Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK may have narrowly slipped into a technical recession at the end of 2023, according to estimates from a leading think-tank, underscoring the fragile health of the economy as the country heads towards a general election.Gross domestic product edged down by 0.1 per cent in the final three months of last year, following an equal decline in the previous quarter, according to the National Institute of Economic and Social Research.A technical recession is defined as two consecutive quarters of contracting GDP.The outlook should improve in 2024 as inflation slows and wages continue to rise, the think-tank added, but it warned that whoever wins the election expected this year will inherit an economy that is “bereft of significant growth”. “The overall picture of flatlining output in the United Kingdom, which we have seen now for almost two years, continues,” Niesr said in research published on Wednesday.The Office for National Statistics is due to report fourth-quarter GDP on February 15. The figures will be politically sensitive, as chancellor Jeremy Hunt prepares for a March Budget that the Conservatives hope will boost their re-election chances. Hunt has said 2024 should be the year when the country should “throw off our pessimism and declinism about the UK economy”. Prime Minister Rishi Sunak last year pledged to “grow the economy”.Other forecasters also expect the final set of official figures for 2023 to confirm it was a year with little economic growth.Last week the Bank of England estimated that the economy flatlined in the final quarter of the year and projected that GDP would expand by just 0.25 per cent in 2024. Niesr was more upbeat about 2024 and predicted the economy would expand by 0.9 per cent this year.It also said inflation would fall faster than the BoE expected, and predicted price growth would hit 1.5 per cent in April thanks to falling energy prices. Given the sharp slowdown in price growth, the think-tank expects the BoE to be in a position to start cutting interest rates from the current 5.25 per cent level in May.The combination of slower inflation and sustained wage growth should mean real household disposable incomes will rise by 1.9 per cent on average in 2024-25, Niesr predicted.But, for the bottom half of income distributions, living standards would be between 7 and 20 per cent lower in 2024-25 compared with 2019-20. They would not return to pre-pandemic levels until 2027, the think-tank added.Niesr also warned that the UK’s trend rate of growth, or the sustainable pace at which it can expand, remained low given depressed levels of investment and sluggish productivity figures. The think-tank estimated the UK’s trend growth rate was just 0.9 per cent, far less than the 2.3 per cent rate in the decades leading up to the global financial crisis, and 1.2 per cent from that point until the pandemic.“Raising this trend rate of growth should be at the top of the government’s priorities for economic policy,” Niesr said.  More

WELLINGTON (Reuters) -New Zealand labour pressures have eased slightly but the country’s job market remains tight despite some cooling of the broader economy, according to data released by Statistics New Zealand on Wednesday.New Zealand’s jobless rate rose to 4.0% in the fourth quarter, but was below expectations of a 4.2% unemployment rate, while employment increased 0.4%. At the same time, wage growth increased in the quarter with the private sector labour cost index (LCI) excluding overtime recording a 1.0% lift on the quarter, stronger than the expected 0.8% increase.“Fourth-quarter figures confirmed that the exceptionally tight NZ labour market is only slowly going off the boil,” ASB Bank senior economist Mark Smith said in a note. ASB Bank expects unemployment to continue its upward journey, but it may not rise by as much as earlier expected, while wage inflation may not moderate as quickly as earlier expected, he added.The New Zealand dollar rose to $0.6097 from $0.6079 as market reduced the chance of near term rate cuts following the data. Two-year swaps climbed to a seven-week high of 4.96% and is now up 26bps for the week, although this is largely due to the market pushing out the timing of U.S. cuts.Labour cost inflation has been a challenge for the Reserve Bank of New Zealand, which has hiked aggressively since October 2021 to try to temper rising prices. Inflation, although off three-decade highs, at 4.7% remains well outside the central bank’s target band of 1% to 3%.In November, the RBNZ held the cash rate at 5.5% while signalling further hikes might be needed if inflation did not continue to ease. Since then data has showed the economy is weaker than many had thought. The central bank is due to meet at the end of the month.Michael Gordon, senior economist at Westpac Bank said wage inflation has not receded as quickly as the RBNZ would have hoped will have a bearing on its forecasts of how quickly inflation will return to with the target range.“Overall, today’s results will probably reinforce the RBNZ’s stance that interest rate cuts are much further away than what the market is currently pricing in,” Gordon said. More

(Reuters) -Fox Corp, Walt Disney (NYSE:DIS)’s ESPN and Warner Bros Discovery (NASDAQ:WBD) said on Tuesday they will launch a sports streaming service later this autumn to capture younger viewers who are not tuned in to television.The media companies will form a joint venture to create a new service from their broad portfolio of professional and collegiate sports rights, which span the National Football League, the National Basketball Association, Major League Baseball, FIFA World Cup and college competitions.The yet-to-be-named service would offer an all-in-one package of programming that would include television channels, such as ESPN, TNT and FS1, as well as sports content that is streamed. Subscribers would also have the option of subscribing to it as part of a streaming bundle from Disney+, Hulu or Max.”This means the full suite of ESPN channels will be available to consumers alongside the sports programming of other leaders,” Disney CEO Bob Iger said in a statement.Media analyst Michael J. Wolf of Activate Consulting said the venture will appeal to the 40 million households in the U.S. that pay for high-speed internet access, but don’t subscribe to pay TV. An all-sports digital offering also is likely to appeal to Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Roku (NASDAQ:ROKU), which aggregate streaming video for millions of consumers.”It’s a smart defensive move with potentially huge upside,” former Disney executive Bernard Gershon said. The launch will come at a time when cable television continues to lose subscribers. Live sports continue to serve a powerful audience draw, whether on television or online, as NBCUniversal’s Peacock demonstrated last month with its live streaming of the NFL’s AFC wild card playoff game, he said. Still, that audience comes at a hefty price, reportedly $110 billion for media rights for the NFL.”Let’s figure out a way to split the costs of rights as they go up,” said Gershon, explaining the possible deal logic. “And let’s create a platform that people will go for a range of sports and capture some of the upside.”The CEOs have been discussing a collaboration for some time, according to two people with knowledge of the situation. The partners view this sports-centric service as providing consumers with more choice, not replacing Disney’s flagship ESPN television network or Fox’s FS1, which already reach an avid group of sports fans on TV, according to sources familiar with the matter. “We believe the service will provide passionate fans outside of the traditional bundle an array of amazing sports content all in one place,” said Fox Chief Executive Lachlan Murdoch.The new entity will be jointly owned by the three media companies, which will have equal board representation and agree to license their sports content on a non-exclusive basis. An independent management team will operate the new entity.The sports-centric service signals a recognition that there is a large market for sports outside of traditional TV. This platform is designed to capitalize on that opportunity. It also provides another way for these media companies to monetize increasingly costly sports rights.”This new sports service exemplifies our ability as an industry to drive innovation and provide consumers with more choice, enjoyment and value,” Warner Bros Discovery CEO David Zaslav said in a statement.Early last year, Iger had suggested that Walt Disney wants to keep ESPN and will look for strategic partners and investors, as he sought to take the network online.Activist investor Nelson Peltz believes Disney can achieve profitability in streaming by bundling its ESPN+ online service with a larger player interested in sports, according to media reports from last month. More

Mary Kay Henry of the nearly two-million-member Service Employees International Union will not seek re-election when her term ends in May.Mary Kay Henry, the president of the Service Employees International Union, one of the nation’s largest and most politically powerful labor unions, announced Tuesday that she would step down after 14 years in her position.Ms. Henry was the first woman elected to lead the union, which represents nearly two million workers like janitors and home health aides in both the public and private sectors.Under her leadership, it launched a major initiative known as the Fight for $15, which sought to organize fast-food workers and push for a $15 minimum wage. Winning over skeptics in the ranks, Ms. Henry argued that the union could make gains through a broad-based campaign that targeted the industry as a whole rather than individual employers.Labor experts and industry officials cite the campaign as a major force behind significant minimum-wage increases in states including California and New York and cities like Seattle and Chicago. It also pushed a recent California law creating a council to set a minimum wage in the fast-food industry, which will become $20 an hour in April, and to propose new health and safety standards.But the Fight for $15 campaign has not unionized workers on a large scale and enabled them to negotiate collective bargaining agreements with their employers.Ms. Henry’s tenure has coincided with a series of legislative and legal challenges to organized labor, including state laws rolling back collective bargaining rights and allowing workers to opt out of once-mandatory union fees, as well as a landmark Supreme Court ruling allowing government employees to do the same.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Fed reported Tuesday.
Total debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago.

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Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.
Debt that has transitioned into “serious delinquency,” or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.
Delinquencies also rose in mortgages, auto loans and the “other” category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.
“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” said Wilbert van der Klaauw, economic research advisor at the New York Fed. “This signals increased financial stress, especially among younger and lower-income households.”
While delinquency levels are rising, the New York Fed researchers said total debt is moving higher about in line with the pace before the Covid-19 pandemic began in March 2020.
Household debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago. Credit card debt, however, jumped 14.5% from the same period in 2022. Auto debt climbed to $1.61 trillion, up $12 billion on a quarterly basis and $55 billion annually, or 3.5%.

Borrowers have been hit by higher interest rates. In a tightening cycle that ran from March 2022 to July 2023, the Federal Reserve hiked its short-term borrowing rate by 5.25 percentage points, taking the fed funds rate to its highest level in about 23 years. The benchmark rate feeds into most adjustable-rate consumer debt products.
Since the central bank began its tightening, the typical rate on credit cards leaped from about 14.5% to 21.5%, according to Fed data. Credit card debt as a share of income is still below pre-pandemic levels.
While the rise in delinquencies happening from low levels, the trend “bears watching because it is happening while the economy is still growing,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities.
“What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch,” LaVorgna said in a note. “In other words, a mild downturn could turn into a deep one.”
Fed researchers said rising rates probably have played a role in delinquency rates. In the case of autos, for instance, they said payments have changed little even as prices have come down, owing to the elevated rate structure.
Student loan debt, an area of interest for Washington lawmakers, has increased little during the pandemic period, currently totaling just more than $1.6 trillion. That was little change from the third quarter and it was up just 0.4% from a year ago. President Joe Biden has forgiven some $136.6 billion in student loan debt since taking office. The share of debt in serious delinquency edged lower to 0.8%.
Mortgage debt rose 2.8% in 2023, while the delinquency rate increased to 0.82%, up a quarter percentage point from the previous year.
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BRUSSELS (Reuters) -European Union policymakers began final negotiations on Tuesday on new rules to promote local production of equipment for solar and wind power, fuel cells and other clean technologies and ensure its industry can compete with Chinese and U.S. rivals.The bloc aims to set a 2030 target of producing 40% of the products it needs to reduce greenhouse gas emissions. These will cover renewable energy, battery storage, heat pumps, electrolysers, biogas, carbon capture and electricity grids.Europe is increasingly relying on China, which is forecast to have 80% of global manufacturing capacity in solar power for example. It also has concerns that the $369 billion of green subsidies in the U.S. Inflation Reduction Act (IRA) will entice European producers to relocate.European Parliament lawmakers and Belgium, which holds the six-month rotating EU presidency, began talks on Tuesday morning in a bid to agree the final details of the Net-Zero Industry Act (NZIA).The NZIA is a centrepiece of the EU’s push to ensure it is not only a global leader in cutting greenhouse gas emissions, but also in manufacturing the clean tech required.The act, likely to enter force later this year, proposes streamlining the granting of permits for projects that boost EU manufacturing, ensuring they are issued within 18 months.Public authorities conducting tenders for clean-tech equipment, such as for a solar or wind park, would also have to award contracts based not only on the price, but also on environmental criteria and ensuring that no more than 65% of supply is from a single source.Hitting the 40% production target will be particularly tough in solar, given domestic manufacturers supply less than 3% of EU panel deployments and are fighting for survival. The EU wind energy sector is far stronger, although Chinese companies are starting to gain a foothold.Also, while the NZIA will give the EU greater flexibility to support local production and seeks to coordinate various EU funds, it will not have a pot of new money to rival the IRA. A mooted European Sovereignty Fund has failed to materialise.Tuesday’s talks were expected to focus on how widely to interpret clean tech, such as including nuclear power or all equipment components, whether to shorten the permitting timelines and how non-price criteria should be applied in tenders. More

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