Economy

In a report likely to be welcomed by the Bank of England as it readies its latest interest rate decision, the Lloyds (LON:LLOY) Bank Business Barometer jumped by nine points to 44% this month, its strongest since February 2022.Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said weaker inflation and hopes of interest rate cuts pushed the index to its highest level for the month of January since 2016.”With ongoing geopolitical issues and a general election on the horizon, businesses will have factored these into their risk radars and will be working to prepare for any potential impacts on their trading prospects,” he said.”Also, half of all companies say they’re planning to increase headcount in the coming year. Despite that and the changes to minimum wage that will come into force in April, expectations for staff pay fell back following last month’s increase.”A measure of staffing plans increased by four points from December to 33% but pay expectations eased back and the share of firms expecting to increase wages by 4% or more over the next 12 months was the lowest for five months.However, longer-term wage growth expectations remain above their pre-coronavirus pandemic levels.Companies scaled back plans for increasing the prices they charge for a second month in a row, the first back-to-back decrease since June 2022, Lloyds said.The BoE is expected to keep borrowing costs at their highest level since 2008 on Thursday but investors, economists and businesses will be watching for any signs that rate cuts might be coming later in 2024.The Lloyds survey typically includes responses from 1,200 firms and was conducted between Jan. 3 and Jan. 17. More

Shares of the big box retailer rose 1% after the bell. The company said the stock split would increase the number of outstanding common stock to about 8.1 billion from about 2.7 billion.The additional shares will be payable after market close on Feb. 23, Walmart (NYSE:WMT) said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Top European chipmaker Infineon is racing to hire more skilled workers in south and south-east Asia as the regions become increasingly important to the world’s semiconductor and tech supply chains.Infineon’s Asia-Pacific president and managing director, Chua Chee Seong, told Nikkei Asia that the company is recruiting more staff in India, which is already the German chipmaker’s crucial Asian research and development base, and that it also aims to significantly expand the workforce at its new Vietnam office to “multiple hundreds” of engineers.“I think south-east Asia and south Asia’s importance in terms of chip talent and the chip supply chain will only increase in the coming years,” Chua said. “The region is relatively neutral in the dynamic geopolitical environment, while it is also an ideal location for efficient operations.”Chua said India’s significance is rapidly increasing. In addition to being a valuable source of skilled workers — the company already employs 2,000 chip designers and software developers there — the country is becoming a crucial end market for chips used in automobiles and electronics.“We see growing competition for talent-hunting in India as investments are piling in, and thus we have to look for new locations inside India to open an office,” Chua said.This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan. Subscribe | Group subscriptionsA rising India looks very similar to China of two to three decades ago, according to Chua. “At this early stage, we’re seeing western companies making initial investments, paving the way for the emergence of local suppliers and brands in the future.”He identified the automobile and motorcycle industries as particularly promising, highlighting India’s potential to replicate China’s current market size of 20mn to 30mn cars. “With only 4mn cars currently, India has immense room for growth,” he said. India’s 20mn-strong motorcycle market also presents a massive growth opportunity for chips for electric two-wheelers and battery technology, Chua said.The war for chip talent has been heating up in south-east Asia and India as chipmakers and other tech companies increase their regional presence, driven by a desire to diversify supply chains beyond China and build more resilience.India has attracted big players, including Intel, Qualcomm, AMD, Applied Materials and Micron, who are setting up R&D centres and even production facilities there, while Apple’s top suppliers Foxconn and Pegatron are increasing production of iPhones in India.Chua Chee Seong, Infineon’s president and managing director for the Asia-Pacific region More

(Reuters) – A look at the day ahead in Asian markets.Wednesday will bring prompt tests of the just-released International Monetary Fund upgrades of U.S. and Chinese growth outlooks that could should set the tone for markets, starting with Asia on Wednesday.The IMF on Tuesday adjusted its forecast for 2024 global growth upward amid a stabilized inflation outlook, and said a “soft landing” was in sight. While IMF’s World Economic Outlook may not be the biggest market mover, it threw down a marker for the two most important economies, raising the GDP growth rate outlook for China to 4.6% from 4.1% and the U.S. to 2.1% from 1.5%.Chinese official manufacturing PMIs for January on Wednesday will give insight as to how on-target the IMF might be, and can help set the tone for local stock markets and beyond. In December the purchasing manager’s index fell to 49.0 from 49.4, below the 50.0 expansion/contraction threshold.Industrial output reports are also due from Japan and South Korea. Earlier in Asia, regional shares slumped amid deepening worries about the Chinese real-estate sector after developer group China Evergrande (HK:3333) was ordered to be liquidated on Monday.China and Hong Kong stocks dragged MSCI’s broadest index of Asia-Pacific shares outside Japan down about 0.9%. Japan’s Nikkei was up 0.11%, set for a nearly 8% gain for the month.Speaking of soft landings, in the run up to the two-day Federal Open Market Committee meeting that kicked off Tuesday Fed policy makers have made clear they will not jeopardize one by easing too soon or too aggressively, even if inflation is showing signs of coming down. This leaves global traders on tenterhooks ahead of Wednesday’s FOMC statement, and, perhaps more importantly, the question and answer session with chair Jerome Powell afterward. The S&P 500 struggled to stay above water Tuesday but did manage to eke out another in a series of record highs, while Treasury yields slipped and the dollar was near flat. Fed funds futures markets indicate a near zero probability of a cut this month and in recent days have priced the easing cycle starting at the May meeting, instead of March as previously favored. At their December meeting policy makers penciled in 75 basis point of cuts this year. That median projection would be a less aggressive loosening than the market expects from the current policy rate of 5.25%-5.50%, where it has been since July.Meanwhile the U.S. labor market looks tight, based on Labor Department job openings data released Tuesday. While the ADP employment report comes out Wednesday the main event is the January nonfarm payrolls release on Friday, which will inform the Fed’s deliberations in March as to whether markets are in for a U.S. soft landing, no landing, or, least likely from current indications, a hard one. “For a March cut to happen you’d have to have some pretty clear communication from the Fed laying the groundwork tomorrow, but when you look at the economic data and where the labor market is, it’s hard to have a high degree of confidence that they will see the need to cut,” said Frank Rybinski, head of macro strategy at Aegon (NYSE:AEG) Asset Management. Here are key developments that could provide more direction to markets on Wednesday: — South Korea Industrial Output – December– Japan Industrial Output – December– China Manufacturing PMI – January– Australia CPI – December– U.S. ADP employment – January– U.S. FOMC policy statement More

WASHINGTON (Reuters) – U.S. job openings unexpectedly increased in December and data for the prior month was revised higher, suggesting that the labor market likely remains too strong for the Federal Reserve to start cutting interest rates in the first quarter.Nevertheless, the labor market is gradually cooling, with the report from the Labor Department on Tuesday also showing Americans staying put at their current jobs, which could help to slow wage growth. The number of people quitting their jobs, likely in part for greener pastures, was the lowest in nearly three years.There were 1.44 positions for every unemployed person, steady from November, but down from two jobs in March 2022, when the U.S. central bank started hiking rates. Fed officials are expected to keep rates unchanged at the end of a two-day policy meeting on Wednesday against the backdrop of a resilient economy, which is being anchored by the labor market through consumer spending. Financial markets have lowered the odds of a rate cut in March to well below 50%. “Persistent demand for workers, while positive for continued economic growth, may throw a wrench into efforts to cool inflation early in 2024,” said Ben Ayers, senior economist at Nationwide in Ohio. “This is again a sign of too much of a good thing, which should lead to a later-than-hoped shift to monetary policy easing.”Job openings, a measure of labor demand, were up 101,000 to 9.026 million on the last day of December, the Labor Department’s Bureau of Labor Statistics said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report. Data for November was revised higher to show 8.925 million unfilled positions instead of the previously reported 8.79 million. Economists polled by Reuters had forecast 8.75 million job openings in November. Job openings peaked at a record 12.0 million in March 2022. Demand for labor has remained fairly healthy despite tighter monetary policy. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.There were an additional 239,000 job openings in the professional and business services sector in December. The were also notable increases in manufacturing, retail trade, healthcare and social assistance as well as financial activities sectors. Unfilled jobs, however, decreased by 121,000 in the accommodation and food services industry and fell 83,000 in the wholesale trade sector. Jobs were abundant in the South, but there were fewer opportunities available in the Midwest. The Northeast saw a modest increase in vacancies, while the West reported a mild drop. The job openings rate was unchanged at 5.4%. Hiring rose 67,000 to 5.621 million, lifted by professional and business services, accommodation and food services as well as state and local government. But healthcare and social assistance hiring declined 119,000. The hires rate rose to 3.6% from 3.5% in November. Layoffs increased 85,000 to a still-low 1.616 million, driven by job losses in transportation, warehousing and utilities, which enjoyed a boom in business during the COVID-19 pandemic. United Parcel Service (NYSE:UPS) said on Tuesday it planned to cut 12,000 jobs. Professional and business services sectors also shed workers in December. The layoffs rate was unchanged at 1.0% for a fourth straight month as most companies hoard workers following difficulties finding labor in the aftermath of the pandemic.Stock on Wall Street were little changed. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.CONSUMERS UPBEATResignations fell 132,000 to 3.392 million in December, the lowest level since January 2021. The fourth straight monthly decline was led by healthcare and social assistance, where quits decreased 71,000. The quits rate, viewed as a measure of labor market confidence, was unchanged at 2.2%. The relatively low quits rate bodes well for slower wage inflation and price pressures in the economy.”That is a positive sign for the Fed, as employee turnover affects the pace of wage growth,” said Lou Crandall, chief economist at Wrightson ICAP (LON:NXGN) in New York. Labor market strength, subsiding inflation and expectations of a rate cut helped to boost consumer confidence in January. The Conference Board said in a separate report on Tuesday that its consumer confidence index rose to 114.8 this month, the highest reading since December 2021, from 108.0 in December. The rise in confidence was across all age groups, with bigger gains reported for consumers 55 years and over. Confidence improved for all income groups, with the exception of households with annual incomes of $125,000 and more, where a marginal decline was recorded. Consumers’ inflation expectations over the next 12 months dropped to 5.2%, the lowest reading since March 2020, from 5.5% in December. Perceptions of a recession this year eased further.The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, widened to 35.7 this month from 27.3 in December. This measure correlates to the unemployment rate in the Labor Department’s monthly employment report. The government is expected to report on Friday that nonfarm payrolls increased by 180,000 jobs in January, according to a Reuters survey of economists. The economy added 216,000 positions in December. The unemployment rate is forecast to rise to 3.8% from 3.7% in December. Despite the rise in confidence, consumers were less enthusiastic about making big-ticket purchases over the next six months. There is, however, no strong correlation between confidence and consumer spending. Other data on Tuesday showed solid house price growth in November amid a chronic shortage of properties for sale.”It will be challenging to push for earlier rate cuts in this environment,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. More

The ECB has raised its interest rates by the most in the euro’s history in an effort to bring inflation down from double-digits. It was 2.9% at its latest reading and the bank is now widely expected to start cutting borrowing costs in the spring.Nagel, who had previously described inflation as “stubborn” and a “greedy beast”, struck a more optimistic note on Tuesday.”I am now convinced that we have tamed that greedy beast,” the Bundesbank’s president told an event in Berlin.Still, he stopped far short of backing rate cuts, saying instead that the ECB should decide on any policy changes one meeting at a time and remain focused on incoming data. Nagel also noted that core inflation remained relatively high and argued that the ECB’s current policy stance, which includes a record-high deposit rate of 4.0%, was not very restrictive. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.France is increasing pressure on the European Commission to address complaints raised by protesting farmers, including about imports from Ukraine and a trade deal being negotiated with Latin American countries.As farmers in France continue to blockade highways and disrupt food supplies, President Emmanuel Macron on Tuesday pledged to defend their interests “not by opposing or pointing to Europe as the culprit” but by asking for EU policy reforms. “At the European level, we must have a policy that is consistent with the food sovereignty that we defend.”Macron reiterated France’s long-standing concerns that a free-trade deal with the Mercosur group of countries — Argentina, Brazil, Uruguay and Paraguay — would lead to imports that do not respect European standards, such as on antibiotic usage on chicken farms. “We ask that the agreement as it is in place not be signed,” he said.Macron’s comments come as farmers in France protest about rising costs, falling profits and new regulations as Brussels tries to cut carbon emissions and improve biodiversity. Similar protests are also starting in Belgium where farmers on Tuesday moved to block a crucial port, while German farmers have also blocked motorways and prevented a minister from disembarking a ferry.Among farmers’ grievances are local and EU regulations, while in France, Poland, Slovakia and Romania, they have also objected to cheaper imports from Ukraine flooding their markets. After the Russian full-scale invasion in 2022, the EU agreed to lift tariffs on Ukrainian grain and produce, which have lower production costs and do not have to follow EU standards.On the issue of agricultural imports from Ukraine, another irritant for farmers, Macron said he would raise it at the summit as well because they were “destabilising the European market” for chicken and eggs.The commission has bowed to demands to add quotas on eggs, poultry meat and sugar in its proposal to extend the measures, which is expected on Wednesday, two officials told the Financial Times. Once imports exceed the average annual level of 2022 and 2023 Ukrainian exporters will pay the EU tariff. Poland has signalled it will lift its unilateral embargo once these measures are agreed.The farmers’ protests, and the desire for EU governments to extract concessions from Brussels required to placate them, were set to gatecrash an EU leaders’ summit on Thursday designed to focus on aid to Ukraine. Macron said he would meet the head of the commission, Ursula von der Leyen, to discuss agricultural and trade issues on the sidelines of the summit. Leaders from countries with farmer protests are co-ordinating ahead of the summit, people briefed on the discussions told the FT, and would bring a united front demanding flexibility from the commission.Among the concerns raised at protests across the bloc is the rigidity of rules governing what agricultural activities are eligible for EU subsidies. “Farmers across the EU need support if they are going to be a part of the green transition,” said one of the people. “So it’s a co-ordinated approach between capitals [ahead of the summit].”Brussels hands about €60bn annually to farmers through the Common Agricultural Policy, in what is the biggest single chunk of the EU budget, and it has been tightening green standards to qualify for the subsidies. The commission also ceded on another demand made recently by France and a coalition that Paris said included 22 member states: to push back the reintroduction of an EU requirement for farmers to leave 4 per cent to 7 per cent of their land fallow to protect biodiversity. The rule had been suspended since the outbreak of the war in Ukraine to boost farm production, but was supposed take effect this year. Von der Leyen’s spokesman Eric Mamer on Tuesday said the commission would renew the exemption to allow farmers to plant on the land. The exact details might change, he said.On the Mercosur trade deal, Mamer said talks would continue despite France’s renewed push against it, but added that an agreement was not imminent. “The negotiations are ongoing but we are not there,” he said. EU officials suggested the talks could be strung out beyond June elections for the European parliament, and wait for the political heat to die down. France, the biggest agricultural producer in the EU, has long opposed finalising a deal provisionally agreed in 2019 but Macron has been increasingly vocal about it in recent months, arguing that the pact would be bad for the environment and French farmers. In other EU countries too, agriculture groups have objected to the deal’s increased quotas for meat and produce from Latin America.Trade commissioner Valdis Dombrovskis in December told the FT he could push the deal through without France given that it requires support from a majority of member states, not unanimity.Other member states including Germany, Spain and Sweden are in favour of the deal. “We still hope negotiations will continue and French tractors in the street won’t stop it,” said an EU diplomat.“The vast majority of member states want this deal. We are concerned about these reports,” said another.Additional reporting by Henry Foy in Brussels More

“What we are seeing in the U.K. and a number of other countries is a need to put in place medium-term fiscal plans that will accommodate a significant increase in spending pressures,” Pierre-Olivier Gourinchas said during a press briefing.
In the U.K., he said, this included spending on the National Health Service, social care, education and the climate transition, as well as measures to boost growth, while preventing debt levels from increasing.

British Finance Minister Jeremy Hunt said earlier this month the U.K. would not enter a recession this year.
Hannah Mckay | Reuters

LONDON — The U.K. government should not introduce further tax cuts this year, the International Monetary Fund said Tuesday, as its chief economist argued the national budget needed the money for public services and growth-friendly investments.
“What we are seeing in the U.K. and a number of other countries is a need to put in place medium-term fiscal plans that will accommodate a significant increase in spending pressures,” Pierre-Olivier Gourinchas said during a press briefing.

In the U.K., he said, this included spending on the National Health Service, social care, education and the climate transition, as well as measures to boost growth, while preventing debt levels from increasing.
“In that context, we would advise against further discretionary tax cuts, as envisioned or discussed now,” he said.
An IMF spokesperson separately said the U.K. had higher spending needs across public services and investments than were currently reflected in the government’s budget plans. The IMF has recommended the U.K. strengthens taxes on carbon emissions and property, eliminates loopholes in wealth and income taxation, and reforms rules which set pension levels.
British Finance Minister Jeremy Hunt will announce his latest budget in early March, in what may be the last major fiscal announcement before a General Election is held. The timing of the vote is uncertain, but it must be called by the Conservative government at some point this year.
The Conservatives face an uphill battle, with the opposition Labour party ahead in most polls.

Hunt announced several tax cuts in his fall budget, and made several suggestions he wants to introduce more in the spring.
U.K. public sector net borrowing has fallen sharply, and in December 2023 was around half that of the prior year due to higher VAT (a sales levy) and income tax receipts and lower spending.
The IMF on Tuesday forecast 0.6% growth for the U.K. economy this year, up slightly from an estimated 0.5% figure for 2023. It revised its forecast for 2025 lower by 0.4 percentage points, to 1.6%, when it said disinflation will ease financial conditionals and allow real incomes to recover.

The downgrade, it said, “reflects reduced scope for growth to catch up in light of recent upward statistical revisions to the level of output through the pandemic period.”
Gourinchas told CNBC on Tuesday that despite a weak growth outlook for the year, the U.K. had seen positive news on inflation, which is forecast to average 2.8%.
“We’re at that point, we think, that the Bank of England will be in a position like the Federal Reserve and [European Central Bank] to ease policy rates as inflation is finally brought towards target,” he said. More