Economy

Aid for Ukraine has been held up by Republicans in the U.S. Congress, and the White House has warned that it will run out by the end of the year if not renewed.”We are working very hard on this, and I am certain the United States of America will not betray us, and that on which we agreed in the United States will be fulfilled completely,” Zelenskiy said during a televised press briefing in Kyiv.He added that financial assistance was key to Ukraine’s defence from Moscow’s full-scale attack, which is nearing its two-year mark and showing no signs of abating.”They should know, our American partners, that we’re waiting for this aid. They know the details of what it’s needed for, how it will influence (the situation),” he said.He also said he expected the European Union to approve a 50 billion euro aid package soon. EU leaders approved the launch of membership negotiations, but Hungary blocked the aid package.”I’m confident that we have already achieved all this,” Zelenskiy said. “The question now is one of a certain matter of time.”Ukraine hopes to plug a $43 billion budget deficit next year mostly with foreign aid, including 18.5 billion euros from the European Union and more than $8 billion from a U.S. package that also contains vital military assistance. More

WELLINGTON (Reuters) – New Zealand central bank Governor Adrian Orr said on Wednesday that surprisingly weak third quarter economic data was a “complex situation,” but there were other data points to be released before the next cash rate decision.Orr told a New Zealand parliament committee on Wednesday that the central bank was analysing the data. “We are busily internalising,” he said, adding that before the February cash rate decision other key data points including employment were due to be released and would weigh in to their decision.Gross domestic product(GDP) data released last week showed that the New Zealand economy unexpectedly contracted 0.3% in the third quarter, while historical growth figures were also revised significantly downwards.Orr said that interest rates continue to constraint spending but that the committee remains wary of inflationary surprises.”There’s still a long way to go, particularly with the level of core inflation, or homegrown inflation, still remaining too high,” he said. The Reserve Bank of New Zealand last month held the official cash rate (OCR) steady at 5.5% but noted inflation remained too high and signalled further policy tightening might be needed if price pressures did not ease.One of the biggest challenges is that migration in New Zealand is currently at record high levels, which is boosting overall spending and putting pressure on some prices including house rentals.Orr said that the central bank had been surprised by the continued high levels of inward migration and noted its impact on demand and core inflation. More

During a joint session, senators and deputies approved the proposal. President Luiz Inacio Lula da Silva said in October it was unnecessary to erase the budget deficit by next year given the importance of funding for priority projects and construction investments. That remark sent a chill through markets and sparked intense government debates about a potential relaxation of the goal before it was voted on by Congress.But Lula decided to maintain the proposed zero fiscal target, which has always been viewed skeptically by economists due to its high reliance on extra revenue, after Finance Minister Fernando Haddad convinced the leftist president that any spending cuts would be limited.Under new fiscal rules approved by leftist Lula’s administration, annual expenses should grow no less than 0.6% and no more than 2.5% above inflation, with the additional constraint of being limited to 70% of revenue growth. This framework works in conjunction with the definition of a target for Brazilian public accounts, which was set as zero primary deficit for 2024.The Finance Ministry had argued that the minimum increase of 0.6% in expenses should always be met, regardless of its impact on achieving the fiscal target. Under the bill approved, allocations following the spending rule of the government’s new fiscal framework should not be subject to limitations.In practical terms, this interpretation is expected to cap government budget cuts in 2024 at about 23 billion reais ($4.69 billion). Economists had estimated that without this provision, the figure could reach 53 billion reais. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Efforts to manage a surge of northbound migrants at the US-Mexico border are disrupting trade flows between the countries after authorities shut down two rail crossings that handle tens of billions of dollars in goods each year.US Customs and Border Protection on Monday closed railway bridges at the cities of Eagle Pass and El Paso, Texas, which respectively rank as the second and fourth busiest freight rail crossings with Mexico. The law enforcement agency cited the need to redirect personnel to help take migrants into custody after “observing a recent resurgence of smuggling organisations moving migrants through Mexico via freight trains”. Shippers and railroad industry groups warned that the closures were disrupting trade in goods between the two countries, hitting industries from carmaking to farming. Eagle Pass and El Paso account for 36 per cent of rail traffic at the more than a dozen rail crossings along the southern border.“The urgency of reopening these crossings and restoring rail service between the two nations cannot be overstated,” said Ian Jefferies, chief executive of the Association of American Railroads. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Union Pacific and BNSF — a division of Warren Buffett’s Berkshire Hathaway — were the two US railroads most directly affected by the closures, the association said. The parent company of Mexican rail company Ferromex, Grupo México, declined to comment.For each day that the crossings are closed, Union Pacific must hold 60 trains — or almost 4,500 rail cars — with an equivalent amount of goods stranded in Mexico, the company said. Grain for export is currently being idled in six Midwestern states, with beer and dry food, cars, car parts, consumer goods, metals and cement also stuck.The Eagle Pass and El Paso crossings account for 45 per cent of Union Pacific’s cross-border business, and “there isn’t enough capacity at our other four gateways to reroute them”, the company added. “Most migrants are not crossing the border on trains”, Union Pacific said as it urged the US to reopen the crossing points.The closures come as authorities struggle to process a surge of migrants seeking to cross the border. The US reported a record 2.5mn “encounters” at its southern border in the 12 months to the end of September, which includes migrants who seek asylum at a port of entry as well as those detained after an unauthorised border crossing.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.BNSF said it was “disappointed” by the disruption, adding that “every day of closure increases the impact to the supply chain for critical commodities, including automobiles, industrial products and grain”.From January to October, rail freight trade through Eagle Pass and El Paso totalled $28.8bn, according to the US transportation department, encompassing a wide range of commodities and consumer goods that flow north and south. The beverage category, which also includes spirits and vinegar, recorded about $3bn in trade, while cereals netted $1.8bn.The blockages have the potential to ripple back into the North American rail network, threatening backups that could require some goods to be destroyed, said Bernstein analyst David Vernon.The closures at Eagle Pass and El Paso could also cause stress on the Canadian Pacific Kansas City railroad, whose line through Laredo, Texas is the busiest rail border crossing.Mexico has historically been a big destination for US-grown corn and other grains and oilseeds, which are mostly carried by rail. The National Grain and Feed Association and the North America Export Grain Association warned that livestock businesses in Mexico might run short of feed as the bridge closures persist.There was “critical tightness in feeding supplies for several livestock feeders in Mexico”, the associations said. More

The contract, yet to be ratified by the Teamsters-represented workers, includes provisions for enhanced workplace safety, higher wages and better benefits, the union said.Where additional details need to be finalized, DHL Express said, “we remain committed in continuing to bargain in good faith until a final agreement can be reached.” Newly organized workers at DHL Express, a unit of Deutsche Post (OTC:DHLGY), had gone on strike on Dec. 7 to protest certain labor practices and stalled contract talks.The strike had threatened to delay packages during the critical peak holiday shipping season when package carriers such as DHL, FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS) see volumes spike.The Teamsters-represented workers load and unload DHL Express airplanes at Cincinnati/Northern Kentucky International Airport, one of DHL’s largest and busiest logistics hub in North America.The Teamsters is looking to intensify organizing activity following a closely watched contract deal at the world’s biggest delivery firm UPS in August. More

BRATISLAVA (Reuters) – At least 15,000 people demonstrated in Slovakia’s capital on Tuesday as protests grew against plans of Prime Minister Robert Fico’s government to fast-track criminal law changes that include scrapping a special prosecutor’s office focused on corruption.Opposition parties led protests in cities around the central European country of 5.4 million for a third straight week, with protesters in Bratislava waving Slovak and European Union flags and chanting “Enough of Fico”.Dennik N news website said 15,000 to 18,000 protested, up from 10,000 a week ago.The new government, in power since October, is seeking to speed through proposals in parliament that include scrapping a special prosecutor’s office for high-profile graft cases, limiting protection of whistleblowers and reducing sentences for financial crimes.The European Commission has warned it will take action against Slovakia if it violates EU laws.Opposition parties have promised to do all they can to block the reform plans.”(The government is) underestimating us,” Michal Simecka, head of the biggest opposition party in parliament, Progressive Slovakia, told the crowd.”We have to show them they are wrong. We have to show them that we are defending justice and democracy, even in the winter, even before Christmas.”Patrik Kamencay, 25, said he joined the protest because he does not like how Slovakia looked in the EU.”The government comes with big promises about… how it will improve the lives of citizens,” he said. “And the first thing it does is try to distort the criminal procedure and abolish the special prosecutor’s office.”Fico, a four-time premier who resigned in 2018 amid mass protests against corruption that followed the murder of an investigative journalist, has accused the special prosecutor’s office of being politically motivated and has said its actions violated human rights.The government had sought to enact the legislation by Christmas but government officials have said a vote could shift to January.The government has set out several changes in its first few months in office that have irked the opposition, activists and others.A group of press freedom organisations said this month plans to cut funding to state broadcaster RTVS and divide the group into radio and television units would undermine its independence and threaten media freedom.On Monday, the heads of the anti-monopoly and healthcare regulatory watchdogs appealed in an open letter to the government and lawmakers against planned legislative changes affecting the selection of future chairs to their offices that would make “them dependent on the political will of the government”. More

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(Reuters) – After Ron Hall took out a $407,000 Small Business Administration loan last year to open a franchised sandwich shop in his hometown in Tennessee, business boomed.He hired 15 employees and even snapped up a used Honda (NYSE:HMC) CR-V that he covered in his store’s logos to sell sandwiches in the parking lots of local factories during lunch hours. Early on, the 49-year-old father of two said he was seeing $3,000 a day in total sales.But monthly payments on his SBA loan, which carried a 7% interest rate in May 2022, snowballed by almost $1,000 a month to $6,000 as the rate rose to more than 11% over the past year, in step with aggressive Federal Reserve rate hikes to tame high inflation.Other financial pressures bore down. The price of lettuce and french fries surged, he said, and his mostly working-class clientele, struggling with higher grocery and fuel prices, cut back on eating out. Daily sales now seldom exceed $1,100 and Hall has cut his workforce to seven.”It feels like everything went sideways,” he said.That sentiment seems to be shared by many U.S. small businesses. A recent survey of its members by the small business networking group Alignable found that 58% said they were being hurt by high interest rates – up from 45% who said so in June. In a follow-up question, 24% said paying back SBA loans or securing new ones from the government agency has become much harder.Higher rates add to other headwinds. The effects of the inflationary surge hampered most businesses, regardless of size. Smaller companies, however, are more vulnerable because they often lack the leverage of bigger firms to pass along higher costs to consumers.VULNERABILITIESThe good news is that inflation has been slowing, which should eventually bring relief on borrowing costs. The Fed held interest rates steady at the end of a policy meeting last week, with officials flagging plans to start gradually cutting borrowing costs in 2024. The U.S. central bank’s actions have boosted optimism about a “soft landing” in which inflation continues to slope down to the Fed’s 2% target without a sharp rise in unemployment or a contraction in economic activity.”The economy has been doing reasonably well – so many of these small businesses are still cash-flow positive,” said Thomas Simons, senior U.S. economist at Jefferies. “But the environment overall isn’t really conducive to expansion or hiring.”Simons said conditions were ripe for small startups in 2020 and 2021, with interest rates low and a surge of demand for some goods as the COVID-19 pandemic struck. “Now, with rates much higher, that doesn’t seem to be the case,” he said.The SBA said loan defaults, after falling sharply as a result of pandemic relief programs, are rising but are still lower than they were before the start of the pandemic.There is no evidence yet that smaller employers are cutting lots of jobs, Simons added, although for some time he has been flagging small businesses with floating-rate SBA loans as increasingly vulnerable on that front. According to the U.S. Department of Labor, U.S. job growth accelerated last month, and the unemployment rate fell two-tenths of a percentage point to 3.7% – signs of underlying labor market strength.The surge in interest rates, meanwhile, hasn’t prompted a rash of bankruptcies. Data compiled by the American Bankruptcy Institute (ABI) on the type of bankruptcies declared by small companies shows these filings have edged up over the past year, said Soneet Kapila, ABI’s current president, “but the main cause may be a combination of general economic pressure from poor business performance,” not interest rate pressures.There are signs cost pressures are limiting growth. The same survey of small businesses by Alignable that found companies felt burned by higher interest rates also showed constraints on hiring, with 58% of respondents saying they couldn’t afford to hire the employees they need. That’s up 14 percentage points from October, and is 8 percentage points higher than in September.TAKING A GAMBLEJ.B. Brown, the CEO of BCI Solutions, a metal foundry in Bremen, Indiana, watched his business surge during the pandemic. But demand has cooled in the past year.Although Brown still needs to add workers with advanced technical skills, he has enough basic production workers to meet the softened demand. The challenge is mounting costs. He estimates wages are up 35% compared to before the pandemic, and the cost of his property and liability insurance policy just doubled.Still, he’s gambling on the future: In an uncharacteristic move for a conservative family-owned business, Brown just took out a $7 million bank loan to buy a new machine.”We’ve pulled out of improvements and expansions in the past because it seems like whenever you’re getting ready to do it, the economy tanks,” he said. “But then we always look back and say: ‘We should’ve done it anyway.'” The new machine, however, will produce twice the output of the two older machines it is replacing while requiring half the number of workers to operate, he noted.Brown’s decision cuts against the larger trend. This type of fixed business investment has been weak in recent quarters, putting a drag on otherwise strong GDP growth. Fed Chair Jerome Powell noted last week that high interest rates have curbed this type of spending.Brown said higher rates are a challenge but added that “it’s time to invest.”Hall, the owner of the sandwich shop in Harrogate, Tennessee, has a gloomier view. He just managed to get his bank to issue a home equity loan that will replace his SBA loan with an interest rate closer to his original 7%.He once dreamed of opening a second shop but has dropped that idea, and now regrets getting into the business at all.”If I could find a way to sell it, I would do it in a heartbeat,” he said. More