Economy

Shares of the company, which has struck a $24.6 billion deal to buy smaller rival Albertsons (NYSE:ACI), rose about 4% in premarket trading. Consumers are cooking more at home, instead of eating out, as grocery prices ease at a faster pace than menu prices at restaurants, propping sales of retailers such as Kroger (NYSE:KR) and Walmart (NYSE:WMT). Data from the U.S, Department of Agriculture showed food-at-home prices were only 1.2% higher in January, compared with a year earlier, whereas food-away-from-home prices were 5.1% higher than January 2023. The supermarket chain said it expected fiscal 2024 identical sales, excluding fuel, to increase 0.25% to 1.75%, compared with analysts’ average estimate for a 0.7% increase, according to LSEG data. The company projected adjusted earnings of $4.30 to $4.50 per share for fiscal 2024, compared with analysts’ estimate of $4.34 per share. More

ISTANBUL (Reuters) – Turkey is expected to take more policy steps to cool stubbornly high inflation after this month’s local elections, setting the stage for more pain for Turks already struggling after years of soaring prices, according to data and some economists.Households and investors appear sceptical over whether the central bank’s dramatic U-turn towards massive interest rate hikes – to 45% now from 8.5% last June – is sufficient on its own to rein in inflation that topped 67% last month.Finance Minister Mehmet Simsek and other authorities have urged patience, saying the more orthodox set of policies adopted last year would bring price relief later this year. Simsek said on Monday that he does not plan big tax changes, while the central bank has said it would hike rates more if inflation drifts above forecasts in the months ahead. Yet the higher-than-expected February inflation data, combined with persistently high domestic demand has raised expectations that more fiscal and monetary steps are coming – though not until after March 31 elections for which President Tayyip Erdogan is campaigning hard for his ruling AK Party. “Once the local election cycle is over the monetary and fiscal policies will likely tighten again after a brief pause,” said Selva Demiralp, professor at Istanbul’s Koc University and a former Federal Reserve economist. “By mid-year, we will taste the full bitterness of the policy medicine,” she said. “Inflation will rise until at least then, while hikes to the minimum wage and other fiscal buffers will dissipate.” Among efforts to ease the dual sting of high inflation and borrowing costs, Ankara has hiked the minimum wage by 49% this year.Demiralp and some other prominent economists say that if it wants to cut inflation to 36% by year-end as the central bank forecasts, such fiscal measures need to halt. Wall Street bank JPMorgan expects a 500 basis-point rate hike in April. DISTRUSTConsumers, faced with an 8.25% rise in food and non-alcoholic drink prices from January to February alone, see little relief on the horizon. “My husband and I do not think inflation will decrease rapidly,” said Gulsah, 34, a maths teacher at an Istanbul high school who declined to give a surname. “We try to keep savings in foreign currencies and gold to protect ourselves” because, she said, “we still can’t trust” that the lira will remain stable after the elections. Worried about inflation, Gulsah said she bought a pressure cooker that her family didn’t really need in November just because she thought its price would double or triple this year.Some 92% of households said it was a good time to buy appliances, electronics and other durable goods based on a Koc University Household Inflation Expectations survey of more than 2,500 respondents last month with Konda research firm. The data, not yet published, reflects deep pessimism that inflation will fall after a years-long cost-of-living crisis, brought on by Erdogan’s longstanding opposition to high rates and his ousting of five central bank governors in as many years.The annual growth rate of credit card spending rose to more than 153% while the total loan growth rate was 52% in the 12 months to January, according to banking watchdog data. Bankers have said the government should take measures to curb credit card spending to cool domestic demand. ‘INVISIBLE HAND’After his re-election last May, Erdogan appointed a new cabinet and central bank leadership to turn things around amid depleted foreign reserves and soaring inflation expectations.Foreign investors began buying Turkish bonds late last year, seeking to cash in on the rate hikes. But over the last week the cheer has faded, testing Erdogan’s will to address inflation while his AK Party seeks to reclaim Istanbul and other big cities from the opposition in the approaching elections.The lira tumbled to new lows beyond 31.8 to the dollar this week, 10-year bond yields returned to November levels and Turkey’s credit default swaps, a measure of risk, jumped to 330 basis points, the highest in a month. Gizem Oztok Altinsac, chief economist for Turkey’s largest business group TUSIAD, said annual inflation will fall after May due to base effects but not as much as the central bank predicts due to strong domestic demand.She told an Istanbul summit two weeks ago that rates were not hiked high enough when the tightening began last summer and that despite the election tight fiscal policy needs to buffet monetary policy in order to tackle inflation. “Steps should be taken on time,” Altinsac said. Hakan Kara, the central bank’s former chief economist and a professor at Bilkent University, told the summit: “An invisible hand ensures a tightness level just below optimum whenever the central bank is about to reach optimum policy tightness.”A Reuters poll sees annual inflation falling to 42.7% by year-end, higher than the central bank forecast. Simsek, speaking on local broadcaster BloombergHT this week, said that inflation would remain high in the coming months due to base effects and the delayed impact of rate hikes, but would fall in the next 12 months. More

BUCHAREST/BRUSSELS (Reuters) -European Commission President Ursula von der Leyen on Thursday won the backing of the EU’s leading political group, the centre-right European People’s Party, to head the bloc’s powerful executive for another five years.The only candidate in the party’s ballot, von der Leyen listed the war in Ukraine, the crisis in Gaza destabilising the Middle East, and the rise of China as key challenges for the 27-nation European Union, a wealthy grouping of 450 million people. “And here at home, (Russian President Vladimir) Putin’s friends are trying to rewrite our history and hijack our future. They are spreading hate from behind their keyboards,” she told a party caucus in Bucharest.”Our peaceful and united Europe is being challenged like never before by populists, by nationalists, by demagogues.”Von der Leyen won with 400 votes in favour and 89 against, an EPP official said, as U2 song “Beautiful Day” blasted from the speakers.The backing comes ahead of an EU-wide parliamentary election in June that will lead to the appointment of a new slate of top EU officials – including the head of the Brussels-based Commission.Currently seen as a clear favourite to lead the Commission again, von der Leyen would begin a new term as Europe looks to strengthen its security and defence while Russia wages war on its borders and Donald Trump eyes a return to the White House.If approved by leaders of the EU’s 27 member countries, she will have another term charting the bloc’s policies on everything from big tech and state aid to Chinese investment screening and sanctions against Russia.She vowed to advance EU economies, clamp down on smugglers driving irregular immigration to the bloc, strengthen competitiveness and businesses, as well as supporting farmers as costs of living rise. Von der Leyen also promised more financial and military aid to Ukraine, which has been fighting against Russian invasion for more than two years.”Prosperity, security, democracy – this is what people care about in these difficult times,” she said. “In times of change, Europe has your back.”VON DER LEYEN Born in Belgium where her father worked at the same European Commission she now leads, von der Leyen is a physician and a mother of seven. A former German defence minister, she steered the EU through the COVID-19 pandemic, Russia’s 2022 invasion of Ukraine and an energy crunch. The first woman ever to hold the influential job, she saw Britain leave the EU, put into law more ambitious climate goals, and oversaw massive new spending on energy, health and post-pandemic economic recovery.    Known for honing decisions among a tiny group of her closest aides, von der Leyen drew criticism for visiting Israel after the Oct. 7 Hamas attack without clearly demanding that the country respects international humanitarian law in its response.Despite a rise in far-right and populist parties in the bloc, the EPP has kept a clear lead among other political groups ahead of the June vote, according to opinion polls. Still, securing the necessary majority in the new European Parliament, where eurosceptics are set to win more seats, might be the biggest hurdle for von der Leyen to clear, possibly forcing her into policy trade-offs to win the votes needed. More

LONDON (Reuters) -Global banking regulators proposed measures on Thursday to crack down on “unacceptable” attempts by the world’s biggest banks to game rules in a bid to avoid heavier capital requirements.About 30 globally systemic banks (G-SIBs), such as JPMorgan, HSBC, BNP Paribas (OTC:BNPQY) and Morgan Stanley, must hold more capital than smaller domestic peers, based on a range of factors, which determines which “bucket” they are slotted into, and therefore how much extra capital they must hold.The rules were introduced a decade ago after many lenders were bailed out by taxpayers in the global financial crisis.”The proposed revisions aim at constraining banks’ ability to lower their G-SIB scores through window-dressing,” the Basel Committee said in a statement.The aim is to stop “regulatory arbitrage behaviour” that seeks to temporarily reduce banks’ perceived systemic footprint around the reference dates used for the reporting and public disclosure of G-SIB scores.”This will be achieved by requiring banks participating in the G-SIB assessment exercise to report and disclose most G-SIB indicators based on an average of values over the reporting year, rather than year-end values.”The proposals are out to public consultation until June 7.”The Committee sees the benefits of a wide application of the revisions to all banks participating in the G-SIB assessment exercise, but it is also seeking feedback on options that would apply those changes to a narrower set of banks to reduce the reporting burden,” the committee said.Basel is proposing a start date of January 2027 for the proposed changes.Banking regulators from the world’s main financial centres are members of the Basel Committee and commit to applying agreed rules in their national handbooks for lenders.The Bank for International Settlements in Basel, Switzerland, where the Committee is based, said in a 2021 paper that up to 13 banks in the European Union would have faced more intense supervision and higher capital requirements in the absence of window dressing.The committee published a study on Thursday on how implementation of its G-SIB rules have evolved over the past decade, saying it showed that the banks have seen their role shrink across all categories of systemic importance.”G-SIBs appear to have adjusted their balance sheets after the introduction of the framework,” the study said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The Biden administration will target billionaires and corporate America with sweeping tax rises as part of a plan to cut the US’s record national debt and boost the president in the polls ahead of November’s election.The proposals, expected to be unveiled in Thursday’s State of the Union address and over the following week, include an increase in the minimum corporate tax from 15 per cent to 21 per cent, as well as a 25 per cent minimum tax for billionaires.The plans are intended to cut the US’s record national debt by $3tn over the next decade. According to the Congressional Budget Office, the independent fiscal watchdog, the country’s debt pile had reached $26.2tn by the end of 2023.The proposals, which are unlikely to pass Congress but are intended to distinguish Biden’s progressive agenda from that of his Republican rival Donald Trump, come as most voters remain unconvinced by the president’s performance on the economy.Sixty per cent say they disapprove of Biden’s handling of the economy, according to an FT-Michigan Ross poll conducted last month, while 49 per cent say they are worse off financially than when he took office in 2019. Biden’s annual State of the Union speech marks a critical opportunity for the 81-year-old president to convince sceptical voters he is up to the task of governing for a second term.Concerns over the president’s frailty were reinforced by a recent report from the special counsel investigating Biden’s handling of classified documents, which described the president as a “well-meaning, elderly man with a poor memory”.One Democratic megadonor, who co-hosted a fundraiser for the president last year, told the Financial Times that Biden should “step down” for the next generation of leaders.“I’m worried he’s not going to win,” the donor said. “Our democracy is at stake. And there’s too much on the line here for the Democrats.”Biden’s proposal to increase the minimum corporate tax comes as 58 per cent of voters polled said large businesses were taking advantage of high inflation to raise their prices, against 36 per cent who blame Democratic policies for the surge in the cost of living.Economists have grown increasingly concerned about the fiscal plans of both Democrats and Republicans. The CBO has warned that publicly held debt is set to rise from 99 per cent of gross domestic product at the end of 2024 to 116 per cent of GDP by the end of 2034. This would mark the highest level ever recorded.Biden has proposed introducing a billionaire’s tax multiple times in the past few years. He has also said in the past that he would raise the top rate of corporate tax from 21 per cent to 28 per cent.As part of the new plans, the administration also intends to deny companies tax deductions on employees who are paid more than $1mn. This would raise more than $250bn, according to senior administration officials. By contrast with Biden’s revenue plans, Trump is expected to propose making permanent the tax cuts introduced during his first term of office, currently set to expire in 2025.Those cuts included a reduction in the benchmark corporate levy from 35 per cent to 21 per cent, a move that brought the US into line with averages across advanced economies.The OECD has proposed a global deal to raise the lowest possible global corporate tax rate to 15 per cent, but many countries have yet to ratify the plan, despite signing up to it. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of Martin Sandbu’s Free Lunch newsletter. Sign up here to get the newsletter sent straight to your inbox every ThursdayGreetings. Yesterday was Budget Day in the UK — perhaps more interesting politically than economically, as it was the last one before the next general election. For all the coverage you need, see the FT’s Budget page.Last week, we dissected the US’s strong productivity growth since the pandemic, and one reader asked for the same treatment of Europe. So here goes.As is well known, the EU is nowhere near matching the US’s post-pandemic productivity bounce. It has had a decent recovery — the bloc’s gross value added rose 3.9 per cent in the four years to the third quarter of 2023 — but this is left in the dust by the US’s stellar rebound. And whatever output growth the EU did have was largely a factor of more people working, unlike in the US. In those four years, EU productivity — measured as value added per worker — grew a measly 0.6 per cent (in total, not per year). To be fair, it is also the case that each person worked fewer hours on average compared with before the pandemic. So if you measure EU productivity by value added per hour worked rather than per person employed, the four-year rise is a more respectable 2 per cent.But contrast this with the US where, in the non-farm business sector, output per worker rose about 5 per cent and output per hour worked increased more than 6 per cent in the four years from the eve of the pandemic. The last Free Lunch attempted to understand this US productivity mini-miracle by breaking it down into how individual industry groups have evolved. With no similar overall productivity growth in the EU, there may be no story for a similar decomposition to illuminate. But it’s worth doing anyway since overall stagnation could still hide interesting differences between sectors.And one thing that is immediately clear is that those sectoral variations — chart below — are very different from the US. In both countries, the sector with the strongest productivity growth was the information industry, which includes telecoms and data processing. That’s no surprise given the leap in digitisation and remote working technology that the pandemic necessitated. But look at European manufacturing, which leapt ahead, producing 5.8 per cent more per worker towards the end of 2023 than four years earlier, despite the traumatic energy crisis of 2022. In the US, remember, manufacturing was a drag on overall productivity growth. As I have written before, don’t be too quick to cry for European industry.Another contrast is that professional and business services recorded much lower productivity growth in the EU than in the US, although it did pull up the aggregate number in Europe too.The most talked-about sectors during the lockdowns and reopenings — wholesale and retail trade, hospitality, and transport and warehousing, all of which EU statistics lump together in one big industry group — behaved rather similarly on both sides of the Atlantic, with poor productivity growth even as they lost employment share to other sectors.Efficiency changes within a sector only move the needle for overall productivity, however, if the sector itself is sizeable. In the chart below, I account for the relative sizes of the EU economy’s industrial groups to show their absolute contribution to the evolution of the bloc’s productivity over the four years to the third quarter of last year (measured as value added per worker, to make it comparable with last week’s exercise for the US). As suspected, there is not much of a story — not, in particular, a story of any one sector’s big productivity contributions being erased by devastating productivity losses in other sectors. All the contributions are small; remove any sector, and it wouldn’t change the big picture. Without the drag of the construction sector, productivity growth would double, but still only to 1.2 per cent over four years. Take away professional services, and value added per worker would have risen 0.2 percentage points less than it did; a tenth of the contribution the sector made in the US.The within-sector rates of productivity growth, in fact, add up to so little that they together barely match the very small contribution to productivity growth from cross-sector reallocation. That contribution is about the same as in the US, just a quarter of a percentage point over the four years in question. One idiosyncratic feature of the European evolution, however, is agriculture (such a small employer in the US that we didn’t even include it last week). It is a very unproductive sector, so the shrinking of its employment share by 0.3 percentage points since before the pandemic made a positive difference to overall productivity. This is worth keeping in mind as we contemplate the farmers’ protests around the continent.The other idiosyncratic European story here is that of manufacturing. It has shed labour (measured both in terms of workers and even more in terms of hours worked), which is bad for overall productivity because manufacturing is more productive than the economy on average. Yet it has expanded its within-industry value added more than its US counterpart, and this contributed 0.9 percentage points to overall output per worker (that is, more than the total). If I was asked to interpret those numbers, I would say they seem to reveal a sector that — behind the jeremiads about energy costs, Chinese competition and Washington’s Inflation Reduction Act — has made use of those headwinds to ruthlessly cut waste and rationalise its operations. It is not all bad news. Other readablesThis week the EU’s new rules on big “gatekeeper” internet companies come into force. Our reporters have detected scepticism about whether they will live up to their promise. At the Centre for European Reform, Zach Meyers has a useful guide to the factors that will determine the Digital Market Act’s success or failure.China’s new economic programme targets 5 per cent growth, opens up for modest stimulus and boosts defence and research spending. It’s a far cry from what the Chinese economy needs.More brainstorming is coming forth around the idea of lending Ukraine money against a claim on future reparations payment from Russia — with a view to seizing Russia’s blocked assets if (when) those payments fail to materialise. I first outlined such an idea last year. Recently, a related proposal for a “limited recourse” syndicated loan has been made by Lee Buchheit, Hugo Dixon and Daleep Singh. These ideas seem to have caught the interest of UK foreign secretary Lord David Cameron, who mentioned them positively in the House of Lords this week.Mining companies are asking the London Metal Exchange to separate contracts for nickel produced through low- and high-carbon production methods, which could lead to a “green nickel premium”. It’s another sign of rising pressure to prevent the undercutting of industrial carbon transitions, exemplified by the EU’s carbon border adjustment mechanism.Numbers newsRecommended newsletters for youChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up here More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The US is pushing Japan and the Netherlands to tighten restrictions on exports of chipmaking equipment to China, following a series of advances by blacklisted Chinese tech companies Huawei and SMIC.Washington imposed unilateral export controls in October 2022 in an effort to slow Chinese efforts to build or obtain high-performance semiconductors that can be used for military purposes.The Netherlands and Japan, where companies specialise in the production of advanced chipmaking equipment, joined the US last year by enforcing export curbs on sophisticated machines and components.But despite the controls, Chinese mobile phone maker Huawei and Shanghai-based Semiconductor Manufacturing International Corporation — both of which are on a US trade blacklist — revealed in August they had produced an advanced chip used in Huawei’s Mate 60 series phone.The Biden administration wants Tokyo and The Hague to go further to close gaps in the existing regime, said people close to the talks. The countries remained divided over where the loopholes were, said one person. Possible measures include restricting exports of less sophisticated machines, as well as introducing restrictions on servicing and repairs offered for machines already purchased by Chinese clients before the controls took force. Bloomberg first reported the talks. A European official confirmed Washington was applying pressure but did not give more details. The Dutch ministry of trade declined to comment. A Japanese trade ministry official said Tokyo was having talks with various countries but declined to comment further. The Hague is pressing Brussels to co-ordinate export controls after being isolated last year. In a proposal sent to other governments, seen by the FT, it stressed the need to “avoid fragmentation of national controls within the EU”. Such controls are a national competence but Brussels in January put forward proposals to play a bigger role.Three people familiar with the US government effort told the Financial Times that Washington was also trying to persuade South Korea to join the Netherlands and Japan by imposing similar controls.South Korea has not replicated the Dutch and Japanese controls because its companies do not manufacture chipmaking equipment as sophisticated as the machines produced by the Netherlands’ ASML or Japan’s Tokyo Electron.But a person familiar with the US-South Korea talks said that China’s heavily-subsidised chipmakers, including SMIC, had been using less sophisticated equipment to produce advanced chips at a loss.“The Chinese don’t have to worry about the efficiency of the process — they can use trailing edge equipment to produce leading edge chips because they can afford to bleed money in a way no one else can,” the person said. “This is making the Americans nervous, so they want to expand the scope of controls to include more non state of the art machines.”The person added the South Korean government would be reluctant to introduce the curbs, which would affect smaller producers of tools and components. “These medium-sized companies, most of which are relatively unknown, are regarded as the backbone of the Korean economy.” The South Korean government declined to comment.A person familiar with the situation said the US government had also raised concerns over Japanese and South Korean semiconductor companies selling critical equipment parts to sanctioned Chinese entities after US companies suspended deliveries because of the controls.Chinese imports of foreign semiconductor equipment surged to record highs last summer just before the Dutch and Japanese controls, as chipmakers in the country prepared for the curbs.On Thursday, Chinese foreign minister Wang Yi condemned US efforts to deny China access to advanced technologies.“The US has been devising various tactics to suppress China and keeps lengthening its unilateral sanctions list, reaching bewildering levels of unfathomable absurdity,” Wang told a press briefing in Beijing.“If the United States insists on suppressing China, it will ultimately harm itself.”Additional reporting by Nian Liu in Beijing More

CBRE said on Thursday it had been appointed by the receiver to sell an old four-storey residential building in Kowloon, while another agent, Savills, said it had been appointed by the receiver to sell two connected industrial buildings.”We’ll continue to see many foreclosures this year as landlords fail to negotiate new terms with the lenders after years of poor market and high interest rates,” said Churchill Keung, CBRE Hong Kong capital market assistant manager.”Some lenders would step up repossessing the asset to put on the market as they think the removal of additional stamp duties could stimulate market sentiment.” Hong Kong, one of the most expensive property markets in the world, has seen its housing and commercial property prices plunge more than 20% and 30%, respectively, from their peaks.Last week, the financial hub removed all additional stamp duties, reversing an unsuccessful government push in previous years to cool housing prices, and the home market immediately celebrated with a jump in transactions. The residential building that CBRE was appointed to sell was seized by creditors this year. It is valued at HK$42 million ($5.37 million), half of its asking price in 2022 when the original owner, the family of deceased property investor Tang Shing Bor, put it on the market. The industrial buildings, which the lenders seized from Hoixe Cake Shop this year after the company was ordered by a court to liquidate, have an indicative price of HK$510 million ($65.22 million), Savills said, nearly 40% lower than a transaction in the same area in January. Last week, a second mansion in Hong Kong that once belonged to China Evergrande (HK:3333) Group’s chairman, was put up for sale by its receivers, according to Savills, which was appointed for the tender sale.($1 = 7.8197 Hong Kong dollars) More