Economy

WASHINGTON (Reuters) -The U.S. House of Representatives rejected a Republican-led bill on Tuesday that would provide $17.6 billion to Israel, as Democrats said they wanted a vote instead on a broader measure that would also provide assistance to Ukraine, international humanitarian funding and new money for border security.The vote was 250 to 180, falling short because it was introduced under an expedited procedure requiring a two-thirds majority for passage. The vote was largely along party lines, although 14 Republicans opposed the bill and 46 Democrats supported it.Aid for Israel – one of the largest recipients of U.S. foreign aid – has traditionally received strong bipartisan support in Congress. But many opponents called the House legislation a political ploy by Republicans to distract from their opposition to a $118 billion Senate bill combining an overhaul of U.S. immigration policy and new funding for border security with billions of dollars in emergency aid for Ukraine, Israel and partners in the Indo-Pacific region.Republican House Speaker Mike Johnson had said the Senate bill was “dead on arrival” in the chamber even before it was introduced. And Senate Republican leaders said on Tuesday they did not think the measure would receive enough votes to pass.”This accomplishes nothing and delays aid getting out to our allies and providing humanitarian relief,” said Representative Rosa DeLauro, the top Democrat on the House Appropriations Committee, urging opposition to the Israel-only bill. “Our allies are facing existential threats and our friends and foes around the globe are watching, waiting to see how America will respond.”Democratic President Joe Biden, who supports the Senate bill, promised to veto the House’s Israel-only measure.STRUGGLE TO SEND SECURITY ASSISTANCEThe Israel bill’s supporters insisted it was not a political stunt, saying it was important to move quickly to support the Jewish state as it responds to the deadly Oct. 7 assault by militants from Hamas-ruled Gaza.”This bill simply provides necessary resources to our closest ally in the region and our own military,” said Republican Representative Ken Calvert, the Republican Defense Appropriations Subcommittee chairman who introduced the measure.Israel began its offensive in Gaza after militants killed 1,200 people and took 253 hostages in southern Israel on Oct. 7. Some Democrats also blasted the House bill for failing to provide humanitarian assistance for Palestinian civilians. Gaza’s health military says at least 27,585 Palestinians have been confirmed killed in the campaign, with thousands more feared buried in neighborhoods reduced to rubble.Members of Congress have been struggling for months to find a way to send security assistance abroad, particularly to Ukraine as it battles Russian invaders. Biden has twice sent Congress requests for emergency spending bills, most recently in October.The Republican-majority House passed an Israel-only bill in November, but it was never taken up in the Democratic-led Senate, as negotiators worked on Biden’s request for a broader emergency security package and Republican demands that any security assistance be combined with changes in immigration policy and security at the border with Mexico.The failed Israel House vote was the second in quick succession for Johnson’s Republican majority on Tuesday. It came immediately after the chamber voted against impeaching Biden’s top border official, Homeland Security Secretary Alejandro Mayorkas. More

Ford Motor attributed the loss in the fourth quarter to charges related to pension plans and a restructuring of overseas operations.Ford Motor said it lost $526 million in the final three months of 2023, mainly as a result of special charges related to its employee pension programs and the reorganization of some of its overseas operations.The automaker said its fourth-quarter revenue rose to $46 billion, from $44 billion a year earlier, thanks to strong sales of internal-combustion vehicles and light commercial trucks.The division of the company that makes gasoline and hybrid vehicles earned $813 million before interest and taxes in the fourth quarter, and its commercial vehicle division made $1.8 billion. The unit that makes electric vehicles lost $1.6 billion.John Lawler, Ford’s chief financial officer, said the company’s profit in the fourth quarter was also hurt by an extended strike by the United Automobile Workers union, and higher labor costs stemming from the new contract it signed with the U.A.W.“You adjust for those two factors, and you see a pretty strong quarter,” Mr. Lawler said in a conference call.Ford had previously said the strike reduced its pretax profit by $1.7 billion in 2023.Looking ahead, Ford said it expected to make between $10 billion and $12 billion in adjusted earnings before taxes and interest this year.Ford reported a profit of $4.3 billion in 2023, compared with a $2 billion loss in 2022. Revenue in 2023 rose to $176 billion, up from $158 billion in 2022. The company said its 58,000 U.A.W. workers would be paid profit-sharing bonuses of up to $10,400 based on its performance in 2023.The automaker said it wanted to improve its financial performance by investing less in some areas, like electric vehicles, while setting higher profit goals for the projects it was still putting money in. “Simply ‘good’ isn’t good enough and investments are going to projects that have credible plans to deliver their targeted returns,” Mr. Lawler said in a statement.Ford shares were up about 6 percent in extended trading after it reported earnings. More

MEXICO CITY (Reuters) – A reform proposed by Mexican President Andres Manuel Lopez Obrador for retirees to have a pension equal to their final salary will come with a cap on monthly payments, according to a document sent to Mexico’s Congress.The draft plan for employees to receive such generous pensions has morphed into one of the stand-out initiatives of Lopez Obrador’s sweeping reforms that include judicial, electoral, environmental and other changes.However, the suggestion has raised questions about sustainability and whether Mexico can afford it. Opponents and critics have dismissed the plans as an unrealistic political ploy ahead of the June presidential polls.The document sent to the Mexican Congress and reviewed by Reuters on Tuesday states the proposal would only be available to those who started contributions to Mexico’s social security institute IMSS after July 1, 1997, as well as those holding accounts with government workers’ social security body, ISSSTE.But the monthly payments would be capped at 16,777 Mexican pesos ($984.61) and the figure would be adjusted for inflation every year, the document states.At present, 4.5 million people receive retirement pensions from IMSS in a country of some 126 million inhabitants, while 1.3 million people drawn pensions from ISSSTE.To fund the proposal, Lopez Obrador suggested the government would create a fund with 64 billion pesos and source money from state governments, while also diverting cash destined for autonomous institutions that he wants to disband.However, some estimates have suggested the cost of the proposal may be 430 billion pesos in 2025 (1.3% of the GDP) and climb to 2.0% of GDP by 2035, according to Eurasia Group, an international risk consultancy.The opposition’s line that it would support pensions reforms if it does not harm fiscal stability was a political tactic aimed at shielding themselves from the president’s attacks on the campaign trail, Eurasia Group said in a note to clients on Tuesday.”It is highly unlikely that opposition parties will support this initiative given its impact on public finances,” the note added.($1 = 17.0392 Mexican pesos) More

The S&P Global/CIPS UK Purchasing Managers’ Index’s headline measure of the construction industry improved to 48.8 in January from 46.8 in December, its highest since August 2023 although still in no-growth territory. Economists polled by Reuters had forecast a smaller rise to 47.3.Tim Moore, Economics Director at S&P Global Market Intelligence, said customer demand appeared close to turning a corner as the economy picked up after a weak end to 2023.”UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon,” Moore said. Construction firms said higher shipping costs pushed up prices paid for raw materials for the first time since last September.There have been signs in other surveys that disruption to shipping in the Red Sea has delayed deliveries to British manufacturers.Tuesday’s PMI survey chimed with data from the Royal Institution of Chartered Surveyors, published last week, that showed a brighter outlook for the construction sector.S&P Global said residential house-building continued to be the biggest drag on activity although the pace of decline was the softest since March last year.Output in civil engineering was close to stabilisation and commercial building also shrank by less than in December, S&P Global said. Overall new orders growth showed the slowest rate of decline since they started to contract in August 2023 and employment fell only slightly.The wider all-sector PMI, which includes previously released services and manufacturing figures, rose to its highest in eight months at 52.6 from December’s 51.7. More

LONDON (Reuters) – British living standards will start to rise again this year but it will be 2027 before poorer households recover their pre-pandemic spending power, putting an onus on the next government to boost the country’s slow economic growth, a think tank said.Politicians should resist the temptation to offer voters tax cuts ahead of an election expected in 2024 and invest the money instead in ways to inject more speed into the economy, the National Institute or Economic and Social Research (NIESR) said.With the ruling Conservatives lagging the opposition Labour Party in opinion polls, Prime Minister Rishi Sunak and finance minister Jeremy Hunt have said they want to cut taxes, probably as soon as March 6 when Hunt will announce a budget plan.Stephen Millard, a NIESR deputy director, said the good news for 2024 was that wages would continue to rise while inflation fell quickly towards the BoE’s 2% target, probably allowing the central bank to start cutting interest rates in May.”The bad news is that trend growth remains low at around 1%,” Millard said in a statement alongside NIESR’s latest forecasts. “There is a desperate need for increased public and private investment if higher growth is to be restored.”While overall living standards look set to grow by 1.9% in the 2024/25 financial year starting in April, households in the bottom half of the income range will be between 7 and 20% worse off than immediately before the COVID-19 pandemic, NIESR said.Britain’s next government could speed up the slow recovery in household disposable income by prioritising public investment in areas such as transport infrastructure, housing and skills training over pre-election give-away tax cuts, it said.More resources should also be provided for local authorities, many of which have had to cut public services.NIESR’s latest forecasts showed it expected Britain’s economy entered a shallow recession in the second half of 2023 but would grow by 0.9% in 2024 – up from a previous forecast of 0.5% – and by 1.2% in 2025, before getting stuck at about 1% in each of the next three years. Consumer price inflation would average 2.2% in 2024, down from 7.4% in 2023, helped by lower energy prices, and remain around that level until 2028.The BoE was likely to cut Bank Rate to 3.25% by 2026, two years earlier than NIESR had previously forecast.The think tank urged the British central bank to be clearer about its plans for lowering borrowing costs, something the European Central Bank and the U.S. Federal Reserve had been more explicit about, helping financial markets and businesses. More

The BoE bought some 875 billion pounds ($1.10 trillion) of gilts over more than a decade after the 2008-09 financial crisis, using freshly created reserves to stimulate Britain’s economy, a process known as quantitative easing (QE).It is now in the process of selling down its holdings of gilts through a combination of active sales and allowing bonds to mature – also known as quantitative tightening (QT) – and its stock now stands at 737 billion pounds.”With more public money at stake than was ever envisaged when QE was launched, the Bank and Treasury should take our advice and explore whether the usual value for money considerations can be factored in when deciding the pace and level of QT they implement,” Harriett Baldwin, chair of the Treasury Committee in parliament’s lower house, said.The committee said the accounting system around the central bank’s balance sheet should be revamped if the BoE were ever to reintroduce QE.”The way in which profits and losses are accounted for should be revisited, in particular the 2012 decision to remit cashflows quarterly between the Bank and the Treasury,” the report said.These cashflows have come under increasing scrutiny. Rising bond prices and ultra-low interest rates through the 2010s made QE profitable for the BoE, which remitted these profits – worth 124 billion pounds at their peak – to the finance ministry.Now the BoE’s stock of bonds have turned into a big loss-maker for the public finances, thanks to rising interest rates and the falling value of gilts over the last couple of years. In turn the finance ministry is required to finance the BoE’s losses – thereby limiting the government’s fiscal space at a time of already stretched budgets.The BoE now expects these losses will exceed the profits made during the 2010s, resulting in a net loss of around 50 billion pounds by the mid-2030s.”We welcome the committee’s report and will consider its findings carefully before responding. We continue to encourage active debate about our monetary policy decisions and their implementation,” the BoE said in a statement.($1 = 0.7950 pounds) More

BENGALURU (Reuters) – A resurgent dollar is more likely to stay strong than not over the coming months, according to foreign exchange strategists polled by Reuters, as markets reassess how soon the Federal Reserve may cut interest rates.Bucking a brief downward trend that started late last year, the dollar index gained nearly 2.0% in January alone. Various Fed officials pushed back on rampant market speculation for a rate cut in March, with the probability now down to less than 20% from a peak of around 90%, according to rate futures.A blowout U.S. jobs report for January, clear hints from the U.S. central bank after the end of a policy meeting last week, and a follow-up television interview with Fed Chair Jerome Powell have quashed most remaining hopes of early rate cuts.The latest data from the Commodity Futures Trading Commission already showed currency speculators paring their short dollar bets for a third week in a row, a trend that is likely to continue.A near 80% majority of foreign exchange (FX) strategists, 52 of 67, in a Reuters Feb. 1-6 poll said the greater risk to their six-month forecast was for the dollar to trade stronger than they predicted. The remaining 15 said the greater risk was for it to be weaker.”The race has started, with the market at first questioning whether the dollar would continue weakening at the beginning of this year. Now I think they’ve come to believe the strong dollar should be closer towards leading the pack,” said Paul Mackel, global head of FX at HSBC, adding that the speed at which central banks cut “will dictate currency performance.” “Overall, we believe in a strong dollar this year, but not an exceptional one like in 2021 and 2022.”With growth in most major economies expected to lag the U.S. and rate differentials favoring the greenback, most strategists say it will be an uphill task to dethrone the dollar in the short-term.However, the median forecast among 76 strategists surveyed showed the dollar would weaken from current levels against most major currencies in the next three, six and 12 months, an outlook analysts have held for about a year.”Does it make sense for the market to be pricing similar cumulative rate cuts from the Fed, ECB (European Central Bank) and many other central banks … we don’t think so,” noted George Saravelos, head of FX research at Deutsche Bank.”The real debate is not if the Fed cuts a few weeks sooner or later, but if it cuts by less or more than the rest of the world over the next two years. We continue to see the risks skewed towards less Fed easing and, therefore, in favor of the USD.”The euro, trading around $1.07 on Tuesday, was expected to gain more than 4.0% to change hands at $1.12 in 12 months. The Japanese yen was forecast to strengthen more than 9.0% from current levels to 135.50/dollar.Median views for most major currencies were little changed since December.(For other stories from the February Reuters foreign exchange poll:) More

(Reuters) – The Federal Reserve made the right choice last week to hold interest rates steady amid an outlook that likely heralds more inflation declines, Patrick Harker, president of the Philadelphia Fed, said on Tuesday. The policy decision last Wednesday “is one I support,” Harker said in the text of a speech prepared for an event in Glassboro, New Jersey. “The data point to continued disinflation, to labor markets coming into better balance, and to resilient consumer spending — three elements necessary for us to stick to the soft landing we remain optimistic to achieve,” said Harker, who is not a voter on the policy-setting Federal Open Market Committee this year. He said “real progress” is being made in getting inflation back to the Fed’s 2% target. Last week, officials kept their overnight target rate range steady at between 5.25% and 5.5% and signaled that with inflation moving down, the next step is likely to lower short-term borrowing costs. But Fed Chair Jerome Powell, speaking after the Fed meeting, pushed back on the idea of a rate cut at the March policy meeting. Other Fed officials have said it could take some time to determine whether it’s time to lower rates after what had been an aggressive campaign raising them to combat high levels of inflation.Harker did not say in his prepared remarks what he expects on the rate-cut front. But he said that Fed action “has put us on the path to a soft landing,” and given how the data has come in, “the runway at our destination is in sight.”Harker had been one of the first Fed officials to argue that the central bank was done with rate hikes. More