Economy

Many longstanding General Motors workers have been voting against the tentative accord, which they feel insufficiently improves retirement benefits.A United Automobile Workers union vote on a tentative contract agreement with General Motors that provides record wage increases has run into unexpectedly strong resistance from veteran workers.Voting at most union locals has been completed and the final result, due as early as Thursday evening, will very likely be decided by a narrow margin. A majority of workers at several large plants in Michigan, Indiana and Tennessee rejected the contract, though union members at a large sport utility plant in Arlington, Texas, voted in favor of it.G.M., Ford Motor and Stellantis agreed to similar contracts with the union after U.A.W. members went on strike at select plants and warehouses. Workers walked off the job at the first three plants on Sept. 15 and stayed on strike for more than 40 days. It was the first time the union has struck all three automakers at the same time, though it did not shut down all of the factories of any company.The agreement appears to be headed for ratification at Ford and Stellantis, the maker of Chrysler, Jeep and Ram vehicles, by comfortable margins, according to running tallies the U.A.W. published online.At G.M., many veteran workers have opposed the contract because they want the company to contribute more money to retirement plans and the cost of health care for retirees.“I’ve heard from some traditional workers who said there wasn’t enough in there for them,” said David Green, director of the U.A.W. Region 2B, which includes Ohio, Indiana and a small part of Michigan. “The post-retirement health care is an issue for some people. For some people, it’s the pension contributions.”Mr. Green himself thinks the contract represents a big victory for union members. “This is the best contract I’ve seen since I started in 1989,” he said. “So I was happy with it.”General Motors declined to comment on the contract vote.The tentative contract raises the top wage by 25 percent, from $32 to more than $40 over four and a half years. The increase is more than the combined wage increases the union has won over the past 22 years, according to U.A.W. officials.Newer hires who are lower on the pay scale will see larger increases that take them to the new top wage. And workers who were recently hired will see their hourly pay double.The agreement also provides for cost-of-living adjustments that will nudge wages higher if inflation persists as well as enhanced company contributions to pensions and retirement plans, more paid time off and the ability to strike if any plant is closed during the term of the contract.The contract negotiations with G.M., Ford and Stellantis were led by the United Automobile Workers president, Shawn Fain, center, who was elected this year.Brittany Greeson for The New York TimesTo be ratified, the agreement must secure a simple majority. More than 46,000 U.A.W. workers work at G.M., although not all of them are likely to turn in ballots. More than 14,000 company employees took part in the targeted strikes.As of Wednesday afternoon, an online vote tally that the union maintains showed that just over 54 percent of the votes were in favor of the contract, but that tally did not include numbers from some big plants.If the tentative agreement is voted down, it would represent a big setback for the U.A.W. president, Shawn Fain, who was elected this year and promised to take a more aggressive approach in the contract talks in hopes of winning significant pay increases and reversing some of the concessions the union accepted in past contracts.He appeared to deliver that in what was widely regarded as a record deal. President Biden, who joined striking workers on the picket line in September at a G.M. site in Belleville, Mich., hailed Mr. Fain’s efforts. The president joined Mr. Fain last week at a plant in Belvidere, Ill., that Stellantis agreed to keep open after halting production this year.“I don’t think it diminishes Shawn Fain’s luster that much because of a close ratification vote,” said Arthur Wheaton, director of labor studies at Cornell University School of Industrial and Labor Relations. “It just means expectations were high, and had he not delivered as much as he did, it wouldn’t have passed.”After the contracts with the three Detroit automakers are ratified, Mr. Fain hopes to try to organize workers at nonunion plants in the South owned by Toyota, Honda and other foreign automakers, and the nonunion plants that Tesla operates in California and Texas.Since the terms of the U.A.W. agreements were announced, some of those companies have increased wages of factory workers. Toyota has told workers that it will raise hourly rates by 9 percent in January. Honda and Hyundai will lift wages 11 percent and 14 percent next year. Hyundai plans to increase wages 25 percent by 2028.“Everybody at those companies should say, ‘Thank you, U.A.W.,’” Mr. Wheaton said. “Those increases wouldn’t have happened without the new U.A.W. contract.” More

Stay informed with free updatesSimply sign up to the More

The most recent indications on the CME Group’s FedWatch gauge point to a full percentage point of interest rate cuts by the end of 2024.
This week has featured two important reports, one showing that consumer prices were unchanged and wholesale prices actually declined half a percent in October.
“They’re not going to want to signal that now is the time to start talking about decreases in interest rates, even if fed funds futures already has that incorporated,” former Boston Fed President Eric Rosengren told CNBC.

Traders work on the floor of the New York Stock Exchange (NYSE) on November 15, 2023 in New York City. 
Spencer Platt | Getty Images News | Getty Images

Markets seem to have taken this week’s positive economic data as the all-clear signal for the Federal Reserve to start cutting interest rates aggressively next year.
Indications that both consumer and wholesale inflation rates have eased considerably from their mid-2022 peaks sent traders into a frenzy, with the most recent indications on the CME Group’s FedWatch gauge pointing to a full percentage point of cuts by the end of 2024.

That may be at least a tad optimistic, particularly considering the cautious approach central bank officials have taken during their campaign to bring down prices.
“The case isn’t conclusively made yet,” said Lou Crandall, chief economist at Wrightson ICAP. “We’re making progress in that direction, but we haven’t gotten to the point where they’re going to say that the risk of leveling out at a level too far above target has gone away.”
This week has featured two important Labor Department reports, one showing that consumer prices in aggregate were unchanged in October, while another indicated that wholesale prices actually declined half a percent last month.
While the 12-month reading of the producer price index sank to 1.3%, the consumer price index was still at 3.2%. Core CPI also is still running at a 12-month rate of 4%. Moreover, the Atlanta Fed’s measure of “sticky” prices that don’t change as often as items such as gas, groceries and vehicle prices, showed inflation still climbing at a 4.9% yearly clip.
“We’re getting closer,” Crandall said. “The data we’ve gotten this week are consistent with what you would want to see as you move in that direction. But we haven’t reached the destination yet.”

In search of 2% inflation

The Fed’s “destination” is a place where inflation isn’t necessarily at its 2% annual goal but is showing “convincing” progress that it’s getting there.
“What we decided to do is maintain a policy rate and await further data. We want to see convincing evidence, really, that we have reached the appropriate level,” Fed Chair Jerome Powell said at his post-meeting news conference in September.
While Fed officials haven’t indicated how many months in a row it will take of easing inflation data to reach that conclusion, 12-month core CPI has fallen each month since April. The Fed prefers core inflation measures as a better gauge of long-run inflation trends.
Traders appear to have more certainty than Fed officials at this point.
Futures pricing Wednesday indicated no chance of additional hikes this cycle and the first quarter percentage point cut coming in May, followed by another in July, and likely two more before the end of 2024, according to the CME Group’s gauge of pricing in the fed funds futures market.
If correct, that would take the benchmark rate down to a target range of 4.25%-4.5% and would be twice as aggressive as the pace Fed officials penciled in back in September.
Markets, then, will watch with extra fervor how officials react at their next policy meeting on Dec. 12-13. In addition to a rate call, the meeting will see officials make quarterly updates to their “dot plot” of rate expectations, as well as forecasts for gross domestic product, unemployment and inflation.
But pricing of Fed actions can be volatile, and there are two more inflation reports ahead before that meeting. Wall Street could find it self disappointed in how the Fed views the near-term policy course.
“They’re not going to want to signal that now is the time to start talking about decreases in interest rates, even if fed funds futures already has that incorporated,” former Boston Fed President Eric Rosengren said Wednesday on CNBC’s “Squawk Box.”

‘Soft landing’ sightings

Market enthusiasm this week was built on two basic supports: the belief that the Fed could start cutting rates soon, and the notion that the central bank could achieve its vaunted “soft landing” for the economy.
However, the two points are hard to square, considering that such aggressive easing of monetary policy historically has only accompanied downturns in the economy. Fed officials also seem reticent to get too dovish, with Chicago Fed President Austan Goolsbee saying Tuesday that he sees “a way to go” before reaching the inflation target even as he holds open a possible “golden path” to avoiding a recession.
“A slower economy rather than a recession is the most likely outcome,” Rosengren said. “But I would say there’s certainly downside risks.”
The stock market rally plus the recent drop in Treasury yields also pose another challenge for a Fed looking to tighten financial conditions.
“Financial conditions have eased considerably as markets project the end of Fed rate hikes, perhaps not the perfect underpinning for a Fed that professes to keeping rates higher for longer,” said Quincy Krosby, chief global strategist at LPL Financial.
Indeed, the higher-for-longer mantra has been a cornerstone of recent Fed communication, even from those members who have said they are against additional hikes.
It’s part of a broader feeling at the central bank that it doesn’t want to repeat the mistakes of the past by quitting the inflation fight as soon as the economy shows any signs of wobbling, as it has done lately. Consumer spending, for instance, fell in October for the first time since March.
For Fed officials, it adds up to a difficult calculus in which officials are loathe to express overconfidence that the final mile is within sight.
“Part of the problem the Fed always has to deal with is this illusion of control,” said Crandall, the economist who started at Wrightson ICAP in 1982. “They can influence things, but they can’t control them. There are just too many exogenous factors feeding into the complex dynamics of the modern global economy. So I’m moderately optimistic [the Fed can achieve its inflation goals]. That’s a little different than being confident.” More

Stay informed with free updatesSimply sign up to the More

Stay informed with free updatesSimply sign up to the More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.The gloom hanging over the EU economy deepened today after the European Commission downgraded its growth forecasts as high inflation and weak business activity take their toll.Brussels now expects the eurozone and the wider EU to grow 0.6 per cent in 2023, down 0.2 percentage points from its September forecast. It also cut growth forecasts for next year, downgrading to 1.3 per cent for the EU and 1.2 per cent for the eurozone.There was better news on inflation: the Commission believes the downward trend will continue with the headline figure set to fall from 6.5 per cent this year to 3.5 per cent in 2024. (Friday’s Disrupted Times will feature fresh data for October.)  The past few days have offered mixed signals on the performance of EU member states.  France today reported a higher than expected rise in unemployment to its highest level in two years, with younger workers and women disproportionately affected. In Germany there were signs of optimism, from investors at least, who think an economic turnaround is imminent as inflation falls and interest rates stabilise. A collapse in housebuilding however could yet result in wider damage to the EU’s biggest economy and, as in France, danger signs are flashing in its unemployment statistics.The European Central Bank meanwhile is unlikely to offer relief in the form of interest rate cuts any time soon, as its president Christine Lagarde made clear to the FT last week.Mario Draghi, former Italian prime minister and European Central Bank president, who has been tasked to address the EU’s falling competitiveness, told the FT that he was almost certain that Europe would have a recession by year-end.The challenge he faces is substantial. The EU economy, in dollar terms, is 65 per cent of the size of the US economy, down from 91 per cent in 2013. Per capita, US gross domestic product is more than twice the size of the EU’s, and the gap is increasing. Europe is also lagging behind in crucial sectors such as semiconductors and the productivity gap with rivals is widening. Member states’ gripes about the bloc’s single market are the subject of a separate report by another former Italian prime minister, Enrico Letta, to be delivered in March.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.In commissioning the Draghi and Letta reports, our Big Read reports, the EU has at least shown a willingness to acknowledge its problems. But fixing them and catching up with ever more competitive rivals will require far greater political will. “Europe needs an overhaul,” said one official inside the commission. “Root and branch.” Need to know: UK and Europe economyThe official measure of UK house prices fell year on year for the first time in more than a decade, while rental costs rose at a record pace as high borrowing costs hit the property market.The UK is struggling to attract foreign direct investment. There has been a sharp drop in the number of projects in some key sectors since the Brexit referendum. Our piece explains why. New data highlighted a softening in the UK labour market with wage growth easing to 7.7 per cent in the third quarter.A record number of UK households are seeking help with cost-of-living problems and charities are struggling to cope with a surge in rough sleepers across England.Denmark could block Russian oil tankers from sailing through its waters under new EU plans to better police the west’s poorly enforced price cap on the Kremlin’s crude. The $60 cap is being almost completely circumvented, according to western officials and Russian export data. Plans to target Russian diamonds have come under fire.Ukraine reached a deal with insurers Marsh McLennan to provide affordable cover to ships carrying grain and other critical food supplies from its Black Sea ports. Need to know: Global economyUS president Joe Biden and Chinese President Xi Jinping are meeting in San Francisco in a bid to stabilise relations between the two countries. Ahead of the talks, Biden halted plans for an Indo-Pacific trade deal after opposition from Congressional Democrats, while China agreed to crack down on companies exporting chemicals used to make fentanyl, the synthetic opioid responsible for a huge overdose crisis in the US.Global food price inflation is set to fall sharply, according to Rabobank, a specialist food and agribusiness bank, dragged down by falling prices of key food staples such as sugar, coffee, corn and soyabeans. Demand, meanwhile, is set to decline as consumers struggle with the cost of living.US consumer price inflation fell more than expected to 3.2 per cent in October from 3.7 per cent the previous month, prompting Treasury yields to fall sharply and Wall Street stocks to climb. Producer prices fell by the most in seven months. US retail sales are holding up better than expected.A costly US government shutdown has been averted after bipartisan support was secured to keep federal activity funded until early next year. But the bill leaves billions of dollars in foreign aid for Israel and Ukraine in limbo.Chinese consumer and industrial activity expanded faster than expected in October, raising hopes that the economy could be moving on from its recent doldrums.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Japan’s economy shrank more than expected in the third quarter, highlighting the fragility of its post-pandemic recovery and complicating the Bank of Japan’s efforts to gradually unwind its easing measures. Indonesia is the world’s largest producer of nickel, a critical mineral for new industries such as electric vehicles. A Big Read examines whether this potential can overcome vested interests and bureaucracy to lift it into the top tier of world economies. Need to know: businessRenault urged European investors to back Ampere, its new electric vehicle arm set to float next year, setting out plans to more than double sales by 2031 and claw market share from rivals including Tesla. Denmark’s Ørsted, the world’s largest offshore wind developer, shook up its management team after abandoning projects in the US and slashing the value of its portfolio. Siemens Energy is restructuring its wind turbine business after steep losses. Hedge funds have profited by betting against the troubled industry. Manchester City set a revenue record for an English Premier League football club, hitting £712mn in the 2022-23 season. It is increasing investment in media and content to further boost growth.Big western fashion brands are not paying “ethical” prices for clothes made in Bangladesh, the country’s exporters association said. Protests over wages have sparked factory closures in the world’s second-largest garment exporter. Can Barclays finally move on from years of strategic drift and stock market woes? A Big Read weighs up the bank’s prospects. Wall Street bonuses are set to fall by up to 25 per cent this year as rising interest rates damp dealmaking and curtail new stock market listings.The World of WorkWorking from home is at fault for some of the big delays in UK national infrastructure projects, including the HS2 rail plan, according to a government advisory body.McDonald’s has sacked 18 UK employees after establishing a specialist unit to handle staff complaints about allegations of sexual assault, harassment and bullying, its UK chief executive told parliament yesterday.Just how useful is LinkedIn for working people’s lives? Can you build your brand without becoming unbearable? Listen to the latest Working It podcast. Some good newsThe Caribbean island of Dominica is creating what it says is the world’s first sperm whale reserve. Commercial fishing and large ships will be banned in the area off its western coast, a key nursing and feeding ground for the endangered mammals.People walk past a mural of a whale created by artist Marcus Cuffi in Roseau, Dominica, More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Concierges range from fictional hotel fixer Monsieur Gustave to the archetypal jobsworth who spies on French apartment dwellers. The UK will hope a new investment minister will resemble the former, though perhaps be less heavily perfumed. This supremo will lead a revamped “concierge service” intended to spur flagging inward investment.The number of foreign direct investment projects into the UK has fallen since Britain voted to leave the EU in 2016. By some other measures, FDI is at record highs. UK FDI is also far from the worst performing internationally.Official data shows that the UK secured 1,654 projects in the 12 months to March this year, 27 per cent fewer than in 2016-17. Overall project numbers have fallen across Europe in recent years, according to EY data. The picture is prettier when delineated in invested capital. About $100bn of new projects were recorded last year, double the figure at the time of the Brexit vote, according to data from fDi Markets. Most of the money went into renewable energy projects. That is good for the environment, but not so good for employment. Project numbers have been lost at the margins, thinks Peter Arnold, EY’s UK chief economist, because the UK no longer offers easy access to the EU’s single market. Investment returns appear relatively healthy. The average annual income earned on FDI stock by 26 developed economies was 6 per cent between 2018 and 2021. Returns for Switzerland, Belgium and Norway, which are relatively small investors in Britain, were double the average. US businesses, the largest category of investor in the UK, made 5 per cent annually between 2013 and 2021. Their returns were only 3.4 per cent in France and 4 per cent in Germany.Footloose investors should brace themselves for a bombardment of brochures from the UK, once a favoured destination for foreign manufacturers. These will extol the nation’s work ethic as well as its wind speeds. However, subsidies available under the US’s Inflation Reduction Act, which has an estimated value of $1.2tn, will count for more with many corporate strategists.If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline. More

The producer price index declined 0.5% for the month, the biggest monthly decline since April 2020. Wall Street had been expecting a 0.1% increase.
The Commerce Department’s advance retail sales report for the month showed a decline of 0.1%. Wall Street had been looking for a decline of 0.2%.
The Empire State Manufacturing Survey, which gauges conditions in the New York area, posted an unexpected increase of 14 points to 9.1.

Wholesale prices in October posted their biggest decline in 3½ years, providing another indication that the worst of the inflation surge may have passed.
The producer price index, which measures final-demand costs for businesses, declined 0.5% for the month, against expectations for a 0.1% increase from the Dow Jones consensus, the Labor Department reported Wednesday. The department said that was the biggest monthly decline since April 2020.

On a yearly basis, headline PPI posted a 1.3% increase, down from 2.2% in September.
Excluding food and energy, core PPI was unchanged, also below the forecast for a 0.3% increase. Excluding food, energy and trade services, the index increased 0.1%.
The report comes a day after the Labor Department said the consumer price index, which measures prices for goods and services at the consumer level, was unchanged in October from the previous month. That set off an aggressive rally on Wall Street, where sentiment is rising that the Federal Reserve is done raising interest rates and could in fact start cutting in the first half of 2024.
However, consumers in October displayed some sensitivity to prices.
The Commerce Department’s advance retail sales report for the month showed a decline of 0.1%, according to a number that is adjusted for seasonal factors but not inflation. Wall Street had been looking for a drop of 0.2%. Excluding autos, sales rose 0.1%, compared with expectations for an unchanged number.

Price declines came primarily from the goods side, as the index slid 1.4%, according to the PPI report. Final demand services prices were unchanged. A spike in goods prices caused by outsized demand for big-ticket items in the early days of the Covid pandemic helped fuel the inflation surge.
Some 80% of the drop in goods prices came from a 15.3% tumble in gasoline prices, the Labor Department said.
On the services side, transportation and warehousing costs increased 1.5%, while trade services declined 0.7%. Airline passenger services prices increased 3.1%.
From the consumer standpoint, sales also were held back by the decrease in gasoline prices, with sales at service stations down 0.3%, the Commerce Department reported. Motor vehicles and parts dealers saw a decline of 1% while furniture and home furnishing stores reported a 2% drop. Both food and beverage and electronics and appliance stores showed increases of 0.6%.
The control group of retail sales that the Commerce Department uses to compute gross domestic product showed a 0.2% gain. Sales overall increased 2.5% from a year ago.
Stocks were positive following the report while Treasury yields also were higher.
In other economic news, the Empire State Manufacturing Survey, which gauges conditions in the New York area, posted an unexpected increase of 14 points to 9.1, better than the estimate for a -3 reading. The number represents the percentage of companies seeing expansion against contraction, so any positive number indicates growth.
The report, from the New York Federal Reserve, showed gains in inventories and shipments, while the indexes for employment, prices and unfilled orders fell.
Correction: Wholesale prices in October posted their biggest decline in 3½ years. An earlier version misstated the time frame. More