Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The number of ships allowed to cross the Panama Canal each day will be slashed in the coming months as climate change increasingly rocks global trade.More than 3 per cent of world trade passes through the nearly 110-year-old canal, which relies on freshwater to operate its locks. It is experiencing one of the worst droughts on its record. This year, for the first time, the canal authorities cut the number of ships that can cross each day, reducing it to 31 per day, down from the average of about 36 per day. On Tuesday the canal authority said it would further limit crossings to 25 bookings per day starting later this week and gradually reduce it before reaching just 18 per day from February next year.The canal authority said on Tuesday that October was the driest in the region since 1950, partly fuelled by the El Niño phenomenon, which warms the Pacific Ocean and affects temperature and rainfall around the world. The reservoir system that supplies the canal also provides drinking water for almost half the country’s population. “The Canal and the country face the challenge of the upcoming dry season with a minimum water reserve,” the canal authority said in a statement on Tuesday. “The Panama Canal urges its customers to make reservations in order to transit as programmed.”Though the canal has suffered droughts before, it is highly unusual for restrictions to be in place during Panama’s wet season — which runs from May to December.In August the canal was already considered a wild card in global container shipping by some analysts, and the latest restrictions will begin to take hold in the run-up to the busy Christmas shopping period. The canal’s most important route is between countries in Asia such as China and the east coast of the United States, and sees a vast array of goods pass through from petroleum products to vehicle parts to grains.Some operators, such as those with container ships, are more likely to book slots to cross the canal in advance. Those without reservations are waiting about 2.7 days to cross, according to the canal authority’s data.“This will bring with it the likelihood that container services will begin to see delays which they’ve been able to previously avoid,” freight forwarder and logistics company Flexport wrote in a newsletter this week. It said it would expect delays of about two to three days, meaning it would still be faster than the Suez Canal for most Asian ports. “Heavy and time-critical cargo should consider routing via the US or Canadian West Coast or utilising rail or trucking services.”The lower number of crossings comes at a particularly challenging time for the Central American country, which relies on the more than $4.6bn in revenue the canal brings in each year. In recent weeks large protests have broken out in the capital Panama City against a large copper mine that accounts for about 4 per cent of gross domestic product.Additional reporting by Oliver Telling in London More

The final au Jibun Bank Japan manufacturing purchasing managers’ index (PMI) stood at 48.7 in October, slightly improved from 48.5 in September, but still below the 50.0 point threshold that separates growth from contraction.Subindexes of output and new orders also contracted for a fifth straight month in October. Respondents said that sales demand at home and abroad was weak.New exports orders fell for a 20th straight month with higher prices weighing on sales. The Chinese market was particularly weak.”Companies continued to batten down the hatches by cutting purchasing, not replacing leavers and focusing on smart inventory management to minimise any unnecessary plant costs,” said Usamah Bhatti at S&P Global Market Intelligence, which compiled the survey.The survey showed the subindex gauging employment slipped for the first time since February 2021 as firms didn’t replace headcount due to weaker output and order books.”Inflationary pressures remained somewhat sticky, with costs again rising quite steeply and charges up to a marked degree,” Bhatti said.Fuelled by rising costs of raw materials and a weak yen, inflation has weighed on firms and clouded the economic outlook.The tame PMI data came after official figures showed Japan’s factory output rose much less than expected in September as demand slowed significantly.On the bright side, manufacturers remained confident about the outlook, supported by hopes of improvements in demand, the inventory cycle and key sectors such as autos and electronics. More

In a report that is yet to be presented to the IMF Executive Board, the staff said the slowdown in inflation in Australia is slow and core inflation remains sticky. “Staff therefore recommend further monetary policy tightening to ensure that inflation comes back to the target range by 2025 and minimize the risk of de-anchoring inflation expectations,” they said. The Reserve Bank of Australia has raised rates by 400 basis points since May last year to an 11-year high of 4.1% to tame a post-pandemic surge in prices, but have paused for four months now as policymakers wanted to preserve the strong job gains in the labour market. However, with inflation proving stubbornly high, consumers showing signs of resilience and housing prices on track to hit a record high, a majority of economists and markets are now betting the RBA will respond with another rate hike as soon as next week. The RBA currently forecasts inflation will return to the target band of 2-3% in late 2025, an already protracted path compared with other major economies. More

TOKYO (Reuters) -Japan’s top currency diplomat Masato Kanda said on Wednesday authorities were on standby to respond to recent “one-sided, sharp” moves in the yen, escalating his warning to investors against pushing down the currency too much.”Speculative trading seems to be the biggest factor behind recent currency moves,” Kanda, vice finance minister for international affairs, told reporters on the yen’s declines.The situation surrounding yen moves has become “more tense” than before, he said, adding that authorities will “respond appropriately without ruling out any options”.”We’re on standby,” Kanda said when asked about the chance of yen-buying intervention, though he declined to say what kind of action authorities could take and when that will happen.The yen plummeted across the board on Tuesday, dropping to a 15-year low against the euro and a new one-year trough versus the dollar, after a minor step adopted by the Bank of Japan (BOJ) toward ending years of monetary stimulus failed to appease some investors who had expected a bigger move.After sliding to 151.715 against the dollar overnight on Tuesday, the yen stood at 151.350 in Asia on Wednesday.Markets are on alert for possible yen-buying intervention by Japanese authorities, who are under pressure to combat a sustained depreciation of the currency as it pushes up import prices and households’ cost of living.Tokyo took action in September of last year, its first foray in the market to boost its currency since 1998, after a BOJ decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar. It intervened again in October 2022 after the yen plunged to a 32-year low of 151.94. More

Economists have pointed out a cooling trend in average pay. Wages and salaries for private sector workers, excluding bonuses and incentive pay, recorded a mere 0.9% rise, down from the previous quarter’s 1.1%. The ECI is an essential metric for Federal Reserve officials as it reflects changes in pay across the same job roles over time.During fall of last year, ECI-tracked pay and benefits growth reached a peak of 5.1%. However, swift inflation has eroded Americans’ purchasing power. The Fed’s objective is to slow down inflation to facilitate inflation-adjusted income gains even amidst smaller pay hikes. Fed Chair Jerome Powell has suggested that yearly wage increases of approximately 3.5% are consistent with the central bank’s 2% inflation target.Fast-forwarding to October this year, Europe’s inflation rate decreased to 2.9%, influenced by dropping fuel prices, but growth has been stagnant. Surging interest rates and an uncertain economic outlook might lead to Federal Reserve’s inaction. Meanwhile, the US experienced robust wage growth this summer, further complicating the Fed’s fight against inflation.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Despite the FDA approval, Amgen’s treatment is expected to be launched in 2025 as part of a legal settlement between the two companies earlier this year to delay the entry of the therapy. Biosimilars are close copies of complex biological drugs.Stelara, introduced in 2009, has been J&J’s top-selling drug since 2019, with sales reaching $9.7 billion in 2022. More

SYDNEY (Reuters) – New Zealand’s jobless rate rose to the highest in more than two years in the September quarter as employment slipped and wages grew by less than forecast, a soft report that cemented expectations of an end to interest rate hikes. The local dollar fell 0.4% to $0.5805 as the market bet that rates had already peaked at 5.5% and the next move from the Reserve Bank of New Zealand (RBNZ) would be downward, albeit not until late 2024. Data released by Statistics New Zealand on Wednesday showed unemployment climbed to 3.9% in the third quarter, up from 3.6% the previous quarter and the highest since mid-2021. Employment fell 0.2% in the quarter, missing analyst forecasts of a 0.4% rise and the first drop since the depths of the pandemic in mid-2020. “Monetary policy is working,” said Mary Jo Vergara, a senior economist at Kiwibank. “The RBNZ should take comfort in today’s employment data coming in softer than their expectations and, as such, is further evidence that no more rate hikes are needed.” Rates are already at 15-year highs, helping slow inflation to a two-year low of 5.6% in the September quarter. The central bank noted several headwinds for the economy in a financial stability report released on Wednesday, including financial stress among some borrowers and lower prices for key commodity exports.Markets now imply only a 10% chance of another hike at the RBNZ’s next policy meeting in late November, while some easing might come from around August next year.Debt markets also rallied with two-year swap rates falling to 5.52%, a long way from their October peak of 5.835%. Wednesday’s data showed cost pressures were cooling as ordinary time wages rose 0.8% in the third quarter, under forecasts of 1.0% and pulling annual growth down to 4.1%.Annual growth in overall labour costs held at 4.3% – but only because of high awards in the public sector. Growth in the private sector slowed to 4.1%. “With the labour market cooling in earnest now, we expect wage growth to continue easing in the quarters ahead,” said Abhijit Surya, an economist at Capital Economics, who sees the jobless rate hitting 4.5% by year-end. “All told, the data support our view that the RBNZ’s tightening cycle is at an end.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Planes have begun landing at a new Chinese-built airport near the city of Siem Reap, the latest symbol of how Cambodia is pinning its hopes for infrastructure investment on its political and economic patron.The Siem Reap-Angkor International Airport, built over three years at a cost of about $1bn, began operations last week ahead of its official inauguration next month.Cambodia has received billions of dollars in infrastructure funding from China. Much of it, including the new airport, has come under the banner of the Belt and Road Initiative (BRI), the overseas infrastructure-building project that Chinese president Xi Jinping has nurtured over the past decade.Attending a BRI forum in China last week, Cambodian prime minister Hun Manet signed several memorandums of understanding about potential projects.Hun Manet met top political officials and representatives of state-owned companies, including China Machinery Engineering, China National Energy Engineering & Construction, China Datang, Genertec International and China Railway Construction.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 subscriptionsThe meetings covered plans to invest in renewable energy, the gas sector, a data management centre, water supply upgrades and new rail links.Speaking with China Railway Construction chair Wang Jianping, Hun Manet discussed modernising Cambodia’s existing rail network and connecting it to the city of Bavet on its eastern border with Vietnam, and with the tourist hub of Siem Reap.Hun Manet also met Li Kuo, chair of China Metro Group, which is interested in building light-rail connections to the Siem Reap airport and another under construction in Phnom Penh.“The Belt and Road Initiative has been instrumental in providing many developing countries, including Cambodia, with numerous advantages such as the development of physical infrastructure, increased foreign direct investments, economic growth, regional and global integrations and people-to-people exchanges,” Hun Manet said in a speech at the event.The new 700-hectare airport is about 40km from Siem Reap and was developed by a consortium of state-owned companies from China’s Yunnan province. The consortium will run the facility under a 55-year build-operate-transfer deal.It was built to handle 7mn passengers a year, with potential for expansion, and serves as the gateway to the Angkor Wat temple complex, Cambodia’s biggest tourism draw. The country has been attempting to win back visitors after years of Covid-related disruption, including with a campaign focused specifically on Chinese tourists.The airport replaces one run by French conglomerate Vinci, which was just 5km from the world heritage-listed site, a proximity that presented problems, said Sinn Chanserey Vutha, a spokesperson for Cambodia’s State Secretariat of Civil Aviation.These included a difficult approach path for pilots during some months and concerns that increasing the number of flights could impact the temples.It was also too close to residences to allow for expansion, necessitating the move to another site, whose distance from Siem Reap was in line with international norms, Vutha said. Tokyo’s Narita airport, he pointed out, is even further from the centre of the city it serves.To move forward on the Siem Reap airport, the government had to end the agreement governing operation of the previous facility many years early.The previous facility was run by Cambodia Airports, 70 per cent owned by Vinci Airports and 30 per cent by a Malaysian-Cambodian joint venture. Vutha said a committee set up to sort out compensation awarded $63mn for the early termination.The new operator, Angkor International Airport Investment, is a consortium of Yunnan Investment Holdings, Yunnan Construction Investment Group and the Yunnan Airport Group. The consortium was also given control of the old airport, but Vutha said it had yet to propose another use for the site.Vinci had operated all of Cambodia’s international airports — in Phnom Penh, Siem Reap and Sihanoukville — under concessions awarded in the 1990s that were supposed to run until 2040.Its concession in Phnom Penh is also likely to be cut short, with a new $1.5bn airport overseen by local conglomerate Overseas Cambodia Investment expected to come online in 2025.Vutha said Vinci was in discussions with Cambodia Airport Investment, the special project vehicle in charge of the development, about whether they would play a role in the future facility.“These are [business-to-business] discussions. How far they reached, we don’t know,” he said.Cambodia Airports spokesperson Norinda Khek said it was continuing with further development of the Sihanoukville site and had “engaged in constructive dialogue with involved parties on the new Phnom Penh airport project”.A version of this article was first published on October 24 by Nikkei Asia. ©2023 Nikkei Inc. All rights reserved.Related stories More