Economy

Formal negotiations between the U.S. planemaker and its largest union — District 751 of the International Association of Machinists and Aerospace Workers — were set to begin in early February, but the start date was pushed back at Boeing (NYSE:BA)’s request after a Jan. 5 in-flight cabin blowout on a 737 MAX 9.IAM District 751’s contract agreement with Boeing ends at midnight on Sept. 12. The union, which represents about 31,000 workers in the area around Puget Sound, Washington, will be looking to obtain wage increases of around 40% over the three- to four-year life of the contract and will propose reinstating pensions, which were phased out in a 2014 deal, IAM District 751 President Jon Holden said in a recent interview with Reuters.It will also seek a commitment from Boeing to build its next airplane in the Puget Sound area, Holden said. “That’s the commitment our members have earned.”Labor makes up less than 15% of the total cost of a Boeing aircraft, with engineering, support and manufacturing jobs built into that figure, Boeing Chief Financial Officer Brian West said during an investors conference on Tuesday.Asked about Boeing’s strategy for negotiations, West said, “We fully expect to get to a point that we have an agreement and work constructively with our partners in the IAM.” More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.UK prime minister Rishi Sunak has suffered one of the worst weeks of his premiership with data confirming he had led the country into recession followed by the loss of two safe seats in parliamentary by-elections.The opposition Labour party proved that its high opinion poll ratings could be translated into actual votes at the ballot box as it snatched the seats in Wellingborough in Northamptonshire and Kingswood near Bristol. There were also growing signs that the Conservatives are losing votes on the right to the populist Reform UK party.Last night’s results cap a challenging few days for the Tories, who had spent yesterday fighting accusations that they were responsible for tipping the UK into a recession. GDP data showed the economy shrinking 0.3 per cent in the final quarter of 2023 following a decline of 0.1 per cent in the third. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Some economists argue the dip is only a “technical” recession — defined as two successive quarters of negative growth — in comparison with the more serious downturns in the past featuring mass unemployment. The argument that growth was now returning was also given credence by this morning’s positive retail sales figures for January, suggesting the economy was picking up momentum. There was also more positive data earlier in the week showing inflation holding steady at 4 per cent, lower than analysts had expected.This was however drowned out by the political furore around the GDP figures, given the fact that Sunak had made restoring growth one of his key promises to voters. Instead, said Labour shadow chancellor Rachel Reeves, we now had “Rishi’s recession”.  GDP per capita was gloomier still. An increase in population would normally lead to higher growth: instead the fall in output per head of 0.7 per cent in 2023 was the first contraction since the financial crisis, barring the pandemic emergency of 2020.The string of data comes as Chancellor Jeremy Hunt prepares for a crucial Budget on March 6, possibly the last big chance to turn around Tory fortunes before a general election expected before the end of the year. The FT revealed earlier this week that Hunt was considering another squeeze on public spending to pay for tax cuts but a new set of internal fiscal forecasts showed he has little room for manoeuvre. Economists have warned that Hunt’s planned 1 per cent real terms annual increase in public spending through to 2029 is a “fiction” that would seriously damage already stretched public services.Back in the world of politics, the GDP figures are welcome news for the Labour party, which has suffered its own week of dire headlines, or as one of its officials commented: “To have people talking about recession in an election year isn’t good for Rishi Sunak. His selling point was supposed to be that he knew how to run the economy.”  Need to know: UK and Europe economyBrussels has downgraded forecasts for EU and eurozone growth this year to 0.9 per cent and 0.8 per cent respectively, but has also revised lower inflation expectations as energy and other commodity prices fall faster than expected. European Central Bank chief Christine Lagarde pushed back against suggestions interest rate cuts were imminent.Germany’s withdrawal of support for a piece of EU legislation that it had long appeared to back, the new supply chain law, is the latest incident causing frustration among other member states at Olaf Scholz’s unpredictable governing coalition. European comment editor Tony Barber says gains for the hard right in June’s European parliamentary elections could disrupt EU climate, migration and trade policies.Need to know: global economyEconomic growth in Africa slowed to 3.2 per cent in 2023 from 4.1 per cent the year before because of “multiple shocks” and increasing global economic uncertainty, the African Development Bank said. For this year the AfDB forecasts growth of 3.8 per cent and 4.2 per cent for 2025.Australia classified nickel, crucial for electric vehicle batteries, as a “critical” mineral, eligible for government funds, to support an industry hit hard by a flood of cheap nickel from Indonesia.Hedge funds have piled into the cocoa market, exacerbating a surge in prices sparked by poor harvests in West Africa. Their bet, which has already earned bumper profits for trend-following hedge funds, helped drive the London price to a record close of £4,757 per ton last week. Japan’s economy joined the UK in contracting for a second straight quarter on weak domestic demand, adding to pressure on the Bank of Japan as it considers raising interest rates for the first time since 2007. Prabowo Subianto, Indonesia’s likely new president, first ran for office as a military hardliner but has morphed into a more benign grandfatherly figure. He is expected to pursue a populist path that could test the country’s fiscal strength. Need to know: businessJPMorgan and State Street, two of the world’s biggest asset managers, are quitting a climate investor group, while BlackRock, the world’s largest money manager, is downsizing its commitment, reflecting a green backlash from US Republicans and others.Business is also under pressure from the opposite political direction: a Cambridge-led coalition of UK universities has warned banks and asset managers they are prepared to shift billions of pounds into greener institutions unless the financial providers accelerate net zero plans and stop financing new fossil fuel projects.Longi Green Energy Technology, the world’s biggest solar panel manufacturer, warned Europe and the US not to restrict Chinese companies from their renewable energy supply chains if they were serious about transitioning away from fossil fuels. Just six weeks after a private equity rescue was completed, The Body Shop’s international network has been dismantled, its crown jewel, the UK business, has collapsed into administration, and then-chief executive Ian Bickley has departed. Here’s how it happened. Calstrs, the US pension giant, said private equity needed to share more wealth with the workers of the companies it takes over. Columnist Gillian Tett says the industry ignores protests at its peril.A Big Read investigates whether OpenAI, one of the fastest growing companies in history, can create superintelligence before it runs out of cash.Science round upA new satellite mission, set to launch next month aboard a SpaceX rocket, aims to track planet-warming emissions of methane gas to help build a global map of oil and gas infrastructure and monitor it for leaks. A campaign to plant trees across Africa will not only damage ancient grassland ecosystems that absorb carbon dioxide but also fail to fully restore depleted forests, according to a new report. The study will intensify debate on whether global tree-growing projects backed by western governments and philanthropists will help mitigate climate change and other environmental damage.In the largest analysis of its kind to date, researchers have found that blood proteins can predict dementia up to 15 years before clinical diagnosis. It bolsters the findings of smaller studies suggesting certain proteins are “biomarkers” of susceptibility to Alzheimer’s and other neurodegenerative diseases.Scientists have invented a breakthrough antibiotic that successfully combats “superbugs” in non-human tests. Cresomycin was found to be effective in mice against several bacteria that cause serious infections and are increasingly resilient to drugs used to kill them. Brussels told the UK it must ease visa procedures and costs for scientists or risk missing out on the full benefits of the Horizon Europe research programme. The tensions threaten UK efforts to restore the prominent role it had in Horizon before it dropped out for three years.Scientists are still grappling with the puzzle of what causes long Covid and how it could be treated. The disease is defined as the continuation or development of symptoms three months after initial infection with Sars-Cov-2, with these symptoms lasting for at least two months. Some good newsThe reconstructed spire of Paris’s Notre-Dame cathedral, damaged in the devastating fire of 2019, can now be seen after scaffolding was removed following almost five years of reconstruction.Notre-Dame’s new spire, topped with a cross and golden rooster More

January’s jump in retail sales provided a glimmer of positive news about the health of the UK consumer on Friday after grim data earlier this week showed the country slid into recession at the end of 2023.  But analysts were quick to caution against overly optimistic conclusions from the sales volumes, which rose at a month-on-month pace of 3.4 per cent, given the broader picture of stagnation that continues to hang over Britain.Retail sales may well gain further momentum in the coming months as real incomes grow alongside falling inflation, but this is unlikely to translate into stellar growth given the underlying weakness in UK productivity. With the Bank of England forecasting that gross domestic product will expand by just 0.25 per cent this year, the country is a long way from finding its way out of the low-growth trap that seems likely to bedevil the ruling Conservatives in the election expected this year. The pressure on Prime Minister Rishi Sunak to meet his pledge to “grow the economy” was underscored overnight with the loss of two more seats to Labour in by-elections in England. “We would be reluctant to assume that this signifies the return of a rip-roaring consumer economy,” said Ellie Henderson, economist at Investec. The bounce in retail sales volumes reversed a sharp fall of 3.3 per cent in December, leaving them hovering at similar levels to November 2023. Analysts said difficulties in seasonally adjusting numbers around the close of the year might have contributed to the gyrating figures. “The rapid rebound suggests the dip was more likely down to the ever-shifting seasonal trends in spending, which have continued to change pace since Covid-19,” said James Smith, economist at ING bank. In addition, volumes remain 1.3 per cent below pre-pandemic levels, confirming the broader picture of stagnation that was painted by Thursday’s GDP data. In 2023, overall household consumption increased by just 0.3 per cent, according to estimates from the Office for National Statistics.UK output per head shrank by 0.7 per cent in 2023, falling every quarter last year, the ONS said. GDP per capita has not grown since the beginning of 2022, the longest series of declines or stagnation since 1955.  “Overall, the trend looks close to flat,” said Allan Monks, economist at JPMorgan, of the retail numbers. The bigger than expected retail bounce last month may not be a reliable guide to this year’s consumer spending outlook, but there are some ingredients in place for further improvements in 2024. Most importantly, further declines in inflation from the current 4 per cent towards the Bank of England’s 2 per cent target should relieve some of the pressure on household finances in the coming months — especially if drops are coupled with reductions in the central bank’s key interest rate. Strong wage growth is now outpacing inflation, boosting disposable incomes. Inflation-adjusted total pay rose by 1.6 per cent in the three months to December, according to the ONS, the biggest increase since 2021. Consumer price inflation will decline to just 1.5 per cent in April, according to the National Institute of Economic and Social Research, allowing the BoE to start cutting rates from their 16-year high of 5.25 per cent in May. Given the better inflation picture, the Niesr think-tank is predicting an increase in real household disposable income of about 2 per cent in 2024-25. ONS polling suggests people are starting to feel the easing of inflation pressures. Some 46 per cent of adults reported an increase in their cost of living over the past month, down from 76 per cent between March 22 and April 2 2023, according to a survey released by the statistics agency on Friday. Households will experience a further modest lift because of the tax cuts announced by chancellor Jeremy Hunt in November, although those reductions will not change the longer-term trend of a surging tax burden that is heading to a postwar high. Such improvements need to be seen in perspective, however. Analysis by Niesr shows that lower-income households are still set to be grappling with living standards that will be 7-20 per cent lower in 2024-25 than in 2019-2020. In separate research, the Resolution Foundation think-tank found that GDP per capita is 4.2 per cent below its path before the onset of the cost of living crisis — equivalent to a £1,500 hit per person. Given the continued flatlining of productivity, this broader picture of stagnation seems unlikely to change radically. A first estimate from the ONS this week showed output per hour was down 0.3 per cent in the final quarter of 2023 compared with a year earlier, and just 2 per cent higher than before Covid struck. Jens Larsen, economist at the Eurasia Group consultancy, said the UK should enjoy brighter economic prospects this year than last but structural issues remained. Interest rates are at high levels compared with two years ago and consumer prices are still rising, albeit more slowly. “The recovery is nowhere near complete,” Larsen said, pointing to the weak supply side of the economy, with poor productivity growth and sluggish investment. “It is not a sharp cyclical rebound where you see production or incomes off to the races.” More

NEW YORK (Reuters) – Federal Reserve Bank of Atlanta President Raphael Bostic said on Friday that while he needs more data to convince him inflation pressures are truly falling, he’s open to lowering rates at some point in the next few months. “My outlook is to start the normalization, start returning our policy stance to a more neutral stance in the summer time,” Bostic said in a CNBC interview. “We’ve seen tremendous progress” in lowering inflation and that’s pulled forward the likely timing of a rate cut from where he had been expecting it, Bostic said.The progress on price pressures makes the outlook for policy fluid, Bostic noted. If inflation makes strong progress moving back toward 2% “I’ll be willing to pull [rate cut expectations] forward even further, but I want to see it continue before making that judgment.” Bostic appeared on the television channel in the wake of recent data showing that consumer and wholesale price rises were bigger than expected during January, which challenged the view that inflation is retreating swiftly back to 2%. Bostic said data like this affirm the need for the central bank to be patient, something it can afford to be given the broader strength of the economy.Bostic noted he was modestly surprised by the data “but not in a big way.” He foresees more declines in inflation but reiterated the path back to 2% could be uneven. The recent data means “we just have to be patient and let’s not get too far ahead and assume that the job is done, because there’s still work to do,” he said. Bostic also told CNBC that ample market liquidity means the central bank can continue to press forward with its work to shrink the size of its balance sheet, but he warned he didn’t want to push the process too far. More

“We will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves,” Daly said in remarks prepared for delivery to the National Association for Business Economics. Inflation declined rapidly last year, from 5.5% in January to 2.6% in December by the Fed’s targeted measure of the personal consumption expenditures price index. Unemployment, meanwhile, was 3.7% last month, up just three tenths of a percentage point from the start of the year. The combination, Daly said, is “unequivocally good news,” but it is unclear whether that will continue. Risks for this year include the potential that inflation’s progress slows, or that the labor market falters, she said. And while projections embedded in financial market pricing and reflected in surveys suggest inflation is on track to the Fed’s 2% target, she said, “we need more time and data to be sure that they will be realized.” Data Friday showing underlying wholesale prices surged last month appeared to reinforce that view, though Daly did not cite it specifically. Financial markets are pricing in about four quarter-point interest-rate cuts this year, starting in June, that will bring the Fed’s policy rate to the 4.25%-4.5% range by year end. Fed policymakers in December largely felt three rate cuts would be appropriate, though they will update those forecasts at their meeting next month. More

GENEVA (Reuters) – The head of the World Trade Organization warned on Friday that it could be difficult to strike deals at a major ministerial meeting later this month amid a “tough environment”, citing elections, recessions and wars in Ukraine and Gaza.Trade ministers gather for a meeting in Abu Dhabi from Feb. 26-29 where they will try to broker global trade agreements, including on reforming the 29-year-old body’s hobbled dispute system and cutting fishing subsidies.”It’s going to be a bit tough because the conference is taking place at a difficult conjuncture. We are sailing against the wind,” WTO Director-General Ngozi Okonjo-Iweala told reporters in Geneva, describing negotiating positions as far apart. “We are facing a lot headwinds, economic and political headwinds. You will understand it’s not going to be easy.”However, she said she felt she thought some outcomes were still possible which might include the second part of a deal on cutting subsidies for fishing that are emptying the world’s oceans and a road map for agriculture talks. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Lagging productivity growth in the EU could reverse the European Central Bank’s progress in bringing down inflation, a senior ECB official has warned as she recommended keeping monetary policy tight.“[Slow productivity growth] increases the risk that firms may pass higher wages costs on to consumers, which could delay inflation returning to our 2 per cent target,” said Isabel Schnabel, one of the ECB’s most hawkish policymakers, in a speech on Friday at the European University Institute in Florence, Italy. “In this environment, monetary policy needs to remain restrictive.” The US has remained ahead of the EU in labour productivity since the mid-1980s, with the gap growing between the US and EU in the early 2000s as mass adoption of information technology took off. The difference in unit labour cost, a measure of productivity, between the EU and US has widened in the past year, as European wages have risen in a stagnant eurozone economy that has been battered by the fallout from Russia’s invasion of Ukraine two years ago. “On the back of two inflation shocks, the eurozone is an economy where people are still being paid and paid more. What is happening is that a lot of people are working but GDP is low, so as a result the output per worker is falling,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. “That is inflationary.” In her speech, Schnabel called on the EU to reduce regulations that she said make it hard for companies to grow, and emphasised the need for lower barriers to entry so that new innovative businesses could better compete with established players.Many experts agree that regulatory restrictions are holding back productivity growth in the eurozone. Recent population projections from Eurostat forecast that the EU will decline 3.5 per cent by 2070, with notable decreases in the working age and young populations. The old-age dependency ratio in the EU, or the number of people aged above 65 relative to the working age population, will increase from 37 per cent in 2022 to 60 per cent in 2070. There will therefore be fewer total EU workers and fewer workers relative to the total population, and they will need to increase their output per hour to continue meeting demand and shore up the social system, analysts said.Data released this week showed that the eurozone economy flatlined in the last quarter of 2023, while the number of corporate bankruptcies increased 0.6 per cent in the same period. Many economists view Europe’s productivity challenge as a long-term issue, not one that can be quickly solved to ease rising prices today. “If you are looking for a solution to Europe’s inflation problems at the moment, it is not going to be a pick-up in productivity. But that will come over the longer term,” said Paul Mortimer-Lee, an economist at the National Institute of Economic and Social Research based in New York. More

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