Economy

TORONTO (Reuters) – A look at the day ahead in Asian markets.With Wall Street shut for Thanksgiving on Thursday, Asian investors will miss the usual swing factor. Instead, Friday’s release of Japan’s core inflation data for October will set the tone for trading in the region.Japan’s core consumer inflation likely accelerated again in October, staying above the central bank’s 2% price target for a 19th straight month, according to a Reuters poll.With inflation already exceeding the Bank of Japan’s target for more than a year, the latest data may influence the central bank’s widely expected decision to raise short-term interest rates to around zero from -0.1 next year with some betting on the chance of action in January.And upside surprise could buoy the yen against the dollar.The BOJ faces challenges in navigating Japan away from the extremely accommodative policy of the past decade without causing market turmoil or squashing a fragile economic recovery.In China, property stocks are likely to be in focus again on expectations Beijing would offer a range of financing to support the struggling sector.It’s a different inflation tale on the other side of the world, with the European Central Bank satisfied with the easing price pressures in the euro zone. That made the ECB’s decision to hold rates steady in October an easy task, according to the accounts of their Oct. 25 to 26 meeting released on Thursday showed.Stocks in Europe ended firmer, with the ECB news cementing the view that the global central banks are done with their latest tightening campaign, and if price pressures ease, 2024 could be the year of rate cuts.But some of the inflation-easing trade is already priced into the market, reflected in the near 11% rally in the MSCI world index in the past 18 trading days. And markets need new triggers to fuel the next leg of the equities rally.One factor could be the resilience of American consumers, who have continued to open their wallets despite higher borrowing costs.The Black Friday sale will kick off the year-end holiday shopping season and will put to test the U.S. consumers’ appetite for spending.Early indications are that U.S. retailers across apparel, electronics and home improvement are bracing for challenging times, and higher discounts might not spark the level of spending the companies are hoping for.Here are key developments that could provide more direction to markets on Friday:- Japan CPI- Singapore industrial production- Malaysia CPI- New Zealand retail sales- Thailand manufacturing production index- Taiwan money supply (By Denny Thomas; Editing by Josie Kao) More

“We think that what is now in the budget for Italy should be strengthened,” IMF Managing Director Kristalina Georgieva was quoted as saying by Italy’s Corriere della Sera newspaper.”The fiscal adjustment Italy is taking is not going to work fast enough to bring deficits and debt levels down,” she added in comments published in English after an interview with a number of European newspapers.Italy’s government last month approved a budget for next year with measures worth around 24 billion euros ($26.2 billion) in tax cuts and increased spending, despite market concerns over the country’s strained public finances.Italy is projected to have a budget deficit next year of 4.3% of gross domestic product. The budget is currently making its way through parliament.The European Commission forecast last week that Italy’s debt, proportionally the second highest in the euro zone, would rise marginally from a projected 140% of national output this year to 141% in 2025.($1 = 0.9168 euro) More

Despite these challenges, Filipino families are taking proactive steps to fortify their financial standing. Over half of the respondents (51%) are focusing on building emergency funds, with 34% working towards settling debts more quickly. When faced with immediate financial issues, strategies include making affordable payments (46%), using savings (45%), or seeking assistance from personal networks (38%).The study also points out that job losses have marginally increased, affecting one-fifth of families, while salary cuts and reduced work hours are impacting nearly one-quarter. This has led consumers to prioritize spending on essentials and cut back on luxury items.Credit interest among Filipinos has slightly declined, with less than three-fifths of respondents expressing interest compared to 64% last year. Perceived credit accessibility has diminished since last year as well, with over half preferring personal loans but deterred by the high costs associated with borrowing.TransUnion emphasizes the importance of consumer credit awareness during these uncertain times, particularly as digital fraud concerns remain significant. Most respondents report encountering phishing attempts and have heightened anxiety about sharing personal data online due to fears of identity theft.Adding to the concern over digital security, Pia Arellano highlighted substantial losses amounting to P155 million due to online frauds from January through August this year. This underscores the critical need for trust in digital transactions and the protection of consumer information.Filipino consumers are evidently adjusting their financial habits in light of economic instability by increasing savings for emergencies and accelerating debt repayment. While some expect higher expenses on essential bills and necessities, there is a clear trend toward reducing discretionary spending on items such as automobiles and digital products.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

BUENOS AIRES (Reuters) -Argentina’s central bank debated an interest rate hike at its directors meeting on Thursday, a bank source told Reuters, though decided to hold the benchmark level steady for now and keep monitoring inflation and outflows of deposits.The South American country’s interest rate is currently at 133%, one of the highest levels in the world in a bid to bring down triple-digit inflation and encourage people to keep savings in the local peso currency despite rapid depreciation.Two sources had earlier said a rate hike was on the cards.”They changed their mind. There was a discussion and the idea prevailed that there was no need yet to raise rates,” an official bank source said. “They will watch how things develop in the coming days.”The interest rate debate comes after libertarian economist Javier Milei won the South American country’s presidential runoff election on Sunday, with campaign pledges to dollarize the economy, close the central bank and abruptly cut spending.He will take office on Dec. 10, replacing outgoing center-left Peronist President Alberto Fernandez, whose popularity nose dived as the country slumped into its worst economic crisis in two decades, with poverty over 40% and a recession looming.Argentina has annualized inflation nearing 150%, negative net foreign currency reserves and a sliding peso, kept only in check by strict currency controls, which though have spawned parallel exchange rates far away from the official one.Analysts said that a rate hike remained on the cards as the bank aims to stem recent signs of outflows of peso deposits from local banks into dollars as savers looked for a safe haven against potential reforms Milei makes once in office. More

This article is an on-site version of our Britain after Brexit newsletter. Sign up here to get the newsletter sent straight to your inbox every weekGood afternoon. It was the Autumn Statement in Brexitland this week, and as usual the headlines were consumed by a battle for political narrative around personal taxation and what it all means for the voters’ pocketbooks. But there was big actual news for business and not just the permanent extension of ‘full expensing’ of capital investment but also the publication of Lord Richard Harrington’s review of how the UK can do better at attracting foreign direct investment. It was a thinly veiled blueprint for an industrial strategy and his foreword to the report is well worth reading.Both of these measures shared the common purpose of creating more certainty for business, an absolutely essential commodity for encouraging investment as the turbulence of the post-Brexit years has demonstrated.That was a point made this week by Dave Ramsden, the deputy governor for markets and banking at the Bank of England, when he told the Treasury select committee that Brexit had clearly “chilled” the UK’s business investment, both foreign and domestic. (Listen from 12h.04m.38s)“We do know from a large body of analytical evidence that a key driver of business investment decisions is certainty . . . you want certainty around where fiscal policy is going, and certainty about what kind of relationships your economy is going to have,” he said.Full expensing delivers longer term certainty on fiscal policy, but as for the “kind of relationships” the UK economy is going to have, that continues to be dogged by the structural uncertainties that Brexit creates.It’s the structural part that is important. Even if the UK gets a stable government (one that doesn’t flip-flop on net zero or repeatedly threaten to legislate in defiance of its international treaty obligations) Brexit creates a permanent state of low-grade uncertainty.This is because every time its largest trade partner advances new rules and regulations, the UK (and its investors who have links with integrated supply chains and data sharing) are going to have to ask themselves how the UK will, or won’t, respond to those rules.I’m not sure exactly which “analytical evidence” Ramsden was referring to, but quite possibly it was this 2019 paper by a clutch of Bank of England economists that examined how Brexit causes a different, more nagging, type of uncertainty.“Brexit is unusual in that it generated persistent uncertainty,” they wrote, differentiating the UK’s decision to leave the EU from other big, one-off shocks such as “the 1973 Opec oil price shock, Gulf Wars I or II, the 9/11 attacks, the collapse of Lehman Brothers”.(On a more micro level, this November 2023 paper by the Centre for Inclusive Trade Policy looks at the impact of that uncertainty on UK import prices and finds the “referendum outcome raised UK import prices by 11 per cent and consumer prices by 0.6 per cent through trade policy uncertainty alone”.)A more precarious perch in the worldThe question is the extent to which, with the Trade and Cooperation Agreement now in place and functioning, the UK can limit the ongoing uncertainty caused by its new, inherently more precarious, perch in the world.Industry adapts (small companies stop trading, bigger ones suck up the bureaucracy and cost) but business must manage the drag of a constantly evolving policy environment. For example, a new Brexit border on EU imports comes into force in January; questions are pending on how a UK carbon border tax will link with the EU’s; or on how the EU’s move towards data localisation will affect the UK’s data adequacy agreement.And the wheels grind slowly. The TCA came into force on January 1 2021, but it was only a couple of weeks ago — nearly three years on — that the UK government announced its plans for an “alternative transitional registration model” for chemicals under UK Reach. A consultation on the proposals “will be published in early 2024”. Industry groups like the Chemical Industries Association and the British Coatings Federation welcomed the prospect of a lighter touch regime, having warned in May that uncertainty around the regulatory regime for the industry risked causing “irreparable damage” to British businesses.At the same time environmental and consumer groups, including Chem Trust, the Greener UK coalition and Breast Cancer UK, have all spoken of the need for “robust” regulation and warned against reducing requirements for the amount of data held on chemicals by the regulator.Ruth Chambers, senior fellow at Greener UK, which represents 10 of the UK largest conservation groups, says: “The forthcoming consultation on chemicals regulation is a chance for ministers to show the environment is at the heart of their policymaking, as pledged.”Will they? Or given the current polls and the advancing political timeframe of the next election, will a Labour government respond differently to such pressure than a Conservative one? I don’t know the answer to that — and nor do industry or investors — which is the point. Ongoing uncertainty.Brexit challengeAs Harrington said in his FDI review, investment decisions are driven by a panoply of factors, but as the 200 investors he spoke to kept telling him, the UK’s traditional attractiveness has been “offset by recent policy instability, regulatory and policy uncertainty and market access challenges”.It was notable that the Office for Budget Responsibility did not adjust it’s Brexit impacts forecast this week; while last week the National Institute of Economic and Social Research published an updated estimate of the Brexit hit, which it said “gradually escalates” to some 5-6 per cent of GDP or about £2,300 per capita by 2035. NIESR said the effects were down to “the fall in the UK terms of trade” in the EU-UK trade deal and the related fall in UK productivity, each accounting for over 2.5 percentage points of the estimated reduction in real GDP.The challenge of Brexit is that it makes those issues identified by Harrington inherently harder to address — even if the Labour leader Sir Keir Starmer wins a 150 seat majority, there is no magic wand that will make those structural impediments go away. Only hard graft will do that.Brexit in numbersZooming out slightly, because while Brexit hurts at the margin and creates those structural challenges, they don’t exist in isolation, but are just one element of a much bigger picture.This is shown by this week’s chart which is taken from a fascinating deep dive into UK trade performance by the Boston Consulting Group’s centre for growth, which is run by Raoul Ruparel, who in a previous life was Europe adviser to Theresa May.He examines the UK underperformance in goods trade and finds that it’s not confined to EU-UK trade — a fall in UK exports to the US is as worrying — and looks at reasons for why this might be.The study comes up with three factors: inflation skewing some countries’ trade stats favourably compared to the UK; the fact that globally trade has recently seen a boom in areas like agriculture and fertiliser that aren’t UK strengths (so the UK hasn’t caught much of the updraught); but also persistent UK underperformance in areas where it is strong, like cars and (see chart) chemicals.It’s a salutary finding that in 2022, the UK exported similar levels of organic chemicals to the US as it did in 1995, while in the same period Ireland exported 31 times and China over 52 times the amount.Disaggregating the underlying causes is hard. Ruparel suggests a number of possible reasons, including a recent shift in pharmaceutical manufacturing to Ireland, high UK industrial energy prices, a lack of investment (see above) and a potential Brexit factor, since Ireland and China’s exports to the US increase sharply post 2016 while the UK’s flatline, then decrease.But the wider point is that, looking to the future, the UK’s challenges predate Brexit and are not confined to Brexit. Ruparel’s advice is not to fight old wars, but invest in preparing for future ones.That means focusing on the industries where future booms might take place, and positioning the UK well to take advantage of these — Harrington’s report is at least a start on that.Britain after Brexit is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.Recommended newsletters for youInside Politics — Follow what you need to know in UK politics. Sign up hereTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up here More

Consumer spending has been strong in 2023 despite higher prices and waning savings. But some retailers have jitters heading into Black Friday.Christina Beck is approaching this holiday season cautiously.Ms. Beck, a 58-year-old administrative director at a school, makes lists of gifts she plans to buy for her family and friends and sticks with it. But her spending this year will be kept in check by the high cost of food in grocery stores and restaurants, and the mortgage for a home in Minneapolis she bought last year with her best friend.That best friend, Kristin Aitchison, cannot wait for the holidays. Ms. Aitchison, 55, who works for a senior living home, advises her family each year that she plans to make the holidays smaller, spending less. And every year, she spends more than she did the year before.“I’m a huge gift giver,” Ms. Aitchison, who started her shopping in early November. “I have so much joy in giving gifts. I’m always running around the last week before Christmas because I have to find just a few more gifts.”There are many reasons for people to be more prudent in their holiday spending this year. While inflation is less rapid than it was a year ago, millions of shoppers still feel sticker shock when buying groceries. Payments on federal student loans, which were on pause during the pandemic, have resumed. And higher interest rates have meant larger credit card bills and, for home buyers, mortgage payments.Yet consumer spending has been surprisingly strong throughout 2023. For retailers, the question is whether people will continue to spend their way through the holiday season or decide this is the time to pull back.Predictions are murky. The National Retail Federation said it expected holiday sales to increase 3 to 4 percent from last year, without adjusting for inflation, on a par with the prepandemic 2019 season. But in a survey by the Conference Board, a nonprofit research group, consumers said they planned to spend an average of $985 on holiday-related items this year, down slightly from the $1,006 they anticipated spending last year.One closely watched early indicator, Amazon’s Prime Day in October, showed consumers were spending more, but only slightly. They spent an average of $144.53 on Prime Day, a 2 percent increase from the average the year before, according to Facteus, which analyzed credit and debit card transaction data.Last week, the Commerce Department reported that retail sales nationwide fell 0.1 percent in October from September, the first drop since March. Executives at Walmart also warned that consumer spending had weakened in the last two weeks in October, noting that people seemed to be waiting for sales.“It makes us more cautious on the consumer as we look into the fourth quarter,” John David Rainey, the chief financial officer of Walmart, said in an interview. “I think there’s likely more variability in the numbers.”Still, the retail sales pullback was smaller than the decline that many economists had expected after a very strong summer of spending, and some analysts saw it as a sign of continued consumer resilience.Holiday sales are likely to be decent by prepandemic standards, though not as strong as the gangbuster seasons in 2020 and 2021, said Tim Quinlan, a senior economist at Wells Fargo.Higher-income shoppers still have plenty of extra savings built up during and after the pandemic, but those with lower incomes have more fully used up their resources, Mr. Quinlan said. Higher interest rates may also deter shoppers from putting holiday shopping on credit cards. The combination of reduced savings and higher rates “makes it tougher to have a big pile of presents under the tree this year,” he said.For much of the year, consumer spending has been underpinned by continued strength in the job market and wage gains. Average hourly earnings in October were up 4.1 percent from a year earlier. That was faster than inflation. As measured by the Consumer Price Index, prices were up 3.2 percent.Those factors have helped to keep retail sales climbing on a yearly basis.It’s the Most Wonderful Time of the Year (for the Economy)Three decades of monthly retail spending show how important the holiday season is to our economy.Still, signs of slowing are beginning to show up. Wage growth is slowing, and the unemployment rate has risen over recent months. Like Mr. Quinlan, many economists think that consumers are getting closer to exhausting their savings, though some studies suggest that many have been drawing down their financial cushions only slowly.For many, the resumption of student-loan payments is putting a crimp in holiday spending plans. In a holiday survey by the consulting firm Deloitte, 17 percent of respondents said they had to resume student loan payments, and almost half of them said they planned to reduce their holiday spending as a result.In past years, Tara Cavanaugh, a 37-year-old marketing manager, spent as much as $1,500 on gifts for her family, friends and various office parties, she said. This year, after a move with her partner to Boulder, Colo., and the resumption of her $400-a-month student-loan payments — her partner also has student-loan debt — she said she was paring down her gift list and expected to spend closer to $200.Tara Cavanaugh outside her home in Boulder, Colo. She plans to pare down her gift list this year.Kevin Mohatt for The New York Times“We both make decent incomes and live simply, sharing an old car and our furniture is still from Ikea, but it still feels like we’re struggling,” Ms. Cavanaugh said of her and her partner. “I know a lot of us are feeling the pinch, so I’m not going to freak out about giving gifts to people who are older than me, are doing fine and don’t need anything.”As always, many people are looking for deals, whether on Black Friday or through other pre-Christmas sales. About 52 percent of consumers plan to watch for deals and special offers online and 39 percent plan to hunt for sales in stores this year, according to a survey by the research firm Forrester.When the Amazon toy catalog landed in Claire Kielich’s mailbox in Austin, Texas, her two daughters, ages 5 and 10, who also have birthdays in December, began circling what they wanted.“I’ll be watching to see if any of those things go on sale for Black Friday,” said Ms. Kielich, 40, who does product development and sourcing in the furniture industry. She said she expected to spend around $1,000 this holiday season and already had a stash of stocking stuffers hidden in one of her closets.Ms. Beck in Minneapolis started buying holiday gifts in July, making lists of what friends and family needed or liked, picking up unique items at local craft stores or from small local businesses and storing them in what she calls her “present drawer.” This approach, she said, helps her put more thought into her gifts and keeps her from spending beyond her budget.Her best friend, Ms. Aitchison, takes the opposite approach. While careful with her finances during the year, come the holidays she has no plan and, basically, no budget. Her oldest child has barred her from ever buying him another pair of corduroy pants. Last year, she bought four nine-foot-tall blow-up dinosaur costumes for her adult children.“Of course, nobody needs a blow-up dinosaur costume,” Ms. Aitchison conceded.This holiday season, she plans to shop until she drops.“I don’t think about what I’m going to spend,” she said. “In January and February, because I spent all my money, I’ll eat beans and rice while I pay the bills off.”Despite their different holiday shopping styles, Ms. Aitchison said she and Ms. Beck always had fun shopping together.“She doesn’t get nearly the amount of things that I do,” Ms. Aitchison said. “She’s always like: ‘Kristin stop. Put that down. You don’t need it.’” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is director of policy, research and impact at the Trussell Trust, a charity that supports food banks and campaigns to end the need for them across the UKIn delivering yesterday’s Autumn Statement, the UK’s chancellor faced two very different and potentially opposing challenges.The most pressing, politically, was to calm the party’s base, mollify the Conservative politicians feeling bruised by the cabinet reshuffle and prove that he and the prime minister were sincere in their commitment to tax cuts.The chancellor’s second challenge was much more important: addressing the escalating crisis of homelessness, destitution and debt among people on low incomes. This is already pushing food banks to breaking point, increasing strain on public services and causing increasing disquiet. As always in the run-up to a Budget, there were myriad rumours about what might be in it. The most worrying of these was the suggestion that benefits might not be uprated in the usual way. At a time when 3.8mn people live in destitution, record numbers are forced to turn to food banks and the majority of people on universal credit can’t afford essentials, this was a terrifying prospect.On the face of it, the chancellor just about managed to pass both the tests facing him. He announced not only an enormous package of tax cuts aimed at businesses, but cuts to National Insurance for both employees and the self-employed, together worth around £10bn a year.And he drew back from the brink and announced not only that benefits would rise with the usual September inflation rate, but also a major boost to Local Housing Allowance, which many people on low incomes rely on to help pay their rent. The latter step was especially significant. LHA has been frozen since 2020 while rents have soared. The growing gap has driven up homelessness and increased hunger and debt. Yesterday, the chancellor implicitly restored the link between LHA and rents, returning to the original intention that the policy should cover the cheapest 30 per cent of rents in every area. Together, these two measures cost about £4.3bn and will ease some of the pressures which have been driving so many people to the doors of food banks.The chancellor might be expecting to enjoy a good news day, or even week. However, the positive headlines mask some uncomfortable truths. The cuts to National Insurance, for example, while bigger than expected, are only a fraction of the tax rises already in place through the previously announced freezing of personal tax thresholds, which the Office for Budget Responsibility estimates will raise £44.6bn in 2028-29. The tax burden will still rise every year to a postwar high of 37.7 per cent of GDP by 2028-29.When it comes to hunger, hardship and debt, even with the chancellor’s boost, universal credit simply won’t meet the costs of essentials. People on low incomes still face severe difficulties, which will continue to damage health and productivity. People are missing meals, having to unplug the fridge and freezer, living in cold, damp houses and missing hospital appointments because they can’t afford the bus fare to get there. On average, real household disposable incomes will have fallen 3.5 per cent between 2019-20 and 2024-25 — the largest reduction in real living standards since ONS records began. All this creates a challenging backdrop to the general election, especially as it seems the chancellor chose to spend most of his fiscal headroom in this Autumn Statement. Assuming there will be a Budget in March 2024, perhaps the last before the election, it’s unclear how much room the government will have — either to shore up Tory support or reverse the rising tide of hunger and destitution blighting the UK.  More

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