Economy

LONDON (Reuters) – British home prices will flatline this year, a better performance than expected three months ago, buoyed by supply constraints and expected interest rate cuts later in the year, a Reuters poll found.After a slowdown, Britain’s property sector has picked up in recent months as mortgage interest rates have fallen although some lenders, including Santander (BME:SAN) and HSBC, have recently announced price increases.Still, the Bank of England is expected to start cutting borrowing costs from a 16-year peak of 5.25% in the third quarter, probably in August, a separate Reuters poll showed.Those interest rate cuts meant all 19 respondents to an extra question said purchasing affordability would improve over the coming year.”With little change in house/flat prices, lower mortgage rates during the year and higher incomes will combine to improve affordability,” said Ray Boulger at mortgage adviser John Charcol.Average home prices are expected to hold steady this year before rising 3.0% in 2025 and 4.0% in 2026, medians in the Feb. 16-28 poll of 26 property market experts showed. Overall inflation is expected to average 2.5%, 2.1% and 2.0% in the three years, respectively.”We expect house prices will recover in the second half of 2024 but may not show in the indices until 2025. More competitive rates will support modest growth in 2025 and 2026,” said Marcus Dixon at real estate services firm JLL.Home sale prices rose in annual terms this month for the first time in six months as demand from buyers strengthened, property website Rightmove (OTC:RTMVY) said earlier in February.In London – a big draw for foreign investors – prices will increase faster than nationally this year, rising 1.7%, and then increasing 3.0% next year and 4.3% in 2026, the poll found.”The exodus from London has ended and new construction of residential units has plummeted. At the same time, the UK’s capital city remains a beacon for international homeowners,” said Tony Williams at advisory firm Building Value. Housebuilder Taylor Wimpey (LON:TW) will build fewer houses this year, it said on Wednesday, joining other developers in cutting building targets, just days after Britain’s competition watchdog concluded the sector had limited supply to maintain its prices.However, the supply of affordable homes will narrow modestly in the next 2-3 years, according to five analysts. Three said it would stay the same while five said it would widen.”There’s a lot of quite good quality one- and two-bedroom urban living options coming through,” said Lee Layton at global property consultants Colliers.”Obviously, a lot needs to be done and it will be years before we ever produce enough affordable housing for the need. But I hope that we will start heading in the right direction in the next 2-3 years.” The average asking price of a UK property was 362,839 pounds ($458,882) this month, Rightmove said, around 11 times the average British salary. When also factoring in the downpayment needed to secure a mortgage, it puts the dream of home ownership out of reach for many.When asked about the proportion of homeowners to renters, nine analysts thought it would decline. Six said it would rise.”Tenants’ finances have been under increasing pressure, with rising rents and high inflation limiting their ability to put money aside for a deposit,” said Aneisha Beveridge at estate agency Hamptons.(For other stories from the Reuters quarterly housing market polls:)($1 = 0.7907 pounds) More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.French inflation fell less than expected in February as faster growth in energy prices offset a sharp slowdown in food costs, denting hopes that the European Central Bank will cut interest rates soon.Slower growth in French food and manufactured goods prices drove inflation in the eurozone’s second-largest economy down to 3.1 per cent in the year to February, from 3.4 per cent a month earlier, the national statistics agency said on Thursday. The latest reading was its lowest level since September 2021 but was slightly above the 3 per cent level forecast by economists in an earlier Reuters poll.Inflation in Spain fell in line with forecasts to 2.9 per cent in February, taking it back below 3 per cent for the first time in six months, but an acceleration in fuel prices partly offset lower growth in electricity costs, according to the country’s statistics office.Since the disruption of the coronavirus pandemic and Russia’s invasion of Ukraine triggered the biggest surge in consumer prices for a generation, eurozone inflation has been slowing rapidly, leaving ECB policymakers trying to gauge how fast it will drop to their 2 per cent target.German inflation figures are due to be released later on Thursday before eurozone-wide data is published on Friday, setting the tone for discussions about the timing of rate cuts at the ECB’s meeting next week.ECB president Christine Lagarde told the European parliament this week that price growth was expected to “continue slowing down, as the impact of past upward shocks fades and tight financing conditions help to push down inflation”. However, Lagarde said wage growth remained strong and would be “an increasingly important driver of inflation dynamics in the coming quarters, reflecting employee demand for inflation compensation and tight labour markets”. The ECB plans to release new price growth forecasts after its meeting next week. Goldman Sachs expects it to cut its forecast for eurozone inflation this year from 2.7 per cent to 2.3 per cent and for next year from 2.1 per cent to 2 per cent — in line with the ECB’s target.French consumers remained cautious at the start of this year despite lower inflation. Household spending on goods fell 0.3 per cent in January from the previous month, the statistics agency said, suggesting record high eurozone policy rates of 4 per cent were still weighing on demand. More

The week’s main focal point is due later Thursday, January’s personal consumption expenditures (PCE) price data, widely seen as the Federal Reserve’s preferred inflation gauge.Recent economic data releases, and the consumer prices release in particular, have prompted investors to push back bets on rate cuts by the Federal Reserve to later in the year.Investors will be watching closely to see if the upside surprise seen in the January CPI is replicated, underlining Fed caution about the timing of rate cuts.Year-on-year headline and ‘core’ PCE inflation rates are forecast to slip to 2.4% and 2.8% respectively, but monthly rises are expected to be a healthy 0.3% and 0.4%.U.S. stock futures edged lower Thursday, as investors warily await the release of key inflation data as well as more corporate earnings.By 03:45 ET (08:45 GMT), the Dow futures contract was 90 points, or 0.2%, lower, S&P 500 futures had dipped by 9 points or 0.2%, and Nasdaq 100 futures had fallen by 35 points or 0.2%.The three main indices closed lower Wednesday, but are on track to register gains this month after strong results from Nvidia (NASDAQ:NVDA) seemed to remove worries about the sustainability of the AI-driven rally. The Nasdaq Composite is on course to post a gain of over 5% this month, the S&P 500 has jumped 4.6%, while the Dow Jones Industrial Average has added 2.1%. This would mark the DJIA’s first four-month winning streak since May 2021.There are more earnings to digest Thursday, including from Best Buy (NYSE:BBY), Hewlett Packard Enterprise (NYSE:HPE) and Bath & Body Works (NYSE:BBWI), while the likes of Snowflake (NYSE:SNOW) and Salesforce (NYSE:CRM) will also be in the spotlight after they released results after the close Wednesday. The saga surrounding the leadership of OpenAI, and the potential that investors were misled, is set to be investigated by the Securities and Exchange Commission, according to a report by the Wall Street Journal, with the newspaper citing people familiar with the matter.The move followed OpenAI board’s decision in November to fire Sam Altman as CEO and remove him from the board, only for Altman to return to his position just days later. The regulator is specifically looking into internal communications involving Altman, and had also sent a subopena to OpenAI in December, the WSJ report showed.OpenAI shot into the public spotlight with the release of its ChatGPT software in late-2022, prompting a broader rush into generative artificial intelligence.Europe has its own inflation data to digest Thursday, with consumer prices due from the German states, France and Spain, ahead of the eurozone figures on Friday.Inflation in the eurozone is retreating, with February’s CPI seen falling to 2.5% on an annual basis, from 2.8% the prior month.However, officials at the European Central Bank have consistently cautioned that it’s still too early for the central bank to cut interest rates.Bundesbank President Joachim Nagel reiterated that view on Wednesday.”We still lack more reliable data on wage developments and confirmation that with these data, we will get inflation back to 2% in 2025,” Nagel said. “Next week’s projections will be an important milestone.”The ECB will release new quarterly economic projections next Thursday.Oil prices edged lower Thursday, adding to the previous session’s losses as a sharp build in U.S. crude stocks reinforced concerns about demand in the world’s largest economy.By 043:45 ET, the U.S. crude futures traded 0.6% lower at $78.03 a barrel, while the Brent contract dropped 0.7% to $81.60 per barrel. Crude inventories rose for the fifth consecutive week, increasing by 4.2 million barrels to 447.2 million barrels in the week ended Feb. 23, official data from the Energy Information Administration showed on Wednesday, heightening investors’ worries over a slow economy and reduced oil demand in the largest consumer in the world.Traders will be keeping an eye on the U.S. inflation data for clues about future economic activity, as well as events in the Middle East and the possible extension of voluntary oil output cuts from the producer group, the Organization of Petroleum Exporting Countries and its allies. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.India’s commerce minister has said that trade policy has no role in fighting climate change, dealing a blow to hopes of tackling global warming through trade deals.Piyush Goyal told the Financial Times that trade and the environment “are two separate issues” and the rich world’s attempts to embed sustainability into agreements were “biased”.“Trade has nothing to do with that,” he said in an interview at the World Trade Organization’s biennial conference, where governments are discussing how to green trade flows and abolish subsidies for overfishing.Goyal said that other UN institutions were best placed to tackle climate change and labour standards, such as the Framework Convention on Climate Change and International Labour Organization.“The world has prepared different multilateral organisations and they should be respected,” he said. “They should be allowed to do their job.” Countries that industrialised through fossil fuels should pay to arrest climate change, Goyal said, evoking the 2015 Paris Agreement, in which developed countries promised to finance developing countries to cut fossil fuel use and adapt to climate change.A 2009 commitment to spend $100bn per year for developing countries by 2020 has not been met.“All the environmental damage that has been done in the past has still not been made up for. What about that?” he asked.“Before we add new environmental issues, let’s first sort out who is responsible for the environmental degradation. Certain promises were made in Paris. They have to be delivered upon.”India accounts for 17 per cent of the world’s population but produces just 3 per cent of emissions, he said.Goyal attacked unilateral EU trade measures trying to protect the environment, saying: “There is clearly bias, discrimination and unfairness.”  They include the carbon border adjustment mechanism; a tax on imports of products such as steel that produce high emissions; and a deforestation law that would force importers of commodities such as rubber and coffee to prove they were not grown on land recently cleared of trees. He said Delhi had not decided whether to bring a WTO complaint about the measures. Goyal, who is under pressure over his tough stance at the ministerial conference, where he has threatened a veto in several areas, hit back at the US for its decision to hamstring the WTO’s dispute resolution function.Washington has blocked the appointment of arbitrators to appeal panels, which means countries that lose a case can simply ignore the judgment by appealing into the void. “I have many complaints that I need to be addressed by the WTO,” he said. “I have no recourse to justice. So until we have a functioning appellate body all other decisions have no meaning.”India is itself obstructing almost single-handedly two other negotiations. It insists on retaining a publicly funded food stockpile system, stalling talks on agricultural subsidies.There have been widespread protests by farmers in India ahead of elections, raising the stakes for Goyal.India also wants to end an agreement not to impose duties on electronic goods such as film streaming and social media. Goyal said this favours big tech companies over SMEs who need tariff protection to grow. The ecommerce moratorium is usually extended from meeting to meeting. India, backed by Indonesia and South Africa, is refusing to do so, although most WTO members favour the move.“I have start-ups. I have technology professionals who are happy to produce domestic technology. I have ecommerce platforms in India. But should I not be supporting them? Is it the right only of a few select big tech companies to do ecommerce?” he asked.The conference is scheduled to finish on Thursday but is expected to run over as delegations haggle over the moratorium.Goyal said India was ready to close a trade deal with the UK “immediately” but London had not taken a decision.Talks with the EU continued but India would “absolutely not” accept any sustainability commitments, which are a critical demand of Brussels.  More

BEIJING/HONG KONG (Reuters) – Chinese university graduate Zhang Baichuan travels hundreds of kilometres from one job fair to another in a final push to find a better offer than the unappealing one he received after more than 1,000 applications.He hopes the post-Lunar New Year recruiting season in China, when many companies advertise for new positions, brings more attractive opportunities than the livestream moderator role he was offered recently.While Zhang, 23, was fine with the 5,000 yuan ($695) monthly salary, with the company covering meals and accommodation, he dreaded the 12-hour shifts, six days a week – known in China as the “996” work culture.”I’m not keen on a 996 schedule, but I’m considering it as a safety net while I look for better options,” Zhang, who holds a business management degree from Hebei GEO University, said outside his 50-yuan-per-night hostel room in suburban Beijing.”I don’t like the devaluation of degrees, but the reality is that there are more college graduates now,” he said before travelling to another job fair outside of Beijing.Encouragingly for China’s first-quarter economic growth, the post-Lunar New Year recruiting season is off to a stronger start than in 2023, when the world’s second-largest economy was going through its biggest COVID-19 infection wave.But high youth unemployment gives employers a large pool of candidates to choose from, keeping wage growth sluggish and cementing worries China may struggle to boost household consumption enough to stabilise growth and lift the economy out of deflation.Zhaopin, one of China’s biggest recruiting platforms, said in the first week after the Feb. 10-17 break there were 45% more companies looking to hire than in the corresponding post-holiday week of last year.That demand hasn’t translated into higher wages, however, which were only up 3% on average.The pace, which lags China’s expected 2024 economic growth target of around 5%, suggests the job market remains an employers’ market for now, said ING chief China economist Lynn Song.”The recovery in the job market will likely be modest this year as economic momentum remains relatively weak,” Song said.More than 21% of Chinese aged 16-24 were unemployed last June, the last data point before officials suspended the series. China resumed publication this year, excluding college students from the data, to put youth unemployment at 14.9% in December.’NEW NORM’The travel sector – the fastest to recover after three years of COVID restrictions – led the way in hiring, offering 56.3% more jobs than last year, followed by logistics with 26% and transportation with 21.6%, Zhaopin said.At the Beijing job fair, one of thousands across China, a hotel human resources manager who only gave her surname Han, said her firm tweaked commission thresholds, which could lead to 30-40% higher take-home pay from last year.Others were less generous. Zhang Chengjin, director at housing information provider Mingwang, said he could only offer a “slight increase,” given the troubled property sector was generally cutting jobs.A civil servant from Lanzhou, capital of the northwestern Gansu province, said the local government’s debt woes forced it to cut bonus payments, reducing his annual pay by a fifth.”It might be the new norm,” he said.SUBSIDY HOPESWith China’s parliament starting its annual meeting next week, pressure is growing on leaders to come up with policies that address weak household spending, a long-standing structural imbalance.Analysts at Societe Generale (OTC:SCGLY) and HSBC say last week’s comments by President Xi Jinping calling for the “replacement of old durable goods” raised expectations policymakers could announce subsidies for home appliance purchases.But such subsidies would change little. Relative to economic output, household spending in China is about 20 percentage points below global average.For China to become a more consumption-driven economy, household incomes must rise faster than GDP for sustained periods and policymakers need to find ways to transfer resources from the government sector to households, analysts say.”Large enough subsidies and tax breaks are helpful in frontloading purchases,” said Gary Ng, Asia Pacific senior economist at Natixis. “However, consumption will only rebound if households become more optimistic or if income growth and wealth effects see real improvement.”Gao Tianyi, a 26-year-old attending the Beijing job fair, worries about a “trend of pushing salary expectations lower,” but says he tries to “remain humble” in his job hunting.”Some people can’t sleep at night because they can’t find a job,” said Gao. “For me, it’s the mornings. I wake up and immediately start to worry.”($1 = 7.1989 Chinese yuan) More

Argentina’s libertarian president Javier Milei is ready to bypass hostile legislators who blocked his landmark economic reforms and rely on decrees and other executive powers to implement his radical austerity plan.His strategy for reviving the stricken economy is widely perceived as high-risk, but Milei waved aside doubts during a confident interview at the pink-coloured presidential palace, the Casa Rosada. He said he was making faster progress than expected with a fiscal adjustment so drastic it had no parallel “not just in Argentina but the world”. The chance of ordinary Argentines rioting against austerity was “zero” and his message to Argentina’s growing number of poor, he said, was: “You don’t get out of poverty by magic. You get out of poverty with capitalism, savings and hard work.”A political outsider inaugurated in December on a promise to take a chainsaw to the state, Milei surprised Argentina by eking out the country’s first budget surplus in 12 years in January. That was achieved by slashing payments to provinces, freezing budgets and not uprating pensions and benefits fully for inflation, which was running at 254 per cent a year last month.Economists have warned that such drastic spending cuts may not be sustainable. But Milei, a former economist and TV pundit, believes that having brought down inflation from a peak of 25.5 per cent a month in December to 20.6 per cent in January and an expected 15 per cent in February, he can turn around the crisis-stricken economy this year without congress. “We have avoided hyperinflation,” the self-styled anarcho-capitalist leader told the Financial Times. “Our objective is to continue lowering inflation . . . [and] finish cleaning up the [central bank’s balance sheet]. Once the central bank is cleaned up, we are planning to lift exchange controls . . . the IMF estimates we could do it by the middle of the year.”Milei’s reform agenda ran into trouble almost immediately when the opposition-dominated congress began unpicking hundreds of deregulation measures proposed in his wide-ranging draft bill.Rather than see the bill “shredded”, the president withdrew it and plans to wait until after midterm legislative elections late next year before trying again with a comprehensive package. He said, however, that he would not wait that long to push ahead with large parts of his reform agenda — and was ready to do it without congress.“There are other reforms which we can do by decree . . . by changing the application of laws, and all that we will do,” Milei said. He pointed out that about a third of his proposed 1,000 reform measures were included in an emergency decree that will remain in force unless both houses of congress vote to reject it.“But while congress has its current make-up, we think it’s difficult to pass reforms because what became clear with the [economic reform bill] is that the politicians . . . have no problem damaging the interests of Argentines in order to keep their privileges.”Milei conceded that “in the long term you need congress” but insisted that Argentina’s historically low levels of investment meant that business could achieve big returns in the short term with only small outlays of capital.The president believes that lifting exchange controls would open a virtuous circle of economic recovery. “We could have a lot of investment despite not having institutional changes . . . and this could be the take-off point so that next year Argentina is growing in a strong, solid, sustainable way with low inflation.”This, he believes, would allow his insurgent La Libertad Avanza party, founded only two and a half years ago, to win more seats in next year’s midterm elections. Then he would try again to legislate. “We are ready to send back all the reforms after the 11th of December 2025. We have sent 1,000 but we still have 3,000 more to present.”In the meantime, Milei will continue to send reforms piecemeal to congress to expose what he called political games by the country’s political “caste” of professional politicians. “Those who vote against will be identified as the enemies of change,” he said. Casa Rosada, the presidential building in Buenos Aires More

SAO PAULO (Reuters) -Japan stands ready to take appropriate action against excessive exchange-rate moves, its top currency diplomat said following yen declines to levels seen by traders as heightening the chance of currency intervention.The warning by Masato Kanda, Japan’s vice finance minister for international affairs, likely reflects Tokyo’s desire to prevent further falls in the yen that would hurt households and retailers by boosting the cost of importing raw materials.”I won’t comment on recent currency moves. But it’s desirable for exchange rates to move stably reflecting fundamentals,” Kanda told reporters on Wednesday on the sidelines of the G20 finance leaders’ meeting in Sao Paulo.”We’re watching currency moves with a strong sense of urgency, and ready to respond appropriately if we see excessively volatile moves,” he said.The yen is the worst-performing major currency this year as funds and others have traded on the huge U.S.-Japan interest rate and bond yield gap, and bet that it will persist. It has shed 6% of its value against the dollar so far this year, falling below 150.00 per dollar to within sight of its post-1990 lows around 152.00 per dollar.Kanda, who is attending the G20 meeting on behalf of Finance Minister Shunichi Suzuki, said he called on policymakers to be mindful of the risk that volatility may heighten in financial markets, including for exchange rates.”I told the meeting that excess volatility in the currency market was undesirable, and that it was important to maintain the G20 commitment on exchange rates,” he said.The G20 and the smaller G7 group of advanced nations share a common understanding that stable currency moves are desirable, and that countries have authority to take action in the market when exchange-rate moves become too volatile.Japan intervened in the currency market three times in 2022 when the yen plunged to 32-year lows near 152 yen to the dollar, conducting rare dollar-selling, yen-buying intervention.While authorities have not stepped in to the market since then, traders are on alert for any sign of intervention as the yen flirts at the 150-level seen as Tokyo’s line-in-the-sand.Japanese authorities have repeatedly said they were paying more attention to the speed of currency moves, rather than levels, in deciding whether and when to intervene.The yen’s recent declines have been driven in part by heightening market expectations that the Bank of Japan will keep interest rates ultra-low, even after pulling short-term borrowing costs out of negative territory. More

SEOUL (Reuters) – North Korean leader Kim Jong Un has called for an “industry revolution” in rural regions by building factories nationwide, state media KCNA said on Thursday, amid chronic food shortages and widening economic inequality. Attending the groundbreaking ceremony for a plant in Songchon County, east of the capital Pyongyang, Kim pledged to push ahead with his “Regional Development 20×10 Policy”, under which the country seeks to open modernised factories in at least 20 remote counties every year for the next 10 years. The policy was unveiled as Kim’s key economic initiative at a meeting last month of the Supreme People’s Assembly, the country’s rubber-stamp parliament.”Establishing regional industry factories equipped with modern equipment and production lines in every city and county of the country within the next 10 years is truly a great revolution with enormous epochal significance,” Kim told the ceremony, according to KCNA. Kim handed over regimental colours at the ceremony to a military unit that has recently been created to carry out the initiative, saying that they would “create an era of great change for radically developing regions”. Kim has been pushing for modernising the farming sector and rural communities as North Korea’s economy heavily relies on agriculture but has long grappled with food shortages amid sanctions over its weapons programmes and seasonal impacts from natural disasters. North Korean defectors have reported deepening inequality between largely elite residents of Pyongyang and other major cities, and the farming population in rural areas. South Korea’s unification ministry said last month that the economic gap between them appears to have further widened in terms of everything from food rations and housing to education and access to healthcare. More