manufacturer Top Glove. The CBP said the company had taken action to address its concerns. In 2019, CBP issued a similar order against imports from Malaysian glove maker WRP, which it revoked in March last year.Like Top Glove, Supermax’s earnings have risen sharply during the pandemic, with full-year profits surging 627 per cent to RM3.81bn ($916m) in the 12 months to June 30 this year, following a 326 per cent increase a year earlier, according to data from Refinitiv.Shares of Supermax plummeted on Thursday, notching losses of as much as 11.1 per cent. Supermax’s largest international institutional investors include BlackRock, Vanguard and Norges Bank, according to Bloomberg data.With additional reporting by Oliver Barnes in London More